Tom Moeller

U.S. retail sales fell 0.4% last month and missed expectations for no change. November's gain was revised down slightly to 1.0% and the October figure also was revised down slightly to no change. Excluding autos sales similarly fell [...]

U.S. Retail Sales Miss Expectations

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114b.jpg" align="left" border="0" height="265" width="353">
In recent months, the British Pound has taken a sharp fall.
From its peak of 102.89 (January, 2005 = 100) in early November, the
Broad Effective Exchange rate of the British pound had declined 7.6% by
last Friday. By contrast, during this time, the Broad Effective
Exchange rate of the US dollar rose 0.56% from 89.63 to 90.13. The
first chart compares the effective exchange rates of the two countries.
The inflationary implications of decline in the pound are likely to
complicate monetary policy.
The pound has depreciated somewhat more against the euro than
the dollar. From the November peak of 1.43 euros, the pound declined
8.3% to 1.32 euros on January 11, while the pound declined 7.1% from
the peak of $2.11 to $1.96 over the same period. The value of the pound
in dollar and euro terms is shown in the second chart. The sharp
decline in the pound relative to the euro is likely to have a dampening
effect on the Euro Area's exports to the U. K.
In hindsight, the earlier rise in the value of the pound
appears to have been somewhat anomalous. The British current account as
a percentage of GDP, which had been relatively high, was even higher
than that of the U.S. in the third quarter of last year as can be seen
in the third chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114d.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114c.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMAN&nbsp;
MANUFACTURING NEW ORDERS AND SALES (2000=100)&nbsp;</th>
<th scope="col">Jan 11,&nbsp; 2008</th>
<th scope="col">Nov 11, 2007&nbsp;</th>
<th scope="col">% Chg&nbsp;</th>
<th scope="col"></th>
<th scope="col"></th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Broad Effective
Exchange Rates (Jan, 2005=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; U.
K&nbsp;.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>95.04</td>
<td>102.89</td>
<td>-7.63</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; U. S.</td>
<td>89.63</td>
<td>90.13</td>
<td>0.56</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Pound/ Euro&nbsp;</td>
<td>1.32</td>
<td>1.44</td>
<td>-8.33</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Pound/Dollar</td>
<td>1.96</td>
<td>2.11</td>
<td>-7.11</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Q3 2007</td>
<td>Q2 2007&nbsp;</td>
<td>Q3 2006&nbsp;</td>
<td>Q/Q&nbsp; Dif&nbsp;</td>
<td>Y/Y Dif&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Current Account/
GDP&nbsp; (%)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;U.
K&nbsp;.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>5.7</td>
<td>-4.0</td>
<td>-4.0</td>
<td>-1.7</td>
<td>0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
U. S.</td>
<td>5.1</td>
<td>5.4</td>
<td>6.6</td>
<td>-0.3</td>
<td>-1.5</td>
</tr>
</tbody>
</table>
</body></html>

In recent months, the British Pound has taken a sharp fall. From its peak of 102.89 (January, 2005 = 100) in early November, the Broad Effective Exchange rate of the British pound had declined 7.6% by last Friday. By contrast, during [...]

Decline in British Pound Complicates U.K. Monetary Policy, Dampens Euro Area Export Prospects

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114e.jpg" align="left" border="0" height="265" width="353">
Industrial output is dropping in November and more than
offsetting the rise in October that followed another drop in September.
The chart shows that while industrial output trends are ragged across
sectors they are also losing momentum. Main EMU sectors are lower in
November and in the quarter-to-date (see table, final column). Still
for two of the three largest Euro Area countries, France and Germany,
IP was still advancing in Q2 even though it did fall in both those
countries in November. Spain&#8217;s sharp rise is no surprise since the
Spanish data are extremely volatile. The UK, an European Union member,
shows a slight drop in output in November and small decline two months
into the fourth quarter as well. 
 

