Tom Moeller

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<a href="/comment/100611f_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100611f.png"></a>The University of Michigan
indicated that its mid-June measure of consumer sentiment added to
earlier gains and rose to 75.5, its highest level since January 2008.
Since its low late in 2008 the measure has risen by more than
one-third. During the last ten years there has been an 89% correlation
between the level of sentiment and the y/y change in real consumer
spending.
The index of expected economic conditions led
last month's advance with a 2.8% increase to 70.7. The index was up
43.7% from the 2008 low. The readings for the expected change in
personal finances (-3.3% y/y) and expected five-year business
conditions (1.2% y/y) both improved. Expectations for business
conditions during the next year slipped (+14.5% y/y).
Sentiment about current economic conditions also
improved to the highest level since early-2008 and it was up 44.2% from
the 2008 low. The assessment of current personal finances continued its
steady improvement and buying conditions for large household goods,
including furniture, refrigerators, stoves &amp; televisions, rose
back to its highest level since early-2008&nbsp; (12.4%
y/y).
Expected price inflation during the next year
fell sharply m/m to 3.1% but remained up from the December 2008 reading
of 1.7%.&nbsp;Respondents' view of government policy, which may
eventually influence economic expectations, rose m/m to its highest
level since January but remained&nbsp; down sharply from its high
last May. Sixteen percent of respondents thought that a good job was
being done by government versus 36% who thought a poor job was being
done.

The Reuters/University of Michigan survey data are not seasonally
adjusted. The reading is based on telephone interviews with about 500
households at month-end. These results are based on about 320
interviews. The summary indexes are in Haver's USECON database
with details in the proprietary UMSCA database.


The "Inflation" in Inflation Targeting from
the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2010/el2010-17.html">here</a>.
<a href="/comment/100611g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100611g.png"></a>
<a href="/comment/100611h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100611h.png"> </a>

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM" ;="">University of Michigan</a> </th>

<th scope="col">Mid-June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Juney/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Consumer Sentiment </td>
<td>75.5</td>
<td>73.6</td>
<td>72.2</td>
<td>6.6%</td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">Current Conditions </td>
<td>82.9</td>
<td>81.0</td>
<td>81.0</td>
<td>13.3</td>
<td>69.6</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr>
<td class="firstcol">Expectations</td>
<td>70.7</td>
<td>68.8</td>
<td>66.5</td>
<td>2.2</td>
<td>64.1</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>

</html>

The University of Michigan indicated that its mid-June measure of consumer sentiment added to earlier gains and rose to 75.5, its highest level since January 2008. Since its low late in 2008 the measure has risen by more than one- [...]

U.S. Consumer Sentiment Gains Upward Momentum

Robert Brusca

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<a href="/comment/100611e_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100611e.png"></a>
The German harmonized inflation rate rose by 01% in May, Germany's
domestic headline inflation measure fell by 0.1% with the core up at a
sharp +0.5% offsetting last month's 0.4% drop. 
 Headline inflation in Germany is steadily
increasing with the annualized rate climbing over shortening time spans
at 1.2% over 12-mos, 1.3%over 6-mos and 2.6% over 12-mos. Core
inflation is still tempered at a 1.5% three-month pace in May. But it
is not showing clear acceleration as the 1.5% standing is higher than
both the Yr/Yr and the six-month pace but the six month pace shows
deceleration from 12-months. On balance there are some core pressures
but they are not as steady building as for headline inflation.
 How widespread is inflation's acceleration? Using
the main 11 categories in the table inflation is accelerating over
three-months compared to six months in 63% of the categories. It'
acceleration over six months compared to 12-months is only in only 36%
of the categories. It is accelerating Yr/Yr compared to the pace of one
year ago in 54% of the categories. On balance there is evidence of
inflation and it is most acute over three-months where the measurement
is the least reliable and most volatile. Apart from the 3-month
diagnostic, inflation's acceleration does not seem that sharp or
widespread. 
 One key for the ECB is going to be how to deal
with oil that has been booming and busting and wreaking havoc with
price trends and with inflation more generally. A second key will be to
see how it deals with all the financial distress in the region. There
is not only financial distress but national austerity plans in train.
With all of these negative growth shocks we would expect the ECB to be
a bit more inflation-tolerant than it might be in other times. But that
is still a question for the policymakers. After all, stimulus is being
breathed into the euro-economy by the ever weakening currency. And with
that comes some added inflation threat to counter the downside growth
risks. What will the ECB do? That is what we will be watching to see. I
expect temperance but I am ever wary. 



<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan=8 scope="col">German HICP and CPI details</th>
</tr></thead>

