Andrew Cates

**Oil prices and yields**
Concerns about the global growth outlook, spurred by cuts from the International Energy Agency to their forecasts for demand, have driven oil prices sharply lower over the past few days. Fears about supply disruptions stemming from geopolitical instability in the Middle East have additionally faded, at least for now. Since oil prices have been a key driver of the market’s inflation expectations, as evidenced in chart 1 below, this has been significant in buoying risk appetite in broader financial markets as well.

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**UK inflation**
There was good news on the UK inflation front this week too thanks to a slew of weaker-than-expected data for wages and prices. For example, private sector regular pay growth rose by just 0.2% m/m August, its lowest monthly growth rate for seven months. The September data for both headline and core CPI inflation additionally dropped quite sharply, partly thanks to a big drop in service sector inflation (see chart 2). The Bank of England will almost certainly take comfort in these numbers, given concerns about how a tight labour market had previously been stoking wage inflation and fuelling price pressures in the service sector.

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**China’s PPI inflation** 
Recent data from China also revealed that inflation outcomes for September were lower than expected, with PPI inflation sliding further into deflationary territory, specifically dropping to -2.8% y/y from -1.8% in the previous month. This intensifying pace of deflation might magnify concerns about excess capacity in China's economy, which could potentially spill over into global markets as China seeks to export this surplus. Notably, China’s PPI has historically led global PPI trends, amplifying worries that this deflationary pressure might influence global inflation dynamics in the near future (chart 3).

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**EM portfolio flows**
Recent policy initiatives from China designed to shore up its economy initially generated much enthusiasm from investors. This can be seen in chart 4 below showing a surge in portfolio inflows to emerging markets, and to Asia in particular, in September. The specific spark for this was the introduction of a range of monetary stimulus measures on September 24th which included lower interest rates and cuts in reserve requirement ratios. However, that initial euphoria has since dissipated as the announcement of a number of fiscal policies designed to address local government debt risks and property market instability, have not met expectations.

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**Banking conditions in the euro area**
On a brighter note the latest ECB bank lending survey suggested that the wheels of credit in the euro area may now be turning more quickly. The latest survey, for example, revealed that euro area banks reported unchanged credit standards for loans to companies in Q3. That follows more than two years of successive tightening. Banks also reported a further net easing of credit standards for loans to households for house purchases. In the meantime net demand for loans by companies increased moderately in Q3 while demand for housing loans rebounded strongly.

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**Global equity sector performance**
Global equity markets have had a good year so far in large part, as noted above, because the world economy appears to be on course for a soft landing and central banks have now begun to ease monetary policy. Structural factors, however, have also been influential, and most notably investor optimism about AI. As chart 6 below suggests, technology stocks have delivered the strongest returns so far in 2024. That’s striking because the technology sector is often perceived to be cyclical. Yet defensive sectors, such as utilities and consumer services, have also performed relatively well so far this year while other cyclical sectors, such as basic materials and consumer goods, have under-performed.

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A soft landing narrative has continued to shape sentiment in financial markets over recent days, supported by several factors. These include upbeat corporate earnings news, a sharp drop in oil prices (see chart 1), and weaker-than-expected inflation data (chart 2). However, concerns about global growth persist, particularly given the underwhelming economic data that’s been emerging from China (chart 3). While the monetary policy initiatives announced in late September were met with enthusiasm from investors (chart 4), subsequent fiscal policy measures have clearly fallen short of expectations. Back to a more positive note, the latest euro area bank lending survey suggests that the ECB's recent easing efforts, including this week’s 25bps rate cut, are starting to reap some benefits (chart 5). Meanwhile, ongoing optimism around the role of AI technology has also contributed to a soft landing narrative, despite the absence of clear productivity gains thus far (chart 6).

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Charts of the Week: Following the Leader

Tom Moeller

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Total retail sales increased 0.4% (1.7% y/y) during September after an unrevised 0.1% August increase and a minimally revised 1.2% gain in July, according to the U.S. Census Bureau. A 0.3% rise had been expected in the Action Economics Forecast Survey. Excluding motor vehicles & parts, retail sales rose 0.5% (2.2% y/y) after increasing 0.2% in August, revised from 0.1%, and 0.5% in July, revised from 0.4%. A 0.2% gain had been expected.

Sales of motor vehicles & parts held steady (-0.3% y/y) last month after falling 0.4% in August. This compares to a 5.7% rise (2.2% y/y) in unit light vehicle sales which followed a 5.1% August increase.