On Balance, the talk for Euro Area suggests that growth is not
the main worry there, while inflation is becoming more of a worry,
unlike the US cycle. Recent reports show that the 3-Month LIBOR premium
over the US discount rate has been evaporating as the successive TAF
auctions have been completed. So Europe may have less of a sense of
risk form the financial crisis that welled up related to sub-prime
loans and more at the end of last year. Still that is different from
saying that growth prospects there have improved. This morning the Euro
was strong and headed toward a new high vs dollar. It made a new high
vs sterling. Surely with the impact for such shifts in the pipeline
growth in the E-zone will not be enhanced. Nonetheless more of the ECB
members seem to be leaning toward agreeing that it is time to hike
rates. 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> E-zone
and UK IP and MFG</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Nov-07</td>
<td>Nov-07</td>
<td>Nov-07</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Ezone Detail</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Q-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-0.6%</td>
<td>0.5%</td>
<td>-1.3%</td>
<td>-5.4%</td>
<td>1.0%</td>
<td>2.2%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-1.4%</td>
<td>-5.6%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>-1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Durables</td>
<td>-1.9%</td>
<td>0.0%</td>
<td>-3.7%</td>
<td>-20.5%</td>
<td>-4.5%</td>
<td>-3.1%</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Nondurables</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-1.2%</td>
<td>-4.1%</td>
<td>0.8%</td>
<td>2.2%</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.6%</td>
<td>0.6%</td>
<td>-1.4%</td>
<td>-5.8%</td>
<td>0.6%</td>
<td>2.1%</td>
<td>-1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>-0.7%</td>
<td>0.9%</td>
<td>-1.3%</td>
<td>-4.1%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>0.7%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Main
E-zone Countries and
UK IP in MFG</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>104.8</td>
<td>104.8</td>
<td>104.8</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Memo: Manufacturing</td>
<td>1-Mo%</td>
<td>1-Mo%</td>
<td>1-Mo%</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Q-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.9%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-2.9%</td>
<td>2.7%</td>
<td>4.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France: IP excl Construction</td>
<td>-1.5%</td>
<td>2.1%</td>
<td>-1.3%</td>
<td>-3.0%</td>
<td>0.8%</td>
<td>2.5%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-1.4%</td>
<td>-0.6%</td>
<td>-1.7%</td>
<td>-13.9%</td>
<td>-5.3%</td>
<td>-3.9%</td>
<td>-9.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-6.2%</td>
<td>10.2%</td>
<td>-6.8%</td>
<td>-13.6%</td>
<td>-7.7%</td>
<td>-0.7%</td>
<td>13.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>-1.9%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>-0.2%</td>
</tr>
</tbody>
</table>
</body></html>

Industrial output is dropping in November and more than offsetting the rise in October that followed another drop in September. The chart shows that while industrial output trends are ragged across sectors they are also losing [...]

Euro Area IP Slows on Broad Front

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114a.jpg" width="353">
The U.S. government ran a budget surplus this past December of $48.261B, about the same as during December of 2006. These two figures were improved from the December deficits of the prior two years.
For the first three months of FY08, however, the government&#39;s budget deficit deepened to $105.5B versus a deficit of $80.4B during the first three months of FY07.
Federal receipts grew 5.7% y/y, a slowdown from the 8.2% y/y growth during the first three months FY07. Growth in individual income tax receipts (44% of total receipts) continued steady at 9.1%. Withheld income taxes grew 10.5%, which was an acceleration from 8.3% growth early last fiscal year, but non-withheld taxes fell 4.0% versus 28.3% growth during the first three months of FY07.
As a result of the slowdown in corporate profit growth, growth corporate income taxes (13% of total receipts) showed a shortfall of -1.0% versus an 18.6% gain in FY07. Employment &amp; general retirement contributions picked up to a 6.9% rate of growth from 3.7% but unemployment insurance receipts fell 6.4%, about the same as during the prior fiscal year.
U.S. net outlays grew 4.9%, reversing a y/y decline of 5.6% in early FY07. Growth in defense spending (19% of total outlays) eased to 2.1% from 3.8% and Medicare expenditures (12% of outlays) fell 33.4%, but spending in many other categories picked up: agriculture, transportation, health, income security, justice administration and interest, with the rise in interest rates. Growth in social security spending (21% of outlays) held about steady at 6.3%.The Government&#39;s financial data is available in Haver&#39;s USECON database.
Monetary Policy Flexibility, Risk Management, and Financial Disruptions is Friday&#39;s speech by GovernorFrederic S. Mishkin and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080111a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005 &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$48.261B</td>
<td>$-98.238B</td>
<td>$41.961B (12/06)</td>
<td>-$162.8B</td>
<td>-$248.2B</td>
<td>-$318.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$277.0B</td>
<td>$151.1B</td>
<td>6.5%</td>
<td>6.7%</td>
<td>11.8%</td>
<td>14.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$228.7B</td>
<td>$249.3B</td>
<td>4.9%</td>
<td>2.8%</td>
<td>7.4%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. government ran a budget surplus this past December of $48.261B, about the same as during December of 2006. These two figures were improved from the December deficits of the prior two years. For the first three months of FY08, [...]

