Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050509a.jpg" width="353">
The Weekly Leading Index of the US economy from the Economic Cycle Research Institute (ECRI) fell 0.2% in the latest period and it was the fifth decline since mid-March. The six month growth rate of 3.0% continued to signal economic expansion though it was down from the recent high of 3.9%.
Higher claims for jobless insurance and weaker commodity prices contributed to the index&#39;s decline offset somewhat by a rise in mortgage applications and lower interest rates.
During the last ten years there has been a 69% correlation between six-month growth in the ECRI leading index and two quarter growth in real U.S. GDP.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The ECRI Leading Index&#39;s recent pattern generally mirrors the Conference Board&#39;s Index of Leading Economic Indicators, with a slight lead. Construction of the ECRI Leading Index differs from the Conference Board Index but there has been a 70% correlation between the y/y percent change in the two series over the last 10 years.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months.
The latest from ECRI is available <a href="http://www.businesscycle.com/">here</a>.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI Leading Index</a></th>
<th scope="col">04/29/05</th>
<th scope="col">04/22/05</th>
<th scope="col">Growth Rate</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Weekly</td>
<td>134.4</td>
<td>134.7</td>
<td>3.0%</td>
<td>4.2%</td>
<td>6.6%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>April</td>
<td>Mar</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly</td>
<td>134.9</td>
<td>135.4</td>
<td>3.3%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
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The Weekly Leading Index of the US economy from the Economic Cycle Research Institute (ECRI) fell 0.2% in the latest period and it was the fifth decline since mid-March. The six month growth rate of 3.0% continued to signal economic [...]

ECRI Leaders' Forward Momentum Down

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050506d.jpg" width="353">
The Canadian economy also experienced job growth in April, with a total employment gain of 29,300, following a slim 4,400 rise in March. The great part of the April move was in service industries, as the number of workers in the goods sector held just about steady. From a year ago, employment increased 1.4%, indicating some slowing after a 2% average annualized rate of increase over the past three years.
In the goods sectors, April&#39;s flat result was the net of a nearly offsetting rise in construction jobs and fall in manufacturing. These same two have maintained this kind of pattern over the last year as well. In service industries, firm uptrends are evident in trade, finance, professional services and education. Transportation, health care and accommodations and food service are losing jobs, although the declines in the latter two are quite modest. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050506c.jpg" width="353">
The unemployment rate in Canada has continued its declining trend begun in late 2003. The 6.8% in April is the lowest since the same level in December 2000. While this might suggest recent strength in the Canadian labor market, optimism must be tempered by the fact that employment growth has been slower. In fact, the inroads on the reported unemployment rate come from lower labor force participation. While employers are adding new jobs at a slower pace, people are pulling back somewhat from wanting jobs in the first place. This is reflected in the reduction in the participation rate by 0.4% from its 2004 average of 78.2% of the working-age population to 77.8% in April. Had participation remained at that level, calculations indicate that the labor force would have been nearly 80,000 larger in April and the resulting unemployment rate would not have declined.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CANSIM/CANSIM.HTM">Canada</a></th>
Mo/Mo Change, 000s
<th scope="col">Yr/Yr % Apr 2005 </th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Apr 2005</td>
<td>Mar 2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Employment*</td>
<td>29.3</td>
<td>4.4</td>
<td>1.4%</td>
<td>1.5%</td>
<td>1.9%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods - Producing* </td>
<td>0.4</td>
<td>10.8</td>
<td>0.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>6.3%</td>
</tr>
<tr>
<td class="firstcol">Service - Producing*</td>
<td>28.9</td>
<td>-6.3</td>
<td>1.5%</td>
<td>1.2%</td>
<td>2.6%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Labor Force**</td>
<td>-5.6</td>
<td>-8.2</td>
<td>0.7%</td>
<td>1.1%</td>
<td>1.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate**</td>
<td>6.8%</td>
<td>7.0%</td>
<td>Apr 2004</td>
<td colspan="3">Annual Average</td>
</tr>
<tr class="odd">
<td class="firstcol">7.3%</td>
<td>7.2%</td>
<td>7.7%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">Participation Rate**</td>
<td>77.8%</td>
<td>78.0%</td>
<td>78.3%</td>
<td>78.2%</td>
<td>78.1%</td>
<td>77.4%</td>
</tr>
</tbody>
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The Canadian economy also experienced job growth in April, with a total employment gain of 29,300, following a slim 4,400 rise in March. The great part of the April move was in service industries, as the number of workers in the goods [...]