<td>&nbsp;</td>
<td colspan=3>Mo/Mo %</td>
<td colspan=3>Saar %</td>
Yr/Yr

<tr class="even">
<td>&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr
Ago</td>
</tr>
<tr>
<td class="firstcol">HICP Total</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>1.9%</td>
<td>1.1%</td>
<td>1.2%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.2%</td>
</tr>
<tr class="even">
<td colspan=8 class="firstcol">CPI
</td>
</tr>
<tr>
<td class="firstcol">All</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>0.6%</td>
<td style="color:red;">2.6%</td>
<td>1.3%</td>
<td>1.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">
CPIxF&amp;E</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>0.3%</td>
<td style="color:red;">1.5%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Food</td>
<td>-0.4%</td>
<td>0.6%</td>
<td>1.1%</td>
<td style="color:red;">5.2%</td>
<td>3.9%</td>
<td style="color:red;">1.1%</td>
<td>-1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Alcohol</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.1%</td>
<td>1.2%</td>
<td style="color:red;">3.1%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Clothing
&amp; Shoes</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>3.8%</td>
<td>1.2%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rent
&amp;Util</td>
<td>0.0%</td>
<td>0.5%</td>
<td>0.4%</td>
<td style="color:red;">3.3%</td>
<td>2.0%</td>
<td style="color:red;">1.0%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">Health
Care</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td style="color:red;">0.0%</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport</td>
<td>-0.7%</td>
<td>-0.2%</td>
<td>1.1%</td>
<td>0.7%</td>
<td>0.7%</td>
<td style="color:red;">4.1%</td>
<td>-3.9%</td>
</tr>
<tr>
<td class="firstcol">Communication</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.7%</td>
<td style="color:red;">-1.8%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rec
&amp;Culture</td>
<td>1.8%</td>
<td>-2.7%</td>
<td>1.0%</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">Education</td>
<td>-0.8%</td>
<td>-1.6%</td>
<td>-0.6%</td>
<td>-11.2%</td>
<td>-5.3%</td>
<td style="color:red;">-1.3%</td>
<td>-5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Restaurant
&amp; Hotel</td>
<td>0.4%</td>
<td>-1.0%</td>
<td>1.3%</td>
<td style="color:red;">2.6%</td>
<td style="color:red;">1.3%</td>
<td>1.1%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>0.2%</td>
<td>0.5%</td>
<td>0.0%</td>
<td style="color:red;">2.6%</td>
<td>-0.7%</td>
<td>0.8%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Diffusion</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td style="color:red;">63.6%</td>
<td>36.4%</td>
<td>54.5%</td>
<td>--&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">Type:</td>
<td colspan=3>Diffusion:
Current Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>



</html>

The German harmonized inflation rate rose by 01% in May, Germany's domestic headline inflation measure fell by 0.1% with the core up at a sharp +0.5% offsetting last month's 0.4% drop. Headline inflation in Germany is steadily [...]

German Inflation Perks Up; Core Rate In Mild Rebound From Lows

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<a href="/comment/100611d_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100611d.png" align="left"></a>
A slowing in growth: The overall OECD area leading indicator rose by
0.2% this month as the growth rate over three-months fell short of the
six month pace and the six month pace fell short of the 12-month pace. 
 Slowing is on schedule in some sense - The Yr/Yr
growth rates are still at very elevated rates. But the pace is
beginning to slow. Since we are looking at the highest growth rates for
these three leading countries on this measure since the early 1970s it
is not surprising that the pace is beginning to ratchet lower. Rarely
have the three key OECD regions/countries grown at a pace in excess of
what they are showing now. 
 Euro-Area is being stung by its debt problem
fallout: The euro-area indicator, however, isn&#8217;t just slowing. Its
indicator is actually dropping by 4.7% month-to-month. It is perhaps
the first real sign that Europe&#8217;s growth is being ensnared by the
geopolitical and debt problems of the region. Over three months the
OECD measure for the euro-area is up by just 1% at an annual rate. This
compares to a 4% pace for the entire OECD region and a 7% pace for the
US.
 The decelerations: Over six months the OECD
growth rates have fallen to about 60% of their 12 month pace. For Japan
and the US things are holding up better as Japan&#8217;s current growth over
six-months is 82% of its twelve-month pace and for the US it is 75% of
its twelve-month pace. But for the euro-area growth it is only 36% of
its
twelve-month pace over the last six-months. The OECD prefers to look at
six month growth rates and if we compare the current six month pace
(Apr 2010-Oct 2009) to the previous six-month pace (May2009 to Oct2009)
the OECD deceleration is even more stark with growth in the recent six
month period that is only 21% of growth in the previous six month
period.
 Prospects: On balance the revival of the OECD
region, judging from the leading indicator growth, has been excellent.
But the real proof is in the sort of recovery that develops, not the
strength of the indicator that precedes it. The sharp recent fall-off
of the euro-area index is a warning of another sort. The sorts of
variables that plug into leading indicators can be accurate harbingers
and they can also be the sorts of things that overreact to events.
Right now the euroarea is trying to sort out the nature of the
geopolitical and economic mess that it is in. There has been far more
contagion that has affected expectations and other sensitive variables
outside the zone that there will be transmission of weakness from the
Zone to theses same regions. I also believe that the financial element
of the crisis is overblown &#8211;a bit like reinjuring an old wound before
it is fully healed. It will take time to see how much actual economic
data are affected by these ongoing developments in the Zone and in
Europe. I think the OECD indices overstate the prospects for weakness
in Europe.