U.S. Budget Deficit Deeper in 1Q FY08: Growth in Receipts Down, Outlays Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114a.jpg" align="left" border="0" height="265" width="353">
The U.S. government ran a budget surplus this past December of
$48.261B, about the same as during December of 2006. These two figures
were improved from the December deficits of the prior two years.
For the first three months of FY08, however, the government's
budget deficit deepened to $105.5B versus a deficit of $80.4B during
the first three months of FY07.
Federal receipts grew 5.7% y/y, a slowdown from the 8.2% y/y
growth during the first three months FY07. Growth in individual income
tax receipts (44% of total receipts) continued steady at 9.1%. Withheld
income taxes grew 10.5%, which was an acceleration from 8.3% growth
early last fiscal year, but non-withheld taxes fell 4.0% versus 28.3%
growth during the first three months of FY07.
As a result of the slowdown in corporate profit growth, growth
corporate income taxes (13% of total receipts) showed a shortfall of
-1.0% versus an 18.6% gain in FY07. Employment &amp; general
retirement contributions picked up to a 6.9% rate of growth from 3.7%
but unemployment insurance receipts fell 6.4%, about the same as during
the prior fiscal year.
U.S. net outlays grew 4.9%, reversing a y/y decline of 5.6% in
early FY07. Growth in defense spending (19% of total outlays) eased to
2.1% from 3.8% and Medicare expenditures (12% of outlays) fell 33.4%,
but spending in many other categories picked up: agriculture,
transportation, health, income security, justice administration and
interest, with the rise in interest rates. Growth in social security
spending (21% of outlays) held about steady at 6.3%.The Government's
financial data is available in Haver's USECON
database.
Monetary Policy Flexibility, Risk Management, and
Financial Disruptions is Friday's speech by GovernorFrederic
S. Mishkin and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080111a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US
Government Finance</a> &nbsp;</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005 &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$48.261B</td>
<td>$-98.238B</td>
<td>$41.961B 
(12/06)</td>
<td>-$162.8B</td>
<td>-$248.2B</td>
<td>-$318.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$277.0B</td>
<td>$151.1B</td>
<td>6.5%</td>
<td>6.7%</td>
<td>11.8%</td>
<td>14.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$228.7B</td>
<td>$249.3B</td>
<td>4.9%</td>
<td>2.8%</td>
<td>7.4%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>
Decline in British
PoundComplicates U.K. Monetary Policy, Dampens Euro Area Export
Prospects 
by <a href="/comment/Curley.html">Louise
Curley</a> January 14, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114b.jpg" align="left" border="0" height="265" width="353">
In recent months, the British Pound has taken a sharp fall.
From its peak of 102.89 (January, 2005 = 100) in early November, the
Broad Effective Exchange rate of the British pound had declined 7.6% by
last Friday. By contrast, during this time, the Broad Effective
Exchange rate of the US dollar rose 0.56% from 89.63 to 90.13. The
first chart compares the effective exchange rates of the two countries.
The inflationary implications of decline in the pound are likely to
complicate monetary policy.
The pound has depreciated somewhat more against the euro than
the dollar. From the November peak of 1.43 euros, the pound declined
8.3% to 1.32 euros on January 11, while the pound declined 7.1% from
the peak of $2.11 to $1.96 over the same period. The value of the pound
in dollar and euro terms is shown in the second chart. The sharp
decline in the pound relative to the euro is likely to have a dampening
effect on the Euro Area's exports to the U. K.
In hindsight, the earlier rise in the value of the pound
appears to have been somewhat anomalous. The British current account as
a percentage of GDP, which had been relatively high, was even higher
than that of the U.S. in the third quarter of last year as can be seen
in the third chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114d.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114c.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMAN&nbsp;
MANUFACTURING NEW ORDERS AND SALES (2000=100)&nbsp;</th>
<th scope="col">Jan 11,&nbsp; 2008</th>
<th scope="col">Nov 11, 2007&nbsp;</th>
<th scope="col">% Chg&nbsp;</th>
<th scope="col"></th>
<th scope="col"></th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Broad Effective
Exchange Rates (Jan, 2005=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; U.
K&nbsp;.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>95.04</td>
<td>102.89</td>
<td>-7.63</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; U. S.</td>
<td>89.63</td>
<td>90.13</td>
<td>0.56</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Pound/
Euro&nbsp;</td>
<td>1.32</td>
<td>1.44</td>
<td>-8.33</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Pound/Dollar</td>
<td>1.96</td>
<td>2.11</td>
<td>-7.11</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Q3 2007</td>
<td>Q2 2007&nbsp;</td>
<td>Q3 2006&nbsp;</td>
<td>Q/Q&nbsp; Dif&nbsp;</td>
<td>Y/Y Dif&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Current Account/
GDP&nbsp; (%)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;U.
K&nbsp;.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>5.7</td>
<td>-4.0</td>
<td>-4.0</td>
<td>-1.7</td>
<td>0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
U. S.</td>
<td>5.1</td>
<td>5.4</td>
<td>6.6</td>
<td>-0.3</td>
<td>-1.5</td>
</tr>
</tbody>
</table>
UK Core PPI Inflation on the Rise
Again 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 14, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114f.jpg" align="left" border="0" height="265" width="353">
UK Core PPI inflation is making a strong move above the 2%
inflation threshold that the Bank of England applies to overall
consumer inflation (HICP). While the PPI is not the main inflation
metric for the Bank, the surge of inflation at this earlier stage of
production is not welcome news. PPI inflation can be erratic in the UK.
Since Early 2006 this is already the third inflation cycle. Three month
inflation peaked around 3.75% before mid-2006 and again around April
2007; the pace of inflation is again heading higher again in late 2007.
While the successive peaks for inflation were higher during this
episode, the troughs were lower. Through all this, core inflation on a
Yr/Yr basis has been broadly steady. But after edging lower through
November, Yr/Yr core inflation has tuned higher in December. Although
such a move makes a BOE rate cut less likely, the surge in the PPI came
as sterling was hitting a new low vs the euro, the weakest since Dec
1996. Britain, the Euro Area and US all have Central Banks facing tough
policy choices. 
 

