Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421b.jpg" width="353">
The Philadelphia Fed Index of General Business Conditions in the manufacturing sector during April rose slightly to 13.2 from an unrevised 12.3 last month. The 0.9 point m/m increase fell somewhat short of Consensus expectations for a rise to 14.8.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
Declines in the sub indexes again were broad based as new orders reversed all of the jump during March and shipments reversed the gains of the prior two months. Moving in the other direction, the index covering the number of employees surged to the highest level (21.7) since late 2004. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421c.jpg" width="353">
The prices paid index recovered virtually all of last month&#39;s decline. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months recovered nearly all of last month&#39;s decline and rose to 28.2, near the highs of the last year. Expectations for employment recovered moderately.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0406.html">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/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>13.2</td>
<td>12.3</td>
<td>24.6</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>29.0</td>
<td>17.2</td>
<td>47.6</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
</body>
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The Philadelphia Fed Index of General Business Conditions in the manufacturing sector during April rose slightly to 13.2 from an unrevised 12.3 last month. The 0.9 point m/m increase fell somewhat short of Consensus expectations for a [...]

Philadelphia Fed Business Activity Index Up Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421b.jpg" width="353">
The Philadelphia Fed Index of General Business Conditions in the manufacturing sector during April rose slightly to 13.2 from an unrevised 12.3 last month. The 0.9 point m/m increase fell somewhat short of Consensus expectations for a rise to 14.8.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
Declines in the sub indexes again were broad based as new orders reversed all of the jump during March and shipments reversed the gains of the prior two months. Moving in the other direction, the index covering the number of employees surged to the highest level (21.7) since late 2004. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421c.jpg" width="353">
The prices paid index recovered virtually all of last month&#39;s decline. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months recovered nearly all of last month&#39;s decline and rose to 28.2, near the highs of the last year. Expectations for employment recovered moderately.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0406.html">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/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>13.2</td>
<td>12.3</td>
<td>24.6</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>29.0</td>
<td>17.2</td>
<td>47.6</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
Chicago Fed Nat'l Activity Index Recovered 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421a.jpg" width="353">
The Federal Reserve Bank of Chicago indicated that the National Activity Index (CFNAI) recovered during March to 0.37 from 0.19 in February. The three-month moving average of the CFNAI, however, fell slightly to 0.29 from 0.34.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and during the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The latest CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_April2006.pdf">here</a>.
Yield Curve Inversions and Cyclical Peaks from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060501/cover.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">CFNAI</td>
<td>0.37</td>
<td>0.19</td>
<td>-0.21</td>
<td>0.20</td>
<td>0.37</td>
<td>-0.11</td>
</tr>
</tbody>
</table>
Mass Layoffs Remained Low in March 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421e.jpg" width="353">
The number of mass layoff events last month ticked up 0.8% after sharp declines during the prior two months. During all of 1Q, the number of events fell 9.9% from 4Q 2005.
During the last ten years there has been a (negative) 87% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected in December by mass layoffs increased a larger 6.4% during March after a 2.9% February rise. Nevertheless, the 1Q level was down 9.7% from 4Q 2005. Layoffs in the transportation equipment sector (+10.4% y/y) have been significant and quite volatile m/m.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.
Company mass layoffs: The &quot;other&quot; job shock from the Federal Reserve Bank of Minneapolis is available <a href="http://www.minneapolisfed.org/pubs/fedgaz/05-11/layoffs.cfm"> 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/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">All US Industries (# Events, SA)</td>
<td>1,082</td>
<td>1,073</td>
<td>-10.1%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>118,555</td>
<td>111,468</td>
<td>-11.5%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
Consumer Prices in Asia 
by <a href="/comment/Stone.html">Carol Stone</a> April 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421f.jpg" width="353">
The inflation picture in Asia is harder to interpret than that in Europe because the economies have such different structures and the data collection and definitions are less standardized. Three countries reporting today for March show widely varying patterns of consumer price behavior.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421g.jpg" width="353">
In China, the overall CPI trend shows quite modest gains over the last couple of months, and inflation has definitely slowed from a couple of years ago. Prices of household goods and services are headed higher, which may reflect heating costs, and clothing price changes are distinctly less negative than before. But tobacco and alcohol products, recreation and culture and shelter are slowing down. These outweigh the firming tendencies, so, at just 0.8% year-to-year in March, total CPI inflation in China is the lowest since mid-2003.
In Hong Kong, consumer prices have turned up after a period of outright deflation from 1999 through mid-2004. This too may be energy related as transportation and housing costs are the main movers. Clothing and alcohol and tobacco, though, are exerting downward pressure and durable goods prices are maintaining a steady downward trend at about a 2.5% annual rate. So, while inflation has returned in Hong Kong, it seems to be sustained at a quite moderate pace.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421h.jpg" width="353">
India encompasses at least two completely different economies, the urban sector and the rural. Inflation in both is presently about equal, however, with the CPI for rural laborers running at 5.3%, year-on-year, in March and 4.7% in February; this follows 4.9% in 2005 and is considerably higher than the 3% range that prevailed in prior years. The current pace is similar for &quot;urban non-manual employees&quot;, at 4.8% in February, although off somewhat from the 5.7% rate for 2005. While we might be concerned over the seemingly rapid pace of Indian inflation at present, it compares quite favorably with 7%-10% rates during the 1980s and 1990s.