Sales in the retail control group, which excludes autos, building materials, gasoline stations, and food services, rose 0.7% (4.0% y/y) in September, the fifth straight rise. These sales are used in the construction of personal consumption expenditures in NIPA accounts.

Elsewhere, sales performance was mixed in September. Miscellaneous store sales, which account for 2.2% of the total, surged 4.0% (7.9% y/y) in September after improving 0.3% in August. Clothing & accessory store sales increased 1.5% (3.5% y/y) after weakening 0.8% in August. General merchandise store sales gained 0.5% (2.6% y/y) following a 0.4% decline. Within that category, sales at department stores rose 0.4% in September (-1.2% y/y) after a 1.0% decline. Nonstore retail sales improved 0.4% (7.1% y/y) following a 1.6% rise. Sporting goods, hobby shop, book & music store sales rose 0.3% (-3.5% y/y) after they edged 0.1% higher in August. Building materials & garden equipment store sales rose 0.2% (0.5% y/y) after holding roughly steady in August.

To the downside, electronics & appliance store sales weakened 3.3% in September (-4.6% y/y) after falling 1.7% in August. Furniture & home furnishing store sales declined 1.4% (-2.3% y/y) after they eased 0.4% in August. Gasoline station sales dropped 1.6% (-10.7% y/y) last month, the fourth decline in five months.

In the nondiscretionary sales categories, health & personal care store sales rose 1.1% (4.6% y/y) in last month after a 0.6% August rise. It was the fifth consecutive monthly increase. Food & beverage store sales also were strong last month and rose 1.0% (2.5% y/y) after falling 0.5% in August.

Consumers’ penchant to dine out continued last month. Restaurant & drinking place sales increased 1.0% (3.7% y/y) in September, the sixth consecutive monthly rise.

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

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- Core sales post strong increase.
- Miscellaneous store sales surge.
- Motor vehicle sales steady while gasoline purchases fall sharply.

U.S. Retail Sales Pick Up in September as Nonauto Sales Firm

Winnie Tapasanun

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Total industrial production declined 0.3% m/m (-0.6% y/y) in September following a downwardly revised 0.3% increase in August (+0.8% initially) and an upwardly revised 0.6% drop in July (-0.9% previously), according to the Federal Reserve Board. The September IP index at 102.6, the same as in July, was 7.4% above a low of 95.5 in February 2021. A 0.1% m/m August easing had been expected in the Action Economics Forecast Survey. The Federal Reserve estimated that the Boeing strike reduced September IP growth by 0.3% and the effects of two hurricanes subtracted another 0.3%. In Q3 2024, IP fell 0.2% q/q after a 0.6% q/q rebound in Q2 2024, falling at a 0.6% annualized rate following a 2.5% Q2 annualized rate of increase. IP rose 0.2% in 2023, 3.4% in 2022, and 4.4% in 2021.

By **industry groups**, manufacturing production fell 0.4% (-0.5% y/y) in September, the third m/m fall in four months, after a downwardly revised 0.5% increase in August (+0.9% initially). Durable goods production declined 1.0% (-1.3% y/y), down for the third month in four, following a 1.2% August rebound. This reflected m/m output drops of 8.3% (-5.8% y/y) in aerospace & miscellaneous transportation equipment, 1.5% (-0.6% y/y) in motor vehicles & parts, 1.5% (-5.2% y/y) in furniture & related products, 1.4% (+3.7% y/y) in electrical equipment, appliances & components, 0.5% (-3.8% y/y) in nonmetallic mineral products, 0.1% (-2.1% y/y) in machinery, and 0.1% (-1.3% y/y) in fabricated metal products. Notably, aircraft & parts production plunged 11.9% (-9.7% y/y), the first m/m drop since May, following a 2.5% August gain. The following durable goods categories, however, increased m/m in September, including output rises of 1.4% (-2.2% y/y) in wood products, 0.7% (-5.5% y/y) in miscellaneous durables goods, 0.5% (-2.8% y/y) in primary metals, and 0.3% (5.2% y/y) in computer & electronic products.

