Tom Moeller

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020611a.jpg" width="353"></p>
<p>Chain store sales jumped 1.6% in the first week of June following four consecutive weeks when sales were flat or down according to BTM-UBSW.</p>
<p>For all of May, sales rose 0.8% from the April average owing to a surge in sales early in the month.</p>
<p>The leading indicator of chain store sales published by BTM also jumped late in May. The index rose 1.1% in the last full week of the month following a 0.7% gain the week prior.</p>
<p>During the last ten years there has been a 40% correlation between the year-to-year percent change in monthly chain store sales and the change in general merchandise store sales.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></b></th>
<th scope="col"><u><b>6/8/02</b></u></th>
<th scope="col"><u><b>6/1/02</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2001</u></b></th>
<th scope="col"><u><b>2000</b></u></th>
<th scope="col"><b><u>1999</u></b></th>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>411.6</td>
<td>405.0</td>
<td>4.6%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
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Chain store sales jumped 1.6% in the first week of June following four consecutive weeks when sales were flat or down according to BTM-UBSW. For all of May, sales rose 0.8% from the April average owing to a surge in sales early in the [...]

Chain Store Sales Jumped

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Nonfarm payrolls increased 151,000 (1.3% y/y) during February after rising 125,000 in January, revised from 143,000, and 323,000 in December, revised from 307,000. Expectations had been for a 160,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 199,700 in February, down from 236,300 in January.

Average hourly earnings rose 0.3% during February after increasing 0.4% in January, revised from 0.5%. These increases came after a 0.2% December rise, revised from 0.3%. Earnings growth of 4.0% y/y remained up from 3.6% in July, but below the 5.9% high in March 2022. A 0.3% February increase had been expected.

The unemployment rate, measured in the household survey, edged up to 4.1% last month and reversed the January dip to 4.0%. The Action Economics Forecast Survey expected 4.0%. It reached a low of 3.5% in July of 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 8.0% from 7.5%.

In the **payroll survey**, private-sector employment rose 140,000 (1.2% y/y) in February following an 81,000 January gain. Construction sector employment increased 19,000 (2.0% y/y) last month after rising 2,000 in January. Factory sector payrolls gained 10,000 (-0.7% y/y) after falling 5,000 in January.

Private service-producing employment increased 106,000 (1.4% y/y) last month after increasing 88,000 in January. Increases varied greatly amongst service sector categories. Private education & health service jobs rose 73,000 (3.5% y/y) while trade, transportation & utilities employment rose 21,000 (1.0% y/y). Financial activities jobs rose 21,000 (1.0% y/y) and information sector employment rose 5,000 last month (-0.3% y/y). Leisure & hospitality employment fell 16,000 (+1.5% y/y) while professional & business service jobs declined 2,000 (-0.4% y/y). Temporary help services jobs weakened 12,300 (-5.6% y/y).

Government sector payrolls increased 11,000 (1.5% y/y) in February after rising 44,000 in January. Local government jobs improved 20,000 (1.5% y/y) last month while state government employment rose 1,000 (2.2% y/y). The number of federal government jobs declined 10,000 (+0.5% y/y).

The 0.3% February rise in private-sector average hourly earnings reflected a 0.3% gain (4.2% y/y) in the goods-producing sector. Earnings in construction improved 0.2% (4.2% y/y) last month and factory sector earnings rose 0.4% (4.2% y/y). In the private services sector, earnings rose 0.3% (4.0% y/y) after rising 0.4% in January. Information sector earnings held steady (4.6% y/y) and professional & business service-sector earnings rose 0.3% (5.1% y/y). Trade, transportation and utilities pay improved 0.3% (2.7% y/y). Leisure & hospitality earnings rose 0.3% (3.7% y/y). Financial sector earnings increased 0.5% (4.2% y/y) while private education & health services earnings edged 0.1% higher (4.1% y/y).