These data are all found in Haver&#39;s EMERGEPR database, which we maintain directly from country sources. Regional data for China are carried in the premium CHINA database which we market from CEIC, prominent economic consultants in Asia.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEPR/@PQ/@PQ5/@PQ51/@PQ51.HTM">Yr/Yr % Change, NSA</a></th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>0.8</td>
<td>0.9</td>
<td>1.9</td>
<td>1.6</td>
<td>2.4</td>
<td>3.2</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Hong Kong</td>
<td>1.8</td>
<td>1.6</td>
<td>2.6</td>
<td>1.8</td>
<td>0.2</td>
<td>-1.9</td>
<td>-1.6</td>
</tr>
<tr>
<td class="firstcol">India: Rural Laborers</td>
<td>5.3</td>
<td>4.7</td>
<td>4.7</td>
<td>4.9</td>
<td>3.0</td>
<td>3.1</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">India: Urban Non-Manual Employees </td>
<td>--</td>
<td>4.8</td>
<td>5.0</td>
<td>5.7</td>
<td>3.6</td>
<td>4.0</td>
<td>2.8</td>
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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/060420e.jpg" width="353">
In March, consumer price inflation in Europe and North America eased or remained steady. Core inflation is also quiescent.
For the Euro-Zone12, the total CPI was up just 2.2% from a year ago, less than in 2005 and 2004. The core rate, which excludes food, energy, alcohol and tobacco, was a mere 1.3%; this is up very slightly from February and January, but equal to or lower than the last few years.
UK inflation is holding below 2.0% as March&#39;s figure eased 0.2% from February to 1.8%. Its core rate was also 0.2% lower, at 1.2% from 1.4% and for all of last year, 1.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420f.jpg" width="353">
Incredibly, Austria&#39;s CPI has risen only 0.8% over the past year. In that country, health costs, transportation and communications, and education and recreation costs are all running slower; this is a fairly diverse group, indicating that no single factor is responsible for the slow pace.
Canada&#39;s CPI has been running just above a 2% trend for about three years. Its core, defined to exclude just food and energy, is edging a bit higher, but at 1.5% in March, is still quite temperate.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420g.jpg" width="353">
Finally, it is interesting to note that the high-inflation nation here is the US, with a year-on-year rate of 3.4% and the core at 2.1%. Yesterday, Tom Moeller described the month-to-month changes, which showed gains in a couple of categories coming off declines in February. Even so, the 12-month rate actually eased, similar to other countries, and the core rate was steady at 2.1% for a third straight month. Notably, the BLS has started to compile US CPI using the same structure as the Europeans, the so-called &quot;harmonized index of consumer prices&quot; or &quot;HICP&quot;. On this basis, US inflation is higher still, at 3.7% in March, but it is no worse than 2005&#39;s similar number or 2004&#39;s 3.5%.
We continue to monitor these CPIs around the world for evidence that energy costs are pushing up other non-energy prices. So far, while it may &quot;feel&quot; to some of us, as consumers, that &quot;things&quot; are getting more expensive, the data everywhere show remarkable moderation in pricing of non-energy goods and services. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GZ/@GZ5/@GZ5.HTM">NSA, Yr/Yr % Changes</a></th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Euro-Zone12</td>
<td>2.2</td>
<td>2.4</td>
<td>2.4</td>
<td>2.3</td>
<td>2.3</td>
<td>2.0</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core*</td>
<td>1.3</td>
<td>1.2</td>
<td>1.2</td>
<td>1.3</td>
<td>1.9</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>1.8</td>
<td>2.0</td>
<td>1.9</td>
<td>1.9</td>
<td>1.7</td>
<td>1.3</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core*</td>
<td>1.2</td>
<td>1.4</td>
<td>1.2</td>
<td>1.3</td>
<td>1.3</td>
<td>0.9</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>0.8</td>
<td>1.2</td>
<td>1.2</td>
<td>1.5</td>
<td>2.9</td>
<td>1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Canada</td>
<td>2.2</td>
<td>2.2</td>
<td>2.8</td>
<td>2.2</td>
<td>2.1</td>
<td>2.0</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core**</td>
<td>1.5</td>
<td>1.4</td>
<td>1.4</td>
<td>1.3</td>
<td>1.4</td>
<td>1.0</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">US</td>
<td>3.4</td>
<td>3.6</td>
<td>4.0</td>
<td>3.4</td>
<td>3.3</td>
<td>1.9</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core**</td>
<td>2.1</td>
<td>2.1</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
<td>1.1</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; HICP</td>
<td>3.7</td>
<td>4.0</td>
<td>4.5</td>
<td>3.7</td>
<td>3.5</td>
<td>1.8</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
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In March, consumer price inflation in Europe and North America eased or remained steady. Core inflation is also quiescent. For the Euro-Zone12, the total CPI was up just 2.2% from a year ago, less than in 2005 and 2004. The core rate, [...]

Consumer Prices Remain Restrained through March in Europe & Canada

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420c.jpg" width="353">
The Conference Board reported that during March, the Composite Index of Leading Economic Indicators fell 0.1% following a 0.5% February decline that was deeper than initially reported. The decline compared to Consensus expectations for no change.
Six month growth in the leaders slipped to 2.9%, about the middle of the range during the last several months. During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index improved to 60% in March from a downwardly revised 40% during February.
Lower building permits and higher initial claims for unemployment insurance made the largest negative contributions to last month&#39;s decline in the leaders last month.
For the third consecutive month, the spread between yields on the 10 year Treasury Note and Fed funds made a minimal 0.01 percentage point positive contribution to the leaders. The method of calculating the contribution to the index from the interest rate yield spread has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420d.jpg" width="353">
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.2% following a like gain in February that was downwardly revised. All of the four component series rose last month and during the last six months. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP growth.
The lagging indicators increased 0.3% following an unrevised 0.1% February up tick. Last month, two thirds of the series&#39; components rose while the ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, slipped in March.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
The latest World Economic Outlook from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/weo/2006/01/index.htm"> here</a>.