 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> UK PPI</th>
</tr>
</thead><tbody>
<tr class="grey3">
<td></td>
<td class="firstcol" colspan="3">%
M/M</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="even">
<td></td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-MO
</td>
<td>12-Mo
Y-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.7%</td>
<td>9.5%</td>
<td>5.8%</td>
<td>5.0%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>2.6%</td>
<td>2.4%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Core: ex
food
beverages, tobacco
&amp; Petroleum</td>
</tr>
</tbody>
</table>
Euro Area IP Slows on Broad
Front&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 14, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080114e.jpg" align="left" border="0" height="265" width="353">
Industrial output is dropping in November and more than
offsetting the rise in October that followed another drop in September.
The chart shows that while industrial output trends are ragged across
sectors they are also losing momentum. Main EMU sectors are lower in
November and in the quarter-to-date (see table, final column). Still
for two of the three largest Euro Area countries, France and Germany,
IP was still advancing in Q2 even though it did fall in both those
countries in November. Spain&#8217;s sharp rise is no surprise since the
Spanish data are extremely volatile. The UK, an European Union member,
shows a slight drop in output in November and small decline two months
into the fourth quarter as well. 
 

On Balance, the talk for Euro Area suggests that growth is not
the main worry there, while inflation is becoming more of a worry,
unlike the US cycle. Recent reports show that the 3-Month LIBOR premium
over the US discount rate has been evaporating as the successive TAF
auctions have been completed. So Europe may have less of a sense of
risk form the financial crisis that welled up related to sub-prime
loans and more at the end of last year. Still that is different from
saying that growth prospects there have improved. This morning the Euro
was strong and headed toward a new high vs dollar. It made a new high
vs sterling. Surely with the impact for such shifts in the pipeline
growth in the E-zone will not be enhanced. Nonetheless more of the ECB
members seem to be leaning toward agreeing that it is time to hike
rates. 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> E-zone
and UK IP and MFG</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Nov-07</td>
<td>Nov-07</td>
<td>Nov-07</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Ezone Detail</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Q-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-0.6%</td>
<td>0.5%</td>
<td>-1.3%</td>
<td>-5.4%</td>
<td>1.0%</td>
<td>2.2%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-1.4%</td>
<td>-5.6%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>-1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Durables</td>
<td>-1.9%</td>
<td>0.0%</td>
<td>-3.7%</td>
<td>-20.5%</td>
<td>-4.5%</td>
<td>-3.1%</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Nondurables</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-1.2%</td>
<td>-4.1%</td>
<td>0.8%</td>
<td>2.2%</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.6%</td>
<td>0.6%</td>
<td>-1.4%</td>
<td>-5.8%</td>
<td>0.6%</td>
<td>2.1%</td>
<td>-1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>-0.7%</td>
<td>0.9%</td>
<td>-1.3%</td>
<td>-4.1%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>0.7%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Main
E-zone Countries and
