Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419c.jpg" width="353">
Housing starts fell a sharp 17.6% from the record high the prior month which was revised slightly higher from the initial report. March starts of 1.837M were the lowest since November of last year.Consensus expectations had been for a lesser decline to 2.10M starts.
Single-family starts of 1.54M slid 14.4% m/m from the upwardly revised record high in February. Single family starts in the Northeast dropped 19.9% (-16.9% y/y) while single family starts in the Midwest reversed all of the prior month&#39;s jump with a 18.5% (-8.5% y/y) slump. Single family starts in the South fell 15.3% (-4.8% y/y) and starts in the West were off 7.8% (+0.2% y/y).
Multi family starts cratered by nearly a third to the lowest level since June of last year.
Building permits fell 4.0% but the decline the prior month was revised shallower.

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</table>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</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>1,837</td>
<td>2,229</td>
<td>-8.2%</td>
<td>1,952</td>
<td>1,853</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,539</td>
<td>1,798</td>
<td>-5.2%</td>
<td>1,605</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>298</td>
<td>431</td>
<td>-20.7%</td>
<td>347</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,023</td>
<td>2,107</td>
<td>0.2%</td>
<td>2,035</td>
<td>1,8 89</td>
<td>1,749</td>
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Housing starts fell a sharp 17.6% from the record high the prior month which was revised slightly higher from the initial report. March starts of 1.837M were the lowest since November of last year.Consensus expectations had been for a [...]

Housing Starts Off Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419b.jpg" width="353">
The Producer Price Index for finished goods rose 0.7% in March, the largest one month rise since November and surpassed Consensus expectations for a 0.6% gain. Excluding food &amp; energy prices, however, the PPI rose 0.1% for the second consecutive month. Consensus expectations had been for a 0.2% increase.
Finished energy prices advanced 3.3% (15.3% y/y) as gasoline prices jumped 12.3% (31.9% y/y) and fuel oil prices rose 16.1% (55.8% y/y). In April, prices for crude petroleum and for refined petroleum products are down versus March.
Core finished consumer goods prices rose 0.1% (2.6% y/y). Consumer durable goods prices fell by 0.1% (1.6% y/y) for the second consecutive monthly decline. Passenger cars fell again (+1.1% y/y) and home electronic equipment prices were off 0.2% (-4.0% y/y). Household appliance prices rose 0.3% (1.8% y/y).
Core consumer nondurable goods prices rose 0.1% (3.3% y/y) and capital goods prices increased 0.3% (+2.7% y/y). Finished food prices rose 0.3% (3.8% y/y).
Intermediate goods prices posted the largest increase since October. The 1.0% advance reflected a 3.7% (16.7% y/y) gain in energy prices. Core intermediate prices rose 0.3% though plywood prices fell (-13.9% y/y) as did hardwood lumber prices (-0.8% y/y).
Crude prices jumped 4.3% on the strength of surging oil prices, up 5.5% (28.4% y/y). Core crude prices rose for the first month in four. The 1.0% increase reflected price jumps for copper (15.9% y/y) &amp; aluminum (8.9% y/y) base scrap. During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
Inflation Targeting under Commitment and Discretion from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2005/dennis.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</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>
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<td class="firstcol">Finished Goods</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>1.5%</td>
<td>0.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.0%</td>
<td>0.7%</td>
<td>8.4%</td>
<td>6.6%</td>
<td>4.6%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.5%</td>
<td>7.6%</td>
<td>5.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
</tr>
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<td class="firstcol">Crude Goods</td>
<td>4.3%</td>
<td>-1.6%</td>
<td>10.8%</td>
<td>17.6%</td>
<td>25.1%</td>
<td>-10.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>-3.0%</td>
<td>3.4%</td>
<td>26.5%</td>
<td>12.4%</td>
<td>3.8%</td>
</tr>
</tbody>
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The Producer Price Index for finished goods rose 0.7% in March, the largest one month rise since November and surpassed Consensus expectations for a 0.6% gain. Excluding food & energy prices, however, the PPI rose 0.1% for the second [...]