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The length of the average workweek in the private sector held at 34.1 hours last month. The workweek in the goods-producing sector was steady at 39.7 hours for the fifth straight month. The construction sector average workweek eased to 38.6 hours from 38.8 hours. The factory sector workweek was 40.1 hours for the fourth consecutive month while average weekly overtime hours edged up to 2.9	 hours. The average workweek in the private service sector held at 33.1 hours. The aggregate weekly hours index in the private sector, a key indicator of production and income, rose 0.1% last month (0.6% y/y) after a 0.2% decline in January.

In the **household survey**, the rise in the jobless rate to 4.1% in February from 4.0% in January reflected a 588,000 decline in employment which followed a 2.234 million January rise. The labor force fell 385,000 last month following a 2.197 million January increase. The unemployment rate for teenagers rose to 12.9%, while for individuals aged 20-24, the rate increased to 8.3%. The jobless rate for workers aged 25-54 edged up to 3.5% but for workers 55 and over, it eased to 2.9% in February.

The labor force participation rate fell to 62.4% during February, the lowest level since January 2023. The employment/population ratio for all workers fell to 59.9% in February. It remained below its high 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.

**Economic Outlook** is the title of today’s speech by Fed Chair Jerome H. Powell and it can be found [here](https://www.federalreserve.gov/newsevents/speech/powell20250307a.htm).

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- Job gains remain up from last summer.
- Recent trend in earnings growth remains slightly improved.
- Jobless rate is close to mid-point of past year’s range.

U.S. Payroll Employment Growth Picks Up in February, but Earnings Gain Eases & Unemployment Rate Edges Higher

Robert Brusca

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German real orders, those are orders adjusted for the effects of inflation, fell by 70% in January, with foreign orders falling 2.3% and domestic orders falling 13.2%. These results follow increases for all the categories December reported a rise in total real orders of 5.9%, foreign orders of 0.5% and domestic orders of 14%. In November total orders and foreign orders fell while domestic orders rose by 3.5%.

**Weakness overall**
German orders remain in a period of weakness as overall orders are dominated by foreign orders which continued to decline. Foreign orders are falling at an accelerating pace that's strong enough to drive the total order series to a decelerating pace despite the fact that the domestic order series falls over 12 months and gets even weaker over six months but then shows a strong gain over three months. That strong 3-month gain is buried in the total by the extreme weakness in foreign orders; it declined at a 40.2% annual rate over three months.

The statistics behind these trends show total orders down by 2.5% over 12 months, falling at a 12.2% annual rate over six months and falling at a 24.3% annual rate over three months. Foreign orders fall by 3.8% over 12 months, at an 8.4% annual rate over six months and at a 40.2% annual rate over three months. Domestic orders only fall by 0.5% over 12 months but then accelerate that drop falling at a 17.1% annual rate over six months and then rebounded to rise at a 10.5% annual rate over three months.

On a quarter-to-date basis, total orders, foreign orders, and domestic orders are falling at deep double-digit paces of about 25% or more at an annual rate, but this is early in the first quarter with only January data in hand. Things could change.

**Real sector sales**
Real sector sales show greater firmness; real sales fall only in consumer durable goods and in intermediate goods in January. They fell for capital goods and intermediate goods in December. A 3-month growth rate for real sector sales shows an 8.2% annual drop for consumer durable goods, and a 4% annual rate drop for intermediate goods, with increases elsewhere for all the manufacturing. Sales are not just improving but they're accelerating from -0.8% growth over 12 months, to a +5.4% annual rate growth pace over six months to +9.7% annualized growth over three months. Even though orders are weakening at a rapid pace, sales continue to plow ahead, and they've actually been plowing ahead at an improving pace.

On quarter-to-date basis, real sector sales are growing for all categories except for consumer durables and intermediate goods. For all manufacturing, the growth rate is 7.6% at an annual rate.

**Industrial indicators for Europe**
Industrial indicators for Germany, France, Italy, and Spain, the four largest economies in the European Monetary Union, show negative readings in January. But there is some improvement afoot. In Germany, the reading improved slightly to -25.2 in January from -28.2 in December. France’s rating improved slightly to -11 from -11.4. Italy's reading improved to -8.2 from -9.4. Spain's reading improved to -4.4 from -4.6. Industrial confidence in these four economies improved in January across the board, but these are small improvements and improvements are from very weak readings. Looking at a broader changes, the change in these readings from a year ago finds Germany worse off by 20 points with the decline of 20.4 points and with more modest but still negative results for France, Italy, and Spain, all of which are weaker in January 2025 than they were in January 2024.