UK IP in MFG</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>104.8</td>
<td>104.8</td>
<td>104.8</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Memo: Manufacturing</td>
<td>1-Mo%</td>
<td>1-Mo%</td>
<td>1-Mo%</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Q-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.9%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-2.9%</td>
<td>2.7%</td>
<td>4.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France: IP excl Construction</td>
<td>-1.5%</td>
<td>2.1%</td>
<td>-1.3%</td>
<td>-3.0%</td>
<td>0.8%</td>
<td>2.5%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-1.4%</td>
<td>-0.6%</td>
<td>-1.7%</td>
<td>-13.9%</td>
<td>-5.3%</td>
<td>-3.9%</td>
<td>-9.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-6.2%</td>
<td>10.2%</td>
<td>-6.8%</td>
<td>-13.6%</td>
<td>-7.7%</td>
<td>-0.7%</td>
<td>13.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>-1.9%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>-0.2%</td>
</tr>
</tbody>
</table>
</body></html>

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080111f.jpg" align="left" border="0" height="265" width="353">
Overall import prices were unchanged, as expected, last month
after the revised 3.3% spurt during November.
Petroleum prices, overall, eased 0.6% after the 12.7% November
surge. Crude petroleum prices rose 0.6% (53.5% y/y) after a 12.0%
November jump while fuel oil prices fell 5.5% (+43.5% y/y).
Less petroleum, import prices rose 0.3% after a 0.7% November
gain.

During
the last ten years there has been a 66% (negative) correlation between
the nominal trade-weighted exchange value of the US dollar vs. major
currencies and the y/y change in non oil import prices. The correlation
is a reduced 47% against a broader basket of currencies for industrial
supplies &amp; materials excluding petroleum rose
another 0.7% (6.9% y/y). The detailed import price series can be found
in the Haver USINT database.
Capital goods import prices were unchanged (0.8% y/y). Prices
of computers, peripheral and semiconductors fell 0.6% (-5.3% y/y) and
less the high tech sector capital goods prices rose 0.3% (3.4% y/y).
Prices for imports of nonauto consumer goods rose 0.2% (1.6%
y/y) as apparel prices rose 0.3% (1.9% y/y). These prices had been
unchanged or declining through 2004 to 2006. Prices for household goods
rose 0.1% (1.2% y/y) and that y/y growth has been fairly stable.
The gain in overall export prices eased to 0.4%, half the
prior month's increase. Agricultural prices surged again, last month by
2.7% (23.5% y/y) which was double the November increase. Prices for
nonagricultural price goods eased to a 0.3% (4.5% y/y) rise after a
0.9% surge during November. 
Sovereign Wealth Funds: Stumbling Blocks or
Stepping Stones to Financial Globalization? from the
Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-38.pdf">
here</a>.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080111h.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080111g.jpg" height="265" width="312">
<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/@E807/@E807.HTM">Import/Export
Prices (NSA)</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.0%</td>
<td>3.3%</td>
<td>10.9%</td>
<td>4.2%</td>
<td>4.9%</td>
<td>7.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-0.6%</td>
<td>12.7%</td>
<td>50.1%</td>
<td>11.7%</td>
<td>20.6%</td>
<td>37.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.3%</td>
<td>0.7%</td>
<td>2.9%</td>
<td>2.7%</td>
<td>1.7%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.4%</td>
<td>0.9%</td>
<td>6.0%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>