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">6 Month Chg., AR</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>2.9%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>4.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board reported that during March, the Composite Index of Leading Economic Indicators fell 0.1% following a 0.5% February decline that was deeper than initially reported. The decline compared to Consensus expectations [...]

Leading Economic Indicators Down For Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420a.jpg" width="353">
Initial claims for jobless insurance reversed about all of the prior week&#39;s rise with a 10,000 worker decline to 303,000. Consensus expectations had been for an unchanged reading at 313,000 claims versus the prior week&#39;s unrevised figure.
The latest figure covers the survey period for April nonfarm payrolls and claims fell 9,000 (-2.9%) from the March period.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420b.jpg" width="353">
The four-week moving average of initial claims slipped to 305,250 (-9.2% y/y).
Continuing claims for unemployment insurance rose 18,000 during the latest week following a revised 11,000 decline the prior week.
The insured rate of unemployment was stable at 1.9% where it&#39;s been for almost two months.
Are We Working Too Hard of Should We Be Working Harder? A Sample Model of Career Concerns from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/winter2006/foerstermartinez.pdf"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">04/15/06</th>
<th scope="col">04/08/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>303</td>
<td>313</td>
<td>-3.8%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,439</td>
<td>-7.6%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for jobless insurance reversed about all of the prior week's rise with a 10,000 worker decline to 303,000. Consensus expectations had been for an unchanged reading at 313,000 claims versus the prior week's unrevised [...]