**Industrial queue standings -** The table provides queue standings for the industrial confidence indicators since 1990 and here we see how weak conditions are: the German numbers on industrial confidence have been weaker only about 4% of the time. France and Italy have been weaker only about 21% of the time; however, Spain shows the reading above its median! The Spanish reading for January has actually been weaker 51.6% of the time and stronger less than 50% of the time. Spain is above its median.

**Queue standings reveal weakness**
On the upper part of the table, I present two different kinds of queue standing data, one set of percentile standings is applied to the levels of orders expressed in real terms. There we see that overall orders are above their 50th percentile, at 50.5 percentile. Foreign orders have a 64.1 percentile standing. Domestic orders are only at a 27.4 percentile standing, substantially below their historic median. Quite apart from the growth rates, the level of orders Germany is getting from abroad are still above what it has been historically, above the historic median. Domestic orders generate only a 27-percentile standing. The queue standings for real sector sales show manufacturing sales above their historic median at a 51.3 percentile mark, led by a 70.5 percentile standing in capital goods. Intermediate goods are below their median at a 43.9% standing and consumer nondurables are at a 44.4 percentile standing; both of those are marginally below the 50th percentile mark which would designate the median reading since 1990. The levels that are extremely weak are levels of real orders for consumer goods particularly weighed down by consumer durables that have been weaker only 3.2% of the time.

**Growth rate standings**
The second set of standings is applied to year-over-year growth rates and here we see total orders foreign and domestic orders all are below their median growth rate with rankings in the 24th to the 44th percentiles. Real sector sales post only a 32-percentile standing for all manufacturing although year-over-year sales or consumer nondurable goods have a 74-percentile standing and that helps to elevate overall consumer goods to a 63-percentile standing.

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**Summing up**
On balance, the reading that German orders remains poor the January reading, so it shows a loss of further momentum across the board. Real sales are holding up a lot better than orders and that may mean that there'll be a termination of this weakness in orders. It's hard to believe that the orders are this weak and have been weak this long they're going to continue to weaken and drag real sales down further but that remains a possibility. It's always a question when you have this kind of divergence whether the firm sales will get translated back into orders or whether the weakness in orders is going to further degrade the strength in sales and we're waiting to see which way that goes. Right now, the step up in German military seems to set the stage for a strengthening ahead. As for Europe we see weakness across the board and weak standings across the board with only Spain that has been showing better statistics in a number of ways showing some firming and improving trends. The rest of Europe will see increased military spending as well. For now, Germany continues to be struggling along with France and Italy in those conditions are largely borne out by other indicators as well. But there is an air of change in the wind.

Germany

German Orders Drop

Andrew Cates

**US recession risks**
Recession risks in the US have climbed sharply, albeit from low levels, over the past few days. That at least is the message from the US Treasury market – and the spread between 10 year bond yields and 3 month interest rates in particular (chart 1). The re-imposition of tariffs on Chinese imports, alongside new levies targeting Canadian and Mexican goods, has, following retaliatory measures, heightened fears of a global trade war. Coupled with efforts to cut costs and trim headcount in the government sector, latest US data have revealed a big drop in growth momentum. Against this backdrop the Russell 2000 stock price index, which is highly sensitive to domestic growth prospects, has also declined sharply.

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**FDI and Goodwill**
Between 2016 and 2020, US net foreign direct investment (FDI) flows exhibited volatility, reflecting the impact of the Trump administration’s trade policies in that period. The imposition of tariffs on key trading partners, withdrawal from multilateral agreements, and the push for a reshoring of US manufacturing created uncertainty for multinational firms, leading to fluctuating investment patterns. But while corporate tax cuts in 2017 initially encouraged some capital inflows, broader uncertainty around trade relationships arguably discouraged long-term commitments (chart 2). That could have been because these policies eroded the United States' economic goodwill—an intangible asset reflecting trust in stable business conditions and regulatory predictability.