PPI Again Boosted by Petroleum

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419b.jpg" width="353">
The Producer Price Index for finished goods rose 0.7% in March, the largest one month rise since November and surpassed Consensus expectations for a 0.6% gain. Excluding food &amp; energy prices, however, the PPI rose 0.1% for the second consecutive month. Consensus expectations had been for a 0.2% increase.
Finished energy prices advanced 3.3% (15.3% y/y) as gasoline prices jumped 12.3% (31.9% y/y) and fuel oil prices rose 16.1% (55.8% y/y). In April, prices for crude petroleum and for refined petroleum products are down versus March.
Core finished consumer goods prices rose 0.1% (2.6% y/y). Consumer durable goods prices fell by 0.1% (1.6% y/y) for the second consecutive monthly decline. Passenger cars fell again (+1.1% y/y) and home electronic equipment prices were off 0.2% (-4.0% y/y). Household appliance prices rose 0.3% (1.8% y/y).
Core consumer nondurable goods prices rose 0.1% (3.3% y/y) and capital goods prices increased 0.3% (+2.7% y/y). Finished food prices rose 0.3% (3.8% y/y).
Intermediate goods prices posted the largest increase since October. The 1.0% advance reflected a 3.7% (16.7% y/y) gain in energy prices. Core intermediate prices rose 0.3% though plywood prices fell (-13.9% y/y) as did hardwood lumber prices (-0.8% y/y).
Crude prices jumped 4.3% on the strength of surging oil prices, up 5.5% (28.4% y/y). Core crude prices rose for the first month in four. The 1.0% increase reflected price jumps for copper (15.9% y/y) &amp; aluminum (8.9% y/y) base scrap. During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
Inflation Targeting under Commitment and Discretion from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2005/dennis.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/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</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>
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<td class="firstcol">Finished Goods</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>1.5%</td>
<td>0.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.0%</td>
<td>0.7%</td>
<td>8.4%</td>
<td>6.6%</td>
<td>4.6%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.5%</td>
<td>7.6%</td>
<td>5.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>4.3%</td>
<td>-1.6%</td>
<td>10.8%</td>
<td>17.6%</td>
<td>25.1%</td>
<td>-10.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>-3.0%</td>
<td>3.4%</td>
<td>26.5%</td>
<td>12.4%</td>
<td>3.8%</td>
</tr>
</tbody>
</table>
Housing Starts Off Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419c.jpg" width="353">
Housing starts fell a sharp 17.6% from the record high the prior month which was revised slightly higher from the initial report. March starts of 1.837M were the lowest since November of last year.Consensus expectations had been for a lesser decline to 2.10M starts.
Single-family starts of 1.54M slid 14.4% m/m from the upwardly revised record high in February. Single family starts in the Northeast dropped 19.9% (-16.9% y/y) while single family starts in the Midwest reversed all of the prior month&#39;s jump with a 18.5% (-8.5% y/y) slump. Single family starts in the South fell 15.3% (-4.8% y/y) and starts in the West were off 7.8% (+0.2% y/y).
Multi family starts cratered by nearly a third to the lowest level since June of last year.
Building permits fell 4.0% but the decline the prior month was revised shallower.

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<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/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</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>1,837</td>
<td>2,229</td>
<td>-8.2%</td>
<td>1,952</td>
<td>1,853</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,539</td>
<td>1,798</td>
<td>-5.2%</td>
<td>1,605</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>298</td>
<td>431</td>
<td>-20.7%</td>
<td>347</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,023</td>
<td>2,107</td>
<td>0.2%</td>
<td>2,035</td>
<td>1,8 89</td>
<td>1,749</td>
</tr>
</tbody>
</table>
Chain Store Sales Pass A "Soft Spot" 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419a.jpg" width="353">
Chain store sales rose 1.0% last week according to the International Council of Shopping Centers (ICSC)-UBS survey. Coming on the heels of 0.3% increases during the prior two weeks, the increase lifted the average level in April up 0.4% versus March when sales moved sideways for much of the month.
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 nonauto retail sales less gasoline.
The leading indicator of chain store sales from ICSC gained 0.3% (-0.8% y/y) for the first rise in four weeks.
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.