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>

<thead><tr>
<th scope="col" colspan="7">OECD Trend-restored
leading
Indicators</th>
</tr>
</thead><tbody>
<tr class="grey3">
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;" colspan="2">Growth:M/M</td>
<td style="font-weight: bold;" colspan="4">Growth
progression-SAAR</td>
</tr>
<tr class="even">
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">Apr-10</td>
<td style="font-weight: bold;">Mar-10</td>
<td style="font-weight: bold;">3Mos</td>
<td style="font-weight: bold;">6Mos</td>
<td style="font-weight: bold;">12mos</td>
<td style="font-weight: bold;">Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td style="color: red;">0.2%</td>
<td style="color: red;">0.3%</td>
<td style="color: red;">4.0%</td>
<td style="color: red;">5.9%</td>
<td>9.7%</td>
<td style="color: red;">-10.2%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td style="color: red;">-5.2%</td>
<td style="color: red;">0.3%</td>
<td style="color: red;">4.1%</td>
<td style="color: red;">6.2%</td>
<td>10.1%</td>
<td style="color: red;">-11.7%</td>
</tr>
<tr>
<td class="firstcol">OECD.Euro-Area</td>
<td style="color: red;">-4.7%</td>
<td style="color: red;">0.1%</td>
<td style="color: red;">1.0%</td>
<td style="color: red;">3.0%</td>
<td>8.2%</td>
<td style="color: red;">-9.9%</td>
</tr>
<tr>
<td class="firstcol">OECD.Japan</td>
<td style="color: red;">0.2%</td>
<td style="color: red;">0.4%</td>
<td style="color: red;">4.5%</td>
<td style="color: red;">7.5%</td>
<td>9.1%</td>
<td style="color: red;">-13.9%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td style="color: red;">0.5%</td>
<td style="color: red;">0.6%</td>
<td style="color: red;">7.0%</td>
<td style="color: red;">8.7%</td>
<td>11.6%</td>
<td style="color: red;">-12.4%</td>
</tr>
<tr class="even">
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;" colspan="2">Six
months</td>
<td style="font-weight: bold;" colspan="4">Six
month readings at 6-Mo Intervals:</td>
</tr>
<tr class="grey3">
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;" colspan="2">Change
in 6m avg</td>
<td style="font-weight: bold;">Recent six</td>
<td style="font-weight: bold;">6Mo Ago</td>
<td style="font-weight: bold;">12Mo Ago</td>
<td style="font-weight: bold;">18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td style="color: red;">4.6%</td>
<td style="color: red;">5.2%</td>
<td style="color: red;">5.9%</td>
<td>13.6%</td>
<td>-6.5%</td>
<td style="color: red;">-13.7%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td style="color: red;">4.8%</td>
<td style="color: red;">5.5%</td>
<td style="color: red;">6.2%</td>
<td>14.2%</td>
<td>-8.7%</td>
<td style="color: red;">-14.6%</td>
</tr>
<tr>
<td class="firstcol">OECD.Eur</td>
<td style="color: red;">3.7%</td>
<td>4.5%</td>
<td style="color: red;">3.0%</td>
<td>13.6%</td>
<td>-4.1%</td>
<td style="color: red;">-15.2%</td>
</tr>
<tr>
<td class="firstcol">OECD.Japan</td>
<td style="color: red;">5.0%</td>
<td style="color: red;">5.3%</td>
<td style="color: red;">7.5%</td>
<td>10.7%</td>
<td style="color: red;">-14.6%</td>
<td style="color: red;">-13.1%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td style="color: red;">5.6%</td>
<td style="color: red;">6.0%</td>
<td style="color: red;">8.7%</td>
<td>14.6%</td>
<td>-10.2%</td>
<td style="color: red;">-14.5%</</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">Slowdowns
indicated by BOLD RED</td>
</tr>
</tbody>
</table>

</body></html>

A slowing in growth: The overall OECD area leading indicator rose by 0.2% this month as the growth rate over three-months fell short of the six month pace and the six month pace fell short of the 12-month pace. Slowing is on schedule [...]

OECD Leading Indicators Move Up But Slow Down

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<a href="/comment/100611a_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100611a.png"></a> U.S. consumers took a break
during May from their shopping spree after the recession's end. Retail
sales declined 1.2% last month following an upwardly revised 0.6% April
rise. The drop disappointed Consensus expectations for a 0.2% increase.
Nevertheless, sales have risen 5.7% since the recession's end last June.
 Despite last month's already reported increase in
unit sales, retail purchases of motor vehicles fell 1.7% during May.
The y/y gain of 12.6%, however, is close to the gain in unit purchases.
Finally, sales at gasoline service stations fell 3.3% (+20.2% y/y). It
was further evidence that higher prices are discouraging gas usage
since prices fell just 0.4% m/m.
 Nonauto sales declined 1.1% after the 0.6% April
increase which was revised up slightly. The decline also disappointed
Consensus expectations for a 0.1% uptick. The shortfall was paced by a
9.3% drop (+3.1% y/y) in sales at building materials and hardware
stores.
 Also disappointing was "core" discretionary
spending. Apparel store sales declined 1.3% (+4.1% y/y) after a 0.7%
April decline. General merchandise store sales also fell by 1.1%
following a 0.2% slip during April. Working the other way, sales of
furniture, home furnishings &amp; electronics rose 0.8% (5.2% y/y)
and recovered most of the April decline. Furniture sales alone rose
1.0% (5.3% y/y) while a 0.6% increase (5.0% y/y) in sales of
electronics &amp; appliances recovered all of the April drop. Sales
by internet &amp; catalogue vendors ticked up 0.2% (15.2% y/y) but
April sales were revised sharply higher and rose 2.5%.&nbsp;Food
service sales ticked 
 The retail sales data are available in Haver's USECON
database.
 The latest Beige Book
covering regional economic conditions from the Federal Reserve Board
can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2010/20100609/fullreport20100609.pdf">here</a>
.
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<a href="/comment/100611c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100611c.png"></a>