Initial Claims for Unemployment Insurance Drop

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420a.jpg" width="353">
Initial claims for jobless insurance reversed about all of the prior week&#39;s rise with a 10,000 worker decline to 303,000. Consensus expectations had been for an unchanged reading at 313,000 claims versus the prior week&#39;s unrevised figure.
The latest figure covers the survey period for April nonfarm payrolls and claims fell 9,000 (-2.9%) from the March period.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420b.jpg" width="353">
The four-week moving average of initial claims slipped to 305,250 (-9.2% y/y).
Continuing claims for unemployment insurance rose 18,000 during the latest week following a revised 11,000 decline the prior week.
The insured rate of unemployment was stable at 1.9% where it&#39;s been for almost two months.
Are We Working Too Hard of Should We Be Working Harder? A Sample Model of Career Concerns from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/winter2006/foerstermartinez.pdf"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">04/15/06</th>
<th scope="col">04/08/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>303</td>
<td>313</td>
<td>-3.8%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,439</td>
<td>-7.6%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Leading Economic Indicators Down For Second Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420c.jpg" width="353">
The Conference Board reported that during March, the Composite Index of Leading Economic Indicators fell 0.1% following a 0.5% February decline that was deeper than initially reported. The decline compared to Consensus expectations for no change.
Six month growth in the leaders slipped to 2.9%, about the middle of the range during the last several months. During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index improved to 60% in March from a downwardly revised 40% during February.
Lower building permits and higher initial claims for unemployment insurance made the largest negative contributions to last month&#39;s decline in the leaders last month.
For the third consecutive month, the spread between yields on the 10 year Treasury Note and Fed funds made a minimal 0.01 percentage point positive contribution to the leaders. The method of calculating the contribution to the index from the interest rate yield spread has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420d.jpg" width="353">
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.2% following a like gain in February that was downwardly revised. All of the four component series rose last month and during the last six months. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP growth.
The lagging indicators increased 0.3% following an unrevised 0.1% February up tick. Last month, two thirds of the series&#39; components rose while the ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, slipped in March.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
The latest World Economic Outlook from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/weo/2006/01/index.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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">6 Month Chg., AR</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>2.9%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>4.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
Consumer Prices Remain Restrained through March in Europe & Canada 
by <a href="/comment/Stone.html">Carol Stone</a> April 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420e.jpg" width="353">
In March, consumer price inflation in Europe and North America eased or remained steady. Core inflation is also quiescent.
For the Euro-Zone12, the total CPI was up just 2.2% from a year ago, less than in 2005 and 2004. The core rate, which excludes food, energy, alcohol and tobacco, was a mere 1.3%; this is up very slightly from February and January, but equal to or lower than the last few years.
UK inflation is holding below 2.0% as March&#39;s figure eased 0.2% from February to 1.8%. Its core rate was also 0.2% lower, at 1.2% from 1.4% and for all of last year, 1.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420f.jpg" width="353">
Incredibly, Austria&#39;s CPI has risen only 0.8% over the past year. In that country, health costs, transportation and communications, and education and recreation costs are all running slower; this is a fairly diverse group, indicating that no single factor is responsible for the slow pace.
Canada&#39;s CPI has been running just above a 2% trend for about three years. Its core, defined to exclude just food and energy, is edging a bit higher, but at 1.5% in March, is still quite temperate.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420g.jpg" width="353">
Finally, it is interesting to note that the high-inflation nation here is the US, with a year-on-year rate of 3.4% and the core at 2.1%. Yesterday, Tom Moeller described the month-to-month changes, which showed gains in a couple of categories coming off declines in February. Even so, the 12-month rate actually eased, similar to other countries, and the core rate was steady at 2.1% for a third straight month. Notably, the BLS has started to compile US CPI using the same structure as the Europeans, the so-called &quot;harmonized index of consumer prices&quot; or &quot;HICP&quot;. On this basis, US inflation is higher still, at 3.7% in March, but it is no worse than 2005&#39;s similar number or 2004&#39;s 3.5%.
We continue to monitor these CPIs around the world for evidence that energy costs are pushing up other non-energy prices. So far, while it may &quot;feel&quot; to some of us, as consumers, that &quot;things&quot; are getting more expensive, the data everywhere show remarkable moderation in pricing of non-energy goods and services. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GZ/@GZ5/@GZ5.HTM">NSA, Yr/Yr % Changes</a></th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Euro-Zone12</td>
<td>2.2</td>
<td>2.4</td>
<td>2.4</td>
<td>2.3</td>
<td>2.3</td>
<td>2.0</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core*</td>
<td>1.3</td>
<td>1.2</td>
<td>1.2</td>
<td>1.3</td>
<td>1.9</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>1.8</td>
<td>2.0</td>
<td>1.9</td>
<td>1.9</td>
<td>1.7</td>
<td>1.3</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core*</td>
<td>1.2</td>
<td>1.4</td>
<td>1.2</td>
<td>1.3</td>
<td>1.3</td>
<td>0.9</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>0.8</td>
<td>1.2</td>
<td>1.2</td>
<td>1.5</td>
<td>2.9</td>
<td>1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Canada</td>
<td>2.2</td>
<td>2.2</td>
<td>2.8</td>
<td>2.2</td>
<td>2.1</td>
<td>2.0</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core**</td>
<td>1.5</td>
<td>1.4</td>
<td>1.4</td>
<td>1.3</td>
<td>1.4</td>
<td>1.0</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">US</td>
<td>3.4</td>
<td>3.6</td>
<td>4.0</td>
<td>3.4</td>
<td>3.3</td>
<td>1.9</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core**</td>
<td>2.1</td>
<td>2.1</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
<td>1.1</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; HICP</td>
<td>3.7</td>
<td>4.0</td>
<td>4.5</td>
<td>3.7</td>
<td>3.5</td>
<td>1.8</td>
<td>2.2</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/060419e.jpg" width="353">
The labor market seems to be slowing just a bit in Slovenia, according to the monthly labor force survey reported today by the Statistical Office; after climbing from April 2005 through November, employment has been virtually flat since then through February. Even so, at 816,156, it stands 0.8% above a year ago, matching the growth pace for all of 2004, and close to that for the rest of Europe.
Unemployment continues stubbornly just above 10%, with January and February at 10.2%. This is low historically for the country, but as employment has apparently stopped increasing, unemployment has stopped decreasing. It bottomed out at exactly 10.0% in September.
Workers, meantime, appear to be doing &quot;all right&quot;. Their average wages, which were published yesterday, were SIT179.7 in February (SIT=Slovenian Tolars), after social security and income tax withholding. This marks a 2.7% real advance from February 2005, allowing for the 2.1% CPI inflation over the period. Real earnings in the rest of Europe were up just 0.4% in 2005, measured by wages and salaries for the EU-25 calculated by Eurostat.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419f.jpg" width="353">
The average wage indicator hints at general gains in the Slovenian economy; GDP per capita real growth (in fixed 1995 prices) was 4.1% last year. According to the CIA World Factbook, Slovenia is the first transition economy to change from borrower to donor status at the World Bank, and its currency, presently pegged to the euro, is due to switch to the euro next year. All is not completely well, though, as the population has been almost completely flat since 1999; there was net out-migration during the break-up of Yugoslavia, then a modest recovery from 1999 to 2002, but almost no change since. And as we note here, the economy may be showing signs of plateauing after a nice run during 2005.
Country-source data on Slovenia are found in Haver&#39;s EMERGECW database. Since the country joined the European Union in 2004, data generated by Eurostat are also found in the EUROSTAT database. The CIA&#39;s helpful information on the general characteristics of the country are found <a href="http://www.cia.gov/cia/publications/factbook/geos/si.html">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/EMERGECW/@E7/@E7.HTM">Slovenia</a></th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">Feb 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment (SA, Thous.)</td>
<td>816.2</td>
<td>816.6</td>
<td>809.6</td>
<td>813.1</td>
<td>807.5</td>
<td>801.4</td>
</tr>
<tr>
<td class="firstcol">% Change (Mo/Mo &amp; Yr/Yr)</td>
<td>-0.0</td>
<td>0.0</td>
<td>(yr/yr) 0.8</td>
<td>0.7</td>
<td>0.8</td>
<td>-0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (SA, %)</td>
<td>10.2</td>
<td>10.2</td>
<td>10.1</td>
<td>10.1</td>
<td>10.6</td>
<td>11.2</td>
</tr>
<tr>
<td class="firstcol">Average Net Wages &nbsp;(Thous. Tolars)</td>
<td>179.7</td>
<td>179.3</td>
<td>171.4</td>
<td>177.1</td>
<td>168.2</td>
<td>159.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&quot;Real&quot; % Change*&nbsp; &nbsp; (Mo/Mo &amp; Yr/Yr)</td>
<td>-0.2</td>
<td>2.0</td>
<td>(yr/yr) 2.7</td>
<td>2.7</td>
<td>2.1</td>
<td>1.8</td>
</tr>
</tbody>
</table>
</body>
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The labor market seems to be slowing just a bit in Slovenia, according to the monthly labor force survey reported today by the Statistical Office; after climbing from April 2005 through November, employment has been virtually flat [...]