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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">04/16/05</th>
<th scope="col">04/09/05</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>457.4</td>
<td>452.9</td>
<td>3.9%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
More Gloom from Germany 
by <a href="/comment/Curley.html">Louise Curley</a> April 19 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419d.jpg" width="353">
After becoming slightly more optimistic regarding the German economic outlook six months ahead in each of the first three months of this year, the institutional investors and analysts who respond to the ZEW survey became decidedly more pessimistic in April. The excess of optimists over pessimists dropped to 20.1% in April from 36.3% in March and from 59.1% a year ago.
The same but more pessimistic trend is apparent in the respondents&#39; view of current conditions in Germany. In April, the percentage of respondents who considered current conditions bad was 73% greater than those who considered them good. The -73% figure compares with -66% in March and -72.5% in April of last year. In general, pessimistic appraisals of current conditions tend to outweigh the optimistic appraisals, while optimistic appraisals of expectations of future conditions tend to outweigh the pessimistic appraisals, as can be seen in the attached chart. (&quot;Hope springs eternal in the human breast./ Man never is, but always to be, blest.&quot;) <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419e.jpg" width="353">
The ZEW survey also covers opinions on current conditions and expectations in the Euro zone as a whole. Since Germany represents such a large part of the Euro zone, it is not surprising that appraisals of current conditions and expectations in the Euro Zone tend to be similar to those of Germany. Expectations of economic conditions in Germany and in the Euro Zone are shown in the second chart.
With their pessimistic outlook for the economy, the institutional investors and analysts see little to cheer about in the profit outlook. There are only three industries, banking, telecommunications and information technology, in which the optimists outweigh the pessimists by more than 50%. The profit expectations for selected industries are shown in the table below.