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col"></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2009
</th><th scope="col">2008
</th><th scope="col">2007</th>
</tr></thead><tbody>
<tr class="even">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM" ;="">Total Retail Sales &amp; Food Services</a> (%)
</td>
<td>-1.2</td>
<td>0.6</td>
<td>2.1</td>
<td>6.8</td>
<td>-6.3</td>
<td>-1.0</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Excluding Autos</td>
<td>-1.1</td>
<td>0.6</td>
<td>1.2</td>
<td>6.1</td>
<td>-5.1</td>
<td>2.3</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">Non-Auto Less
Gasoline</td>
<td>-0.8</td>
<td>0.6</td>
<td>1.2</td>
<td>4.4</td>
<td>-1.9</td>
<td>1.2</td>
<td>3.5</td>
</tr>
</tbody>
</table>

</html>

U.S. consumers took a break during May from their shopping spree after the recession's end. Retail sales declined 1.2% last month following an upwardly revised 0.6% April rise. The drop disappointed Consensus expectations for a 0.2% [...]

U.S. Retail Spending Disappoints Across-the-Board

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The latest and revised
U.S. foreign trade figures paint the same picture as earlier. An April
deficit of $40.3B, stable since February, followed deterioration from
its shallowest last May. The latest figure roughly matched Consensus
expectations for a deficit of $41.0B.
The deficit's deterioration since last year
reflects the U.S. economic recovery. Non-oil imports slipped 0.7% in
April but it was the first monthly decline in nearly one year. The
21.1% y/y gain during the last twelve months reflects a two-thirds
increase in imports of automotive vehicles &amp; parts. Real
nonauto consumer goods imports rose 4.0% y/y while capital goods
imports jumped by nearly one-quarter with the strength in business
investment. Finally, services imports have risen 6.8% y/y. U.S. travels
abroad fell 0.7% y/y while passenger fares surged 15.0% y/y. "Other"
transportation services imports jumped 7.7% y/y. Imports of petroleum
products slipped marginally in April but were up by two-thirds from
last year with the surge in prices. 
Nominal exports slipped 0.7% during April
following their slightly-revised 3.8% jump during March. Year-to-year,
however, exports have risen a strong 19.9% with the dollar's lower
value. The monthly dip reflected a 5.3% drop in nonauto consumer goods
exports (+10.3% y/y) and a 7.6% drop in food &amp; beverages (+4.2%
y/y). These were offset by a 1.9% increase (50.3% y/y) in industrial
supplies exports and a 1.4% gain (+57.2% y/y) in autos. In addition,
exports of services rose 0.2% (8.0% y/y) as passenger fares were
strong. 
By country, the trade deficit with mainland China
deepened to $19.3B, its deepest since December. Trade with China surged
as exports jumped by one-quarter y/y and imports rose by a lesser
18.2%. The trade deficit with Japan eased to $4.8B but imports rose by
roughly one-third y/y with the U.S. economic recovery and exports rose
17.2% y/y. With the European Union the trade deficit eased to $5.7B as
exports rose 7.0% y/y and imports rose about the same.
The international trade data can be found in
Haver's USECON database. Detailed figures are
available in the USINT database.
<a href="/comment/100610c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100610c.png"></a><a href="/comment/100610d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100610d.png"></a>

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign Trade&nbsp;</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">U.S.
Trade Deficit</td>
<td>$40.3B</td>
<td>$40.0B</td>
<td>$40.1B</td>
<td>$28.4B(4/09)</td>
<td>$378.6B</td>
<td>$695.9B</td>
<td>$701.4B</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports
- Goods &amp; Services (m/m)</td>
<td>-0.7%</td>
<td>3.8%</td>
<td>-0.1%</td>
<td>19.9%</td>
<td>-14.6%</td>
<td>11.5%</td>
<td>13.2%</td>
</tr>
<tr>
<td class="firstcol">Imports
- Goods &amp; Services</td>
<td>-0.4</td>
<td>2.9</td>
<td>2.8</td>
<td>23.9</td>
<td>-23.3</td>
<td>8.0</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">
Petroleum</td>
<td>-0.0</td>
<td>6.0</td>
<td>7.4</td>
<td>67.5</td>
<td>-44.0</td>
<td>37.0</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">
Nonpetroleum Goods</td>
<td>-0.7</td>
<td>3.2</td>
<td>1.9</td>
<td>21.1</td>
<td>-20.9</td>
<td>1.5</td>
<td>4.8</td>
</tr>
</tbody>
</table>

</html>

The latest and revised U.S. foreign trade figures paint the same picture as earlier. An April deficit of $40.3B, stable since February, followed deterioration from its shallowest last May. The latest figure roughly matched Consensus [...]