Slovenia: Labor Market Hesitation Follows Good Growth in 2005

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419a.jpg" width="353">
The total number of mortgage applications fell hard for the second consecutive week and posted a 1.7% drop. So far during April applications are 0.9% below the March average which fell 1.0% from February.
Purchase applications fell 2.5% w/w following the 4.7% drop to open the month but the April average so far is up 1.2% from March, which rose 0.2% versus February.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance slipped 0.4% after a 6.6% slide the prior week and in April are 4.1% below the March average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419b.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose further to 6.78% while the rate on 15-year financing rose to 6.%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
States Fight Predatory Lending in Different Ways from the Federal Reserve Bank of St. Louis can be found <a href="http://stlouisfed.org/publications/re/2006/a/pages/predatory_lending.html"> 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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">04/14/06</th>
<th scope="col">04/07/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>569.6</td>
<td>579.4</td>
<td>-15.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>407.4</td>
<td>417.7</td>
<td>-12.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,526.1</td>
<td>1,532.4</td>
<td>-18.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications fell hard for the second consecutive week and posted a 1.7% drop. So far during April applications are 0.9% below the March average which fell 1.0% from February. Purchase applications fell [...]

Mortgage Applications Down Further

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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Sandy Batten

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Industrial production (IP) rose a much larger-than-expected 0.7% m/m in April, rebounding from an upwardly revised 0.3% m/m decline in March (previously -0.5% m/m), according to data released by the Federal Reserve Board. The Action Economics Survey looked for a 0.2% monthly gain. The y/y rate also rebounded in April, rising to 1.4% y/y after having fallen to 0.7% in March. IP has clearly trended up since late last year. Since November 2025, it has grown at a 3.6% annual rate. The current level of output is the highest since August 2019 but is still 1.5% below the November 2018 series peak.

Manufacturing output led the April rebound, rising 0.6% m/m (1.3% y/y) following an upwardly revised 0.1% monthly increase in March (previously -0.1% m/m). Mining output fell in April for the second consecutive month, edging down 0.1% m/m (+0.2% y/y) after a 1.6% monthly drop in March (revised down from -1.2% m/m). Utilities production rebounded in April, jumping 1.6% m/m (2.7% y/y) and more than offsetting a 1.4% monthly decline in March (revised up from -2.3% previously). The rebound in utilities output reflected a 1.1% rise in electricity production and a 7.3% monthly jump in natural gas distribution, the first monthly gain in four months.

Within manufacturing, durable goods production jumped 1.2% m/m (3.2% y/y) in April after having been unchanged in March. A 3.7% m/m rebound in motor vehicles and parts production, the largest monthly gain since May 2025, led the April increase. Motor vehicles and parts production had fallen 2.4% m/m in March. Production of computers and electronic products increased 1.5% m/m, the fourth consecutive monthly rise. Aerospace output rose 1.6% m/m in April, the third consecutive monthly gain and the largest since July 2025. By contrast, furniture production fell 1.8% m/m, the third consecutive monthly decline. 

Output of nondurable manufactured goods edged down 0.1% m/m (-0.6% y/y) in April, the first monthly decline in four months. Production of apparel and leather goods slumped 2.2% m/m on top of a 2.0% monthly fall in March. Chemical output fell 0.9% m/m in April, its first monthly decline in four months. Output of plastics and rubber products fell 0.9% m/m, the first monthly fall in four months. By contrast, production of petroleum and coal products rose 1.0% m/m in April, the same monthly increase as in March.

By market group, output of consumer goods rebounded in April, increasing 0.9% m/m (-0.2% y/y) following a 0.8% m/m decline in March. Production of business equipment surged 1.5% m/m (+6.0% y/y) in April, the largest monthly gain since March 2025. Output of construction supplies was unchanged in April from March (+1.2% y/y) following a 0.9% m/m gain in March. Materials production rebounded in April, rising 0.5% m/m (1.2% y/y) after a 0.4% m/m decline in March.

In special classifications, output of selected high-tech industries increased 1.0% m/m (+9.2% y/y) in April following a 0.5% monthly gain in March. The rebound in motor vehicles and parts production reflected a 5.3% monthly surge in vehicle output, the largest monthly gain since May 2025. Manufacturing output excluding selected high-tech industries rose 0.6% m/m in April, the largest increase since February 2025, following a 0.1% m/m increase in March. Manufacturing output excluding both selected high-tech industries and motor vehicles and parts advanced 0.3% m/m in April, the same monthly gain as in March.

Capacity utilization rose to 76.1% in April from 75.7% in March. The April reading was the highest since last August but was still 3.3%-points below its long-term (1972-2025) average. Manufacturing capacity utilization increased to 75.8% in April from 75.4% in March, 2.4%-points below its long-term average.

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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- Total industrial output increased a much larger-than-expected 0.7% m/m in April with a small upward revision to March.
- Manufacturing output increased 0.6% m/m, led by a 5.3% m/m rebound in vehicle production.
- Mining output edged down 0.1% m/m, while utilities production rose 1.9% m/m.
- The headline rate of capacity utilization rose to 76.1% in April, its highest reading since last August but still well below its long-term average.