Nondurable goods production rose 0.2% (0.5% y/y) in September, the fourth m/m rise in five months, after a 0.2% decline in August. The September rise reflected m/m output increases of 1.8% (+2.3% y/y) in petroleum & coal products, 1.0% (+6.7% y/y) in printing & related support activities, and 0.3% (3.0% y/y) in chemicals. To the downside, the following nondurable goods categories fell m/m in September, including output drops of 4.2% (-4.5% y/y) in textiles & product mills, 2.6% (-8.5% y/y) in apparel & leather goods, 0.6% (+1.0% y/y) in paper, 0.1% (-3.1% y/y) in plastics & rubber products, and 0.1% (-1.6% y/y) in food, beverages & tobacco.

Mining activity fell 0.6% (-2.2% y/y) in September, as the effects of two hurricanes on oil & gas extraction more than offset increases elsewhere. The m/m fall was the second in three months following a downwardly revised 0.7% August gain (+0.8% initially). In contrast, utilities output rose 0.7% (0.6% y/y), as electric & natural gas utilities increased, following declines of 1.3% (-0.04% initially) in August and 1.1% (-3.0% previously) in July.

By **market groups**, business equipment output slid 3.5% (-4.2% y/y) in September, the third m/m slide in four months, reversing a 0.2% increase in August. Materials production fell 0.2% (-0.9% y/y), down for the third month in four, after a 0.4% August increase. Construction supplies production dipped 0.1% (-0.2% y/y) following a 0.4% August rebound. To the upside, consumer goods output grew 0.2% (0.2% y/y) in September, the fifth m/m gain in six months, after a 0.6% rise in August, reflecting a 0.7% drop (-1.9% y/y) in durable consumer goods and a 0.5% rebound (0.8% y/y) in nondurable consumer goods.

In **special classifications**, factory output of selected high-tech industries advanced 1.5% (10.0% y/y) in September, the sixth m/m gain in seven months, on top of a 1.3% rise in August (+1.7% initially). Manufacturing production excluding selected high-tech industries fell 0.4% (-0.8% y/y) following a 0.5% August rebound and manufacturing production excluding selected high-tech and motor vehicles & parts fell 0.3% (-0.8% y/y) after a 0.2% August decline; both posted the third m/m fall in four months.

Capacity utilization fell to 77.5% in September, the lowest since January, after rising to 77.8% in August (78.0% initially). The Action Economics Forecast Survey forecasted 77.8%. The September reading was 2.2 percentage points below its long-run (1972–2023) average. Manufacturing capacity utilization fell to 76.7% in September from 77.1% in August (77.2% initially); the September rate was 1.6 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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- September IP -0.3% m/m (-0.6% y/y); August gain revised down.
- Mfg. IP declines 0.4% m/m, w/ durable goods down 1.0% and nondurable goods up 0.2%.
- Mining activity drops 0.6% m/m, but utilities output rebounds 0.7% vs. two straight m/m falls.
- Key categories in market groups mostly decrease.
- Capacity utilization down 0.3%-pts. to 77.5%.

U.S. Industrial Production Drops in September, w/ Boeing Strike and Hurricanes Affecting Output

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The Housing Market Index compiled by the National Association of Home Builders/Wells Fargo rose 4.9% (7.5% y/y) in October to 43 after rising 5.1% in September. It remained below the break-even point of 50 where it’s been for the last six months. The index stands below a July 2023 high of 56 and a November 2020 peak of 90.

The average rate on a 30-year fixed rate mortgage rose to 6.44% last week compared to 6.32% in the prior week. It has averaged 6.29% this month, down from a high of 7.79% in the last week of October 2023, according to Freddie Mac.

The single-family sales measure rose 4.4% (2.2% y/y) to 47 this month from 45 in September. It was the highest reading since June. The prospective sales index in six months rose 7.5% (29.5% y/y) to 57 from 53 in September. It was the highest level in six months. The traffic of prospective buyers’ index rose 7.4% (11.5% y/y) to 29 in October. It was the highest level since May.

Housing performance across the country was mixed in October. The Northeast index fell 5.5% (+13.0% y/y) to 52 from 55. The index for the Midwest improved 4.9% (16.2% y/y) to 43 from 41 in September. In the South, the index improved 7.5% (unchanged y/y) to 43, but remained below the recent high of high of 52 in March. The index in the West increased 7.3% (22.2% y/y) to 44 from 41 in September. The index hit a low of 28 in November of last year.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The figures are diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. The regional indexes run back to December 2004.

These data are included in Haver's **SURVEYS** database.

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- Overall index stands at highest level in four months.
- Component performance is mixed.
- Regional indexes largely improve.