U.S. Trade Deficit Stable M/M But Sharply Deeper Since Last Year

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The latest and revised
U.S. foreign trade figures paint the same picture as earlier. An April
deficit of $40.3B, stable since February, followed deterioration from
its shallowest last May. The latest figure roughly matched Consensus
expectations for a deficit of $41.0B.
The deficit's deterioration since last year
reflects the U.S. economic recovery. Non-oil imports slipped 0.7% in
April but it was the first monthly decline in nearly one year. The
21.1% y/y gain during the last twelve months reflects a two-thirds
increase in imports of automotive vehicles &amp; parts. Real
nonauto consumer goods imports rose 4.0% y/y while capital goods
imports jumped by nearly one-quarter with the strength in business
investment. Finally, services imports have risen 6.8% y/y. U.S. travels
abroad fell 0.7% y/y while passenger fares surged 15.0% y/y. "Other"
transportation services imports jumped 7.7% y/y. Imports of petroleum
products slipped marginally in April but were up by two-thirds from
last year with the surge in prices. 
Nominal exports slipped 0.7% during April
following their slightly-revised 3.8% jump during March. Year-to-year,
however, exports have risen a strong 19.9% with the dollar's lower
value. The monthly dip reflected a 5.3% drop in nonauto consumer goods
exports (+10.3% y/y) and a 7.6% drop in food &amp; beverages (+4.2%
y/y). These were offset by a 1.9% increase (50.3% y/y) in industrial
supplies exports and a 1.4% gain (+57.2% y/y) in autos. In addition,
exports of services rose 0.2% (8.0% y/y) as passenger fares were
strong. 
By country, the trade deficit with mainland China
deepened to $19.3B, its deepest since December. Trade with China surged
as exports jumped by one-quarter y/y and imports rose by a lesser
18.2%. The trade deficit with Japan eased to $4.8B but imports rose by
roughly one-third y/y with the U.S. economic recovery and exports rose
17.2% y/y. With the European Union the trade deficit eased to $5.7B as
exports rose 7.0% y/y and imports rose about the same.
The international trade data can be found in
Haver's USECON database. Detailed figures are
available in the USINT database.
<a href="/comment/100610c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100610c.png"></a><a href="/comment/100610d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100610d.png"></a>

<table cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign Trade&nbsp;</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">U.S.
Trade Deficit</td>
<td>$40.3B</td>
<td>$40.0B</td>
<td>$40.1B</td>
<td>$28.4B(4/09)</td>
<td>$378.6B</td>
<td>$695.9B</td>
<td>$701.4B</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports
- Goods &amp; Services (m/m)</td>
<td>-0.7%</td>
<td>3.8%</td>
<td>-0.1%</td>
<td>19.9%</td>
<td>-14.6%</td>
<td>11.5%</td>
<td>13.2%</td>
</tr>
<tr>
<td class="firstcol">Imports
- Goods &amp; Services</td>
<td>-0.4</td>
<td>2.9</td>
<td>2.8</td>
<td>23.9</td>
<td>-23.3</td>
<td>8.0</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">
Petroleum</td>
<td>-0.0</td>
<td>6.0</td>
<td>7.4</td>
<td>67.5</td>
<td>-44.0</td>
<td>37.0</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">
Nonpetroleum Goods</td>
<td>-0.7</td>
<td>3.2</td>
<td>1.9</td>
<td>21.1</td>
<td>-20.9</td>
<td>1.5</td>
<td>4.8</td>
</tr>
</tbody>
</table>
U.S. Initial Jobless
Insurance Claims Hover While Continuing Claims Plummet 
<a href="/comment/Moeller.html">Tom Moeller</a> June
10, 2010


<a href="/comment/100610e_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100610e.png" align="left"></a>Job market improvement has
been scant this year after material gains during 2009. The Bureau of
Labor Statistics reported that initial claims for jobless insurance
slipped another 3,000 to 456,000 following a 4,000 decline the week
earlier which was less than initially reported. While the latest figure
was slightly lower than Consensus expectations for 448,000, claims have
been hovering near this cycle's low since January. Nevertheless, last
week's figure was down from the recession peak of 651,000 reached in
March of 2009. The four-week moving average of initial claims ticked up
to 463,000.
Continuing claims for unemployment insurance
during the latest week broke from their recent sideways movement and
dropped a sharp 255,000 to the lowest level since December of 2008.
Claims were down by one-third from the June '09 peak. The overall
decline is a function of the improved job market but also reflects the
exhaustion of 26 weeks of unemployment benefits. Continuing claims
provide an indication of workers' ability to find employment. The
four-week average of continuing claims at 4.618M remained near the
cycle low. This series dates back to 1966.&nbsp;
The above-mentioned decline in ongoing
claims does not reflect those who receive extended benefits. Extended
benefits for unemployment insurance rose sharply in the latest week to
394,380 and it was the highest level since November.&nbsp;These
figures do not include the 4.995 mil. benefit recipients under state
administered "EUC" emergency&nbsp;programs, but paid for by the
Federal government.
The insured unemployment rate dipped to 3.5% from
an upwardly-revised 3.7%. The rate reached a high of 4.9% during May of
2009. During the last ten years, there has been a 96% correlation
between the level of the insured unemployment rate and the overall rate
of unemployment published by the Bureau of Labor Statistics.&nbsp;
The highest insured unemployment rates in the
week ending May 22 were in Puerto Rico (6.2 percent), Alaska (5.5),
Oregon (5.3), California (4.8), Nevada (4.7), Pennsylvania (4.6), North
Carolina (4.3), Wisconsin (4.2), Connecticut (4.1), New Jersey (4.0),
and Rhode Island (4.0). The lowest insured unemployment rates were in
Virginia (1.8), Texas (2.1), Tennessee (2.5), Wyoming (2.5), Georgia
(2.9), Maryland (2.9), Ohio (2.9), Maine (2.9) Florida (3.0) and New
York (3.2). These data are not seasonally adjusted but the overall
insured unemployment rate is.
The unemployment insurance
claims data is available in Haver's WEEKLY database
and the state data is in the REGIONW database.
Fostering
Workforce Development is yesterday's speech by Fed Chairman
Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20100609a.htm">here</a>.