</body></html>

Overall import prices were unchanged, as expected, last month after the revised 3.3% spurt during November. Petroleum prices, overall, eased 0.6% after the 12.7% November surge. Crude petroleum prices rose 0.6% (53.5% y/y) after a [...]

U.S. Import Prices Flat as Oil Levels Off

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080111b.jpg" align="left" border="0" height="265" width="353">
The Economy watcher indices and the Teikoku indices are all at
relative low points in their respective ranges. The headline economy
watchers index is in the bottom 5% of its five year range. Still
Japanese authorities say that the virtuous circle is intact (some
circle). The Economy Watchers&#8217; employment index is at a five year low.
The future index from the Economy Watchers complex is in the bottom 1.5
percentile of its five year range. Surely this can&#8217;t be good. 
 

We can add to this the finding in the November US trade report
that real non petroleum US exports growth has turned negative over
three months. Surely the rest of the world economy is slowing down and
slumping US exports &#8211; despite their competitiveness- is one sign. These
results from Japan are just another piece of the puzzle that helps to
explain US export weakness despite a huge decline in the dollar
exchange rate (although it&#8217;s not so weak vs the yen). 
 

The Teikoku sector indices echo the Economy-Watcher findings.
The manufacturing, retail and wholesale sector indices are on five year
lows. Construction is in the bottom 16% of its range. Services are
&#8216;relatively strong&#8217; holding to the bottom 20% of their range&#8230; 
 

Japan is still slowing and expectations of the Economy
Watchers do NOT see a turning here soon. Results still seem to be worse
than what the government wants to admit. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Key Japanese surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
</tr>
<tr>
<td colspan="8">Diffusion</td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>36.6</td>
<td>38.8</td>
<td>41.5</td>
<td>42.9</td>
<td>5.0%</td>
<td>15.1%</td>
<td>27.5%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>37.5</td>
<td>41.9</td>
<td>43.8</td>
<td>48.8</td>
<td>0.0%</td>
<td>14.7%</td>
<td>21.5%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>37.0</td>
<td>38.8</td>
<td>43.1</td>
<td>46.0</td>
<td>1.5%</td>
<td>10.6%</td>
<td>32.2%</td>
</tr>
<tr>
<td class="firstcol">NTC Manufacturing</td>
<td>52.3</td>
<td>50.8</td>
<td>49.5</td>
<td>49.8</td>
<td>47.3%</td>
<td>30.2%</td>
<td>15.5%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Econ Trends (Teikoku'/50
neutral/weighted diffusion)</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>40.8</td>
<td>41.7</td>
<td>42.4</td>
<td>43.8</td>
<td>0.0%</td>
<td>9.7%</td>
<td>18.9%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>34.2</td>
<td>34.4</td>
<td>37.2</td>
<td>37.7</td>
<td>0.0%</td>
<td>0.0%</td>
<td>17.1%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>37.0</td>
<td>38.3</td>
<td>39.1</td>
<td>40.2</td>
<td>0.0%</td>
<td>0.0%</td>
<td>6.3%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>43.5</td>
<td>45.0</td>
<td>45.6</td>
<td>46.6</td>
<td>20.1%</td>
<td>36.4%</td>
<td>42.7%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>32.0</td>
<td>32.6</td>
<td>34.7</td>
<td>36.8</td>
<td>16.4%</td>
<td>22.8%</td>
<td>43.8%</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">100 is high; Zero is low</td>
</tr>
</tbody>
</table>
</body></html>

The Economy watcher indices and the Teikoku indices are all at relative low points in their respective ranges. The headline economy watchers index is in the bottom 5% of its five year range. Still Japanese authorities say that the [...]

