Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070611a.jpg" width="353">
France, Italy and Ireland reported industrial production data for April today. In all three countries, contrary to expectations, industrial production declined from March. France was down 0.77%; Italy, 0.81% and Ireland, 3.26%. These declines following the announcement last week of a 2.27% decline in Germany&#39;s April industrial production are beginning to raise concerns that growth in the Euro Area may be peaking. The first chart, showing industrial production in Germany, France, Italy and Ireland over the past eight years puts the April decline in perspective. It appears to be significant in Ireland and Germany, but merely a ripple in France and Italy where industrial production has varied very little during this period.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070611b.jpg" width="353">
The strength of the Euro, shown in the second chart, has dampened the demand for Euro Area exports of goods and services, and has undoubtedly affected the level of production adversely. Since exports of goods and services have amounted to 50% of Germany&#39;s GDP and roughly 30% of both France&#39;s and Italy&#39;s GDP, the rise in the euro has affected Germany&#39;s exports more than those of either France or Italy. In the first quarter national accounts, Net Exports of Goods and Services in Germany declined 1.16% while they increased 1.84% in France and 0.36% in Italy as shown in the third chart.
While exports are an important part of these economies, they are not the sole determinant of growth. It is too early, therefore, to suggest that Euro Area Growth is peaking on the basis of declines in industrial production that are largely due to a falling off in foreign demand. Domestic demand has begun to pick up and could offset some of the negative effects of a decline in exports.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070611c.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION &nbsp;(SA, 2000=100)&nbsp;</th>
<th scope="col">Apr 07</th>
<th scope="col">Mar 07&nbsp;</th>
<th scope="col">Apr 06</th>
<th scope="col">M/M%</th>
<th scope="col">Y/Y%</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France</td>
<td>103.6</td>
<td>104.4</td>
<td>101.9</td>
<td>-0.77</td>
<td>1.67</td>
<td>102.9</td>
<td>101.9</td>
<td>101.7</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>98.2</td>
<td>99.0</td>
<td>97.6</td>
<td>-0.81</td>
<td>0.61</td>
<td>98.8</td>
<td>96.3</td>
<td>97.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>142.3</td>
<td>147.1</td>
<td>134.5</td>
<td>-3.26</td>
<td>5.80</td>
<td>134.2</td>
<td>127.6</td>
<td>123.9</td>
</tr>
<tr>
<td class="firstcol"> Germany </td>
<td>114.1</td>
<td>116.7</td>
<td>110.0</td>
<td>-2.27</td>
<td>3.70</td>
<td>111.7</td>
<td>105.5</td>
<td>102.6</td>
</tr>
</tbody>
</table>
</body>
</html>

France, Italy and Ireland reported industrial production data for April today. In all three countries, contrary to expectations, industrial production declined from March. France was down 0.77%; Italy, 0.81% and Ireland, 3.26%. These [...]