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<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" ;="">Unemployment
Insurance (000s)</a></th>
<th scope="col">06/04/10</th>
<th scope="col">05/28/10</th>
<th scope="col">05/21/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>456</td>
<td>459</td>
<td>463</td>
<td>-233.6%</td>
<td>572</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,462</td>
<td>4,717</td>
<td>-31.8</td>
<td>5,809</td>
<td>3,340</td>
<td>2,549</td>
</tr>
<tr>
<td class="firstcol">Insured Unemployment Rate(%)</td>
<td>--</td>
<td>3.5</td>
<td>3.7</td>
<td>4.9 (6/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
Credit Market's Net Borrowing
Stabilizes in Q1, Following Year-Long Contraction 
<a href="/comment/Stone.html">Carol Stone</a> June
10, 2010



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Activity in U.S. credit markets
experienced a
relative recovery in Q1, as total liabilities contracted a mere $10.3
billion, SAAR.&nbsp; This was a sharp improvement from the $841.3
billion rate of shrinkage in Q4 2009 and the year's average reduction
of $610.6 billion.&nbsp; These debt aggregates come from the
Federal Reserve's flow-of-funds statistics reported today, June 10, for
Q1 2010.
By sector, the biggest change was in
nonfinancial corporations, which raised debt at a $289 billion annual
rate, turning around from the net paydown of $57 billion in
Q4.&nbsp; Companies had the largest amount of net commercial paper
issuance since Q3 of 2008 and the largest volume of net new corporate
bonds in a year. The federal government, as might be expected,
increased its debt issuance from $956 billion in Q4 to $1,446 billion
in Q1, both seasonally adjusted annual rates.&nbsp; 
Households, on the other hand, continued
paying down debt.&nbsp; Their home mortgage debt fell at a $390
billion rate and consumer credit at a $39 billion rate.&nbsp; With
some partial offsets in other borrowing, their total credit usage
dropped at a $330 billion pace.&nbsp; This contributed, as today's
press reports have noted, to a further gain in their net worth to $54.6
trillion on March 31 from $53.5 trillion at year-end.&nbsp; 
he financial sector extends its
contraction.&nbsp; The debt of commercial banks, finance companies
and specialized lenders fell at a $1,336 billion rate in Q1, a fifth
consecutive quarterly drop, albeit the smallest.&nbsp; The largest
was $2,293 billion in Q2 2009.&nbsp; Commercial banks and issuers
of asset-backed securities (ABS) had the largest paydowns of their own
debt among various financial institutions, and both of those, along
with money market funds, also continued to reduce their provision of
credit to their own customers.
The rest of the world borrowed modestly in U.S.
markets in Q1, $112 billion on balance.&nbsp; As investors, these
foreign participants in U.S. financing provided $663 billion in total
funds, more than accounted for by acquisition of Treasury
securities:&nbsp; official holdings increased at a $451 billion
annual rate and private foreign investors took on $339 billion
worth.&nbsp; There were obviously liquidations of several other
asset positions, especially including commercial paper and private
holdings of agency and GSE-backed securities.
The flow-of-funds data are in Haver's FFUNDS
database, and the series on Mortgage Equity Withdrawal are in USECON.
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<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstclass">Flow of Funds (Y/Y % Chg.)</th>
<th scope="col">% of Total Outstanding</th>
<th scope="col">Q1 '10
</th><th scope="col">4Q '09
</th><th scope="col">3Q '09
</th><th scope="col" colspan=3>End of Year
</th></tr></thead>
<tr class="grey2">
<td colspan=5>&nbsp;</td>
<td>2008</td>
<td>2007</td>
<td>2006</td>
</tr>
<tr>
<td class="firstcol">Total Credit Market Debt
Outstanding</td>
<td>100.0%</td>
<td>-1.5</td>
<td>-0.5</td>
<td>0.7</td>
<td>5.1</td>
<td>10.3</td>
<td>9.9</td>
</tr>
<tr class="odd">
<td class="firstcol">
Federal Government</td>
<td>15.9%</td>
<td>21.3</td>
<td>22.7</td>
<td>30.1</td>
<td>24.2</td>
<td>4.9</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">
Households</td>
<td>25.9%</td>
<td>-1.8</td>
<td>-1.7</td>
<td>-1.7</td>
<td>0.3</td>
<td>6.7</td>
<td>10.1</td>
</tr>
<tr class="odd">
<td class="firstcol">
Nonfinancial Corporate Business</td>
<td>13.8%</td>
<td>1.0</td>
<td>0.2</td>
<td>0.5</td>
<td>5.6</td>
<td>12.8</td>
<td>8.5</td>
</tr>
<tr>
<td class="firstcol">
Nonfarm, Noncorporate Business</td>
<td>6.7%</td>
<td>-8.3</td>
<td>-7.6</td>
<td>-5.1</td>
<td>5.3</td>
<td>14.2</td>
<td>14.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Sectors</td>
<td>28.7%</td>
<td>-12.0</td>
<td>-8.8</td>
<td>-5.8</td>
<td>5.6</td>
<td>13.4</td>
<td>10.0</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan=8>Trillions
of $</td>
</tr>
<tr>
<td class="firstcol">Net
Worth: Households &amp; Nonprofit Organizations</td>
<td>--</td>
<td>$54.565</td>
<td>$53.502</td>
<td>$52.974</td>
<td>$51,293</td>
<td>$64.358</td>
<td>$64.415</td>
</tr>
<tr class="odd">
<td class="firstcol">
Tangible Assets: Households</td>
<td>--</td>
<td>$22.994</td>
<td>$23.061</td>
<td>$23.081</td>
<td>$23.890</td>
<td>$28.037</td>
<td>$29.735</td>
</tr>
<tr>
<td class="firstcol">
Financial Assets: Households</td>
<td>--</td>
<td>$45.542</td>
<td>$44.510</td>
<td>$44.000</td>
<td>$41.668</td>
<td>$50.687</td>
<td>$48.124</td>
</tr>
<tr class="odd">
<td class="firstcol">
Total Liabilities: Households</td>
<td>--</td>
<td>$13.970</td>
<td>$14.068</td>
<td>$14.106</td>
<td>$14.265</td>
<td>$14.366</td>
<td>$13.444</td>
</tr>