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**China growth target**
China has not been spared from the latest round of trade actions by US President Trump, who doubled tariffs on Chinese imports from an initial 10% to 20%. This move prompted retaliation from China, which imposed tariffs ranging from 10% to 15% on US agricultural goods, among other measures. However, it may be important to note that China’s response to US tariffs has been relatively restrained. Despite the potential growth-dampening effects of US policies and other risks, China has once again set its annual growth target at “around 5%”. This target was revealed during China’s annual National People’s Congress, which began this week. Investors are now closely watching for specific policy details on government measures to support growth and navigate China’s ongoing challenges. An early indicator of China’s approach is the budget deficit target of 4% of GDP this year, up from last year’s 3%, marking the largest deficit in more than 30 years. This suggests the government is willing to increase spending significantly to support the economy. For context, China achieved exactly 5% growth last year, largely thanks to a strong Q4 performance as authorities’ stimulus measures took effect and, somewhat ironically, due to a front-loading of imports from China in anticipation of possible US trade initiatives.

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**South Korea’s economy**
South Korea's industrial production has shown a noticeable slowdown in recent months (chart 4). This trend reflects broader economic challenges, including weakening global demand for semiconductors and possibly thanks to supply chain disruptions stemming from geopolitical tensions. The US administration’s renewed protectionist trade stance may have added further strain. Additionally, diplomatic tensions with China—South Korea’s largest trading partner—have complicated the trade environment, leading to weaker business investment and industrial activity.

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**Inflation and the ECB**
Wage growth in the euro area, as tracked by the ECB, has shown significant moderation after peaking in 2023, aligning with a broader decline in services inflation. That suggests the central bank's restrictive monetary policy is having its intended effect, easing inflationary pressures across the economy. And this was, in turn, a key reason behind the ECB’s decision to lower its key policy rates by 25bps this week. That said, as the accompanying commentary suggested, policymakers remain cautious, emphasizing the need for sustained disinflation before committing to a further shift in the monetary policy stance.

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**Energy and growth**
Finally, chart 6 below illustrates the relationship between per capita GDP and primary energy consumption per capita in the world’s major developed and developing economies, It highlights how higher energy use tends to correlate with higher economic output and living standards. Energy is a fundamental driver of economic activity, supporting key factors of production such as capital, labour, and technology. Industrial productivity, transportation, digital infrastructure, and household consumption all rely on stable and affordable energy supplies. Economies with higher energy consumption, such as the United States, tend to have more advanced manufacturing, service sectors, and technological innovation, translating into higher GDP per capita. Meanwhile, lower energy consumption often reflects constraints on industrial capacity, infrastructure, and economic development, as seen in China and other emerging economies. However, the ongoing energy transition—shifting towards renewable energy sources—introduces challenges and opportunities. While reducing reliance on fossil fuels is necessary for sustainability, ensuring that clean energy remains abundant and cost-effective is crucial for maintaining productivity and economic growth. The ability of countries to transition efficiently to renewable energy while sustaining high levels of economic output could define a country’s competitiveness in the years ahead.

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Financial markets have experienced heightened volatility in recent days, with investor sentiment rattled by rising US recession risks, escalating global trade tensions, and mounting geopolitical uncertainties. Sharp decline in US stocks, lower yields coupled with weaker confidence data reflect growing concerns that recent trade and economic policies from the US administration are sapping economic growth and increasing financial instability (chart 1). Beyond immediate market fluctuations, the long-term impact of these policies is also sparking a broader debate about the erosion of economic goodwill—the trust and stability that businesses and consumers historically associated with the United States (chart 2). Meanwhile, China and South Korea, two of the world’s most trade-dependent economies, are also feeling the strain with latest data from the latter suggesting sharply slower industrial production and weakening external demand (charts 3 and 4). The impact is also evident in Europe, where, having cut its key policy rates by 25bps this week, the ECB faces increasing challenges in calibrating monetary policy amid an uncertain economic landscape (chart 5). Finally, and looking at even broader issues, energy remains a critical variable in the global outlook. While the long-term energy transition continues, short-term concerns over trade-driven supply disruptions and geopolitical instability in energy markets add another layer of economic risk, reinforcing fears that persistent economic fragmentation could weigh on long-term growth across major economies (chart 6).

