Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503a.jpg" width="353">
Chain store sales gained 0.5% during the final week of April according to the International Council of Shopping Centers (ICSC)-UBS survey. The increase raised the average of sales in April 0.4% versus March when sales fell 0.2%.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC ticked 0.1% (-0.3% y/y) higher, the third consecutive weekly rise following three declines.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Reexamining the Consumption-Wealth Relationship: The Role of Uncertainty from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr202.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</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">Total Weekly Chain Store Sales</td>
<td>458.0</td>
<td>455.8</td>
<td>3.0%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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</tbody>
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Chain store sales gained 0.5% during the final week of April according to the International Council of Shopping Centers (ICSC)-UBS survey. The increase raised the average of sales in April 0.4% versus March when sales fell 0.2%. [...]

Chain Store Sales Gain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503d.jpg" width="353">
Challenger, Gray &amp; Christmas reported that job cut announcements in April fell 33.0% to the lowest level since November 2000. The three month average of job cut announcements fell to the lowest level since last September.
During the last ten years there has been an 84% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements fell sharply m/m in the consumer goods (-18.2% y/y), industrial goods (-27.1% y/y), telecommunication (-96.1% y/y) and transportation industries but declines elsewhere were limited.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans recovered some of the prior month&#39;s decline with a 21.3% rise.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
<tbody>
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<td class="firstcol">Announced Job Cuts</td>
<td>57,861</td>
<td>86,396</td>
<td>-19.8%</td>
<td>1,039,175</td>
<td>1,236,426</td>
<td>1,431,052</td>
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Challenger, Gray & Christmas reported that job cut announcements in April fell 33.0% to the lowest level since November 2000. The three month average of job cut announcements fell to the lowest level since last September. During the [...]

Challenger Layoff Count Lowest Since 2000

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503h.jpg" width="353">
The Federal Open Market Committee raised the target rate for federal funds an expected 25 basis points to 3.00%. The discount rate also was raised 25 basis points to 4.00%.
The unanimous decision to raise rates was the eighth since last June.
Today&#39;s press release from the Fed continued to contain a comment suggesting that rates could be raised again. &quot;The Committee believes that, even after this action, the stance of monetary policy remains accommodative ...&quot; The text also continued to mention that &quot;the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.&quot;
In a more forthright comment on inflation than made in the past, the press release indicated &quot;Pressures on inflation have picked up in recent months and pricing power is more evident.&quot;
For the complete text of the Fed&#39;s latest press release please click <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2005/20050503/default.htm">here</a>.
U.S. Monetary Policy: An Introduction from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/federalreserve/monetary/index.html"> here</a>.