</table>
U.S. Fiscal 'YTD Budget Deficit Narrows As
Receipt Decline Slows 
<a href="/comment/Moeller.html">Tom Moeller</a> June
10, 2010



<a href="/comment/100610e_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100610l.png" align="left"></a>The Federal government ran
a budget deficit last month of $135.9B. The shortfall pulled the YTD
deficit to $935.6B but that was slightly diminished from the first
eight months of&nbsp; FY'09. The deficit's decline year-to-date is
in line with the latest projection from the Nat'l Association For
Business Economists of a diminished $1.310 trillion for 2010.
A slowing shortfall in net revenues during the
first eight months of FY'10 helped ease the deficit. Individual
income tax receipts fell 7.8% y/y as the unemployment rate remained
elevated. The rate of decline, however, continued lower than the peak
29.0% at the end of last year. Corporate tax receipts rose 17.5% 'YTD
versus the first eight months of last fiscal year with improved
corporate profits, and the gain is accelerating. Year-to-date,
employment taxes fell 4.4% (just lightly lower than the peak rate of
decline) but unemployment insurance tax receipts improved by 13.4%
versus the first eight months of last fiscal year. Estate &amp;
gift taxes fell by nearly one-quarter this fiscal year.
Overall, net outlays fell 3.5% so far this fiscal
year versus FY'09 as a commerce &amp; housing credit expired.
"Income security" spending (11% of outlays) continued to jump by
nearly&nbsp; one-quarter while defense spending (19% of total
outlays) rose 6.1%. Social Security payments (21% of outlays) rose 3.3%
and net interest payments (5% of outlays) rose 9.6%. Medicare
expenditures (12% of outlays) rose 5.1% and other health care services
spending (10% of outlays) rose 11.2%. 
The Government's financial data are available in
Haver's USECON database, with extensive detail
available in the specialized GOVFIN.
Fix Double Leverage Problem
from the American Enterprise Institute can be found here <a href="http://www.aei.org/article/102168">here</a>.
<a href="/comment/100610e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100610m.png"></a>
<a href="/comment/100610e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100610n.png"></a>

<table cellspacing="0" width="100">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US
Government Finance</a> </th>
<th scope="col">May</th>
<th scope="col">FY 'YTD</th>
<th scope="col">FY 'YTD</th>
<th scope="col">FY 2009</th>
<th scope="col">FY 2008</th>
<th scope="col">FY 2007</th>
</tr></thead>
<tr>
<td class="firstcol">Budget Balance</td>
<td>$-135.9B</td>
<td>$-935.6B</td>
<td>--</td>
<td>$-1,417.1B</td>
<td>$-454.8B</td>
<td>$-161.5B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$146.8B</td>
<td>$1,346.0B</td>
<td>-2.0%</td>
<td>-16.6%</td>
<td>-1.7%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">Net Outlays</td>
<td>$282.7B</td>
<td>$2,281.6B</td>
<td>-3.5%</td>
<td>18.2%</td>
<td>9.1%</td>
<td>2.8%</td>
</tr>

</table>
</html>

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
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background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
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<body>