Some Employment Gains in Canada, But Lower Unemployment Reflects Reduced Participation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050506a.jpg" width="353">
April non-farm payrolls rose 274,000 following an upwardly revised 146,000 increase a month earlier. Consensus expectations had been for a 175,000 rise. The latest increase pulled the average three month change in payrolls (240,000) to its highest in nearly a year.
The household survey also indicated that the labor market remained firm as the unemployment rate held at a low 5.2%. Employment rose 598,000 (1.8% y/y) and the labor force rose 605,000 (1.3% y/y) as the participation rate rose to 66.0%, its highest this year. The number of job losers fell sharply for the fourth straight month (-15.0% y/y) due to a 21.1% decline in the number of permanent job losers versus last year.
Private service producing payrolls rose 211,000 (2.0% y/y) last month and gains were spread across industries. Total government employment rose 18,000 (0.7% y/y) but federal government jobs fell again (-1.1% y/y). Factory sector payrolls fell 6,000 for the third monthly decline this year though the breadth of hiring gain improved slightly to 50%. Six-month breadth remained low at 38.7%.
Construction jobs rose a firm 47,000 (4.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050506b.jpg" width="353">
The index of aggregate hours worked (employment times hours worked) rose 0.9% (3.1% y/y) helped higher by a jump in the length of the workweek to its highest since 2002. The level of hours worked began the quarter 4.4% (AR) ahead of 1Q05.
Average hourly earnings increased 0.3% for the second month and earnings in manufacturing recovered all of the prior month&#39;s 0.2% decline (2.3% y/y).
Evidence of Wage Inequality, Worker Education, and Technology from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/05/05/Wheeler.pdf"> here</a>.
A corrected FOMC Statement is available <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2005/20050503/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>274,000</td>
<td>146,000</td>
<td>1.7%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-6,000</td>
<td>-7,000</td>
<td>-0.1%</td>
<td>-1.2%</td>
<td>-4.9%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.9</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.2%</td>
<td>5.2%</td>
<td>5.5%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>5.8%</td>
</tr>
</tbody>
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April non-farm payrolls rose 274,000 following an upwardly revised 146,000 increase a month earlier. Consensus expectations had been for a 175,000 rise. The latest increase pulled the average three month change in payrolls (240,000) [...]