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<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">GERMANY %</a></th>
<th scope="col">Apr 05</th>
<th scope="col">Mar 05</th>
<th scope="col">Mar 04</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y 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">Expectations</td>
<td>20.1</td>
<td>36.3</td>
<td>49.7</td>
<td>-16.2</td>
<td>-29.6</td>
<td>49.6</td>
<td>38.4</td>
<td>45.3</td>
</tr>
<tr>
<td class="firstcol">Current conditions</td>
<td>-73.0</td>
<td>-66.0</td>
<td>-42.5</td>
<td>-7.0</td>
<td>-0.5</td>
<td>-67.7</td>
<td>-92.6</td>
<td>-83.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Profit expectations</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">&nbsp; Banking</td>
<td>52.4</td>
<td>55.5</td>
<td>67.2</td>
<td>-3.1</td>
<td>-14.8</td>
<td>59.6</td>
<td>30.5</td>
<td>-8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Telecommunications</td>
<td>51.1</td>
<td>56.5</td>
<td>69.2</td>
<td>-5.4</td>
<td>-18.1</td>
<td>62.5</td>
<td>49.7</td>
<td>9.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Information technology</td>
<td>52.5</td>
<td>59.4</td>
<td>71.9</td>
<td>-6.9</td>
<td>-19.4</td>
<td>63.0</td>
<td>45.2</td>
<td>17.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer/trade</td>
<td>-26.9</td>
<td>-22.6</td>
<td>-13.7</td>
<td>-4.3</td>
<td>-13.2</td>
<td>-18.2</td>
<td>-33.7</td>
<td>-28.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Machinery</td>
<td>37.3</td>
<td>45.6</td>
<td>52.4</td>
<td>-8.3</td>
<td>-15.1</td>
<td>53.4</td>
<td>7.0</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Vehicle/automotive&nbsp;</td>
<td>-19.0</td>
<td>-2.9</td>
<td>5.9</td>
<td>-16.1</td>
<td>-24.9</td>
<td>-0.1</td>
<td>-8.2</td>
<td>-6.0</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">EURO ZONE %</a></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>24.6</td>
<td>37.3</td>
<td>59.1</td>
<td>-12.7</td>
<td>-34.5</td>
<td>52.1</td>
<td>48.9</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">Current conditions</td>
<td>-32.8</td>
<td>-24.8</td>
<td>-55.4</td>
<td>-5.0</td>
<td>21.6</td>
<td>-41.4</td>
<td>-78.5</td>
<td>67.5</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418e.jpg" width="353">
On Wednesday, April 20, the central bank of Romania will issue new banknotes and coins of the new leu, which will become the legal currency as of July 1. One new leu is equal to 1,000 old lei.
Romania is one of a number of countries that have redenominated there currencies after they have tamed the inflation that had eroded the value of their currencies. Romania experienced three bouts of hyper inflation in the nineties--the first, producing an inflation rate as measured by the year-to-year percent increase in the consumer price index of 350% reached in March 1992, the second with a monthly peak of 309.7% in December 1993 and the third, with a monthly peak of 177.4% in June , 1997. The high rates of inflation led to continuing declines in the currency. The attached chart shows inflation, measured by the year-to-year percent increase in the consumer price index and the monthly exchange rate, Leu/US$, with the latter plotted on an inverted scale. Inflation in Romania has been declining slowly since early 2000 and has now reached 8.6% in March of this year.
A decline in the leu/US$ means that the dollar has depreciated against the leu or that the leu has appreciated against the dollar. (In the Haver data bases when the exchange rate is listed in terms of the foreign currency to the dollar, the percentage changes calculated are the percentage changes in the dollar relative to the foreign currency. In order to calculate the percent change in the foreign currency relative to the dollar, one takes the reciprocal of (1+the change in the dollar) and subtracts 1. For example the change in the leu/US$ from March 2004 to March 2005 was -14.99%, meaning that the dollar depreciated 14.99% against the leu or that the leu appreciated {(1/85.01)-1} or 17.6%.

<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/EMERGECW/@E3/@E3.htm">Romania</a></th>
<th scope="col">Mar 05</th>
<th scope="col">Feb 05</th>
<th scope="col">Mar 04</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</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>
<td class="firstcol">Consumer Price Index (%Y/Y)</td>
<td>8.63</td>
<td>8.92</td>
<td>13.09</td>
<td>-0.19</td>
<td>-4.46</td>
<td>11.86</td>
<td>15.36</td>
<td>22.51</td>
</tr>
<tr>
<td class="firstcol">Lei/US$ (EOP)</td>
<td>28429</td>
<td>27473</td>
<td>33440</td>
<td>3.48</td>
<td>-14.99</td>
<td>-1082</td>
<td>-2.70</td>
<td>6.02</td>
</tr>
</tbody>
</table>
</body>
</html>

On Wednesday, April 20, the central bank of Romania will issue new banknotes and coins of the new leu, which will become the legal currency as of July 1. One new leu is equal to 1,000 old lei. Romania is one of a number of countries [...]