U.S. Industrial Production Jumped in April

Robert Brusca

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Industrial orders in Canada are back on an expansion path with orders growing 4.7% in March on top of a 6.9% gain in February. These statistics chronicle Canadian orders digging out from a hole they fell into early in 2026. Now the data show emerging sequential growth in Canadian orders, which are advancing 3.6% over 12 months at a 14.9% annual rate over six-months, and a 26.7% annual rate over three-months. Still, on the chart that plots the year-over-year growth rates these recent accelerated rates of growth appear as mere recoveries from what had been earlier weakness. It remains to be seen how much acceleration the Canadian economy will actually undergo.

Unfilled orders expanded in March for the second month in a row, growing 2.4% after growing 1.4% in February once again following the recovery theme.

Manufacturing shipments grew by 3% in March after growing 3.4% in February and after dropping sharply in January - again echoing the recovery theme. Durable goods show two months of increases with the March increase weak after a very strong rise in February. Motor vehicle output recovered very strongly in February, after falling at a 37.1% annual rate in January; motor vehicle output is up by 15% in March, a hefty growth rate but short of what was posted in February. Once again, we see an echo of the theme of recovery. However, shipments of durable goods excluding motor vehicles are less robust, after dropping 1.8% in January output rose by 3.8% in February and has fallen back, dropping by 1.1% in March, a small fly in the ointment of this recovery theme for Canada. And nondurable goods shipments saw a small increase in January of 0.2%, a flat February, and now an extremely strong, 5.6% month-to-month gain in March.

Canada's sequential growth rates are on the verge of showing broad acceleration. Orders clearly do accelerate from 12-months to six-months to three-months. Unfilled orders, however, accelerate over six-months compared to 12-months and then take a small step back over three-months to an annualized growth rate of 13.4% - a very small step back that is still far above the 12-month growth pace. Manufacturing shipments, too, show a small flaw in acceleration as the 6-month pace dips ever so slightly before logging a very strong 3-month pace. Durable goods then are an exception to the acceleration theme; however, nondurable goods get back on board with the strong acceleration move.

**Rankings**
The rank standings for these categories are based on annual growth rates and comparison with data extend back approximately 25 years. Orders have a 58-percentile standing, unfilled orders have a 57-percentile standing, while manufacturing shipments have a 62-percentile standing. Shipments for durable goods durables excluding motor vehicles and from motor vehicles as a stand-alone have rankings in their 30th- to 40th-percentiles, below their historic medians. (medians occur at a ranking of 50). However, nondurables have an extremely strong 80.5 percentile standing. The data are consistent, the recovery and progress with the exception that durable goods shipments that are not fully on board and languish below their historic median results. Ranking the data over six-month growth rates improves the results somewhat and brings motor vehicles on board for a growth rate that is above its historic median.

**Signs of improvement**
Goods-based industry shows signs of picking up even in March as oil prices were rising and industry was facing greater challenges. The US industrial production report for April, similarly, shows acceleration across the board, even as the economy continued to deal with the difficulties of rising oil prices. Of course, the Canadian US economies are closely linked; we would expect the manufacturing sectors to be performing with some degree of synchronization. However, there's no reason to be complacent about the outlook. Oil prices have continued to rise, the challenge to consumers is strong and across all countries. In the US special tax cuts enacted last year, which went into effect earlier this year, have helped to deliver extra money to consumers that have helped them deal with the oil price shock. But these were funds that were supposed to help stimulate the economy to higher growth and were planned by the President to help him with midterm elections coming later in the year. The US economy still has to deal with those realities with sharply divided political reality as well.

**Outlook**
The US acrimony with Canada has taken a back burner for a while. And as that has happened the Canadian economy has come back to life. However, Canada still has some problems with inflation although it also has a broader inflation target to accommodate some flexibility. And the prospect for more inflation because of global oil prices continues to hang in the balance. The results for March are encouraging but certainly not definitive. Canada has mounted a nice recovery after a period of difficulty earlier in the year but it's still hard to say what comes next.



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Canada

Canadian Industry Perks Up

Andrew Cates

**A Tug of War Between AI Hope and Geopolitical Shock**
The latest Blue Chip Economic Indicators survey highlights a growing divergence between economies benefiting from AI-driven optimism and those more exposed to the inflationary consequences of renewed geopolitical instability. Taiwan stands out as the clearest AI beneficiary, with growth forecasts revised sharply higher while inflation expectations have risen only modestly, reflecting surging semiconductor demand and continued investment in global technology supply chains. China also remains relatively resilient, supported by ongoing AI-related capital spending and stronger technology sectors. By contrast, the euro area and UK have seen much larger upward revisions to inflation forecasts alongside weaker or declining growth expectations, underscoring their greater vulnerability to the recent Middle East shock and higher energy costs. Korea sits somewhere in between: benefiting from the AI hardware cycle but still exposed to trade and energy headwinds. Overall, the chart illustrates the increasingly important push-and-pull shaping the global outlook: AI optimism and productivity hopes on one side, and geopolitical fragmentation, energy insecurity and supply-side inflation pressures on the other.

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**Forecasters See Contained Pass-Through**
Against this backdrop, our latest Blue Chip special question sought to gauge whether economists believe the recent rise in energy prices will remain largely contained — or whether it risks spilling more meaningfully into underlying global inflation dynamics. The results suggest forecasters have become somewhat less concerned about a broad and persistent inflationary impulse since April. A larger share of respondents in the May survey now expect only a “limited and temporary” pass-through into core inflation, while the proportion anticipating “moderate and persistent” effects has declined noticeably. Very few panelists expect significant second-round effects, implying that most still believe inflation expectations and wage-setting behaviour remain relatively well anchored. In part, this reflects confidence in central bank credibility and the view that softer global demand conditions will constrain firms’ pricing power. Yet the persistence of a sizeable minority still expecting moderate pass-through underscores the uncomfortable tension facing policymakers. 