ĀIs Growth in the Euro AreaĀpeaking? ĀĀ Ā

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070608b.jpg" width="353">
Industrial production in Turkey has declined in the last two reported months, but those follow a very strong performance in February. In total, IP dropped 1.9% and 3.4% in April and March, respectively, while it surged 6.4% in February. Total manufacturing output fell 3.0% in April and 3.9% in March, but February was up 7.5%. These are all month-to-month figures, seasonally adjusted by Haver Analytics. Data on Turkey are included in Haver&#39;s EMERGEMA database, with the Middle Eastern and African nations.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070608c.jpg" width="353">
As is evident from just the moves in the totals, Turkish industry behavior is not very smooth. Even the mature textile sector -- from the traditional rugs to high fashion, for instance -- has been growing recently, but fell hard in 2005. Newer sectors are more erratic still. Machinery production was down 2.8% in April and 13.1% in March, but it had surged by 22% during 2006.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070608d.jpg" width="353">
This said, the economy is a diverse one, with the traditional textiles now joined by a wide array of other sectors. Metals and machinery are notable as well as automobile production. Indeed, the auto and truck output have expanded rapidly, with a pace now of about 50,000 cars monthly and 30,000 trucks. The truck figures rival Germany and France and exceed the UK. [Those countries&#39; auto and truck output volumes are in Haver&#39;s G10+ database.] The diversity, of course, helps limit the lurches in total industrial production as strength in one sector can balance weakness elsewhere. And the Turkish economy as a whole is moving ahead. Its US-dollar equivalent GDP in 2000 prices was as large last year as those of Austria, Belgium and Switzerland and it is rapidly gaining on Sweden, all much more established. Of course, the standard of living of the average Turk remains a mere fraction of Belgians, Austrians and Swiss. But the growth is encouraging. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">TURKEY Industrial Production ( % Change)</th>
<th scope="col">Apr 2007*</th>
<th scope="col">Mar 2007*</th>
<th scope="col">Feb 2007*</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2000- 2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Industry</td>
<td>-1.9</td>
<td>-3.4</td>
<td>6.4</td>
<td>5.8</td>
<td>5.4</td>
<td>9.8</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>-3.0</td>
<td>-3.9</td>
<td>7.5</td>
<td>5.5</td>
<td>4.8</td>
<td>10.4</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Textiles</td>
<td>3.0</td>
<td>2.0</td>
<td>9.4</td>
<td>-1.1</td>
<td>-11.8</td>
<td>-1.5</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">Basic Metals</td>
<td>1.6</td>
<td>-1.0</td>
<td>3.9</td>
<td>10.7</td>
<td>3.4</td>
<td>11.6</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Machinery</td>
<td>-2.8</td>
<td>-13.1</td>
<td>4.4</td>
<td>22.0</td>
<td>1.2</td>
<td>31.0</td>
<td>5.7</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>-3.0</td>
<td>-10.3</td>
<td>5.2</td>
<td>9.7</td>
<td>9.6</td>
<td>53.3</td>
<td>0.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial production in Turkey has declined in the last two reported months, but those follow a very strong performance in February. In total, IP dropped 1.9% and 3.4% in April and March, respectively, while it surged 6.4% in [...]

Turkish Industrial Production Pauses after Earlier Surge; National Economy Expanding and Diversifying

Robert Brusca

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070608e.jpg" width="353">
Japan&#146;s economy watcher&#146;s survey cycled higher from late 2004 through early 2005. Then it dropped off until picking up to a minor peak in August 2006. From that mini- peak it spread out on a gradual increase until it fell sharply again in May, the figure reported today &#150; a sharp drop. 
The employment and future indexes are cycling in concert but with smaller amplitudes. 
The Teikoku indexes and NTC MFG survey echo the findings of weakness but the various surveys find weakness in differing magnitudes. See table below. 
The far right columns put the recent observations for each index or sub-reading in the context of its five year max or min. This allows us to compared intrinsically different indicators. 
Results show that the NTC MFG index is the weakest in the 30th percentile of its range for this period. Next in line comes the economy watcher index and its components with the headline index at 44.4% of its range. The Teikoku indices are the strongest with MFG relatively firm at a range reading of 75% (top 25% of its range) and with retail the relative weakest at 64% of its range. Wholesale services and construction are relatively healthy in the Teikoku scheme. Even so the Teikoku indices are dropping and all sectors dropped again in May. They made their local peak about one year and have been slipping slowly ever since.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Key Japanese Surveys
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>Feb-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
</tr>
<tr>
<td class="firstcol">Diffusion</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>46.8</td>
<td>49.7</td>
<td>50.8</td>
<td>49.2</td>
<td>44.4%</td>
<td>59.8%</td>
<td>65.6%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>50.7</td>
<td>57.1</td>
<td>56.3</td>
<td>55.9</td>
<td>35.6%</td>
<td>63.1%</td>
<td>59.7%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>50.0</td>
<td>51.9</td>
<td>51.3</td>
<td>52.1</td>
<td>52.9%</td>
<td>68.0%</td>
<td>70.6%</td>
</tr>
<tr>
<td class="firstcol">NTC MFG</td>
<td>51.4</td>
<td>52.3</td>
<td>--</td>
<td>--</td>
<td>30.2%</td>
<td>41.4%</td>
<td>43.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Econ Trends (Teikoku&#39;/50 neutral/weighted diffusion)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>45.2</td>
<td>47.0</td>
<td>47.2</td>
<td>46.7</td>
<td>76.2%</td>
<td>85.1%</td>
<td>86.2%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>39.6</td>
<td>41.1</td>
<td>41.1</td>
<td>39.9</td>
<td>64.3%</td>
<td>74.3%</td>
<td>74.3%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>42.8</td>
<td>44.3</td>
<td>44.6</td>
<td>43.8</td>
<td>75.6%</td>
<td>83.5%</td>
<td>85.8%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>49.1</td>
<td>50.3</td>
<td>49.9</td>
<td>49.4</td>
<td>88.4%</td>
<td>93.6%</td>
<td>92.2%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>37.7</td>
<td>38.4</td>
<td>38.7</td>
<td>38.7</td>
<td>84.4%</td>
<td>89.2%</td>
<td>91.2%</td>
</tr>
<tr>
<td colspan="8">100 is high; Zero is low</td>
</tr>
</tbody>
</table>
</body>
</html>

