Tom Moeller

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      <p>Nonfarm business sector productivity for Q4'12 declined 2.0% (SAAR,
      +0.6% y/y) and reversed virtually all of the 3.2% increase during Q3,
      revised from 2.9%. A 1.0% decline has been expected. That left the 1.0% gain for all of last year down
      sharply from the roughly 3.0% annual increases during the two years
      immediately following the last recession. Lower productivity growth last
      quarter was accompanied by a quickened 2.4% rise (2.6% y/y) in
      compensation per hour. Nevertheless, for all of last year compensation
      growth slowed to 1.7%, its weakest since 2009. This combination of lower
      productivity and high compensation caused unit labor costs to jump at a
      4.5% annual rate (1.9% y/y). Declines during the prior two quarters,
      however, left the full year increase at a modest 0.7%.</p>
      <p>In the factory sector, the productivity picture was more encouraging. The
      modest 0.5% rise (1.3% y/y) in productivity reversed the Q3 decline.
      Nevertheless, the 2.0% full year increase was down from 2.5% in 2011 and
      6.4% in 2010. Compensation growth decelerated to 1.0% (4.7% y/y) but the
      four quarter increase surged to 4.7%, its fastest since Q2'09. The full
      year 2.4% rise followed a 2.6% gain in 2011, both of which were slower
      than the 8.0% increase in 2003. The improvement in productivity dropped
      the gain in unit labor costs to 0.4%, its weakest in a year. As a result,
      the full year gain in costs was a modest 0.4%.</p>
      <p>The productivity &amp; cost figures are available in Haver's <b>USECON</b>
      database.&nbsp;</p>

      
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      <p>&nbsp;</p>


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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
      

        <thead>
          <tr>
            <th class="firstcol" scope="col" ><b>Productivity &amp;
              Costs (SAAR,%)</b></th>
            <th>Q4'12</th>
            <th>Q3'12</th>
            <th>Q2'12</th>
            <th>Q4 Y/Y</th>
            <th>2012</th>
            <th>2011</th>
            <th>2010</th>
          </tr>
        </thead>
        <tbody>
          <tr class="grey3">
            <td class="firstcol" colSpan="8" ><b>Nonfarm Business
              Sector</b></td>
          </tr>
          <tr>
            <td class="firstcol" >Output per Hour (Productivity)</td>
            <td  >-2.0</td>
            <td  >3.2</td>
            <td  >1.9</td>
            <td  >0.6</td>
            <td  >1.0</td>
            <td  >0.7</td>
            <td  >3.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Compensation per Hour</td>
            <td  >2.4</td>
            <td  >0.8</td>
            <td  >1.3</td>
            <td  >2.6</td>
            <td  >1.7</td>
            <td  >2.7</td>
            <td  >2.0</td>
          </tr>
          <tr>
            <td class="firstcol" >Unit Labor Costs</td>
            <td  >4.5</td>
            <td  >-2.3</td>
            <td  >-0.5</td>
            <td  >1.9</td>
            <td  >0.7</td>
            <td  >2.0</td>
            <td  >-1.0</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol" colSpan="8" ><b>Manufacturing
              Sector</b></td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Output per Hour</td>
            <td  >0.5</td>
            <td  >-0.9</td>
            <td  >0.0</td>
            <td  >1.3</td>
            <td  >2.0</td>
            <td  >2.5</td>
            <td  >6.4</td>
          </tr>
          <tr>
            <td class="firstcol" >Compensation per Hour</td>
            <td  >1.0</td>
            <td  >2.3</td>
            <td  >9.0</td>
            <td  >4.7</td>
            <td  >2.4</td>
            <td  >2.6</td>
            <td  >1.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Unit Labor Costs</td>
            <td  >0.4</td>
            <td  >3.2</td>
            <td  >9.0</td>
            <td  >3.4</td>
            <td  >0.4</td>
            <td  >0.1</td>
            <td  >-5.0</td>
          </tr>
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Nonfarm business sector productivity for Q4'12 declined 2.0% (SAAR, +0.6% y/y) and reversed virtually all of the 3.2% increase during Q3, revised from 2.9%. A 1.0% decline has been expected. That left the 1.0% gain for all of last [...]

U.S. Worker Productivity Declines and Drives Up Costs


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  <p><a href="/comment/130206e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206e.png"></a>
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      <p>The factory sector is in a recovery mode. The latest industrial
      commodity price index from the Foundation for International Business and
      Economic Research (FIBER) rose yesterday to its highest level since June
      2011. Tuesday's reading of 176.7, was up 5.8% from 12 months earlier and
      by 8.2% since early November. During the last ten years there has been a 42%
      correlation between the three-month change in prices and the change in
      factory sector industrial production.</p>
  <p><a href="/comment/130206g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206g.png" align="left"></a>
           
      Still leading the improvement were prices in the <b>miscellaneous</b>
      group, up by roughly one quarter versus last year and by one-third from
      the late 2011 low. Prices for structural panels (50.8% y/y) and framing
      lumber (39.1% y/y) have led the advance. Rubber prices (-12.6% y/y),
      however, have moved lower. In the <b>textile</b> group, cotton prices have
      recovered a sharp 17.2% from the November low, while <b>crude oil</b>
      prices also have been strong, up 14.8% (0.4% y/y) from their November low.
      Conversely, prices for the petrochemical benzene have moved lower. In the <b>metals</b>
      group, prices for lead (10.4% y/y) and copper scrap (-2.8% y/y) recently
      have been notably strong as they have moved off their fall lows. However,
      aluminum (+1.1% y/y) and steel scrap (-13.0% y/y) prices have risen
      moderately.&nbsp; </p>
      <p>The current forecast for industrial output from the National
      Association for Business Economics calls for 2.6% growth this year. That
      follows a 3.7% increase last year and is the weakest gain of the economic
      recovery. As such, the rate of improvement in industrial commodity prices
      should ease as 2013 progresses but the direction of change will be upward.</p>
      <p>Commodity price data can be found in Haver's <b>DAILY, WEEKLY, USECON</b>
      and <b>CMDTY</b> databases.</p>
      
  <p><a href="/comment/130206h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206h.png"></a>
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
	