Romania to Redenominate the Leu in July: 1 New Leu = 1,000 Old Leu

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418a.jpg" width="353">
Revenues from Tax Day (April 15th) for 2005 won&#39;t be tallied for another month, but the figures for the first half of FY 2005 indicate the U.S. Federal government&#39;s budget deficit lessened just $6.8B versus the first half of FY 2004. The scant improvement is off the pace needed to meet the latest CBO projection of a $365B deficit for FY 2005.
Growth in net receipts for the first six months of FY05 improved to 10.4%, more than triple the growth during the first six months of FY04. Individual tax receipts grew 8.5% versus a 1.2% decline in the first six months of FY04 and corporate tax receipts remained on a pace which doubled the year earlier level. Reflecting the improved job market, employment taxes grew 6.5% versus 1.3% growth last year.
Offsetting the improvement in revenue growth was steady, strong growth in federal outlays, about stable at 7.1% versus the first six months of 2005. Growth in Medicare outlays picked up to 9.5% versus 6.6% and social security outlays grew 5.4%, up from 4.2% in 2004. Veterans benefits grew 17.4%. These gains offset deceleration in defense spending which grew 7.3%, less than the year earlier rate but interest expense, up 9.1, started to grow again with higher rates.
An Analysis of the President&#39;s Budgetary Proposals for Fiscal Year 2006 from the Congressional Budget Office is available <a href="http://www.cbo.gov/showdoc.cfm?index=6146&amp;sequence=0"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">FY &#39;05 - YTD</th>
<th scope="col">FY2004</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-71.2B</td>
<td>$-113.9B</td>
<td>$-294.6B</td>
<td>$-412.1B</td>
<td>$-377.6B</td>
<td>$-157.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$148.7B</td>
<td>$100.9B</td>
<td>10.4%</td>
<td>5.5%</td>
<td>-3.8%</td>
<td>-6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$220.0B</td>
<td>$214.8B</td>
<td>7.1%</td>
<td>6.1%</td>
<td>7.4%</td>
<td>7.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

Revenues from Tax Day (April 15th) for 2005 won't be tallied for another month, but the figures for the first half of FY 2005 indicate the U.S. Federal government's budget deficit lessened just $6.8B versus the first half of FY 2004. [...]

U.S. Budget Deficit - Tax Day 2005

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418b.jpg" width="353">
The 1Q &#39;05 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI improved slightly to 71 from 70 the prior quarter.
Since 1992 there has been a 68% correlation between the Composite Index Level and quarterly growth in factory sector output.
The current orders index improved a point to 90. The export orders index also nudged up a point to 90, but that was a new record level.
The profit margins index slipped modestly for the second quarter but remained near a record level and capital spending intentions for the coming year fell modestly.
For the latest press release from the MAPI click <a href="http://mapi.net/html/prelease.cfm?release_id=1064">here</a>. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418d.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418c.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveys/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">1Q &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>71</td>
<td>70</td>
<td>78</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
</table>
</body>
</html>

The 1Q '05 Composite Business Index published by the Manufacturers' Alliance/MAPI improved slightly to 71 from 70 the prior quarter. Since 1992 there has been a 68% correlation between the Composite Index Level and quarterly growth in [...]