Japans economy watchers survey cycled higher from late 2004 through early 2005. Then it dropped off until picking up to a minor peak in August 2006. From that mini- peak it spread out on a gradual increase until it fell sharply [...]

Land of the Setting Sun? Japan’s Surveys Falter Again…

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070608a.jpg" width="353">
Lest the headline give you any misinformation let me point out that the US trade deficit is a nominal phenomenon and nominal exports did also outpace nominal imports. That is a necessary but not a sufficient condition to shrink the overall trade deficit in the US. Exports rose by 0.2% in April as imports sank by 1.9% as the bulk of the drop was outside of the petroleum complex of goods. 
Dropping imports is not a good sign for growth since imports tend to grow/shrink at twice the pace of GDP growth. Still imports also contain goods destined for inventories since so many consumer goods are imports and this may be a sign that the inventory cycle has not yet kicked up. That could mean that as of April inventories are still in a corrective phase and that they will not add to GDP or, not add much to 2007Q2 GDP. 
At 2% real import growth suggests GDP growth of 1% or less &#150; but the new quarter is young. 
Exports are less than 60% the size of imports (inverse ratio is nearly 1.75). That means that exports must grow by 1.75 times faster than nominal imports just to keep the nominal trade deficit from getting larger. While real exports are outpacing real imports and will augment REAL GDP the condition necessary for the nominal deficit to contract is a bit stronger: exports must grow by 1.75 times faster than imports. And over the past year or so that condition has been fulfilled. The deficit over the last 12 months has averaged -$61.81 while the deficit in April is a smaller -$58.50. The slowdown in US GDP has imparted a slowing to imports as import growth diminished to 4.8% Y/Y while exports grew by 10.7% Yr/Yr. However, recently exports have slowed and nonpetroleum imports have slowed as well (see table below). 
US trade trends are complex but telling. OPEC&#146;s own imports have slowed recently as oil prices had hit a plateau then fallen. But more recently yet, oil prices are on the rise and with it so will OPEC imports pick up again. This should mean that US exports to OPEC that had slowed will pick up as well even as higher oil prices bloat the US import total. 
US exports to China have slowed marked in early 2007 (no exhibit). In April Yr/Yr US exports to China ranked seventh out of nine since 1999. The Y/Y growth of exports to China is down to 12% in April after growing by 25% or more in each of the previous four 12-month periods ending in April. Earlier, US export figures for Jan-March show the same sort of gap with earlier years, except that Jan-March trade flows were very weak in comparison with this year as short a period ago as 2005. Early year weakness does not doom the trend for the year necessarily. But the weakness is a bit disconcerting and there is no guarantee of a reversal - still I think there is a likelihood that these exports to China will revive. 
China has been trying to slow but without much success. Rather than taking weak US exports to China as evidence of China slowing, it may be evidence of US slowing since there is also a good deal of round trip value-added trading between China and the US. Yr/Y US imports from China dropped to their lowest growth rate in NINE years in April at 2.7% Y/Y. <a name="1"></a> 
New trends show that: Technology exports and imports have slowed. Also oil prices at the time of import are now nearly the same as they have averaged over the past year: $57.29/bbl now compared to an average of $57.70/bbl. 
On the good news front: US exports to Japan received a boost in April. Their Yr/Yr growth rate ran up to 16.5% in April from 6.2% in March. A part of this is the favorable year ago comparison, however, as US exports to Japan fell by 2.6% Y/Y in April of 2006. Even so, US exports to Japan show more resilience even if they are at a lower growth rate that US exports to China or to the Asia NICs where Yr/Yr the growth rate of US export flows is dropping sharply. 
On balance there has been a slowing in US trade flows as the US economy has slowed. For a while it looked as though trade was confirming the domestic slowdown signals and that such signals could accumulate and become worrisome. But US employment growth has picked up and the inventory cycle seems to be winding itself down and in that context these slowing flows may simply be the lagged effects of that slowdown that seems to be transitioning into growth. Trade flows do lag. But we must remember that as much as US imports are tied to US growth, so US growth is still an important stimulant for global growth. The US and its hated deficit has been an engine of growth for the rest of the world; that role was reduced in the past year when the nominal US deficit actually shrank and that may have contributed to slower global growth. 