U.S. Payrolls Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050506a.jpg" width="353">
April non-farm payrolls rose 274,000 following an upwardly revised 146,000 increase a month earlier. Consensus expectations had been for a 175,000 rise. The latest increase pulled the average three month change in payrolls (240,000) to its highest in nearly a year.
The household survey also indicated that the labor market remained firm as the unemployment rate held at a low 5.2%. Employment rose 598,000 (1.8% y/y) and the labor force rose 605,000 (1.3% y/y) as the participation rate rose to 66.0%, its highest this year. The number of job losers fell sharply for the fourth straight month (-15.0% y/y) due to a 21.1% decline in the number of permanent job losers versus last year.
Private service producing payrolls rose 211,000 (2.0% y/y) last month and gains were spread across industries. Total government employment rose 18,000 (0.7% y/y) but federal government jobs fell again (-1.1% y/y). Factory sector payrolls fell 6,000 for the third monthly decline this year though the breadth of hiring gain improved slightly to 50%. Six-month breadth remained low at 38.7%.
Construction jobs rose a firm 47,000 (4.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050506b.jpg" width="353">
The index of aggregate hours worked (employment times hours worked) rose 0.9% (3.1% y/y) helped higher by a jump in the length of the workweek to its highest since 2002. The level of hours worked began the quarter 4.4% (AR) ahead of 1Q05.
Average hourly earnings increased 0.3% for the second month and earnings in manufacturing recovered all of the prior month&#39;s 0.2% decline (2.3% y/y).
Evidence of Wage Inequality, Worker Education, and Technology from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/05/05/Wheeler.pdf"> here</a>.
A corrected FOMC Statement is available <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2005/20050503/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>274,000</td>
<td>146,000</td>
<td>1.7%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-6,000</td>
<td>-7,000</td>
<td>-0.1%</td>
<td>-1.2%</td>
<td>-4.9%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.9</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.2%</td>
<td>5.2%</td>
<td>5.5%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
Some Employment Gains in Canada, But Lower Unemployment Reflects Reduced Participation 
by <a href="/comment/Stone.html">Carol Stone</a> May 6, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050506c.jpg" width="353">
The Canadian economy also experienced job growth in April, with a total employment gain of 29,300, following a slim 4,400 rise in March. The great part of the April move was in service industries, as the number of workers in the goods sector held just about steady. From a year ago, employment increased 1.4%, indicating some slowing after a 2% average annualized rate of increase over the past three years.
In the goods sectors, April&#39;s flat result was the net of a nearly offsetting rise in construction jobs and fall in manufacturing. These same two have maintained this kind of pattern over the last year as well. In service industries, firm uptrends are evident in trade, finance, professional services and education. Transportation, health care and accommodations and food service are losing jobs, although the declines in the latter two are quite modest. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050506d.jpg" width="353">
The unemployment rate in Canada has continued its declining trend begun in late 2003. The 6.8% in April is the lowest since the same level in December 2000. While this might suggest recent strength in the Canadian labor market, optimism must be tempered by the fact that employment growth has been slower. In fact, the inroads on the reported unemployment rate come from lower labor force participation. While employers are adding new jobs at a slower pace, people are pulling back somewhat from wanting jobs in the first place. This is reflected in the reduction in the participation rate by 0.4% from its 2004 average of 78.2% of the working-age population to 77.8% in April. Had participation remained at that level, calculations indicate that the labor force would have been nearly 80,000 larger in April and the resulting unemployment rate would not have declined.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CANSIM/CANSIM.HTM">Canada</a></th>
Mo/Mo Change, 000s
<th scope="col">Yr/Yr % Apr 2005 </th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Apr 2005</td>
<td>Mar 2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Employment*</td>
<td>29.3</td>
<td>4.4</td>
<td>1.4%</td>
<td>1.5%</td>
<td>1.9%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods - Producing* </td>
<td>0.4</td>
<td>10.8</td>
<td>0.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>6.3%</td>
</tr>
<tr>
<td class="firstcol">Service - Producing*</td>
<td>28.9</td>
<td>-6.3</td>
<td>1.5%</td>
<td>1.2%</td>
<td>2.6%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Labor Force**</td>
<td>-5.6</td>
<td>-8.2</td>
<td>0.7%</td>
<td>1.1%</td>
<td>1.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate**</td>
<td>6.8%</td>
<td>7.0%</td>
<td>Apr 2004</td>
<td colspan="3">Annual Average</td>
</tr>
<tr class="odd">
<td class="firstcol">7.3%</td>
<td>7.2%</td>
<td>7.7%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">Participation Rate**</td>
<td>77.8%</td>
<td>78.0%</td>
<td>78.3%</td>
<td>78.2%</td>
<td>78.1%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505e.jpg" width="353">
The Australian trade deficit widened distinctly in March. The A$2.7 billion gap, reported today by the Australian Bureau of Statistics, is the second largest monthly shortfall ever. In this latest month, both exports and imports moved adversely, with exports down 1.5% and imports up 3.3% from February.
At the same time, longer comparisons suggest that March&#39;s trade deficit widening, and the dip in exports in particular, is perhaps not representative of current trends. Exports, in fact, have expanded 12.4% over the past year, encompassing a 17.6% advance in &quot;non-rural goods&quot; shipments. These products appear quite vigorous, recovering markedly from a decline during 2003. Agricultural items, in contrast, have undergone extraordinarily wide cycles in the last several years, and have become less reliable as a prop to the Australian economy.
Imports, as in many countries, are being impacted by the rising cost of energy products, reflected here in the &quot;intermediate goods&quot; line item. Consumers continue to buy foreign products, while demand for capital goods from abroad is beginning to show signs of hesitation. This latter is notable, for, as seen in the second graph, imports of capital goods closely parallel the national accounts measure of investment in machinery and equipment. So the downturn in these imports in the opening months of 2005 may suggest slower investment demand in general in Australia.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505d.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ANZ/@A1/@A1.HTM">Australia</a></th>
<th scope="col">Mar 2005</th>
<th scope="col">Feb 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Balance on Goods &amp; Services </td>
<td>-2,672</td>
<td>-2,238</td>
<td>-2,098</td>
<td>-25,434</td>
<td>-23,749</td>
<td>-10,325</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports of Goods</td>
<td>10,151</td>
<td>10,302</td>
<td>8,870</td>
<td>118,427</td>
<td>108,321</td>
<td>119,478</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rural Goods</td>
<td>1,904</td>
<td>2,075</td>
<td>2,003</td>
<td>26,925</td>
<td>22,357</td>
<td>28,866</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-rural Goods</td>
<td>8,247</td>
<td>8,227</td>
<td>6,867</td>
<td>91,502</td>
<td>85,967</td>
<td>90,612</td>
</tr>
<tr>
<td class="firstcol">Imports of Goods</td>
<td>12,910</td>
<td>12,501</td>
<td>10,921</td>
<td>142,739</td>
<td>131,656</td>
<td>129,468</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>4,070</td>
<td>4,054</td>
<td>3,579</td>
<td>45,304</td>
<td>41,397</td>
<td>39,931</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Goods</td>
<td>2,838</td>
<td>2,949</td>
<td>2,599</td>
<td>34,417</td>
<td>31,032</td>
<td>303,79</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate &amp; Other Goods</td>
<td>6,002</td>
<td>5,499</td>
<td>4,743</td>
<td>63,018</td>
<td>59,227</td>
<td>59,158</td>
</tr>
</tbody>
</table>
</body>
</html>

The Australian trade deficit widened distinctly in March. The A$2.7 billion gap, reported today by the Australian Bureau of Statistics, is the second largest monthly shortfall ever. In this latest month, both exports and imports moved [...]