MAPI Business Outlook Improved

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418b.jpg" width="353">
The 1Q &#39;05 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI improved slightly to 71 from 70 the prior quarter.
Since 1992 there has been a 68% correlation between the Composite Index Level and quarterly growth in factory sector output.
The current orders index improved a point to 90. The export orders index also nudged up a point to 90, but that was a new record level.
The profit margins index slipped modestly for the second quarter but remained near a record level and capital spending intentions for the coming year fell modestly.
For the latest press release from the MAPI click <a href="http://mapi.net/html/prelease.cfm?release_id=1064">here</a>. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418d.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418c.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveys/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">1Q &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>71</td>
<td>70</td>
<td>78</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit - Tax Day 2005 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418a.jpg" width="353">
Revenues from Tax Day (April 15th) for 2005 won&#39;t be tallied for another month, but the figures for the first half of FY 2005 indicate the U.S. Federal government&#39;s budget deficit lessened just $6.8B versus the first half of FY 2004. The scant improvement is off the pace needed to meet the latest CBO projection of a $365B deficit for FY 2005.
Growth in net receipts for the first six months of FY05 improved to 10.4%, more than triple the growth during the first six months of FY04. Individual tax receipts grew 8.5% versus a 1.2% decline in the first six months of FY04 and corporate tax receipts remained on a pace which doubled the year earlier level. Reflecting the improved job market, employment taxes grew 6.5% versus 1.3% growth last year.
Offsetting the improvement in revenue growth was steady, strong growth in federal outlays, about stable at 7.1% versus the first six months of 2005. Growth in Medicare outlays picked up to 9.5% versus 6.6% and social security outlays grew 5.4%, up from 4.2% in 2004. Veterans benefits grew 17.4%. These gains offset deceleration in defense spending which grew 7.3%, less than the year earlier rate but interest expense, up 9.1, started to grow again with higher rates.
An Analysis of the President&#39;s Budgetary Proposals for Fiscal Year 2006 from the Congressional Budget Office is available <a href="http://www.cbo.gov/showdoc.cfm?index=6146&amp;sequence=0"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">FY &#39;05 - YTD</th>
<th scope="col">FY2004</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-71.2B</td>
<td>$-113.9B</td>
<td>$-294.6B</td>
<td>$-412.1B</td>
<td>$-377.6B</td>
<td>$-157.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$148.7B</td>
<td>$100.9B</td>
<td>10.4%</td>
<td>5.5%</td>
<td>-3.8%</td>
<td>-6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$220.0B</td>
<td>$214.8B</td>
<td>7.1%</td>
<td>6.1%</td>
<td>7.4%</td>
<td>7.9%</td>
</tr>
</tbody>
</table>
Romania to Redenominate the Leu in July:  1 New Leu = 1,000 Old Leu  
by <a href="/comment/Curley.html">Louise Curley</a> April 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418e.jpg" width="353">
On Wednesday, April 20, the central bank of Romania will issue new banknotes and coins of the new leu, which will become the legal currency as of July 1. One new leu is equal to 1,000 old lei.
Romania is one of a number of countries that have redenominated there currencies after they have tamed the inflation that had eroded the value of their currencies. Romania experienced three bouts of hyper inflation in the nineties--the first, producing an inflation rate as measured by the year-to-year percent increase in the consumer price index of 350% reached in March 1992, the second with a monthly peak of 309.7% in December 1993 and the third, with a monthly peak of 177.4% in June , 1997. The high rates of inflation led to continuing declines in the currency. The attached chart shows inflation, measured by the year-to-year percent increase in the consumer price index and the monthly exchange rate, Leu/US$, with the latter plotted on an inverted scale. Inflation in Romania has been declining slowly since early 2000 and has now reached 8.6% in March of this year.
A decline in the leu/US$ means that the dollar has depreciated against the leu or that the leu has appreciated against the dollar. (In the Haver data bases when the exchange rate is listed in terms of the foreign currency to the dollar, the percentage changes calculated are the percentage changes in the dollar relative to the foreign currency. In order to calculate the percent change in the foreign currency relative to the dollar, one takes the reciprocal of (1+the change in the dollar) and subtracts 1. For example the change in the leu/US$ from March 2004 to March 2005 was -14.99%, meaning that the dollar depreciated 14.99% against the leu or that the leu appreciated {(1/85.01)-1} or 17.6%.

<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/EMERGECW/@E3/@E3.htm">Romania</a></th>
<th scope="col">Mar 05</th>
<th scope="col">Feb 05</th>
<th scope="col">Mar 04</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</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>
<td class="firstcol">Consumer Price Index (%Y/Y)</td>
<td>8.63</td>
<td>8.92</td>
<td>13.09</td>
<td>-0.19</td>
<td>-4.46</td>
<td>11.86</td>
<td>15.36</td>
<td>22.51</td>
</tr>
<tr>
<td class="firstcol">Lei/US$ (EOP)</td>
<td>28429</td>
<td>27473</td>
<td>33440</td>
<td>3.48</td>
<td>-14.99</td>
<td>-1082</td>
<td>-2.70</td>
<td>6.02</td>
</tr>
</tbody>
</table>
</body>
</html>