The OECD leading indicators (released today) show that growth in the US is on an upswing and points to still solid trends in China (albeit through March not April). Germany, Italy and Japan are flagged as slowing in the OECD framework though US exports to Japan seem to be a reason to cast some of those fears aside there. 
Trade, after having taken a big bite out of Q1 GDP seems to have become a mild positive for the US economy. Of course, a good deal of the reason for trade&#146;s more moderate role has been the slowing in US growth itself. Trade is one of the automatic stabilizers you may recall from your econ 101 studies. As the economy picks up trade will likely become more of a negative again, although probably by less than before because the US growth potential now seems lower. That will make imports slower and reduce their &#145;feedback&#146; drag on growth. The outlook for US exports, is, however, still questionable. There are again some scattered signs of slowing in Europe but mostly from Germany and they are new, scattered, and not pronounced, so far. Our best guess is that trade&#146;s drag is not going to be reduced and that If European growth lives up to its forecasts trade could continue to be a positive for growth in the US. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
US Merchandise and Services Trade
</tr>
</thead>
<tbody>
<tr class="grey6">
<td class="firstcol">Category</td>
<td>Current</td>
<td>Previous</td>
<td colspan="3">$SA % SAAR/Average</td>
</tr>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td colspan="2">% M/M: Current &amp; Prev</td>
<td colspan="3"></td>
</tr>
<tr class="grey5">
<td class="firstcol">Apr.07</td>
<td>M:$Bil/%</td>
<td>M:$Bil/%</td>
<td>3-MO</td>
<td>6-MO</td>
<td>Yr/Yr</td>
</tr>
<tr class="grey4">
<td class="firstcol">Goods &amp; Services Balance</td>
<td>-$58.50</td>
<td>-$62.39</td>
<td>-$59.49</td>
<td>-$59.01</td>
<td>-$61.81</td>
</tr>
<tr class="grey4">
<td class="firstcol">Goods Balance</td>
<td>-$67.08</td>
<td>-$70.74</td>
<td>-$67.77</td>
<td>-$67.13</td>
<td>-$69.16</td>
</tr>
<tr class="grey3">
<td class="firstcol">Exports (G&amp;S)</td>
<td>0.2%</td>
<td>2.6%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>10.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Merchandise</td>
<td>0.1%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>6.7%</td>
<td>10.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Services</td>
<td>0.5%</td>
<td>2.2%</td>
<td>12.3%</td>
<td>11.1%</td>
<td>11.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Imports (G&amp;S)</td>
<td>-1.9%</td>
<td>4.4%</td>
<td>7.6%</td>
<td>5.8%</td>
<td>5.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Merchandise</td>
<td>-2.2%</td>
<td>5.0%</td>
<td>8.2%</td>
<td>5.9%</td>
<td>4.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Non-Petrol</td>
<td>-2.4%</td>
<td>2.2%</td>
<td>7.4%</td>
<td>1.3%</td>
<td>4.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Petrol &amp; Product</td>
<td>-0.2%</td>
<td>18.4%</td>
<td>1.6%</td>
<td>29.9%</td>
<td>4.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Services</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>4.7%</td>
<td>5.0%</td>
<td>5.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Technology Trade</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">Tech Exports</td>
<td>-14.7%</td>
<td>24.6%</td>
<td>-4.0%</td>
<td>-14.4%</td>
<td>4.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Tech Imports</td>
<td>-6.4%</td>
<td>14.9%</td>
<td>-2.5%</td>
<td>-13.4%</td>
<td>17.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Crude Oil</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">MBD (Volume):Mb/d</td>
<td>10.16</td>
<td>10.46</td>
<td>9.88</td>
<td>9.90</td>
<td>10.22</td>
</tr>
<tr class="grey4">
<td class="firstcol">$/BBL</td>
<td>$57.28</td>
<td>$53.00</td>
<td>$53.66</td>
<td>$53.21</td>
<td>$57.70</td>
</tr>
<tr class="grey2">
<td class="firstcol">Non Petroleum trade</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">Exports</td>
<td>-0.1%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>7.9%</td>
<td>11.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Imports</td>
<td>-2.4%</td>
<td>2.2%</td>
<td>7.4%</td>
<td>1.3%</td>
<td>4.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance</td>
<td>-$42.29</td>
<td>-$45.51</td>
<td>-$44.38</td>
<td>-$43.96</td>
<td>-$44.82</td>
</tr>
<tr class="grey1">
<td colspan="6">Real Exports and Imports: Non-Petroleum trade</td>
</tr>
<tr class="grey4">
<td class="firstcol">Real Non Oil Exports</td>
<td>-0.3%</td>
<td>3.6%</td>
<td>1.2%</td>
<td>3.6%</td>
<td>7.3%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Real Non Oil Imports</td>
<td>-2.6%</td>
<td>2.1%</td>
<td>6.2%</td>
<td>-1.7%</td>
<td>1.8%</td>
</tr>
<tr class="grey4">
<td colspan="6">Balances are in Bil averages for period: Others % annualized except monthly</td>
</tr>
</tbody>
</table>
</body>
</html>