        <thead>
          <tr>
            <th class="firstcol" scope="col" >FIBER Industrial
              Materials Price Index (1990=100)</th>
            <th scope="col" ><b>02/05/13</b></th>
            <th scope="col" ><b>Y/Y %</b></th>
            <th scope="col" ><b>2012</b></th>
            <th scope="col" ><b>2011</b></th>
            <th scope="col" ><b>2010</b></th>
          </tr>
        </thead>
        <tbody>
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            <td class="firstcol" ><b>All Items</b></td>
            <td  >176.7</td>
            <td  >5.8</td>
            <td  >166.4</td>
            <td  >173.0</td>
            <td  >157.9</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol" ><b>&nbsp;Textiles</b></td>
            <td  >78.3</td>
            <td  >-3.1</td>
            <td  >77.9</td>
            <td  >86.1</td>
            <td  >81.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp;Cotton (cents per
              pound)</td>
            <td  >76.2</td>
            <td  >-14.4</td>
            <td  >74.5</td>
            <td  >132.8</td>
            <td  >87.8</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol" ><b>&nbsp;Metals</b></td>
            <td  >259.9</td>
            <td  >-1.4</td>
            <td  >243.0</td>
            <td  >278.7</td>
            <td  >240.0</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;Aluminum ($ per metric
              ton)</td>
            <td  >2,078.0</td>
            <td  >-4.5</td>
            <td  >2,019.6</td>
            <td  >2,400.9</td>
            <td  >2,172.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp;Copper Scrap (cents per
              pound)</td>
            <td  >373.0</td>
            <td  >-2.8</td>
            <td  >360.6</td>
            <td  >400.3</td>
            <td  >326.8</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;Steel Scrap ($ per ton)</td>
            <td  >349.3</td>
            <td  >-13.0</td>
            <td  >366.7</td>
            <td  >412.6</td>
            <td  >326.5</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol"><b>&nbsp;Crude Oil &amp; Benzene</b></td>
            <td>210.57</td>
            <td>3.0</td>
            <td>204.1</td>
            <td>199.3</td>
            <td>182.0</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">&nbsp;&nbsp;Crude Oil (WTI, $ per
              Barrel)</td>
            <td>96.5</td>
            <td>0.4</td>
            <td>94.2</td>
            <td>95.0</td>
            <td>79.4</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol"><b>&nbsp;Miscellaneous</b></td>
            <td>229.2</td>
            <td>22.7</td>
            <td>205.3</td>
            <td>190.6</td>
            <td>179.1</td>
          </tr>
          <tr>
            <td class="firstcol">&nbsp;&nbsp;Framing Lumber ($ per
              1000 board ft.)</td>
            <td>387</td>
            <td>35.3</td>
            <td>321</td>
            <td>273</td>
            <td>283</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">&nbsp;&nbsp;Natural Rubber (cents
              per pound)</td>
            <td>206.0</td>
            <td>-11.5</td>
            <td>211.9</td>
            <td>262.3</td>
            <td>182.9</td>
          </tr>
        </tbody>
      </table>
      </span>




The factory sector is in a recovery mode. The latest industrial commodity price index from the Foundation for International Business and Economic Research (FIBER) rose yesterday to its highest level since June 2011. Tuesday's reading [...]

FIBER: Industrial Commodity Price Increases Are Broad-based

Robert Brusca

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German orders rose unexpectedly on surging foreign demand. German domestic demand weakened as domestic orders fell by 1.2% and are off by 4.6% year-over-year. Meanwhile foreign orders are now up by 0.4% year-over-year. As a result overall orders are off by a tiny 0.1% Year-over-year.  Orders from fellow EMU member countries rose by 7% while orders outside the e-Zone fell by 0.4%. 
</p><p>
Ponder this result for a minute...
</p><p>
<b>Germany: The Oxymoron</b>
Germany is supposed to be the STRONG economy of EMU. But it is certainly no locomotive. But it may have 'loco'-motivations...
</p><p>
Germany's role reminds me of that of a dementor in the Harry Potter stories. They sucked all the happiness and eventually life out of you. Germany sucks out all your demand leaving nothing for the factories at home to satisfy and leaving its fellow EMU members holding the bag in terms of getting their manufacturing sectors to spur their respective economies. Weak demand means weak output
</p><p>
I had a science professor once who noted that it is a bad parasite that kills the host. Yet, that is one way to view the impact of Germany's actions on the weakest members of EMU since the currency Zone was constructed. Aggressive exporting inside the Zone supported by German bank lending and periphery nation over-borrowing is one of the ways the debt crisis came into being.  
</p><p>
<b>Reverse Stimulus from Ynamreg ( 'Germany' spelled backwards)</b>
Now this imagery of Germany may seem a bit unfair. But the point is that Germany does have a stable economy and it is doing much better in just about all respects than its European counterparts but it is not using that strength to invigorate the Zone. Instead, it is making life more difficult for its fellow members. Germany uses its highly enhanced competitiveness to exploit demand conditions INSIDE the Zone with the Zone itself as protection for Germany from outside competition.  Germany does not give back much in terms of domestic demand to fellow Zone members. We can see that orders from German entities placed with German firms are being reduced even as Germany grabs more business from its fellow EMU members. It is the rest of the Zone that is stimulating Germany, not the other way around!
</p><p>
So when we look at aggregate EMU data what we see is that EMU is doing better largely when Germany is doing better, but not necessarily BECAUSE Germany is doing better. That's because many of Germany's gains are at the expense of other EMU members so Germanys rise is offset by someone else's fall within EMU.  Germany is doing better by making its fellow zone members worse off.
</p><p>
While some will want to use these new German data as reason to trumpet the turnaround in in Europe, as the above discussion suggests, I will not blow that horn. What I see is the same old pattern of exploitation.
</p><p>
<b>Past transgressions repeat but with more restraint</b> 
In the pre-debt crisis days German and French firms enhanced their competitive positions Vs countries in the periphery by lending to them and enabling them to buy things they should not have been able to afford. That got the periphery into debt trouble and explains why German and French banks are still struggling with legacy assets. Perched on the very precipice of the onset of the Greek debt crisis Germany pushed one last deal to completion for refurbished submarines sold to Greece before Greece went down. Now Greece can use those submarines to keep an eye in its debt.
</p><p>
What I describe in the paragraphs above is exactly WHY the Zone is not getting better and is continuing to be torn apart.  What is still fundamentally wrong in the Zone and is not fixed is the Zone's competitiveness: Specifically, competitiveness differences. Mario Draghi has ruled out traditional devaluation (ruled out the possibility that a member state would leave the Zone to devalue). Instead, some idiot has coined the term 'internal devaluation' which is a bit like renaming a 'cyanide pill' as a 'sleeping pill.' Internal devaluation is nothing more than deflation which has plagued Japan for nearly two decades and is something that Fed Chairman Bernanke is fighting with all his might and resources to avoid in the US. Why is this 'disease' suddenly the magic elixir for Europe? 
</p><p>
It isn't.
</p><p>
<b>Lie to me...no, not the TV show</b>
Just as US politicians LIE to the US people about their true policy choices and the tax consequences of those choices (think Obamacare and the Afghanistan-Iraq war, just to name two recent 'bipartisan' lies), so too the Europeans lie about their economic options and the likely economic repercussions of holding the Zone together at all costs without a real plan for mending what is wrong. We, the people, are being lied to so it is no wonder we the people are making bad choices in electing our politicians or, they are getting away with kicking the can down the road from election to election. Man may not live by bread alone but politicians do live by elections alone- still, that bread is important and it is in increasingly shorter supply, at least for the people. Sooner or later the bread will run out and the lies will not be nourishing enough and change will come.  
</p>	