Australian Trade Deficit Wider in March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505c.jpg" width="353">
Initial claims for unemployment insurance rose further last week. The 11,000 increase to 333,000 followed an upwardly revised gain of 23,000 the week prior. Consensus expectations had been for 325,000 claims.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 65% correlation with the level of continuing claims.
The four week moving average of initial claims nevertheless fell to 321,500 (-6.9% y/y).
Continuing claims for unemployment insurance gained back 38,000 of a deepened 80,000 drop the prior week.
The insured unemployment rate held at 2.0%.

<table border="0" cellspacing="0" width="100%">
<colgroup><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">04/30/05</th>
<th scope="col">04/23/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>333</td>
<td>322</td>
<td>1.2%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,589</td>
<td>-11.7%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance rose further last week. The 11,000 increase to 333,000 followed an upwardly revised gain of 23,000 the week prior. Consensus expectations had been for 325,000 claims. During the last ten years [...]

Initial Unemployment Insurance Claims Higher Again

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In 1Q05, non-farm labor productivity rose 2.6% versus Consensus expectations for a 1.9% gain. The gain was the quickest in three quarters yet growth year to year slowed to 2.5% from its peak of 5.5% early last year.
The surprise stemmed from a slowdown in hours worked to 1.0% (1.4% y/y) versus 1.6% in 4Q and 2.8% growth in 3Q04. Output growth of 3.6% compared to 5.3% during all of 2004.
Unit labor costs accelerated to 2.2% versus annual growth of 0.4% last year. Compensation costs held steady at a strong 4.8% versus 4.5% growth during 2004.
A 2.9% rise in the implicit price deflator raised slightly the ratio of prices to unit labor costs, suggesting that profit margins remained firm.
Does Wage Inflation Cause Price Inflation? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/PolicyDis/pd1.pdf"> here</a>. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505a.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505b.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>2.6%</td>
<td>2.1%</td>
<td>2.5%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>4.8%</td>
<td>3.8%</td>
<td>5.0%</td>
<td>4.5%</td>
<td>4.0%</td>
<td>3.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>2.2%</td>
<td>1.7%</td>
<td>2.5%</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body>
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In 1Q05, non-farm labor productivity rose 2.6% versus Consensus expectations for a 1.9% gain. The gain was the quickest in three quarters yet growth year to year slowed to 2.5% from its peak of 5.5% early last year. The surprise [...]

U.S. Productivity Slightly Higher Than Expected

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In 1Q05, non-farm labor productivity rose 2.6% versus Consensus expectations for a 1.9% gain. The gain was the quickest in three quarters yet growth year to year slowed to 2.5% from its peak of 5.5% early last year.
The surprise stemmed from a slowdown in hours worked to 1.0% (1.4% y/y) versus 1.6% in 4Q and 2.8% growth in 3Q04. Output growth of 3.6% compared to 5.3% during all of 2004.
Unit labor costs accelerated to 2.2% versus annual growth of 0.4% last year. Compensation costs held steady at a strong 4.8% versus 4.5% growth during 2004.
A 2.9% rise in the implicit price deflator raised slightly the ratio of prices to unit labor costs, suggesting that profit margins remained firm.
Does Wage Inflation Cause Price Inflation? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/PolicyDis/pd1.pdf"> here</a>. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505a.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505b.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>2.6%</td>
<td>2.1%</td>
<td>2.5%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>4.8%</td>
<td>3.8%</td>
<td>5.0%</td>
<td>4.5%</td>
<td>4.0%</td>
<td>3.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>2.2%</td>
<td>1.7%</td>
<td>2.5%</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
Initial Unemployment Insurance Claims Higher Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 5, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505c.jpg" width="353">
Initial claims for unemployment insurance rose further last week. The 11,000 increase to 333,000 followed an upwardly revised gain of 23,000 the week prior. Consensus expectations had been for 325,000 claims.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 65% correlation with the level of continuing claims.
The four week moving average of initial claims nevertheless fell to 321,500 (-6.9% y/y).
Continuing claims for unemployment insurance gained back 38,000 of a deepened 80,000 drop the prior week.
The insured unemployment rate held at 2.0%.