Lest the headline give you any misinformation let me point out that the US trade deficit is a nominal phenomenon and nominal exports did also outpace nominal imports. That is a necessary but not a sufficient condition to shrink the [...]

U.S. Trade Deficit Shrinks Real Exports Outpace Real Imports

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070607e.jpg" width="353">
As prices are sustained at stratospheric levels, we&#39;re all learning the mechanics of gasoline production. Special conditions that matter little at $1.00/gallon become significantly more important at $3.00. It&#39;s also hard to know what represents ordinary supply-demand movement and what is a &quot;special condition&quot;.
The Energy Information Administration of the Department of Energy (EIA) publishes its weekly petroleum situation every Wednesday, with gasoline prices measured through the Monday just before and other data taken as of the previous Friday. In this week&#39;s report, released yesterday morning, the national average retail price of &quot;regular grade&quot; gasoline fell -- that&#39;s &quot;fell&quot; -- in the week to June 4 by 5.2 cents to $3.157/gallon. The prior week, which included the Memorial Day weekend, saw a minuscule 0.9-cents decline. Small though this was, it is notable that the price did not rise further despite the holiday weekend driving.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070607b.jpg" width="353">
We last checked in with the energy markets three weeks ago, and we highlighted the light inventory situation for gasoline, unusual for the post-winter season, which has pushed gasoline prices to record highs. We attributed this to demand conditions that weren&#39;t nearly as weak this winter as has traditionally been the case. It&#39;s also evident from the second graph that even as demand for gasoline has grown, refiners have not been able to keep up. We show refining capacity utilization and we&#39;ve drawn a line at 90%. Almost continuously since the middle of 1993, utilization has been well above this reference line. If we graph the variable with bars, they point up and down around the &quot;horizontal reference&quot;. We see easily then that Hurricanes Katrina and Rita hurt refiners badly, and it&#39;s clear that refinery utilization rates have remained well below our reference point even as they have increased somewhat over the last few weeks. Thus, refining has not recovered from those big 2005 storms, leaving the industry -- and prices -- more vulnerable to ordinary operating outages.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070607d.jpg" width="353">
Another quirk in these data concerns the relationship between prices of various crudes, especially the US base, West Texas Intermediate (WTI) as delivered at Cushing, Oklahoma. As the EIA explain in <a href="http://tonto.eia.doe.gov/oog/info/twip/twiparch/070502/twipprint.html">This Week in Petroleum</a> for May 2, conditions regarding the oil itself and also the operation of the Cushing Hub have depressed the price of WTI relative to other oils. In the third graph, WTI is seen to be lower over the last 3 months or so than Brent and Indonesian oil, which are both &quot;heavier&quot; and should have lower prices than WTI. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070607c.jpg" width="353">So when the price of gasoline has risen more than proportionately to the crude oil we&#39;re most familiar with, it may not be so much that refiners are trying to gouge their customers. In fact, the &quot;crack spread&quot; for Brent crude, while still high by past comparisons, has come down markedly from its recent levels. A similar measure for WTI fell last week, but it remains about $5 more per barrel than Brent, when the usual condition has been for the WTI crack spread to be marginally less than the Brent spread (since the crude is usually more expensive to begin with). As we noted at the beginning of this commentary, it makes one wonder if this mismatch of WTI and Brent (and other crude oils) is a &quot;special condition&quot; to be discounted as temporary, or is it a characteristic of the increasing supply/demand strains in the world energy market and in the US in particular? In that event, both energy suppliers and users would want factor the new relationships into their operating strategies.
The data here on prices and US inventories are in the OILWKLY database. Haver Analytics analysts perform seasonal adjustment on some demand and supply series; these are maintained in our WEEKLY database. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Select Oil Market Indicators</th>
<th scope="col">June 4</th>
<th scope="col">May 28</th>
<th scope="col">May 21</th>
<th scope="col">Month- Ago Week</th>
<th scope="col">Year-Ago Week</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gasoline, US Regular Grade (cents/gal)</td>
<td>315.7</td>
<td>320.9</td>
<td>321.8</td>
<td>305.4</td>
<td>289.2</td>
<td>257.2</td>
<td>227.0</td>
</tr>
<tr>
<td class="firstcol">Crude Oil: West Texas Intermediate ($/barrel)</td>
<td>June 1</td>
<td>May 25</td>
<td>May 18</td>
<td>63.79</td>
<td>71.50</td>
<td>66.13</td>
<td>56.50</td>
</tr>
<tr class="odd">
<td class="firstcol">63.94</td>
<td>64.94</td>
<td>63.61</td>
</tr>
<tr>
<td class="firstcol"> UK Brent &nbsp;</td>
<td>68.91</td>
<td>70.32</td>
<td>66.92</td>
<td>66.92</td>
<td>69.43</td>
<td>65.19</td>
<td>54.58</td>
</tr>
<tr class="odd">
<td class="firstcol">Refinery Utilization (%)</td>
<td>89.63</td>
<td>91.08</td>
<td>91.10</td>
<td>89.03</td>
<td>90.97</td>
<td>89.36</td>
<td>90.35</td>
</tr>
<tr>
<td class="firstcol">Gasoline Stock: Days&#39; Supply</td>
<td>21.3</td>
<td>21.0</td>
<td>21.0</td>
<td>20.9</td>
<td>22.5</td>
<td>22.7</td>
<td>22.8</td>
</tr>
</tbody>
</table>
</body>
</html>