<table class="centered" width="100%" border="0" cellspacing="0">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
   <tr>
    <th scope="col" colspan=9>German Orders and Sales by Sector and Origin</th>
  </tr>
  </thead>
  <tbody>
    <tr class="even">
      <td class="firstcol"><b>Real and SA</b></td>
      <td colspan=3><b>% M/M</b></td>
      <td colspan=5><b>% SAAR</b></td>
    </tr>
    <tr class="even">
      <td class="firstcol"><b></b></td>
      <td><b>Dec-12</b></td>
      <td><b>Nov-12</b></td>
      <td><b>Oct-12</b></td>
      <td><b>3-mo</b></td>
      <td><b>6-mo</b></td>
      <td><b>12-Mo</b></td>
      <td><b>Yr-Ago</b></td>
      <td><b>QTR-2-Date</b></td>
    </tr>
    <tr>
      <td class="firstcol" ><b>Total Orders</b></td>
      <td>0.8%</td>
      <td>-1.8%</td>
      <td>3.9%</td>
      <td>11.8%</td>
      <td>-1.1%</td>
      <td>-1.8%</td>
      <td>-0.1%</td>
      <td>4.0%</td>
    </tr>    
    <tr class="odd">
      <td class="firstcol" >Foreign</td>
      <td>2.4%</td>
      <td>-4.2%</td>
      <td>6.4%</td>
      <td>18.4%</td>
      <td>3.2%</td>
      <td>0.4%</td>
      <td>-0.7%</td>
      <td>10.1%</td>
    </tr> 
    <tr>
      <td class="firstcol" >Domestic</td>
      <td>-1.2%</td>
      <td>1.5%</td>
      <td>0.6%</td>
      <td>3.6%</td>
      <td>-6.2%</td>
      <td>-4.6%</td>
      <td>0.7%</td>
      <td>-3.3%</td>
    </tr>  
    <tr class="grey1">
      <td class="firstcol" ><b>Real Sector Sales</b></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
    </tr>  
    <tr>
      <td class="firstcol" ><b>MFG/Mining</b></td>
      <td>-1.0%</td>
      <td>-0.9%</td>
      <td>-0.5%</td>
      <td>-9.1%</td>
      <td>-9.8%</td>
      <td>-3.3%</td>
      <td>0.3%</td>
      <td>-12.6%</td>
    </tr> 
    <tr class="odd">
      <td class="firstcol" >Consumer</td>
      <td>-0.3%</td>
      <td>-0.3%</td>
      <td>1.5%</td>
      <td>3.4%</td>
      <td>-1.0%</td>
      <td>0.1%</td>
      <td>0.3%</td>
      <td>1.0%</td>
    </tr>   
    <tr>
      <td class="firstcol" >Cons Durables</td>
      <td>3.0%</td>
      <td>-1.0%</td>
      <td>-3.9%</td>
      <td>-7.9%</td>
      <td>-10.4%</td>
      <td>-3.5%</td>
      <td>0.0%</td>
      <td>-21.1%</td>
    </tr> 
    <tr class="odd">
      <td class="firstcol" >Cons Non-Durables</td>
      <td>-0.8%</td>
      <td>-0.3%</td>
      <td>2.4%</td>
      <td>5.1%</td>
      <td>0.6%</td>
      <td>0.6%</td>
      <td>0.4%</td>
      <td>5.2%</td>
    </tr>  
    <tr>
      <td class="firstcol" ><b>Capital Gds</b></td>
      <td>1.9%</td>
      <td>-1.0%</td>
      <td>-1.8%</td>
      <td>-3.9%</td>
      <td>-7.4%</td>
      <td>-0.8%</td>
      <td>-1.2%</td>
      <td>-15.6%</td>
    </tr>  
    <tr class="odd">
      <td class="firstcol" ><b>Intermediate Gds</b></td>
      <td>-4.7%</td>
      <td>-1.2%</td>
      <td>0.4%</td>
      <td>-20.2%</td>
      <td>-17.4%</td>
      <td>-7.8%</td>
      <td>1.7%</td>
      <td>-15.4%</td>
    </tr>  
    <tr>
      <td class="firstcol" ><b>All MFG-Sales</b></td>
      <td>-0.9%</td>
      <td>-1.0%</td>
      <td>-0.5%</td>
      <td>-9.0%</td>
      <td>-9.9%</td>
      <td>-3.3%</td>
      <td>0.3%</td>
      <td>-12.8%</td>
    </tr> 
</tbody>
</table>
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German orders rose unexpectedly on surging foreign demand. German domestic demand weakened as domestic orders fell by 1.2% and are off by 4.6% year-over-year. Meanwhile foreign orders are now up by 0.4% year-over-year. As a result [...]

German Orders Surge Mae West Strategy: Depending On the Demand of 'Strangers'

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   <p><a href="/comment/130206a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206a.png"></a>
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      <p>The Mortgage Bankers Association index of total mortgage applications
      rose 3.4% (4.6% y/y) last week and recovered some of the prior week's
      decline.&nbsp; Home <i>purchase</i> applications rose 2.2% (18.6% y/y) to
      the highest level since May 2010. Applications to <i>refinance</i> an
      existing loan increased 3.5% (1.5% y/y) and recovered a piece of the prior
      week's decline.</p>
      
      <p>Applications for fixed interest rate loans rose by 7.4% y/y while
      adjustable rate loan applications fell by more than one-third y/y. The
      average mortgage loan size fell to a six-month low of $207,700. The
      average size for home purchases was $253,700 last week while for
      refinancings it was $195,000. The average size of a fixed rate loan was
      $193,800 last week and for variable rate loans it was $568,600.&nbsp;</p>
      
      <p>The effective rate on fixed-interest, conventional 15-year mortgages
      increased to 3.08% and was up from December's weekly low of 2.89%. The
      effective rate on a 30-year fixed rate was 3.86% last week while the rate
      on a Jumbo 30-year loan was 4.07%. Though it's recently narrowed, the
      spread between 15- and 30-year loan rates continued wide by historical
      standards. The effective interest rate on an adjustable 5-year mortgage
      increased to 2.83%, up from its November low of 2.72%.</p>
      