U.S. Home Builders Index Increases in October

Sandy Batten

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The Current General Activity Diffusion Index rose to 10.3 in October from 1.7 in September, according to the Manufacturing Business Outlook Survey (MBOS) from the Federal Reserve Bank of Philadelphia, indicating further improvement in activity in the third Federal Reserve District this month. A reading of 3.0 had been expected in the Action Economics Forecast Survey. Twenty-four percent of the firms reported increases in general activity in October (up from 21.9% in September) while 14.0% reported decreases (down from 20.2% in September). Responses to this month's survey were collected from October 7 to October 14.

The headline index reflects the answer to a single question about business conditions. Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology along the lines of the national ISM index. The index rebounded to 52.7 in October from 49.3 in September, indicated that the rise in activity was relatively broad based.

The new orders index rebounded to 14.2 in October after having fallen to -1.5 in September with 30.5% of respondents reporting an increase in orders while only 16.3% reported a decline, the lowest since August 2023. Similarly, the shipments index bounced back to 7.4 in October from -14.3 in September. Twenty-seven percent of respondents reported an increase in shipments while 19.8% reported a decline. Unfilled orders rose but remained negative for the second consecutive month at -1.5. Delivery times lengthened to 10.2 in October from -0.7 in September. Inventory investment continued but the pace slowed with the index falling to 0.5 in October from 5.0 in September.

Employment conditions weakened in October with the number of employees’ index falling to -2.2 from 10.7 in September. Eleven percent of respondents reported an increase in employment, the same as last month, while 12.9% reported a decline versus 0% last month. The average workweek index rose slightly but remained decidedly negative at -11.8.

Both price indexes declined in October but remained positive. The prices paid index declined from 34.0 to 29.7. Nearly 35% of the firms reported increases in input prices, while 5.0% reported decreases; 60.0% of the firms reported no change. The current prices received index decreased 7 points to 17.9. Almost 22 of the firms reported increases in prices received for their own goods, 3.8% reported decreases, and 71.9% reported no change.

The future activity index jumped up to 36.7 this month, its highest reading in three months, from 15.8 in September. Apart from inventories, all other components posted solid increases, led by new orders and shipment.

In this month’s special question, manufacturers were asked about their plans for different categories of capital expenditures next year. Almost 52% of the firms expect to increase total capital spending, compared with 21% that expect to decrease total spending; 27% expect total spending to stay the same. When this question was asked last year, the share of firms expecting to decrease spending slightly exceeded the share of firms expecting to increase spending (30% versus 24%). On balance, the firms expect higher capital expenditures next year for computer and related hardware, software, noncomputer equipment, and energy-saving investments, and lower expenditures on structure and other investments.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The series from the survey dating back to May 1968 can be found in Haver’s **SURVEYS** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The headline index rose more than expected to 10.3 from 1.7.
- The increase was rather widespread with the ISM-adjusted index rising to 52.7.
- New orders and shipments components indexes rebound from negative readings in September to positive in October.
- The employment component index fell back into negative territory in October after a solid increase in September.
- Capital spending expectations rise markedly.

Philly Fed Manufacturing Index Rises Further in October

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Total business inventories rose 0.3% m/m (2.4% y/y) in August, the same monthly increase as in June and July. A 0.3% increase had been expected in the Informa Global Markets Survey.

Retail inventories rose 0.6% m/m (6.4% y/y) in August, slightly slower than the 0.8% monthly gain in July. Increased auto inventories continued to be the major contributor to the rise in overall inventories in August. While the 0.8% m/m increase in auto inventories was the lowest monthly increase in six months, it accounted for 44% of the monthly increase in total inventories. General merchandise inventories were up 1.3% m/m, their largest monthly gain since December 2023. Food and beverage store inventories rose 1.2% m/m in August, their largest monthly gain since October 2022. By contrast, furniture inventories fell 0.5% m/m, their fourth consecutive monthly decline.

Manufacturing inventories edged up 0.1% m/m (0.6% y/y) in August after having been unchanged in July. Wholesale inventories also increased 0.1% m/m (0.6% y/y) in August versus a 0.2% monthly gain in July.

Total business sales fell 0.2% m/m (+1.3% y/y) in August after a 1.1% m/m jump in July. Factory sales fell 0.5% (+1.0% y/y); wholesale sales slipped 0.1% m/m (+1.1% y/y). Retail sales were essentially unchanged (+1.9% y/y) with weakness widespread across major sectors.