<table border="0" cellspacing="0" width="100%">
<colgroup><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">04/30/05</th>
<th scope="col">04/23/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>333</td>
<td>322</td>
<td>1.2%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,589</td>
<td>-11.7%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
Australian Trade Deficit Wider in March 
by <a href="/comment/Stone.html">Carol Stone</a> May 5, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505e.jpg" width="353">
The Australian trade deficit widened distinctly in March. The A$2.7 billion gap, reported today by the Australian Bureau of Statistics, is the second largest monthly shortfall ever. In this latest month, both exports and imports moved adversely, with exports down 1.5% and imports up 3.3% from February.
At the same time, longer comparisons suggest that March&#39;s trade deficit widening, and the dip in exports in particular, is perhaps not representative of current trends. Exports, in fact, have expanded 12.4% over the past year, encompassing a 17.6% advance in &quot;non-rural goods&quot; shipments. These products appear quite vigorous, recovering markedly from a decline during 2003. Agricultural items, in contrast, have undergone extraordinarily wide cycles in the last several years, and have become less reliable as a prop to the Australian economy.
Imports, as in many countries, are being impacted by the rising cost of energy products, reflected here in the &quot;intermediate goods&quot; line item. Consumers continue to buy foreign products, while demand for capital goods from abroad is beginning to show signs of hesitation. This latter is notable, for, as seen in the second graph, imports of capital goods closely parallel the national accounts measure of investment in machinery and equipment. So the downturn in these imports in the opening months of 2005 may suggest slower investment demand in general in Australia.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050505d.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ANZ/@A1/@A1.HTM">Australia</a></th>
<th scope="col">Mar 2005</th>
<th scope="col">Feb 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Balance on Goods &amp; Services </td>
<td>-2,672</td>
<td>-2,238</td>
<td>-2,098</td>
<td>-25,434</td>
<td>-23,749</td>
<td>-10,325</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports of Goods</td>
<td>10,151</td>
<td>10,302</td>
<td>8,870</td>
<td>118,427</td>
<td>108,321</td>
<td>119,478</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rural Goods</td>
<td>1,904</td>
<td>2,075</td>
<td>2,003</td>
<td>26,925</td>
<td>22,357</td>
<td>28,866</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-rural Goods</td>
<td>8,247</td>
<td>8,227</td>
<td>6,867</td>
<td>91,502</td>
<td>85,967</td>
<td>90,612</td>
</tr>
<tr>
<td class="firstcol">Imports of Goods</td>
<td>12,910</td>
<td>12,501</td>
<td>10,921</td>
<td>142,739</td>
<td>131,656</td>
<td>129,468</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>4,070</td>
<td>4,054</td>
<td>3,579</td>
<td>45,304</td>
<td>41,397</td>
<td>39,931</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Goods</td>
<td>2,838</td>
<td>2,949</td>
<td>2,599</td>
<td>34,417</td>
<td>31,032</td>
<td>303,79</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate &amp; Other Goods</td>
<td>6,002</td>
<td>5,499</td>
<td>4,743</td>
<td>63,018</td>
<td>59,227</td>
<td>59,158</td>
</tr>
</tbody>
</table>
</body>
</html>

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Initial claims for unemployment insurance dropped 10,000 to 214,000 in the week of December 20, from 224,000 during the week of December 13. The four-week moving average of initial claims was 216,750, a decrease of 750 from the prior week’s unrevised 217,500.

Federal government employees initially filed 805 (NSA) jobless insurance claims in the week ended December 13, after filing 1091 claims in the week ended December 6.

Continuing claims for unemployment insurance rose 38,000 to 1.923 million in the week ending December 13, after rising 55,000 to 1.885 million, revised from 1.897 million in the week ending December 6. The four-week moving average was 1.894 million in the week ending December 13, down 5,250 from 1.899 million, revised from 1,902,000 in the week ending December 6. The insured unemployment rate stood at 1.3% in the week of December 13, up from 1.2% in the week of December 6.

Federal government employees’ continuing benefits claims were 12,887 (NSA) in the week ending December 6, from 14,077 (NSA) in the week of November 29. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 6, the highest unemployment rates were in New Jersey and Washington (both 2.40%), Massachusetts and Minnesota (both 2.10%), California and Rhode Island (both 2.00%). The lowest rates were in Florida (0.30%), and Alabama, Louisiana, North Carolina (all 0.40%). Rates in other notable states include New York (1.80%), Illinois and Pennsylvania (both 1.70%), and Texas (1.10%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.


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251224e1.jpg

- Initial claims declined from the prior week.
- Continuing claims rose from the prior week.
- The insured unemployment rate edged up.