      <p>The Mortgage Bankers Association surveys between 20 to 35 of the top
      lenders in the U.S. housing industry to derive its refinance, purchase and
      market indexes. The weekly survey covers roughly 50% of all U.S.
      residential mortgage applications processed each week by mortgage banks,
      commercial banks and thrifts. The figures for weekly mortgage applications
      are available in Haver's <b>SURVEYW</b> database.</p>
      
   <p><a href="/comment/130206c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206c.png"></a>
      <a href="/comment/130206d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206d.png"></a></p>
      <p>&nbsp;</p>


<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>      
      
        <thead>
          <tr>
            <th class="firstcol" scope="col"  >MBA
              Mortgage Applications (SA, 3/16/90=100)</th>
            <th scope="col"  >02/01/13</th>
            <th scope="col"  >01/25/13</th>
            <th scope="col"  >01/18/13</th>
            <th scope="col"  >Y/Y%</th>
            <th scope="col"  >2012</th>
            <th scope="col"  >2011</th>
            <th scope="col"  >2010</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol"  >Total Market Index</td>
            <td   >849.8</td>
            <td   >822.1</td>
            <td   >894.8</td>
            <td   >4.9</td>
            <td   >813.8</td>
            <td   >572.3</td>
            <td   >659.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol"  >&nbsp;Purchase</td>
            <td   >215.8</td>
            <td   >211.1</td>
            <td   >214.9</td>
            <td   >18.6</td>
            <td   >187.8</td>
            <td   >182.6</td>
            <td   >199.8</td>
          </tr>
          <tr>
            <td class="firstcol"  >&nbsp;Refinancing</td>
            <td   >4,567.6</td>
            <td   >4,415.2</td>
            <td   >4,916.7</td>
            <td   >1.5</td>
            <td   >4,505.0</td>
            <td   >2,858.4</td>
            <td   >3,348.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol"  >15-Year Mortgage
              Effective Interest Rate (%)</td>
            <td   >3.08</td>
            <td   >3.05</td>
            <td   >2.97</td>
            <td   >3.45<br>
              (2/12)</td>
            <td   >3.25</td>
            <td   >3.97</td>
            <td   >4.39</td>
          </tr>
        </tbody>
      </table>
      </span>

</body>

</html>


The Mortgage Bankers Association index of total mortgage applications rose 3.4% (4.6% y/y) last week and recovered some of the prior week's decline. Home purchase applications rose 2.2% (18.6% y/y) to the highest level since May 2010. [...]

U.S. Mortgage Applications Recover; Interest Rates Move Higher

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            <br>
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            <p>The <b>pump price for a gallon of regular gasoline surged 18
            cents</b> last week to $3.54 per gallon (1.6% y/y). That followed a
            4 cent rise during the prior week. Prices remain down 34 cents per
            gallon since their September peak. The norm for this time of year,
            when driving is reduced, is for prices to decline. Haver Analytics
            constructs seasonal factors to account for seasonal volatility and
            the adjusted price jumped 17 cents w/w to $3.77 per gallon. Since
            their October peak, prices are down 6 cents per gallon.</p>
            <p>The price for a barrel of <b>light sweet crude oil</b> also rose
            another $1.61 last week to $97.44 per barrel (-0.4% y/y) but
            yesterday prices slipped back to $96.14. Brent crude oil prices rose
            to $115.69 per barrel last week (4.0% y/y) and increased further to
            $116.84 yesterday.</p>
            <p><b>Natural gas </b>prices retreated last week to $3.27 per mmbtu
            (+32.5% y/y) but rose to $3.29 yesterday.</p>
            <p>The<b> demand for gasoline increased 3.0% y/y last week. </b>Residual
            fuel oil needs, used for heating, fell by roughly one-third y/y
            while distillate demand was off 6.3% y/y. Inventories of crude oil
            &amp; petroleum products rose 2.7% y/y.</p>
            <p>The energy price data are reported by the U.S. Department of
            Energy and can be found in Haver's <b>WEEKLY </b>database. The daily
            figures are in <b>DAILY</b> and the gasoline demand figures are in <b>OILWKLY.</b>&nbsp;</p>
            <table class="centered" border="0" cellSpacing="0" width="1231">
              <thead>
                <tr>
                  <th class="firstcol" scope="col" width="580">Weekly Price</th>
                  <th scope="col" width="95">02/02/13</th>
                  <th scope="col" width="95">01/28/13</th>
                  <th scope="col" width="95">01/21/13</th>
                  <th scope="col" width="95">Y/Y%</th>
                  <th scope="col" width="95">2012</th>
                  <th scope="col" width="95">2011</th>
                  <th scope="col" width="95">2010</th>
                </tr>
              </thead>
              <tbody>
                <tr>
                  <td class="firstcol" width="580">Retail Regular Gasoline ($
                    per Gallon, Regular)</td>
                  <td width="95" align="center">3.54</td>
                  <td width="95" align="center">3.36</td>
                  <td width="95" align="center">3.32</td>
                  <td width="95" align="center">1.6</td>
                  <td width="95" align="center">3.62</td>
                  <td width="95" align="center">3.52</td>
                  <td width="95" align="center">2.78</td>
                </tr>
                <tr class="odd">
                  <td class="firstcol" width="580">Light Sweet Crude Oil, WTI ($
                    per bbl.)</td>
                  <td width="95" align="center">97.44</td>
                  <td width="95" align="center">95.83</td>
                  <td width="95" align="center">94.54</td>
                  <td width="95" align="center">-0.4</td>
                  <td width="95" align="center">94.20</td>
                  <td width="95" align="center">95.14</td>
                  <td width="95" align="center">79.51</td>
                </tr>
                <tr>
                  <td class="firstcol" width="580">Natural Gas ($/mmbtu)</td>
                  <td width="95" align="center">3.27</td>
                  <td width="95" align="center">3.52</td>
                  <td width="95" align="center">3.43</td>
                  <td width="95" align="center">32.5</td>
                  <td width="95" align="center">2.75</td>
                  <td width="95" align="center">3.99</td>
                  <td width="95" align="center">4.</td>
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            <span id="articletitle">U.S. Chain Store Sales Rise W/W But Remain
            Well Below Holiday Peak</span><br>
            <span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
            Moeller</a>&nbsp;&nbsp;February 5, 2013</span><span id="articletext">
            <p>The latest report from the International Council of Shopping
            Centers and Goldman Sachs indicated that consumers continue to spend
            cautiously. Chain store sales rose 2.4% last week (2.6% y/y)
            following a 3.2% pullback during all of January. During the last ten
            years there has been a 72% correlation between the y/y change in
            chain store sales and the change in retail sales at general
            merchandise stores. That correlation recently has increased.</p>
            <p>General merchandise store sales account for 15% of total retail
            sales. The ICSC-Goldman Sachs retail chain-store sales index is
            constructed using the same-store sales (stores open for one year)
            reported by 78 stores of seven retailers: Dayton Hudson, Federated,
            Kmart, May, J.C. Penney, Sears and Wal-Mart.</p>
            <p>Prospects for sales also deteriorated slightly. The leading
            indicator of chain store sales fell 0.8% (+4.7% y/y) after two weeks
            of increase. The composite leading economic indicator is compiled
            from four series: (1) The MBA's volume index of mortgage
            applications for home purchase, (2) the ABC News/Money magazine's
            survey of consumer buying conditions, (3) new filings for jobless
            benefits, and (4) the 30-year government bond yield.</p>
            <p>The chain store figures can be found in Haver's <b>WEEKLY</b>
            database. </p>
            <table class="centered" border="0" cellSpacing="0" width="1231">
              <colgroup>
                <col>
                <col>
                <col>
                <col>
                <col>
                <col>
                <col>
                <col>
              </colgroup>
              <thead>
                <tr>
                  <th class="firstcol" scope="col" width="536">ICSC-Goldman
                    Sachs (SA, 1977=100)</th>
                  <th scope="col" width="98">02/02/13</th>
                  <th scope="col" width="98">01/26/13</th>
                  <th scope="col" width="99">01/19/13</th>
                  <th scope="col" width="99">Y/Y</th>
                  <th scope="col" width="99">2012</th>
                  <th scope="col" width="99">2011</th>
                  <th scope="col" width="99">2010</th>
                </tr>
              </thead>
              <tbody>
                <tr class="odd">
                  <td class="firstcol" width="536">Total Weekly Chain Store
                    Sales</td>
                  <td align="center" width="98">530.0</td>
                  <td align="center" width="98">517.8</td>
                  <td align="center" width="99">523.2</td>
                  <td align="center" width="99">2.6%</td>
                  <td align="center" width="99">3.0%</td>
                  <td align="center" width="99">3.2%</td>
                  <td align="center" width="99">2.9%</td>
                </tr>
                <tr>
                  <td class="firstcol" width="536">&nbsp;&nbsp; W/W %</td>
                  <td align="center" width="98">2.4</td>
                  <td align="center" width="98">-1.0</td>
                  <td align="center" width="99">-1.5</td>
                  <td align="center" width="99">--</td>
                  <td align="center" width="99">--</td>
                  <td align="center" width="99">--</td>
                  <td align="center" width="99">--</td>
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      &nbsp;
      <p><span id="articletitle">U.S. ISM Nonmanufacturing Index Improvement
      Stalls</span><br>
      <span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
      Moeller</a>&nbsp;&nbsp;February 5, 2013</span></p>
      