With sales falling and inventories rising in August, the inventory/sales (I/S) ratio edged up to 1.38 from 1.37 in July, It has been either 1.37 or 1.38 in each of the past nine months. The manufacturing I/S ratio inched up to 1.46 in August from 1.45. The wholesale I/S was unchanged at 1.35. And the retail I/S increased to 1.33 from 1.32 in July.

The manufacturing and trade data are in Haver’s **USECON** database. The Informa Global Markets forecast is in the **MMSAMER** database.

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- Inventories increased 0.3%, led by retailers.
- Sales declined, led by factory sales.
- Inventory/sales ratio stuck in a range.

U.S. Business Inventories Rose While Sales Fell in August

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped by 19,000 to 241,000 seasonally adjusted in the week ended October 12, from 260,000 in the previous week, revised up 2,000 from the initially reported 258,000 level. The Action Economics Forecast Survey had expected 245,000 in the October 12 week. Press reports indicate that the jump in the October 5 week was related to the impact of Hurricane Helene. The effects of both Hurricane Helene and Milton will likely keep weekly claims data volatile in the coming weeks. The four-week moving average of initial claims was 236,250 in the week ended October 12, up from 231,500 the week before.

In the week ended October 5, the total number unemployment benefit recipients – also known as insured unemployment – was 1.867 million, up 9,000 from 1.858 million in the week of September 28, revised down from 1.861 million. The four-week moving average of insured unemployment was 1.843 million, up from 1.831 million in the prior week.

Also, in the week ended October 5, the insured unemployment rate was still 1.2%. This is the number of beneficiaries as a percent of covered employment; the rate has been at 1.2% continuously since March 11, 2023.

Economic conditions vary widely across states and territories. In the week ended September 28, the highest unemployment rates were in New Jersey (2.18%), California (2.01%), Puerto Rico (1.81%), Rhode Island (1.78%) and Washington (1.76%). The lowest rates were in South Dakota (0.23%), North Dakota (0.34%), Florida, Virginia and North Carolina (each 0.40%), and Alabama, Kansas and Nebraska (each 0.43%). Rates in other notable states include New York (1.47%), Illinois (1.42%), Pennsylvania (1.34%) and Texas (1.05%). These state rates 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continuing claims up 9,000 in the October 5 week, after the 39,000 jump in September 28 week.
- Insured unemployment rate holds at 1.2%.

U.S. Unemployment Insurance Claims Dropped 19,000 in Week Ended October 12

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Pricing pressure from the foreign trade sector eased last month. Import prices weakened 0.4% (-0.1% y/y) in September following a 0.2% August decline, revised from -0.3%. The Action Economics Forecast Survey expected a 0.3% decline. Export prices declined 0.7% (-2.1% y/y) last month after falling 0.9% in August, revised from -0.7%. The Action Economic Forecast Survey expected a 0.6% drop.

The monthly decline in import prices reflected a 7.0% drop (-17.3% y/y) in fuels & lubricants prices which came after a 2.9% decline in August. Nonfuel prices, however, edged 0.1% higher for the third straight month. Their y/y increase has risen to 1.8%, up from -1.9% in April of 2023. Auto import prices improved 0.2% (2.7% y/y), the same as in August. Nonauto consumer goods prices increased 0.2% (0.8% y/y). The gain followed three straight monthly declines. Capital goods prices held steady (+0.4% y/y) after a 0.2% increase. Weakening, however, were foods, feeds & beverage prices which declined 1.5% (+3.8% y/y) after rising 0.2% in August.

The weakening in export prices in September reflected a 0.9% drop (-1.8% y/y) in nonagricultural export prices which was the fourth decline in the last five months. A 0.6% rise (-5.3% y/y) in agricultural product prices offset some of this weakness. Leading the decline, industrial supplies & materials prices fell 2.4% (-6.3% y/y) after a 1.6% August drop. Motor vehicle & parts prices edged 0.1% lower (+2.9% y/y) and reversed the 0.1% rise in August. Offsetting these declines, nonauto consumer goods prices increased 0.3% (0.9% y/y) following a 0.1% improvement in August. Capital goods prices rose 0.2% (1.6% y/y) after a 0.2% dip.

Each of these monthly trade price numbers are not seasonally adjusted. The import and export price series can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPN**A database.

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- Import price decline led by oil; elsewhere most prices firm.
- Export price weakness led by costs of industrial supplies.