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Charts of the Week: Goodwill Hunting 

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The U.S. trade deficit in goods and services (BOP basis) widened to $131.4 billion in January from $98.1 billion in December, revised from $98.4 billion, and $78.2 billion in November, revised from $78.9 billion, according to the U.S. Census Bureau. A $123.0 billion deficit was expected by the Action Economics Forecast Survey. Exports rose 1.2% (4.1% y/y) in January after falling 2.6% in December. This was accompanied by a 10.0% (23.1% y/y) jump in imports which came after a 3.6% December gain.

The deficit in goods trade (BOP basis) swelled to $156.8 billion from $123.3 billion in December, revised from $123.0 billion. Goods exports (customs value) rose 1.6% (1.3% y/y) in January, after falling 3.8% in December. The January increase reflected an 8.1% (10.1% y/y) rise in capital goods exports which came after a 2.6% decline, and an 8.5% jump (0.4% y/y) in nonauto consumer goods exports which recouped an 8.4% December decline. Foods, feeds & beverage exports weakened 7.2% (-1.7% y/y) following a 1.1% December decline. Auto exports dropped 3.1% (-15.5% y/y) after a 6.6% weakening. Industrial supplies exports eased 0.7% (-2.0% y/y) following a 3.0% December drop.

Imports of goods surged 12.5%  (26.1% y/y) in January after two monthly increases of roughly 4.2%. The strength was led by a 34.3% jump (65.3% y/y) in imports of industrial supplies and materials which came after a 19.1% jump in December. Nonauto consumer goods imports climbed 8.3% (26.0% y/y) following a 3.1% December increase. Capital goods imports rose 5.5% (18.2% y/y) following a 1.5% rise. Foods, feeds & beverage imports rose 4.3% (19.2% y/y) following a 1.6% decline while auto imports increased 2.3% (-6.1 y/y) after a 5.5% December drop. Petroleum imports by end-use fell 1.1% (-2.3% y/y) after a 4.6% rise. Nonpetroleum imports shot up 13.4% (28.4% y/y) following a 4.0% December rise.

The inflation-adjusted goods trade deficit (customs value) soared to $142.9 billion in January from $112.1 billion in December. Real exports rose 0.4% (-0.9% y/y) after a 3.9% decline in December while real imports rose 12.4% (24.4% y/y) in January following a 3.9% December rise.

The services trade surplus of $25.4 billion in January compared to $25.2 billion in December. Service exports edged up 0.6% (9.5% y/y) after the same increase in December. Monthly gains in service exports were led by a 3.7% rise (37.6% y/y) rise in exported construction services. Travel services exports gained 0.4% (10.8% y/y) and financial exports increased 1.4% (9.6% y/y). Service imports rose 0.6% (12.1% y/y) in January following a 1.6% gain in December. Monthly gains in service imports were widespread. Maintenance & repair services rose 2.4% (33.1% y/y) while imported transport services gained 0.2 (14.2% y/y). Imported travel services eased 0.7% (+12.4% y/y) while charges for use of intellectual property rose 3.1% (23.4% y/y).

The U.S. goods trade deficit with China deepened to a seasonally adjusted $29.7 billion in January from $25.3 billion in December. Exports to China fell 9.8% (-18.5% y/y) while imports increased 8.8% (11.5% y/y). The deficit with the European Union deepened to $25.5 billion in January from $20.4 billion in December, while the deficit with Japan expanded to $7.4 billion from $5.5 billion.

The international trade data, including relevant data on oil prices, can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Deficit is surprisingly large as petroleum imports surge.
- Goods deficit widens to record, while services surplus was little changed.
- Exports recover half of December’s decline and imports jump.

Chain Store Sales Jumped

Summary

Tom Moeller

More Economy in Brief

U.S. Payroll Employment Growth Picks Up in February, but Earnings Gain Eases & Unemployment Rate Edges Higher

German Orders Drop

Charts of the Week: Goodwill Hunting

U.S. Trade Deficit Deepens in January to Another Record