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**Energy Reawakens as a US Inflation Driver**
While survey respondents generally expect only limited pass-through from higher energy prices into broader inflation, the latest US CPI data provide a reminder that the process may already be underway at the margin. April’s CPI report showed core inflation coming in slightly firmer than expected, suggesting underlying price pressures remain more persistent than many policymakers had hoped. The decomposition of CPI inflation highlights that services continue to dominate overall inflation dynamics, reflecting still-elevated wage and labour-intensive price pressures across the economy. However, the more notable recent development has been the renewed contribution from energy prices, which had previously acted as a disinflationary force through much of 2025. Food inflation has also remained comparatively steady, while non-energy goods prices continue to exert only modest upward pressure despite ongoing tariff and supply-chain concerns. Taken together, the data reinforce the idea that the US economy is not facing a classic demand collapse, but rather a more uncomfortable supply-side environment in which geopolitical energy shocks risk colliding with still-resilient domestic demand, AI-related investment spending and sticky service-sector inflation.

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**AI: The Powerful Counterweight to Geopolitical Headwinds**
If rising energy prices and geopolitical instability represent one major force shaping the current macroeconomic outlook, the extraordinary surge in AI-related investment represents the other. The latest data from Our World in Data show global private investment in AI accelerating sharply again in 2025, reaching close to $300 billion — more than double the level seen just two years earlier. The United States continues to dominate the global AI landscape, accounting for the overwhelming majority of private investment spending, while China and Europe remain considerably smaller contributors despite continued growth. The scale and speed of the 2025 increase is particularly striking given the broader backdrop of elevated policy uncertainty, trade fragmentation and concerns about slowing global productivity growth. In effect, the global economy is now being pulled in two competing directions: on one side, geopolitical tensions, supply-chain fragilities and more recent energy shocks are weighing on confidence and raising supply-side costs; on the other, AI enthusiasm is driving an enormous wave of capital expenditure, infrastructure build-out and technology-related demand. This helps explain why growth expectations — particularly in the US and parts of Asia — have remained comparatively resilient despite an increasingly uncertain global environment.

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**Industrial Winners and Losers in a Fragmenting Global Economy**
The divergence in industrial performance across advanced economies has become increasingly striking. Taiwan has emerged as one of the clearest beneficiaries of the global AI boom, with industrial production surging as semiconductor demand, data-centre investment and advanced electronics exports continue to accelerate. Denmark has also significantly outperformed, though for very different reasons, with the extraordinary global success of its pharmaceutical sector — particularly weight-loss and diabetes drugs — driving a powerful expansion in manufacturing output. By contrast, the UK and Germany have experienced a far weaker industrial recovery. In both cases, elevated energy costs and greater dependence on imported energy have weighed heavily on industrial competitiveness since the post-pandemic energy shock. Germany’s large manufacturing sector has been particularly exposed to higher natural gas prices and weaker external demand, while the UK has continued to struggle with a combination of high energy costs, weak productivity growth and subdued business investment. The chart highlights an increasingly important feature of the global economy: countries exposed to powerful structural growth themes such as AI or pharmaceuticals are pulling away from those still burdened by energy dependence and deteriorating industrial competitiveness.

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**China’s Pulse Is Picking Up Again**
China’s economic backdrop has shown clearer signs of improvement in recent months, with both the Citigroup Economic Surprise Index and the Yicai High Frequency Economic Activity Index moving higher. The rebound suggests that incoming data have begun consistently outperforming expectations after a prolonged period of disappointment. Part of the recent improvement likely reflects the cumulative effects of policy easing, including targeted fiscal support, infrastructure spending and further efforts to stabilise the property sector. Export demand has also remained more resilient than many expected, helped in part by the continued strength of global technology and AI-related supply chains. At the same time, improving domestic mobility and energy usage indicators point to firmer underlying activity momentum. The Yicai index itself is designed to provide a near real-time pulse of the Chinese economy using a basket of high-frequency indicators including subway usage, air pollution, coal consumption, freight activity, unemployment and bankruptcy trends. While China still faces significant structural headwinds — including weak household confidence, property-sector fragilities and deflationary pressures — the recent pickup suggests that growth momentum may be stabilising at a time when several other major economies are becoming more vulnerable to geopolitical and energy-related shocks.

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The global economy is still caught between two powerful and competing forces. On one side, the AI investment boom continues to support growth, industrial activity and equity markets, particularly in the US and parts of Asia. On the other, renewed Middle East tensions and higher energy prices are adding to inflation risks and broader policy uncertainty. The latest Blue Chip survey reflects this divide clearly: growth expectations have generally held up best in economies tied to AI-related investment and technology supply chains, while inflation forecasts have risen more sharply in more energy-exposed economies such as the UK and euro area (chart 1). Forecasters still largely expect only limited pass-through from higher energy prices into core inflation, although recent US CPI data suggest underlying price pressures remain somewhat sticky (charts 2 and 3). At the same time, the extraordinary continued surge in global AI investment — now approaching $300 billion annually — highlights the sheer scale of capital being deployed into semiconductors, data centres and digital infrastructure, particularly in the United States (chart 4). The divergence in industrial production trends also reinforces the growing gap between economies benefiting from structural growth drivers — such as Taiwan’s semiconductor sector and Denmark’s pharmaceutical industry — and those struggling with higher energy costs and weaker competitiveness, notably Germany and the UK (chart 5). Meanwhile, improving Chinese activity indicators suggest policy support and stronger technology demand may finally be helping to stabilise growth (chart 6). Overall, the world economy remains resilient, but increasingly uneven, with AI-related investment continuing to offset — though not eliminate — the drag from geopolitical fragmentation and rising energy insecurity.