      <p>The <b>Composite Index for the service and construction sectors</b>
      from the Institute for Supply Management (ISM) matched expectations and
      slipped to 55.2 last month from a revised 55.7 during December. (Earlier
      figures were revised due to updated seasonal factors.) Since the series'
      inception in 1997 there has been a 75% correlation between the level of
      the nonmanufacturing composite index and the q/q change in real GDP for
      the service and the construction sectors. <span id="articletext"><b>Haver
      Analytics calculates an index</b> using the ISM nonmanufacturing and the
      ISM manufacturing sector index released last Friday. The figure was
      roughly unchanged m/m at 55.0. During the last ten years there has been a
      74% correlation between the composite and the quarterly change in real
      GDP.
      <p>Last month's nonmanufacturing index was supported by the employment
      component, which rose to 57.5, its highest level since February 2006.
      Since the series' inception in 1997 there has been an 88% correlation
      between the level of the ISM nonmanufacturing employment index and the m/m
      change in payroll employment in the service-producing plus the
      construction industries. The supplier delivery index also recovered to
      52.5, its highest level since May, indicating slower delivery speeds.
      Offsetting these improvements were declines in the business activity and
      new orders components. </p>
      <p>The prices index improved m/m to 58.0 but remained near its lowest
      level since July. An increased 23% of respondents reported higher prices
      while just 5% reported them lower. Since inception ten years ago, there
      has been a 65% correlation between the price index and the Q/Q change in
      the GDP services chain price index.</p>
      <p>Beginning with the January 2008 Nonmanufacturing <cite>Report On
      Business, </cite>the composite index is calculated as an indication of
      overall economic conditions for the non-manufacturing sector. It is a
      composite index based on the diffusion indices of four of the indicators
      (business activity, new orders, employment and supplier deliveries) with
      equal weights.</p>
      <p>The ISM data are available in Haver's <b>USECON</b> database. The
      expectations figure from ACTION ECONOMICS is in the <b>AS1REPNA </b>database.&nbsp;&nbsp;</p>
      <table class="centered" border="0" cellSpacing="0" width="1231">
        <thead>
          <tr>
            <th class="firstcol" scope="col" width="566"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
              Nonmanufacturing Survey (SA)</a></th>
            <th scope="col" width="94">Jan</th>
            <th scope="col" width="94">Dec</th>
            <th scope="col" width="94">Nov</th>
            <th scope="col" width="94">Jan'12</th>
            <th scope="col" width="95">2012</th>
            <th scope="col" width="95">2011</th>
            <th scope="col" width="95">2010</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" width="566">Composite Diffusion Index</td>
            <td align="center" width="94">55.2</td>
            <td align="center" width="94">55.7</td>
            <td align="center" width="94">54.8</td>
            <td align="center" width="94">56.0</td>
            <td align="center" width="95">54.6</td>
            <td align="center" width="95">54.5</td>
            <td align="center" width="95">54.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="566">&nbsp;&nbsp; Business Activity</td>
            <td align="center" width="94">56.4</td>
            <td align="center" width="94">60.8</td>
            <td align="center" width="94">60.9</td>
            <td align="center" width="94">58.7</td>
            <td align="center" width="95">57.7</td>
            <td align="center" width="95">57.2</td>
            <td align="center" width="95">57.6</td>
          </tr>
          <tr>
            <td class="firstcol" width="566">&nbsp;&nbsp; New Orders</td>
            <td align="center" width="94">54.4</td>
            <td align="center" width="94">58.3</td>
            <td align="center" width="94">58.0</td>
            <td align="center" width="94">57.8</td>
            <td align="center" width="95">56.6</td>
            <td align="center" width="95">56.3</td>
            <td align="center" width="95">57.0</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="566">&nbsp;&nbsp; Employment</td>
            <td align="center" width="94">57.5</td>
            <td align="center" width="94">56.3</td>
            <td align="center" width="94">51.4</td>
            <td align="center" width="94">46.5</td>
            <td align="center" width="95">53.5</td>
            <td align="center" width="95">52.4</td>
            <td align="center" width="95">49.8</td>
          </tr>
          <tr>
            <td class="firstcol" width="566">&nbsp;&nbsp; Supplier Deliveries
              (NSA)</td>
            <td align="center" width="94">52.5</td>
            <td align="center" width="94">48.5</td>
            <td align="center" width="94">49.0</td>
            <td align="center" width="94">51.0</td>
            <td align="center" width="95">50.6</td>
            <td align="center" width="95">51.9</td>
            <td align="center" width="95">52.2</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="566">Prices Index</td>
            <td align="center" width="94">58.0</td>
            <td align="center" width="94">56.1</td>
            <td align="center" width="94">56.9</td>
            <td align="center" width="94">62.3</td>
            <td align="center" width="95">59.3</td>
            <td align="center" width="95">65.1</td>
            <td align="center" width="95">61.4</td>
          </tr>
        </tbody>
      </table>
      </span>
    </p>
  