U.S. Initial Claims for Unemployment Insurance Dropped in Latest Week

251224a0.jpg

251224b0.jpg

Mortgage applications dropped 5.0% w/w (+49.8% y/y) in the week of December 19, after a drop of 3.8% w/w (+40.9% y/y) in the week of December 12, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 3.7% w/w (+15.9% y/y) in the latest week, the third consecutive weekly decline, following a drop of 2.8% w/w (+12.3% y/y) in the December 12 week. Applications for loan refinancing dropped 5.6% w/w (+110.1% y/y) in the December 19 week after a decline of 3.6% w/w (+86.0% y/y) in the week of December 12. 

The effective interest rate on a 30-year fixed-rate loan fell 8bps to 6.48% in the week ending December 19 from 6.56% in the week ending December 12. The rate on 15-year fixed-rate mortgages dropped 5bps to 5.86% in the latest week from 5.91% in the prior week. The 30-year Jumbo rate rose 8bps to 6.63% in the December 19 week from 6.55% in the December 12 week. The rate on a 5-year ARM jumped 20bps to 5.96% in the latest week from 5.76% in the December 12 week.

The share of applications for refinancing an existing loan edged up to 59.1% of total applications in the December19 week from 59.0% in the week ending December 12. The adjustable-rate mortgage (ARM) share of activity rose to 8.1% in the latest week from 7.2% in the December 12 week.

The average size of a mortgage loan edged down 0.1% w/w (+7.8% y/y) to $399,700 in the week ending December 19, following a rise of 1.5% w/w (6.4% y/y) to $400,000 in the December 12 week. The average size of a purchase loan rose 1.0% w/w (1.1% y/y) to $428,600 in the latest week, after rising 0.6% w/w (-0.3% y/y) to $424,200 in the prior week. The average size of a loan to refinance a mortgage declined 0.9% w/w (+24.9% y/y) to $379,700 in the December 19 week, following a rise of 2.3% w/w (19.8% y/y) to $383,300 in the week ending December 12.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.


- Both purchase applications and refinancing loan applications fell in the latest week.
- Effective interest rate on 30-year fixed loans fell to 6.48%.
- Average loan size edged down.


U.S. Mortgage Applications Dropped in the Week of December 19

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251223c8.jpg

Real GDP grew 4.3% (SAAR) during the third quarter following a 3.8% Q2 gain, revised from 3.3% reported initially. These increases followed a minimally revised 0.6% decline in Q1. A 3.0% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.3% compared to 2.1% y/y in Q2 and remained below its most recent high of 3.4% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment surged 7.0% (4.2% y/y) last quarter after edging 0.6% higher in Q2. Before-tax earnings with IVA & CCA rose 4.2% (9.1% y/y) after improving 0.2% in Q2. Financial sector earnings rose 6.2% (21.1% y/y) after rising 1.1% in Q2. Nonfinancial corporate profits rose 2.5% (3.3% y/y) after edging 0.5% higher in Q2. Earnings from abroad jumped 10.6% (26.3% y/y) following a 2.9% Q2  decline.

Foreign trade balance improvement added 1.59 percentage points to growth last quarter after adding 4.83 percentage points in Q2. Real exports increased 2.1% (1.5% y/y) after falling 0.5% in Q2. Real imports declined 1.2% (-1.8% y/y) after declining 8.3% in Q2. Inventories subtracted 0.22 percentage points from growth after subtracting 3.44 percentage point from Q2 growth.

Real final sales to private domestic purchasers grew 3.0% (2.6% y/y) last quartter after rising 2.9% in Q2, revised from 1.6%. Personal consumption expenditures rose 3.5% (2.6% y/y) after a 2.5% rise, revised from 1.6%. Durable goods spending rose 1.6% (3.2% y/y) after increasing 2.3% in Q2. Motor vehicle purchases declined 6.7% (+1.6% y/y) after strengthening 9.7% in Q2. Spending on home furnishings & appliances weakened 4.2% (+0.7% y/y) following a 2.0% fall. Recreational goods & vehicle buying surged 15.7% (7.0% y/y) last quarter after falling 2.5% in Q2.

Nondurable goods outlays in constant dollars rose 3.9% (3.0% y/y) last quarter following 2.2% growth in Q2. Apparel spending strengthened 6.7% (7.0% y/y) following a 5.8% rise. Food & beverage buying gained 2.0% (1.3% y/y) after edging 0.2% higher. Gasoline & fuel oil purchases improved 1.3% (-0.2% y/y) after falling 2.8% in Q2.