Challenger Layoff Count Lowest Since 2000 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503d.jpg" width="353">
Challenger, Gray &amp; Christmas reported that job cut announcements in April fell 33.0% to the lowest level since November 2000. The three month average of job cut announcements fell to the lowest level since last September.
During the last ten years there has been an 84% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements fell sharply m/m in the consumer goods (-18.2% y/y), industrial goods (-27.1% y/y), telecommunication (-96.1% y/y) and transportation industries but declines elsewhere were limited.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans recovered some of the prior month&#39;s decline with a 21.3% rise.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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">Announced Job Cuts</td>
<td>57,861</td>
<td>86,396</td>
<td>-19.8%</td>
<td>1,039,175</td>
<td>1,236,426</td>
<td>1,431,052</td>
</tr>
</tbody>
</table>
Chain Store Sales Gain 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503a.jpg" width="353">
Chain store sales gained 0.5% during the final week of April according to the International Council of Shopping Centers (ICSC)-UBS survey. The increase raised the average of sales in April 0.4% versus March when sales fell 0.2%.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC ticked 0.1% (-0.3% y/y) higher, the third consecutive weekly rise following three declines.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Reexamining the Consumption-Wealth Relationship: The Role of Uncertainty from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr202.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</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>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>458.0</td>
<td>455.8</td>
<td>3.0%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
U.S. Factory Inventories Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503c.jpg" width="353">
Factory inventories rose 0.6% in March following an upwardly revised like increase in February. Higher oil prices recently have lifted these gains, but not a lot, as petroleum refinery inventories rose 3.2% (22.4% y/y). Less petroleum, inventories rose 0.5% (8.4% y/y).
Accumulation in the primary metals industry has been notable, up 30.3% y/y, and fabricated metal inventories also rose a strong 17.3% y/y. Machinery inventorieshave risen 11.1% this past year and electrical equipment inventories are up 7.9%. Inventories of furniture &amp; related products rose 12.2% y/y while inventories of apparel rose 7.5% y/y.
Factory shipments recovered nearly all of the prior month&#39;s drop with a 1.3% gain. Less transportation, shipments rose 1.6% (9.2% y/y) following a deepened 1.2% decline in February.
Orders to the factory sector ticked up 0.1%, restrained by a 2.3% decline in durable goods orders which was revised from the advance report of a 2.8% drop. The decline in orders for non-defense capital goods less aircraft was lessened to 4.0% (+2.7% y/y) from the advance report of a 4.7% shortfall.Nondurable goods orders, which equal shipments, rose 2.8% (10.4% y/y) led by a 19.8% (42.2% y/y) surge in petroleum. Less oil, orders for non-durables fell 0.4% (+5.5% y/y) for the second monthly drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503b.jpg" width="353">
Unfilled orders fell 0.3% and lowered the ratio of unfilled orders to shipments for durables slightly.
Do Technological Improvements in the Manufacturing Sector Raise or Lower Employment? from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/wps/2005/wp05-5.pdf"> here</a>. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Inventories</td>
<td>0.6%</td>
<td>0.6%</td>
<td>8.9%</td>
<td>7.5%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.1%</td>
<td>-0.5%</td>
<td>4.1%</td>
<td>10.9%</td>
<td>3.7%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.3%</td>
<td>-1.5%</td>
<td>6.7%</td>
<td>10.5%</td>
<td>2.6%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>6.8%</td>
<td>9.1%</td>
<td>4.2%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
Confederation of British Industry's (CBI'S) Distributive Trades Survey:  Retail and Motor Trades Slow Sharply, Wholesale Trade Improves 
by <a href="/comment/Curley.html">Louise Curley</a> May 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503f.jpg" width="353">
The Confederation of British Industries&#39; (CBI&#39;s) Distributive Trades Survey released today, shows a weakening in current retail trade volume and in expected volumes. The percent balance between those who reported an increase in volume in April and those who report a decrease was -14%, compared with -9% in March and +30% in April, 2004.
In the March Survey, there were 3% more retailers who expected an increase in volume in April than those who expected a decrease. In the current survey, there are only 1% more retailers who expect an increase in volume than those who expect a decrease in May suggesting that retailers are almost equally balanced between those who expect May volume will increase and those who expect it to decrease.
Survey results for the wholesale trade sector were more positive. The balance of those reporting an increase in volume over those reporting a decrease rose to 2% from -17% in March in contrast to the expectations expressed in the March Survey when the balance in April was expected to be -7%. The current Survey expects that the balance of increases in wholesale volume over decreases will rise to16% in May.
Reported current and expected volumes in the Motor Trades are bleak. Although the balance of those reporting a decrease in volume over those reporting an increase improved in April to -28%, from -33%, in March, it was 46 percentage points below the +18% of April, 2004. In the March Survey, the expectation for motor trade volume was for a balance of -25%, not too different from the actual figure reported for April. In the current survey, the expectation is that balance of those expecting an increase over those expecting a decrease will increase still further to -33%.
The ability of the expected series to forecast subsequently reported balances is not particularly robust as measured by the correlation coefficient. The best, shown in the attached chart, is that for the motor trades, which has a correlation coefficient of 0.72, compared with that for retail trade of .53 and for wholesale trade, .27. The fact that the motor trades sector is relatively homogeneous while those of the retail and wholesale sectors are heterogeneous may account for better ability of expectations in the motor trades to predict the subsequently reported volume.