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The pump price for a gallon of regular gasoline surged 18 cents last week to $3.54 per gallon (1.6% y/y). That followed a 4 cent rise during the prior week. Prices remain down 34 cents per gallon since their September peak. The norm [...]

U.S. Gasoline and Crude Oil Prices Jump

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   <p><a href="/comment/130205j_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130205j.png"></a>
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      The <b>Composite Index for the service and construction sectors</b>
      from the Institute for Supply Management (ISM) matched expectations and
      slipped to 55.2 last month from a revised 55.7 during December. (Earlier
      figures were revised due to updated seasonal factors.) Since the series'
      inception in 1997 there has been a 75% correlation between the level of
      the nonmanufacturing composite index and the q/q change in real GDP for
      the service and the construction sectors. <span id="articletext"><b>Haver
      Analytics calculates an index</b> using the ISM nonmanufacturing and the
      ISM manufacturing sector index released last Friday. The figure was
      roughly unchanged m/m at 55.0. During the last ten years there has been a
      74% correlation between the composite and the quarterly change in real
      GDP.
      <p>Last month's nonmanufacturing index was supported by the employment
      component, which rose to 57.5, its highest level since February 2006.
      Since the series' inception in 1997 there has been an 88% correlation
      between the level of the ISM nonmanufacturing employment index and the m/m
      change in payroll employment in the service-producing plus the
      construction industries. The supplier delivery index also recovered to
      52.5, its highest level since May, indicating slower delivery speeds.
      Offsetting these improvements were declines in the business activity and
      new orders components. </p>
      <p>The prices index improved m/m to 58.0 but remained near its lowest
      level since July. An increased 23% of respondents reported higher prices
      while just 5% reported them lower. Since inception ten years ago, there
      has been a 65% correlation between the price index and the Q/Q change in
      the GDP services chain price index.</p>
      <p>Beginning with the January 2008 Nonmanufacturing <cite>Report On
      Business, </cite>the composite index is calculated as an indication of
      overall economic conditions for the non-manufacturing sector. It is a
      composite index based on the diffusion indices of four of the indicators
      (business activity, new orders, employment and supplier deliveries) with
      equal weights.</p>
      <p>The ISM data are available in Haver's <b>USECON</b> database. The
      expectations figure from ACTION ECONOMICS is in the <b>AS1REPNA </b>database.&nbsp;&nbsp;</p>
      
   <p><a href="/comment/130205l_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130205l.png"></a>
      <a href="/comment/130205m_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130205m.png"></a></p>
      
      <table class="centered" border="0" cellSpacing="0">
        <thead>
          <tr>
            <th class="firstcol" scope="col"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
              Nonmanufacturing Survey (SA)</a></th>
            <th scope="col">Jan</th>
            <th scope="col">Dec</th>
            <th scope="col">Nov</th>
            <th scope="col">Jan'12</th>
            <th scope="col">2012</th>
            <th scope="col">2011</th>
            <th scope="col">2010</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol">Composite Diffusion Index</td>
            <td>55.2</td>
            <td>55.7</td>
            <td>54.8</td>
            <td>56.0</td>
            <td>54.6</td>
            <td>54.5</td>
            <td>54.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">&nbsp;&nbsp; Business Activity</td>
            <td>56.4</td>
            <td>60.8</td>
            <td>60.9</td>
            <td>58.7</td>
            <td>57.7</td>
            <td>57.2</td>
            <td>57.6</td>
          </tr>
          <tr>
            <td class="firstcol">&nbsp;&nbsp; New Orders</td>
            <td>54.4</td>
            <td>58.3</td>
            <td>58.0</td>
            <td>57.8</td>
            <td>56.6</td>
            <td>56.3</td>
            <td>57.0</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">&nbsp;&nbsp; Employment</td>
            <td>57.5</td>
            <td>56.3</td>
            <td>51.4</td>
            <td>46.5</td>
            <td>53.5</td>
            <td>52.4</td>
            <td>49.8</td>
          </tr>
          <tr>
            <td class="firstcol">&nbsp;&nbsp; Supplier Deliveries
              (NSA)</td>
            <td>52.5</td>
            <td>48.5</td>
            <td>49.0</td>
            <td>51.0</td>
            <td>50.6</td>
            <td>51.9</td>
            <td>52.2</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">Prices Index</td>
            <td>58.0</td>
            <td>56.1</td>
            <td>56.9</td>
            <td>62.3</td>
            <td>59.3</td>
            <td>65.1</td>
            <td>61.4</td>
         </tr>
              </tbody>
            </table>
            </span>

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The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) matched expectations and slipped to 55.2 last month from a revised 55.7 during December. (Earlier figures were revised due to [...]