<a href="/comment/100609f_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609f.png"></a>
UK exports and imports each backtracked slightly in April after solid
to strong gains in March. The upshot is that the flirtation with
progress in deficit reduction has ground to halt and commenced a
backtracking over the last two months. This backtracking could be
reversed. This episode could be a pause in the process of ongoing
deficit reduction or it could be the start of some real backtracking.
For now it's too soon to tell. So we flash yellow cautionary lights
instead of red ones. 
 For now the trends in the UK data are still
beneficial ones for the prospect of further deficit reduction. Imports
are still growing solidly but steadily with growth rates of 10% to 13%
over various horizons from one-year to 3-months. For exports the growth
rates range from 13% to nearly 40% and the highest growth rates are
more recent ones. That suggests that export growth is still on a strong
track while imports are only steady. One worry of course is that with
the Euro weakened and the German export machine turned on UK exports
could suffer stiffer competition. But the pound has weakened even more
than the euro. Moreover, Germany has done nothing to pump up domestic
demand and the rest of Europe is under a cloud of austerity. Germany
itself is considering further austerity moves. 
 In looking at the UK situation we have three
facts to consider. One is that the trade deficit reduction process has
been under way since that reduction has been somewhat effective. The
second, is that the conditions that made that progress a reality seem
to still be in evidence as export momentum seems stronger than import
momentum over the more recent periods. The pound sterling has fallen in
value, augmenting UK competitiveness even Vs the euro-area. The third
point looks ahead: the macroeconomic facts of life seem to put the UK's
back to the wall. Although it can still do well in exporting to the US
which is growing solidly, the UK trade balance with the EMU group seems
more likely to pose challenges. EMU sends 12% of its exports to the UK.
It's an important market for EMU just as EMU is important to the UK.
Moreover, conditions in EMU will affect the UK. The broad euro real
effective exchange rate (trade-weighted and inflation adjusted) has
gone from being 20% above its estimated parity rate to near parity in
two years' time. There should be repercussions on trade flows from this
in trade with the Zone's key trading partners. But during this period
sterling has fallen sharply even against the Euro. The UK problem in
penetrating the e-Zone will not be price competitiveness but it will be
euro-demand. EMU growth is being stimulated by its trade flows riding
the back of its weak exchange rate, not stimulated from within by
domestic demand. In fact the UK deficit with EU countries widened to
&#163;3.3 billion in April, compared with a deficit of &#163;3.2 billion in
March. Exports rose by &#163;0.1 billion and imports rose by &#163;0.2 billion. A
weak European consumer - even in the Europe's strongest economy,
Germany - is the hurdle faced by UK exporters. Europe simply is not a
strong market even although UK exports can profitably sell there.


<table cellspacing="0" width="100%">
<colgroup><col> <col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan=6 scope="col">UK
Trade trends for goods</th>
</tr>
<tr>
<th scope="col">&nbsp;
</th><td scope="col" colspan="2">m/m%</td>
<td scope="col" colspan="3">% Saar</td>
</tr></thead><tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr>
<td class="firstcol">Balance*</td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.28 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.26 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
6.94 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.15 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
6.90 </td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=6>Exports
of Goods</td>
</tr>
<tr>
<td class="firstcol">All
Exp</td>
<td>-0.6%</td>
<td>1.0%</td>
<td>38.9%</td>
<td>13.3%</td>
<td>14.9%</td>
</tr>
<tr>
<td class="firstcol">Capital
gds</td>
<td>-1.3%</td>
<td>1.2%</td>
<td>3.1%</td>
<td>-3.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Road
Vehicles</td>
<td>11.5%</td>
<td>-3.2%</td>
<td>59.9%</td>
<td>22.5%</td>
<td>77.3%</td>
</tr>
<tr>
<td class="firstcol">Basic
Materials</td>
<td>-4.3%</td>
<td>18.8%</td>
<td>577.7%</td>
<td>52.5%</td>
<td>35.4%</td>
</tr>
<tr>
<td class="firstcol">Food
Feed Bev &amp; Tbco</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>32.8%</td>
<td>10.6%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol" >Other
Exports</td>
<td>-1.7%</td>
<td>0.8%</td>
<td>36.3%</td>
<td>14.1%</td>
<td>12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=6>Imports
of Goods</td>
</tr>
<tr>
<td class="firstcol">All
IMP</td>
<td>-0.4%</td>
<td>4.3%</td>
<td>12.9%</td>
<td>10.5%</td>
<td>11.6%</td>
</tr>
<tr>
<td class="firstcol">Capital
gds</td>
<td>2.6%</td>
<td>-0.1%</td>
<td>5.5%</td>
<td>15.8%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">Road
Vehicles</td>
<td>1.0%</td>
<td>5.1%</td>
<td>23.0%</td>
<td>24.0%</td>
<td>60.0%</td>
</tr>
<tr>
<td class="firstcol">Basic
Materials</td>
<td>-5.7%</td>
<td>6.1%</td>
<td>-4.7%</td>
<td>23.0%</td>
<td>19.7%</td>
</tr>
<tr>
<td class="firstcol">Food
Feed Bev &amp; Tbco</td>
<td>1.9%</td>
<td>1.7%</td>
<td>22.1%</td>
<td>-0.5%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">Other
Imports</td>
<td>-1.3%</td>
<td>5.3%</td>
<td>12.4%</td>
<td>8.9%</td>
<td>9.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan=6>*Stg
Blns; mo or period average. All
data are
seasonally adjusted</td>
</tr>
</tbody>
</table>

</body></html>

UK exports and imports each backtracked slightly in April after solid to strong gains in March. The upshot is that the flirtation with progress in deficit reduction has ground to halt and commenced a backtracking over the last two [...]

UK Trade Deficit Ceases Progress Toward Lower Deficits

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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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.

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- 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.

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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.

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**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.

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**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.

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**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.

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**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.

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**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.

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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.

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Charts of the Week: Tariff Truce, Tenuous Trust

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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.

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

Economy in Brief: June 2010

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U.S. Consumer Sentiment Gains Upward Momentum

German Inflation Perks Up; Core Rate In Mild Rebound From Lows

OECD Leading Indicators Move Up But Slow Down

U.S. Retail Spending Disappoints Across-the-Board

U.S. Retail Spending Disappoints Across-the-Board

U.S. Trade Deficit Stable M/M But Sharply Deeper Since Last Year

U.S. Trade Deficit Stable M/M But Sharply Deeper Since Last Year

UK Trade Deficit Ceases Progress Toward Lower Deficits