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Real spending on services increased 3.7% (2.4% y/y) in Q3 after a 2.6% Q2 gain. Outlays on housing & utilities edged 0.3% higher (1.0% y/y) after easing 0.2% in Q2. Health care expenditures surged 6.8% (4.5% y/y) after a 4.8% increase. Transportation outlays gained 3.1% both  q/q and y/y after a 7.0% rise, while recreation spending jumped 6.6% (2.4% y/y) following a 3.9% rise. Restaurant & hotel expenditures increased 1.2% (2.0% y/y) after strengthening 5.9% in Q2. Financial services expenditures rose 2.6% both q/q and y/y following a 4.8% Q2 increase.

Business fixed investment in constant dollars increased 2.8% (3.9% y/y) last  quarter following a 7.3% Q2 rise, revised from 5.7%. Expenditures on structures declined 6.3% both q/q and y/y, after falling for six consecutive quarters. Expenditures on producers’ durable equipment increased 5.4% (7.4% y/y), after strengthening 8.5% in Q2. Outlays on information processing equipment rose 8.4% (18.6% y/y), after strengthening 11.7% during Q2. Industrial equipment investment rose 2.0% (3.4% y/y) after a 6.5% rise. Transportation equipment investment fell  2.7% (+3.0% y/y) after strengthening 25.2%. Intellectual property product spending rose 5.4% last quarter (6.4% y/y), after surging 15.0% in Q2.

Residential structures investment in real terms declined 5.1% (-1.8% y/y), the same as in Q2. It was the third consecutive quartly decline.

Government spending rose 2.2% (1.1% y/y) during the third quarter after an unrevised 0.1% easing in Q2. Federal government expenditures rose 2.9% (-1.0% y/y) after falling 5.3% in Q2. National defense expenditures increased 5.8% (1.0% y/y) after rising 0.9% in Q2. State & local government spending rose 1.8% (2.4% y/y) following a 3.1% rise.

The GDP chain price index rose 3.8% (3.0% y/y) last quarter vs. 2.1% in Q2. The PCE chain price index increased 2.8% (2.7% y/y) following a 2.1% rise. The PCE price index excluding food and energy rose 2.9% (2.9% y/y) after increasing 2.6% in Q2. The business fixed investment price index rose 5.2% (1.5% y/y) in Q3 after a 0.4% decline. The residential price index rose 4.5% (3.3% y/y) last quarter after a 2.2% rise, while the government price index increased 4.4% (3.5% y/y) following a 3.3% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.



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- Consumer spending strengthens; growth in business investment decelerates.
- Corporate profit growth led by earnings abroad.
- Rise in chain price index accelerates.


U.S. GDP Growth is Strong in Q3; Profits Jump

Sandy Batten

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Industrial production fell 0.1% m/m in October but rose 0.2% m/m (2.5% y/y) in November. The Action Economics Forecast Survey expected 0.1% monthly gains in both months. Manufacturing activity was tepid with manufacturing production falling 0.4% m/m in October and unchanged in November. Manufacturing output has not posted a monthly gain since July. Mining output fell 0.8% m/m in October but rebounded 1.7% m/m in November. Utilities output surged 2.6% m/m in October but fell 0.4% m/m in November. Compared to a year ago, manufacturing production is up 1.9%; mining output is up 3.9%; and utilities output is up 4.8%.

By market group, output of durable consumer goods plunged 2.6% m/m in October and fell another 0.2% in November. Production of durable consumer goods has declined in five of the previous six months. Production of nondurable consumer goods rose 0.5% m/m in both October and November. Compared to a year ago, durable consumer goods production has fallen 5.9% while nondurable consumer goods output has risen 2.7%. Business equipment production fell 0.3% m/m in October but rebounded 0.3% m/m in November and is up 11.2% y/y. Production of nonindustrial supplies fell 0.3% m/m in both October and November.

By industry group, output of durable goods fell 0.5% m/m in October and declined 0.1% m/m in November but were up 3.2% from a year ago. Motor vehicle and parts production slumped 5.1% m/m in October and declined 1.0% m/m in November to be down 5.6% from a year ago. Monthly motor vehicle output has declined in five of the previous six months. In contrast, production of computers and electronic products increased 1.5% m/m in October and rose 0.8% m/m in November. Aerospace production continued to rise, increasing 2.0% m/m in October and 1.1% m/m in November to be up 25.2% from a year ago. Output of nondurable goods fell 0.2% m/m in October and edged up 0.1% m/m in November. Their output is up 0.9% from a year ago. Apparel output fell 1.3% m/m in October but recovered in November, rising 2.3% m/m. Food and beverage output rose 0.3% m/m in October and another 1.2% in November.