U.S. ISM Nonmanufacturing Index Improvement Stalls

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      <p></p>
      
      	  <p><a href="/comment/130205i_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130205i.png" align="left"></a>
           
      In January the European monetary Union's service sector index moved up sharply. Improvement was seen across most of the euro-Area. France and Italy are exceptions. In France the services PMI index fell to 43.57 from a value of 45.19 in December. In Italy, the service sector barometer fell to 43.89 from 45.56 in December. The reading for France's service sector has been lower than its current reading only 2% of the time. In Italy, the reading for the service sector has been lower only 8.7% of the time. But the euro Area's overall reading in January of 48.62 stands in the 20th percentile of its queue; it is higher than its January value 80% of the time. These are still very weak readings.
</p><p>
Germany is showing the most life in EMU. Its service sector index moved up to 55.69 in January from 52.4 in December. The 55.69 reading stands in the 78.5th percentile of the German index's queue. It is higher only about 20% of the time, a relatively strong standing.
</p><p>
In the bottom of the table we offer a look at consumer confidence readings; what you see in the confidence readings more or less echoes what the service sector is doing the top panel of the table. German confidence for example sits in the 52nd percent of its queue, while France is in the bottom 11%, Italy stands in the bottom 4% of its queue. The service sector has a lot to do with how consumers feel about the economy.
</p><p>
While the service sector data create a picture of the European Union, that its conditions are beginning to stabilize, some member countries are still unraveling. Even so there seems to be some stability in the area. 
</p><p>
But descriptions of EMU can vary by indicator. Retail sales data which are current through December continue to show outright declines. The volume of retail sales in December in the Zone fell by 0.8%.  It is falling at a 6.5% annual rate over three months and at a 2.3% annual rate over 12 months. Retail sales are showing progressively faster deterioration which is not the message in the PMI indices for EMU at all.
</p><p>
Similarly, automobile registrations are unraveling; they are down by 12.8% year-over-year but falling at a 29.6% annual rate over three months as of December. For countries reporting retail sales, all zone members are showing declines over three months except Spain where the volume of sales is up by 2.7% over three months but still down by 10% year-over-year. Germany, France, Italy, Spain, Portugal, Austria and Denmark all show declines in retail sales year-over-year. 
</p><p>
UK and Sweden, both EU members not EMU members, show retail sales volume up on the year, 0.3% for the UK and by 2.5% for Sweden. But both of them are still posting declines over three months.
</p><p>
Markets reacted positively to this better-than-expected economic data today. But there can be no doubt that the Zone is still fighting off some difficult problems. The ongoing decline in retail sales, a conventional economic report, tells what going on in the zone in real time and real data is not as good as the PMI's are suggesting- at least not yet. (Retail sales in December are not only declining but their drop is accelerating)  The purchasing manager reports which are indicators based on surveys of data from companies operating in the real world are showing some hopeful signs. They are often showing where conditions are headed next better than they assess how things are now. Even so, that is a hopeful message. The conditions they portray aren't as bad as they were. But the PMI reports are still very uneven. The overall EMU reading is still importantly affected by outsized strength in Germany, the region's largest economy. And indicators, not real economic reports, are giving off the relatively strongest signals. 
</p><p>
The chart depicting the profile of the various services PMI indices shows a very sharp turn up in Germany compared to the other EMU members. We have to be careful to remember that most of the zone is still languishing at much lower levels of PMI readings indicating contraction compared to Germany. There is a lot of work for EMU authorities to do regarding fiscal policy the banking sector and economic policy in general. Politics are still in a tangle in the Zone as well, making finding a solution even harder.
</p>
     	  
	  
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
   <tr>
    <th scope="col" colspan=8>EMU Services Sector</th>
  </tr>
  </thead>
  
    <tr class="even">
      <td class="firstcol"><b></b></td>
      <td><b>Jan-13</b></td>
      <td><b>Dec-12</b></td>
      <td><b>Nov-12</b></td>
      <td><b>3-mo</b></td>
      <td><b>6-mo</b></td>
      <td><b>12-Mo</b></td>
      <td><b>Queue-%</b></td>
    </tr>
<tr>
      <td class="firstcol" ><b>Euro-Area</b></td>
      <td>48.62</td>
      <td>47.82</td>
      <td>46.74</td>
      <td><b>47.73</b></td>
      <td><b>47.10</b></td>
      <td><b>47.44</b></td>
      <td>20.1%</td>
    </tr>    
<tr class="odd">
      <td class="firstcol" >Germany</td>
      <td>55.69</td>
      <td>52.04</td>
      <td>49.68</td>
      <td>52.47</td>
      <td>50.63</td>
      <td>51.07</td>
      <td>78.5%</td>
    </tr>
<tr>
      <td class="firstcol" >France</td>
      <td>43.57</td>
      <td>45.19</td>
      <td>45.80</td>
      <td>44.85</td>
      <td>45.55</td>
      <td>46.80</td>
      <td>2.0%</td>
    </tr>  
<tr class="odd">
      <td class="firstcol" >Italy</td>
      <td>43.89</td>
      <td>45.56</td>
      <td>44.60</td>
      <td>44.68</td>
      <td>44.75</td>
      <td>44.01</td>
      <td>8.7%</td>
    </tr>   
<tr>
      <td class="firstcol" >Spain</td>
      <td>46.98</td>
      <td>44.28</td>
      <td>42.40</td>
      <td>44.55</td>
      <td>43.17</td>
      <td>43.19</td>
      <td>30.9%</td>
    </tr>       
<tr class="odd">
      <td class="firstcol" >Ireland</td>
      <td>56.77</td>
      <td>55.75</td>
      <td>56.05</td>
      <td>56.19</td>
      <td>55.05</td>
      <td>52.96</td>
      <td>63.1%</td>
    </tr>      
<tr class="grey1">
      <td class="firstcol" ><b>EU Only</b></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
    </tr>
<tr>
      <td class="firstcol" >UK (CIPs)</td>
      <td>51.47</td>
      <td>48.94</td>
      <td>50.16</td>
      <td>50.19</td>
      <td>51.18</td>
      <td>52.08</td>
      <td>22.1%</td>
    </tr>         
<tr class="grey1">
      <td class="firstcol" >US NONFMG ISM</td>
      <td>#N/A</td>
      <td>55.70</td>
      <td>54.80</td>
      <td>#N/A</td>
      <td>#N/A</td>
      <td>#N/A</td>
      <td>#N/A</td>
    </tr>    
<tr>
      <td class="firstcol" colspan=8>Percentile is over range since May 2000</td>
    </tr>     
<thead>
   <tr>
    <th scope="col" colspan=8>EU Commission Indices for EU and EMU</th>
  </tr>
  </thead>
  <tbody>
    <tr class="even">
      <td class="firstcol"><b>EU Index</b></td>
      <td><b>Jan-13</b></td>
      <td><b>Dec-12</b></td>
      <td><b>Nov-12</b></td>
      <td><b>3-mo</b></td>
      <td><b>6-mo</b></td>
      <td><b>12-Mo</b></td>
      <td><b>Queue-%</b></td>
    </tr>    
<tr>
      <td class="firstcol" >EU Services</td>
      <td>-8</td>
      <td>-11</td>
      <td>-9</td>
      <td>-9.27</td>
      <td>-10.63</td>
      <td>-8.32</td>
      <td>9.4%</td>
    </tr>    
    <tr class="even">
      <td class="firstcol"><b>EMU</b></td>
      <td><b>Jan-13</b></td>
      <td><b>Dec-12</b></td>
      <td><b>Nov-12</b></td>
      <td><b>3-mo</b></td>
      <td><b>6-mo</b></td>
      <td><b>12-Mo</b></td>
      <td><b>Queue-%</b></td>
    </tr> 
<tr>
      <td class="firstcol" >Services</td>
      <td>-9</td>
      <td>-10</td>
      <td>-12</td>
      <td>-10.33</td>
      <td>-11.00</td>
      <td>-7.67</td>
      <td>12.1%</td>
    </tr>    
<tr>
      <td class="firstcol" >Cons Confidence</td>
      <td>-24</td>
      <td>-26</td>
      <td>-27</td>
      <td>-25.67</td>
      <td>-25.50</td>
      <td>-22.67</td>
      <td>9.4%</td>
    </tr>
<tr class="even">
      <td class="firstcol" colspan=7><b>Consumer Confidence by Country</b></td>
      <td><b>Queue-%</b></td>
    </tr>
<tr>
      <td class="firstcol" >Germany</td>
      <td>-8</td>
      <td>-10</td>
      <td>-10</td>
      <td>-9.40</td>
      <td>-9.43</td>
      <td>-5.48</td>
      <td>52.3%</td>
    </tr>            
<tr  class="odd">
      <td class="firstcol" >France</td>
      <td>-28</td>
      <td>-28</td>
      <td>-28</td>
      <td>-27.87</td>
      <td>-27.78</td>
      <td>-24.43</td>
      <td>11.4%</td>
    </tr>
<tr>
      <td class="firstcol" >Italy</td>
      <td>-37</td>
      <td>-38</td>
      <td>-40</td>
      <td>-38.53</td>
      <td>-38.22</td>
      <td>-36.78</td>
      <td>4.0%</td>
    </tr> 
<tr  class="odd">
      <td class="firstcol" >Spain</td>
      <td>-33</td>
      <td>-40</td>
      <td>-38</td>
      <td>-36.73</td>
      <td>-37.08</td>
      <td>-32.68</td>
      <td>11.4%</td>
    </tr>  
<tr>
      <td class="firstcol" >UK</td>
      <td>-16</td>
      <td>-17</td>
      <td>-14</td>
      <td>-15.77</td>
      <td>-17.82</td>
      <td>-19.64</td>
      <td>26.8%</td>
    </tr>                 
<tr>
      <td class="firstcol" colspan=8>Percentile is over range since May 2000</td>
    </tr>     
 </tbody>