MAPI Business Outlook Improvedаа

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/050415f.jpg" width="353">
Spain&#39;s current account deteriorated significantly during 2004, and in January, which was reported today by the Bank of Spain, the deficit continued to widen from year-earlier amounts (see graph alongside).
Much of this movement occurred in merchandise trade, as might be expected. However, other current accounts also moved adversely, as evidenced in the table below. The surplus on services decreased, and the deficit on income increased considerably. Among services, the surplus on tourism, which rose from the mid-1990s through the middle of 2001, flattened subsequently, and during the last year it diminished as Spaniards traveled elsewhere, while outlays by tourists to Spain just held steady.
Conventional wisdom argues that the function of the financial accounts in the balance of payments is to &quot;finance&quot; the current account. But increasingly, as we have frequently mentioned for the US, the financial accounts evolve autonomously. For example, direct investment into Spain, which ran surpluses in 2002 and 2003, moved decisively into deficit last year. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050415g.jpg" width="353">
Similarly with &quot;other&quot; investment, representing mainly bank deposit and lending activities, a surplus in the two earlier years shifted to a deficit position for 2004 and this continued in January. This last item in particular might be associated with the financial operations that facilitate trade flows. But it moved against the trade flows instead. Portfolio investment and payments through the Bank of Spain made the difference to &quot;balance&quot; the &quot;balance of payments&quot;. This mix of payment types, however, highlights clearly that financial flows exert their own independent impact on international economic relations, serving a broader function than simply offsetting shipments of goods back and forth across national borders. 

<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/SPAIN/SPAIN.HTM">SPAIN</a> Balances, Mil. Euros</th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2004</th>
<th scope="col">Jan 2004</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Current Account</td>
<td>-4155</td>
<td>-5710</td>
<td>-809</td>
<td>-3295</td>
<td>-1736</td>
<td>-1407</td>
</tr>
<tr class="odd">
<td class="firstcol">Merchandise</td>
<td>-4675</td>
<td>-5403</td>
<td>-2989</td>
<td>-4324</td>
<td>-3154</td>
<td>-2884</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>1431</td>
<td>1236</td>
<td>1292</td>
<td>2097</td>
<td>2272</td>
<td>2215</td>
</tr>
<tr class="odd">
<td class="firstcol">Income</td>
<td>-1223</td>
<td>-1715</td>
<td>-640</td>
<td>-1069</td>
<td>-882</td>
<td>-940</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">Financial Account</td>
<td>4680</td>
<td>3919</td>
<td>1673</td>
<td>3027</td>
<td>1470</td>
<td>1230</td>
</tr>
<tr>
<td class="firstcol">&quot;Private&quot; Financial Flows = Sum of 3 Below</td>
<td>3022</td>
<td>1072</td>
<td>8738</td>
<td>4040</td>
<td>1618</td>
<td>1342</td>
</tr>
<tr class="odd">
<td class="firstcol">Direct Investment</td>
<td>-1170</td>
<td>-1526</td>
<td>-326</td>
<td>-2157</td>
<td>166</td>
<td>389</td>
</tr>
<tr>
<td class="firstcol">Portfolio Investment</td>
<td>7861</td>
<td>8479</td>
<td>7597</td>
<td>6798</td>
<td>-2506</td>
<td>474</td>
</tr>
<tr class="odd">
<td class="firstcol">Other Investment</td>
<td>-3669</td>
<td>-5881</td>
<td>1467</td>
<td>-601</td>
<td>3958</td>
<td>479</td>
</tr>
</tbody>
</table>
</body>
</html>

Spain's current account deteriorated significantly during 2004, and in January, which was reported today by the Bank of Spain, the deficit continued to widen from year-earlier amounts (see graph alongside). Much of this movement [...]

Spanish Current Account Deficit Widens in January, Even as Financial Flows Seek Their Own Return

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

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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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