Charts of the Week: The Tug of War

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Total retail sales rose a solid 0.5% m/m (4.9% y/y) in April on top of a slightly downwardly revised 1.6% monthly jump in March (previously 1.7%), according to data released by the U.S. Census Bureau. The Action Economics Forecast Survey looked for a 05% m/m gain. Excluding autos, other sales increased 0.7% m/m (6.3% y/y) in April following an unrevised 1.9% monthly jump in March. Expectations were for a 0.6% monthly increase. The strong performance in March and the additional solid gain in April put the April level up 7.8% at an annual rate from the Q1 average, providing a very solid start for Q2.

As expected, the continued rise in retail gasoline prices boosted gasoline sales further in April. Gasoline sales increased 2.8% m/m in April following a 13.7% m/m surge in March and accounted for more than 40% of the April increase in total sales. However, sales were solid even without gasoline sales. Total sales excluding gasoline rose 0.3% m/m in April versus a 0.7% monthly gain in March. Sales excluding both autos and gasoline increased 0.5% m/m in April following a 0.7% m/m rise in March.

The control group of sales (total sales excluding food services, autos, gasoline and building materials that the BEA uses to construct PCE in the national accounts) posted another solid increase in March, rising 0.5% m/m in April following an upwardly revised 0.8% m/m increase in March (previously (0.7% m/m). The solid performances of the control group sales in March and April provide a strong start to Q2. April control-group sales are 5.4% at an annual rate above the Q1 average, in line with the 5.7% annualized increase in Q1. Consumer spending remains surprisingly resilient notwithstanding the recent hit to disposable income from the marked increase in energy prices.

Sales across major sectors were varied in April. Consumers clearly spent more on necessities, owing largely to higher prices. Food sales increased 0.8% m/m in April on top of a 1.0% m/m rise in March. And as already noted, gasoline sales posted another outsized monthly increase. By contrast, department store sales slumped 3.2% m/m, clothing sales fell 1.5% m/m, auto sales declined 0.4% m/m and furniture sales fell 2.0% m/m. More encouragingly, sales of nonstore retailers rose 1.1% m/m, their fourth consecutive solid monthly gain. And sales at restaurants increased 0.6% m/m in April, their third consecutive monthly rise. Analysts frequently use restaurant sales as a barometer of consumer attitudes, believing that consumers would not eat out regularly if they were under serious financial stress.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.


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- Total sales increase 0.5% m/m in April after a 1.6% monthly jump in March.
- Gasoline sales rose 2.8% m/m in April on top of a 13.7% surge in March.
- Auto sales fell 0.4% m/m after a 0.6% m/m rise in March.
- Excluding auto and gasoline sales, remaining sales increased by a solid 0.5% m/m in April versus a 0.7% m/m rise in March.
- Sales of the retail control group that is used to construct PCE rose 0.5% m/m in April and are 5.4% annualized above the Q1 average, providing a good start to Q2.


U.S. Retail Sales Slowed in April But Remained Solid

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance rose by 12,000 to 211,000 in the week ending May 9, from 199,000 in the week ending May 2, revised from 200,000. The four-week average rose 750 to 203,750 in the week ending May 9, from 203,000 the May 2 week, revised from 203,250. The Action Economics/Haver Analytics Survey looked for 205,000 claims to have been filed. 

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 24,000 to 1.782 million in the week ending May 2, from 1.758 million in the week ending April 25, revised from 1.766 million. The four-week moving average declined to 1.781 million in the latest week from 1.788 million in the April 25 week. The four-week moving average reached the lowest level since May 2024. The insured unemployment rate rose back to 1.2% in the week of May 2 from the one-week dip to 1.1% in the April 25 week. It had been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 25, the highest unemployment rates were in Rhode Island (2.29%), New Jersey and Massachusetts (both 2.20%), and Washington (2.15%). The lowest rates were in Florida and Louisiana (both 0.31%), South Dakota (0.32%), Alabama and Arkansas (both 0.36%), North Carolina (0.38%), Tennessee (0.47%) and Iowa, Kansas and Virginia (all 0.48%). Rates in other notable states include California (1.99%), New York (1.66%), Illinois (1.56%), Pennsylvania (1.28%), and Texas (1.03%). 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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- New claims rose by 12,000 to 211,000.
- Continuing claims rose by 24,000 to 1.782 million.
- The insured unemployment rate was back up to 1.2% in the week of May 2, from the one-week dip to 1.1% the prior week.

Economy in Brief: 2006

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Philadelphia Fed Business Activity Index Up Slightly

Philadelphia Fed Business Activity Index Up Slightly

Consumer Prices Remain Restrained through March in Europe & Canada

Leading Economic Indicators Down For Second Month

Initial Claims for Unemployment Insurance Drop

Initial Claims for Unemployment Insurance Drop

Slovenia: Labor Market Hesitation Follows Good Growth in 2005

Mortgage Applications Down Further