As prices are sustained at stratospheric levels, we're all learning the mechanics of gasoline production. Special conditions that matter little at $1.00/gallon become significantly more important at $3.00. It's also hard to know what [...]

Slight Relief for Gasoline Prices as Inventories Loosen. But What Is Happening to West Texas Intermediate?

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070607a.jpg" width="353">
Wholesale inventory trends tell a very positive story. We take out the volatile and special readings from autos and petroleum to look at aggregated stocks and sales trends for all other wholesale classifications. Once done we obtain the chart plotted on the left that shows sales have speeded up as inventories have slowed. They have done that now for the second month in a row on six-month trends. Moreover, it shows that the ramping down in inventories has hit a low and apparent turning point in its decelerating rate of growth, yet another indication that the industry might be through its adjustment phase. 
The table below on inventories and sales behavior provides industry detail and time horizon cohorts for that detail. Over three months all main categories, save two, show that sales growth has surpassed inventory growth. The trend of sales (S) outstripping inventories (I) is widespread. Indeed, the two categories that have sales growth above inventory growth are not deficient in their rate of growth by much. Six-month horizons also are very solid. The S&gt;I growth trend seems pretty solid and well-established for now. 
Additionally the I/S ratios are in good shape. The overall ratio for all of wholesaling is at a new low dating back to 1998. Durables excluding autos are in their bottom 18 percentile and for nondurables excluding petroleum the ratio is in its bottom 10 percentile. 
Conclusion: Overall inventories are in good shape relative to sales. The recent growth rates of inventories relative to sales are settled into a good set of relationships as well. And best of all is the fact that sales growth is on an uptrend. The wholesale report is quite constructive and upbeat.