<table border="0" 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/UK/@U9/@U9.HTM">UK: Distributive Trade Survey</a></th>
<th scope="col">Apr 05</th>
<th scope="col">Mar 05</th>
<th scope="col">Apr 04</th>
<th scope="col">M/M dif</th>
<th scope="col">Y/Y&nbsp;&nbsp; dif</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported (Percent Balance)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>-14</td>
<td>-9</td>
<td>30</td>
<td>-5</td>
<td>-44</td>
<td>24</td>
<td>14</td>
<td>23</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>2</td>
<td>-17</td>
<td>38</td>
<td>19</td>
<td>-36</td>
<td>27</td>
<td>4</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Motor Trade</td>
<td>-28</td>
<td>-33</td>
<td>18</td>
<td>5</td>
<td>-46</td>
<td>-8</td>
<td>-19</td>
<td>7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>May 05</td>
<td>Apr 05</td>
<td>May 04</td>
<td>M/M dif</td>
<td>Y/Y&nbsp;&nbsp; dif</td>
<td>&nbsp;2004&nbsp;&nbsp;</td>
<td>&nbsp;2003</td>
<td>&nbsp;2002</td>
</tr>
<tr class="odd">
<td class="firstcol">Expected (Percent Balance)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>1</td>
<td>3</td>
<td>34</td>
<td>-2</td>
<td>-34</td>
<td>25</td>
<td>18</td>
<td>29</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>16</td>
<td>-7</td>
<td>32</td>
<td>22</td>
<td>-16</td>
<td>17</td>
<td>-1</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Motor Trade</td>
<td>-33</td>
<td>-25</td>
<td>22</td>
<td>-8</td>
<td>-55</td>
<td>-8</td>
<td>-18</td>
<td>5</td>
</tr>
</tbody>
</table>
</body>
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The Federal Open Market Committee raised the target rate for federal funds an expected 25 basis points to 3.00%. The discount rate also was raised 25 basis points to 4.00%. The unanimous decision to raise rates was the eighth since [...]

FOMC Lifts Funds Rate to 3.00%

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503e.jpg" width="353">
Ever since its sharp devaluation at the end of 1993, China has pegged its currency, the Yuan, (domestically known as the renminbi) to 8.277 to the US $. Recently, calls, particularly from the United States, for an appreciation of the currency have become ever more insistent as China&#39;s current account surplus and its reserves have risen sharply.
China has hinted that it might take gradual steps to free the currency, but no time frame has been set. Our purpose here, is not to try to guess when a change in the exchange regime will take place or what form it might take: a managed float, a free float or a simple appreciation to a new peg, but to take a look at the changes that have taken place in the various currencies of the Pacific Rim countries since the Chinese devaluation of 1993.
Hong Kong and Malaysia have also maintained fixed rates. The first chart, illustrating fixed rates, shows the Malaysian ringgit and the Chinese Yuan vs. the US dollar since 1993 when the Yuan was devalued. The ringgit was devalued during the crisis of 1996-7.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503g.jpg" width="353">
Many currencies, other than the Singapore dollar, were devalued at that time, but they, along with the Singapore dollar, were allowed, to a degree, to appreciate or devalue as market conditions warranted. The Japanese Yen and the South Korean Won relative to the US dollar, shown in the second chart, are typical of a relatively free currency regime. While China, Hong Kong, and Malaysia have unchanged rates of exchange since 1966, most of the other countries of the area, have witnessed periods of appreciation and devaluation

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Exchange Rates &nbsp;End of Period</th>
<th scope="col">Apr 05</th>
<th scope="col">1993</th>
<th scope="col">1996&nbsp;</th>
<th scope="col">App+/Deval- 93 to 97</th>
<th scope="col">App+/Deval- 97 to Apr 05</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China Yuan/$&nbsp;</td>
<td>8.277</td>
<td>5.8645</td>
<td>8.276</td>
<td>-29.1</td>
<td>0.0</td>
<td>8.280</td>
</tr>
<tr>
<td class="firstcol">Hong Kong/$</td>
<td>7.80</td>
<td>7.743</td>
<td>7.763</td>
<td>0.0</td>
<td>0.0</td>
<td>7.798</td>
</tr>
<tr class="odd">
<td class="firstcol">Malaysia Ringgit/$</td>
<td>3.80</td>
<td>2.6950</td>
<td>3.80</td>
<td>-29.1</td>
<td>0.0</td>
<td>3.80</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan Yen/$</td>
<td>104.64</td>
<td>111.70</td>
<td>102.13</td>
<td>8.8</td>
<td>-1.9</td>
<td>118.57</td>
</tr>
<tr>
<td class="firstcol">South Korea Won/$</td>
<td>997.0</td>
<td>811.30</td>
<td>1206.0</td>
<td>-25.2</td>
<td>8.8</td>
<td>1186.30</td>
</tr>
<tr class="odd">
<td class="firstcol">Thailand Baht/$</td>
<td>39.43</td>
<td>25.53</td>
<td>46.8</td>
<td>-45.2</td>
<td>18.7</td>
<td>38.80</td>
</tr>
<tr>
<td class="firstcol">India Rupee/$</td>
<td>43.48</td>
<td>31.44</td>
<td>35.94</td>
<td>-12.5</td>
<td>-17.3</td>
<td>43.27</td>
</tr>
<tr class="odd">
<td class="firstcol">Singapore Dollar/$</td>
<td>1.6337</td>
<td>1.6085</td>
<td>1.3995</td>
<td>14.9</td>
<td>-14.3</td>
<td>1.6319</td>
</tr>
<tr>
<td class="firstcol">Taiwan Dollar/$</td>
<td>31.22</td>
<td>26.626</td>
<td>27.52</td>
<td>-3.2</td>
<td>-11.9</td>
<td>31.740</td>
</tr>
</tbody>
</table>
</body>
</html>

Ever since its sharp devaluation at the end of 1993, China has pegged its currency, the Yuan, (domestically known as the renminbi) to 8.277 to the US $. Recently, calls, particularly from the United States, for an appreciation of the [...]