Output of selected high-technology industries rebounded in October and November. After having declined 1.0% m/m in both August and September, production jumped 1.9% m/m in October and 1.1% m/m in November to stand 11.8% higher than a year ago. Manufacturing output excluding selected high-tech industries fell 0.4% m/m in October and was unchanged in November. It has risen only 1.6% over the past year. Manufacturing excluding motor vehicle production was unchanged in October and edged up 0.1% m/m in November; it is up 2.6% y/y.

Total industry capacity utilization edged down to 75.9% in October from 76.0% in September and then recovered the decline in November, edging up to 76.0%. In the manufacturing sector, the utilization rate slumped to 75.4% in October from 75.8% in September and remained at 75.4% in November. The October/November reading is the lowest since January.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.



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- Today’s release contained figures for both October and November that had been delayed by the federal government shutdown.
- IP fell in October but recovered in November.
- Manufacturing output was tepid, falling in October and unchanged in November.
- A surge in utilities output in October prevented a larger decline in total production.
- A jump in mining output in November accounted for all of the increase in total production.


U.S. Industrial Production Fell in October and Recovered in November

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New orders for durable goods fell a more-than-expected 2.2% (+4.8% y/y) in October following an upwardly revised 0.7% m/m rise in September (previously +0.5% m/m) and a 3.0% monthly jump in August. The Action Economics Forecast Survey expected a 1.5% m/m decline. A 23.7% m/m drop in aircraft orders more than accounted for the overall decline. Orders excluding aircraft increased 0.2% m/m (4.0% y/y) in October on top of a 0.5% monthly increase in September.

More generally, transportation orders fell 6.5% m/m (+7.3% y/y) in October following a 0.6% m/m increase in September and an 8.0% monthly jump in August. In addition to the drop in aircraft orders, orders for motor vehicles and parts edged up 0.1% m/m in October, their sixth consecutive monthly increase. Across other sectors, orders for primary metals fell 0.7% m/m, their first monthly decline in ten months. Orders for electrical equipment and appliances slumped 1.5% m/m, their first monthly decline in seven months. In contrast, orders for fabricated metal products rose 0.5% m/m, their fourth consecutive monthly gain. Machinery orders increased 0.8% m/m, their eighth consecutive monthly rise. Orders for computers and electronic products increased a solid 1.0% m/m on top of a 1.2% monthly increase in September.

Shipments of core capital goods (nondefense capital goods shipments excluding aircraft) are a reliable coincident indicator of business spending on equipment in the national accounts. They rose 0.7% m/m in October following an upwardly revised 1.2% monthly gain in September (previously +0.9%). The was the second consecutive monthly increase and the fifth in the past six months. The strong end to Q3 and the continued rise in the first month of Q4 provides a solid starting point for all of Q4. The October shipments figure was 5.9% at an annual rate above the Q3 average. Core capital goods orders rose 0.5% m/m in October on top of an upwardly revised 1.1% m/m increase in September (previously +0.9%). This was the fourth consecutive monthly rise.

Total manufacturing shipments edged up 0.1% m/m (+2.8% y/y) in October after having been essentially unchanged in September. Shipments of durable goods increased 0.6% m/m (5.9% y/y), led by 1.4% monthly jump in transportation shipments. However, apart from a 0.1% m/m decline in shipments of other durable goods, all of the other major sectors posted monthly gains in October. In contrast, shipments of nondurable goods fell 0.4% m/m (-0.3% y/y) in October for their third consecutive monthly decline. The monthly decline was led by a 2.4% m/m fall in shipments of petroleum and coal products although it was relatively widely spread across major sectors. The one exception was a 2.1% m/m increase in leather product shipments, but this came after four consecutive sizeable monthly declines.

Unfilled durable goods orders increased 0.2% m/m (7.9% y/y) in October for their third consecutive monthly gain following a 0.8% m/m rise in September and a 0.7% m/m increase in August. Total factory inventories were unchanged in October (+1.4% y/y) following 0.1% monthly declines in both August and September. Durable goods inventories edged up 0.1% m/m in October while inventories of nondurable goods fell 0.2% m/m, the third consecutive monthly decline.

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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- New orders for durable goods slumped 2.2% m/m in October following increases in both August and September
- A 24% monthly drop in aircraft orders drove the overall decline
- Orders excluding aircraft rose 0.2% m/m in October
- Core capital goods shipments and orders continued to rise in October with small upward revisions to September


Economy in Brief: 2005

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ECRI Leaders' Forward Momentum Down

Some Employment Gains in Canada, But Lower Unemployment Reflects Reduced Participation

U.S. Payrolls Firm

U.S. Payrolls Firm

Australian Trade Deficit Wider in March

Initial Unemployment Insurance Claims Higher Again

U.S. Productivity Slightly Higher Than Expected

U.S. Productivity Slightly Higher Than Expected