        </html>

In January the European monetary Union's service sector index moved up sharply. Improvement was seen across most of the euro-Area. France and Italy are exceptions. In France the services PMI index fell to 43.57 from a value of 45.19 [...]

European Services PMIs Recover, But...

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	  <br>
      
      <span id="articletext">
      <p></p>

   <p><a href="/comment/130205e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130205e.png"></a>
      <a href="/comment/130205f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130205f.png"></a></p>

            <p>The <b>pump price for a gallon of regular gasoline surged 18
            cents</b> last week to $3.54 per gallon (1.6% y/y). That followed a
            4 cent rise during the prior week. Prices remain down 34 cents per
            gallon since their September peak. The norm for this time of year,
            when driving is reduced, is for prices to decline. Haver Analytics
            constructs seasonal factors to account for seasonal volatility and
            the adjusted price jumped 17 cents w/w to $3.77 per gallon. Since
            their October peak, prices are down 6 cents per gallon.</p>
            <p>The price for a barrel of <b>light sweet crude oil</b> also rose
            another $1.61 last week to $97.44 per barrel (-0.4% y/y) but
            yesterday prices slipped back to $96.14. Brent crude oil prices rose
            to $115.69 per barrel last week (4.0% y/y) and increased further to
            $116.84 yesterday.</p>
            <p><b>Natural gas </b>prices retreated last week to $3.27 per mmbtu
            (+32.5% y/y) but rose to $3.29 yesterday.</p>
            <p>The<b> demand for gasoline increased 3.0% y/y last week. </b>Residual
            fuel oil needs, used for heating, fell by roughly one-third y/y
            while distillate demand was off 6.3% y/y. Inventories of crude oil
            &amp; petroleum products rose 2.7% y/y.</p>
            <p>The energy price data are reported by the U.S. Department of
            Energy and can be found in Haver's <b>WEEKLY </b>database. The daily
            figures are in <b>DAILY</b> and the gasoline demand figures are in <b>OILWKLY.</b>&nbsp;
            </p>

   <p><a href="/comment/130205g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130205g.png"></a>
      <a href="/comment/130205h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130205h.png"></a></p>
      <p>&nbsp;</p>


<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
        <thead>
                <tr>
                  <th class="firstcol" scope="col" >Weekly Price</th>
                  <th scope="col" >02/02/13</th>
                  <th scope="col" >01/28/13</th>
                  <th scope="col" >01/21/13</th>
                  <th scope="col" >Y/Y%</th>
                  <th scope="col" >2012</th>
                  <th scope="col" >2011</th>
                  <th scope="col" >2010</th>
                </tr>
              </thead>
              <tbody>
                <tr>
                  <td class="firstcol" >Retail Regular Gasoline ($
                    per Gallon, Regular)</td>
                  <td  >3.54</td>
                  <td  >3.36</td>
                  <td  >3.32</td>
                  <td  >1.6</td>
                  <td  >3.62</td>
                  <td  >3.52</td>
                  <td  >2.78</td>
                </tr>
                <tr class="odd">
                  <td class="firstcol" >Light Sweet Crude Oil, WTI ($
                    per bbl.)</td>
                  <td  >97.44</td>
                  <td  >95.83</td>
                  <td  >94.54</td>
                  <td  >-0.4</td>
                  <td  >94.20</td>
                  <td  >95.14</td>
                  <td  >79.51</td>
                </tr>
                <tr>
                  <td class="firstcol" >Natural Gas ($/mmbtu)</td>
                  <td  >3.27</td>
                  <td  >3.52</td>
                  <td  >3.43</td>
                  <td  >32.5</td>
                  <td  >2.75</td>
                  <td  >3.99</td>
                  <td  >4.</td>
                </tr>
              </tbody>
            </table>
            </span>
         </body></html>

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

250501F20.jpg

250501G20.jpg

U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

250501H20.jpg

250501I20.jpg

- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

U.S. Light Vehicle Sales Fall in April

250501J5.jpg

250501K5.jpg

The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

Economy in Brief: February 2013

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