Exchange Rates in the Pacific Rim

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050502b.jpg" width="353">
The total value of construction put in place rose 0.5% in March for the second month. Consensus expectations had been for a 0.3% gain.
Private residential building activity rose 0.3% following an upwardly revised 1.1% increase in February. The value of new single family building added 0.5% (13.2% y/y) to increases during the prior three months which ranged between 1.0% &amp; 2.0%.
Nonresidential building recovered most of the prior month&#39;s decline as office building again was strong and rose 2.6% (5.6% y/y). Manufacturing building surged 11.3% (38.1% y/y) following two months of decline.
Public construction rose 0.3% following a downwardly revised gain in February. Spending on highways &amp; streets, nearly one third of the value of public construction spending, slipped 0.4% (+2.1% y/y) following strong gains during the prior five months.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Total</td>
<td>0.5%</td>
<td>0.5%</td>
<td>8.0%</td>
<td>8.9%</td>
<td>5.1%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5%</td>
<td>0.4%</td>
<td>10.4%</td>
<td>10.7%</td>
<td>6.0%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.3%</td>
<td>1.1%</td>
<td>12.1%</td>
<td>13.9%</td>
<td>13.1%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.1%</td>
<td>-1.4%</td>
<td>6.3%</td>
<td>3.7%</td>
<td>-7.1%</td>
<td>-12.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.5%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The total value of construction put in place rose 0.5% in March for the second month. Consensus expectations had been for a 0.3% gain. Private residential building activity rose 0.3% following an upwardly revised 1.1% increase in [...]

U.S. Construction Spending Led By Residential

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050502a.jpg" width="353">
The April Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management fell unexpectedly to 53.3. The index has fallen steadily from the peak of 62.8 roughly one year ago. Consensus expectations had been for stability in April at 55.0.
During the last twenty years there has been a 69% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
The new orders (53.7) component more than reversed the slight gain in March and fell to the lowest level in nearly two years but the index of export orders (57.2) recovered about all of the March decline. The employment index (52.3) fell for the third straight month to the lowest since November 2003. During the last twenty years there has been a 69% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.
The production index ticked higher but vendor deliveries and inventories fell.
The prices paid index fell after the sharp rise in March.

<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/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;04</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">Composite Index</td>
<td>53.3</td>
<td>55.2</td>
<td>62.3</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>53.7</td>
<td>57.1</td>
<td>65.8</td>
<td>&nbsp;63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>71.0</td>
<td>73.0</td>
<td>88.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The April Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management fell unexpectedly to 53.3. The index has fallen steadily from the peak of 62.8 roughly one year ago. Consensus [...]

ISM Factory Index Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050502a.jpg" width="353">
The April Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management fell unexpectedly to 53.3. The index has fallen steadily from the peak of 62.8 roughly one year ago. Consensus expectations had been for stability in April at 55.0.
During the last twenty years there has been a 69% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
The new orders (53.7) component more than reversed the slight gain in March and fell to the lowest level in nearly two years but the index of export orders (57.2) recovered about all of the March decline. The employment index (52.3) fell for the third straight month to the lowest since November 2003. During the last twenty years there has been a 69% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.
The production index ticked higher but vendor deliveries and inventories fell.
The prices paid index fell after the sharp rise in March.