<table border="0" cellspacing="0" width="100%">
<colgroup><col></colgroup>
<thead>
<tr>
Inventories: Wholesaling
<th scope="col">I:S ratio</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">All growth rates annualized</td>
<td colspan="6">Inventory-&amp;-Sales Trends: Wholesalers</td>
<td>Percent of</td>
</tr>
<tr class="odd">
<td class="firstcol">2007.Apr</td>
<td colspan="2">3-mos</td>
<td colspan="2">6-mos</td>
<td colspan="2">12-mos</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Sales</td>
<td>Inventories</td>
<td>Sales</td>
<td>Inventories</td>
<td>Sales</td>
<td>Inventories</td>
<td>1998-date</td>
</tr>
<tr>
<td class="firstcol">All Wholesaling</td>
<td>19.3%</td>
<td>4.3%</td>
<td>12.8%</td>
<td>4.6%</td>
<td>8.8%</td>
<td>7.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Durables</td>
<td>9.2%</td>
<td>-1.7%</td>
<td>7.2%</td>
<td>0.4%</td>
<td>7.8%</td>
<td>5.2%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Durables less autos</td>
<td>9.2%</td>
<td>2.2%</td>
<td>7.0%</td>
<td>3.0%</td>
<td>7.6%</td>
<td>7.8%</td>
<td>19.1%</td>
</tr>
<tr>
<td class="firstcol">Autos</td>
<td>9.4%</td>
<td>-21.0%</td>
<td>8.0%</td>
<td>-13.1%</td>
<td>8.7%</td>
<td>-7.6%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">Computers</td>
<td>3.6%</td>
<td>5.1%</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>5.4%</td>
<td>10.6%</td>
<td>38.3%</td>
</tr>
<tr>
<td class="firstcol">Machinery</td>
<td>3.5%</td>
<td>-2.5%</td>
<td>8.4%</td>
<td>2.3%</td>
<td>5.7%</td>
<td>7.7%</td>
<td>33.0%</td>
</tr>
<tr>
<td class="firstcol">Other Durables</td>
<td>11.8%</td>
<td>4.2%</td>
<td>7.8%</td>
<td>3.5%</td>
<td>8.5%</td>
<td>7.6%</td>
<td>14.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Non-durables</td>
<td>29.9%</td>
<td>15.7%</td>
<td>18.6%</td>
<td>12.4%</td>
<td>9.7%</td>
<td>10.4%</td>
<td>5.2%</td>
</tr>
<tr>
<td class="firstcol">Non-durables less Petrol</td>
<td>17.0%</td>
<td>12.2%</td>
<td>12.3%</td>
<td>12.9%</td>
<td>9.8%</td>
<td>11.0%</td>
<td>9.6%</td>
</tr>
<tr>
<td class="firstcol">Petroleum</td>
<td>94.5%</td>
<td>58.5%</td>
<td>46.4%</td>
<td>8.2%</td>
<td>9.3%</td>
<td>4.7%</td>
<td>45.2%</td>
</tr>
<tr>
<td class="firstcol">Groceries</td>
<td>21.7%</td>
<td>23.4%</td>
<td>21.8%</td>
<td>20.7%</td>
<td>15.3%</td>
<td>17.1%</td>
<td>50.4%</td>
</tr>
<tr>
<td class="firstcol">Other Non-durables</td>
<td>15.0%</td>
<td>9.6%</td>
<td>8.5%</td>
<td>11.0%</td>
<td>7.7%</td>
<td>9.6%</td>
<td>11.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

Wholesale inventory trends tell a very positive story. We take out the volatile and special readings from autos and petroleum to look at aggregated stocks and sales trends for all other wholesale classifications. Once done we obtain [...]

U.S. Wholesale Inventories Signal Smoother Sailing

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Tom Moeller

250502A5.jpg

250502B5.jpg

Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

250502C5.jpg

250502D5.jpg

The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

250502X5.jpg

250502F5.jpg

- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

250502F32.jpg

250502G32.jpg

Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

250502H32.jpg

250502I32.jpg

- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

250502E.jpg

The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

250502.jpg

Globally Manufacturing Weakens

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.

Economy in Brief: June 2007

Jump to:

ĀIs Growth in the Euro AreaĀpeaking? ĀĀ Ā

ĀIs Growth in the Euro AreaĀpeaking? ĀĀ Ā

Turkish Industrial Production Pauses after Earlier Surge; National Economy Expanding and Diversifying

Land of the Setting Sun? Japan’s Surveys Falter Again…

U.S. Trade Deficit Shrinks Real Exports Outpace Real Imports

U.S. Trade Deficit Shrinks Real Exports Outpace Real Imports

Slight Relief for Gasoline Prices as Inventories Loosen. But What Is Happening to West Texas Intermediate?

U.S. Wholesale Inventories Signal Smoother Sailing