Japan’s Economy Watcher Index Measures Sink Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080111a.jpg" align="left" border="0" height="265" width="353">
The OECD trend restores leading indicators show a slowing is
in progress across the OECD area. The OECD prefers to look at 6-month
changes in its indicators; these are presented for four separate
non-overlapping periods at the bottom of the table. All
regions/countries shown have declines over the recent past six months -
that indicates a loss of momentum. Over the previous 6-months only OECD
Europe was declining, although Japan barely avoided decline with a 0.1%
rise. Then over the previous two six month periods all regions saw
their trend restored leading indicators declining. What we have is a
slowdown that is broad-based. 
It is very severe in some places. Japan&#8217;s six month drop of 7.5% is
sharp. The US drop of 3.8% is also considerable. The OECD Europe drop
of 2.4% is substantial. 
 

In the chart above we plot the various indices against the
recession bars for the US. The current US decline is not as severe as
it was the last time that the US went into recession. Japan&#8217;s decline
is on the same order of magnitude as it was the last time the US was in
recession, however. Europe&#8217;s decline is more like the sort of slowing
it had in 1996 than when the US was in recession in 2001. However, for
all these comparisons the situation is still in flux and in most places
flux means that conditions are still deteriorating. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col"> OECD
Trend-restored leading Indicators</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Growth progression-SAAR</td>
<td>3-Mos</td>
<td>6-Mos</td>
<td>12-mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.1%</td>
<td style="color: red;">-3.1%</td>
<td style="color: red;">-0.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td style="color: red;">-4.5%</td>
<td style="color: red;">-4.2%</td>
<td style="color: red;">-1.0%</td>
<td style="color: red;">1.4%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-1.8%</td>
<td style="color: red;">-2.4%</td>
<td style="color: red;">-0.7%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-1.2%</td>
<td style="color: red;">-7.5%</td>
<td style="color: red;">-3.8%</td>
<td style="color: red;">1.4%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td style="color: red;">-6.6%</td>
<td style="color: red;">-3.8%</td>
<td style="color: red;">-0.1%</td>
<td style="color: red;">1.5%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6-Mo Ago</td>
<td>12-Mo Ago</td>
<td>18-Mo Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td style="color: red;">-3.1%</td>
<td>2.6%</td>
<td style="color: red;">0.9%</td>
<td style="color: red;">3.6%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td style="color: red;">-4.2%</td>
<td>2.2%</td>
<td style="color: red;">0.1%</td>
<td style="color: red;">2.6%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-2.4%</td>
<td style="color: red;">0.9%</td>
<td style="color: red;">1.1%</td>
<td style="color: red;">3.6%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-7.5%</td>
<td>0.1%</td>
<td style="color: red;">-0.5%</td>
<td style="color: red;">3.3%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td style="color: red;">-3.8%</td>
<td>3.6%</td>
<td style="color: red;">0.5%</td>
<td style="color: red;">2.4%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

The OECD trend restores leading indicators show a slowing is in progress across the OECD area. The OECD prefers to look at 6-month changes in its indicators; these are presented for four separate non-overlapping periods at the bottom [...]

OECD Leading Indicators Showing Declining Momentum

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

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**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

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**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

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**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

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**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

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**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

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Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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

Economy in Brief: January 2008

Jump to:

U.S. Retail Sales Miss Expectations

Decline in British Pound Complicates U.K. Monetary Policy, Dampens Euro Area Export Prospects

Euro Area IP Slows on Broad Front

U.S. Budget Deficit Deeper in 1Q FY08: Growth in Receipts Down, Outlays Up

U.S. Budget Deficit Deeper in 1Q FY08: Growth in Receipts Down, Outlays Up

U.S. Import Prices Flat as Oil Levels Off

Japan’s Economy Watcher Index Measures Sink Sharply

OECD Leading Indicators Showing Declining Momentum