<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/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;04</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">Composite Index</td>
<td>53.3</td>
<td>55.2</td>
<td>62.3</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>53.7</td>
<td>57.1</td>
<td>65.8</td>
<td>&nbsp;63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>71.0</td>
<td>73.0</td>
<td>88.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Led By Residential  
by <a href="/comment/Moeller.html">Tom Moeller</a> May 2, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050502b.jpg" width="353">
The total value of construction put in place rose 0.5% in March for the second month. Consensus expectations had been for a 0.3% gain.
Private residential building activity rose 0.3% following an upwardly revised 1.1% increase in February. The value of new single family building added 0.5% (13.2% y/y) to increases during the prior three months which ranged between 1.0% &amp; 2.0%.
Nonresidential building recovered most of the prior month&#39;s decline as office building again was strong and rose 2.6% (5.6% y/y). Manufacturing building surged 11.3% (38.1% y/y) following two months of decline.
Public construction rose 0.3% following a downwardly revised gain in February. Spending on highways &amp; streets, nearly one third of the value of public construction spending, slipped 0.4% (+2.1% y/y) following strong gains during the prior five months.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Total</td>
<td>0.5%</td>
<td>0.5%</td>
<td>8.0%</td>
<td>8.9%</td>
<td>5.1%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5%</td>
<td>0.4%</td>
<td>10.4%</td>
<td>10.7%</td>
<td>6.0%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.3%</td>
<td>1.1%</td>
<td>12.1%</td>
<td>13.9%</td>
<td>13.1%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.1%</td>
<td>-1.4%</td>
<td>6.3%</td>
<td>3.7%</td>
<td>-7.1%</td>
<td>-12.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.5%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

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/050429i.jpg" width="353">
Employment in Spain is picking up, according to the Q1 labor force survey reported today by the National Institute of Statistics (&quot;INE&quot;). Unemployment is working its way lower.
At the same time, changes to the data collection, both historic and current, make this picture somewhat fuzzy. On March 30, the INE published revisions to historical data back to 1996 to include better coverage of immigrant workers. Then, this quarter, the INE used a new survey questionnaire in line with EC-mandated conventions and it altered its data collection methods.
According to the INE, the first set of revisions raised the working-age population by 1.6 million in Q4 2004. They added almost 965,000 to total employment, and 152,000 to unemployment in that period. Subsequently, the new survey in Q1 2005 added another 132,000 to employment and lowered unemployment by 78,000. The results are indicated in the table below. All the data there are consistent with the population count and immigrant inclusions factored into the March revision. The numbers in parenthesis for Q1 2005 show what would have been tabulated before the newest technical and survey modifications.
Thus, the &quot;published&quot; data show a rise in employment over Q4 2004 of 204,600, but supplemental information from the INE show that only 35% of that represents outright strengthening in labor market activity. Even so, the resulting 4.3% increase over a year ago compares favorably with the performance of employment during the prior three years, when it averaged 3.8% growth. Advancement in labor market conditions is also seen in the lower unemployment rate. It reached 10.6% in Q4, the lowest since 2001. Reported data show a still lower 10.2% in Q1, although the Spanish statisticians&#39; compilation of comparable data show that all of that downshift is attributable to the data revisions. Even so, this is still a healthy development. It is accompanied by a high and rising participation rate, which, in turn, is based on the more comprehensive measurement of the population of Spain, both Spaniards and immigrants.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q1 2005</th>
<th scope="col">Q4 2004</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">Employment (thousands) &nbsp; (% change)</td>
<td>18492.7(18360.7)</td>
<td>18288.1</td>
<td>5.1(4.3)</td>
<td>3.9</td>
<td>4.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment (thousands) &nbsp; (% change)</td>
<td>2099.5(2177.4)</td>
<td>2159.2</td>
<td>-8.2(-4.8)</td>
<td>-1.3</td>
<td>4.0</td>
<td>13.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>56.9(56.75)</td>
<td>56.7</td>
<td>55.9</td>
<td>56.3</td>
<td>55.5</td>
<td>54.3</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>10.2(10.6)</td>
<td>10.6</td>
<td>11.5</td>
<td>11.0</td>
<td>11.5</td>
<td>11.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Industry Employment (thousands) &nbsp; (% change)</td>
<td>3257.5(3203.7)</td>
<td>3246.8</td>
<td>2.6</td>
<td>0.3</td>
<td>0.3</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">Services Employment (thousands) &nbsp; (% change)</td>
<td>11947.3(11804.9)</td>
<td>11729.6</td>
<td>6.3</td>
<td>4.7</td>
<td>5.1</td>
<td>4.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Employment in Spain is picking up, according to the Q1 labor force survey reported today by the National Institute of Statistics ("INE"). Unemployment is working its way lower. At the same time, changes to the data collection, both [...]

Spain Labor Markets Show Employment Gains, Lower Unemployment Even Aside from Data Revisions

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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Kathleen Stephansen, CBE

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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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- 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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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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Chain Store Sales Gain

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FOMC Lifts Funds Rate to 3.00%

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U.S. Construction Spending Led By Residential

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