U.S. Import and Export Prices Decline in September

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

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

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The light vehicle market continued to improve last month, with sales rising to the highest level in four years. U.S. light vehicle sales rose 10.4% (11.8% y/y) to 17.76 million units (SAAR) in March after rising 3.8% to 16.09 million in February. The rise in March vehicle sales accompanied a 1.8% y/y rise in real disposable income through February, which compared to 2.0% growth in 2024.

Sales improvement was broad-based last month. Light truck sales rose 12.1% (13.2% y/y) during March to 14.46 million units (SAAR), after increasing 3.3% in February. Purchases of domestically-made light trucks surged 12.4% (13.1% y/y) to 11.05 million units, after rising 3.3% in February. Sales of imported light trucks jumped 10.7% (13.0% y/y) to 3.40 million units, following February’s 3.4% rise.

Trucks’ 81.4% share of the light vehicle market last month compared to 80.2% in February and set a new record. The share was 80.3% during all of 2024 and 53.3% ten years earlier.

Auto sales also rose last month, by 3.8% (8.2% y/y) to 3.31 million units (SAAR) following a 6.0% February increase. Sales of cars moved to the highest level since July 2021. Purchases of domestically-produced cars rose 3.4% (12.3% y/y) last month to 2.46 million units, after rising 9.2% in February. Sales of imported autos gained 4.9% (-7.6% y/y) to 0.85 million units, following a 2.4% February decrease.

Imports' share of the U.S. light vehicle market eased to 23.9% in March from 24.1% in February. It compared to a May 2023 low of 22.9% before it reached a high of 26.3% in November of 2023. Imports' share of the passenger car market rose to 25.7% last month from 25.4% in February. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.5% in March after holding at 23.8% in February.

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

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U.S. Light Vehicle Sales Surge in March

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Job openings fell 194,000 to 7.568 million in February from an upwardly revised 7.762 million in January (previously 7.740 million), according to the Job Openings and Labor Turnover Survey. The level of openings has been little changed over the past eleven months after having declined rather steadily from a high of 12.134 million in March 2022. The number of openings continues to exceed the number unemployed, but only by 516,000, indicating a relatively balanced labor market. The job openings rate fell to 4.5% in February from 4.7% in January. It remains well below a high of 7.4% reached in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings.

Private sector openings fell 193,000 to 6.667 million in February from 6.860 million in January. The relatively small January decline was led by a 163,000 drop in trade, transportation and utilities openings. Finance openings slid 80,000 and leisure/hospitality openings declined 61,000. By contrast, professional and business services openings increased 134,000. The private sector job openings rate edged down to 4.7% in February from 4.8% in January. It has fluctuated between 4.4% and 5.0% over the past eleven months without a noticeable trend.

Total hiring edged up 25,000 in February to 5.396 million. This was the second increase in the past three months. Still, hiring has fallen 268,000 over the past year. Private hiring rose 46,000 to 5.046 million, its third consecutive monthly increase although it has fallen 231,000 over the past year. The February gain was due mostly to an 82,000 increase in professional and business services hiring. Hiring declined in most other sectors. Government hiring fell 21,000, led by a 15,000 decline in state and local government hiring. The total hiring rate was unchanged at 3.4%, where it has been for four of the past five months. The private hiring rate was also unchanged at 3.7% in February for the fifth consecutive month.

Total job separations edged down 11,000 to 5.261 million in February. They have been little changed over the past eleven months. Quits declined 61,000 to 3.195 million; layoffs rose 116,000 to 1.790 million; other separations fell 67,000 to 275,000. Quits are voluntary separations initiated by the employee and are often viewed as an indicator of workers’ willingness to leave jobs for other opportunities. Private quits (-80,000 in February to 2.998 million) have been relatively trendless recently, fluctuating between 2.8 and 3.1 million over the past seven months. By contrast, private layoffs (separations initiated by the employer) have been on a clear, though modest, uptrend since the middle of last year, pointing to a modest cooling in the labor market. They rose 96,000 to 1.692 million in February, led by a 47,000 increase in professional and business services layoffs.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

- Job openings fell to 7.568 million from 7.762 million in January.
- The job opening rate slid to 4.5% from 4.7%.
- Hiring was little changed in February.
- Layoffs rose to 1.790 million from 1.674 million.

U.S. JOLTS: Openings Fell Slightly and Layoffs Rose Slightly in February

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The ISM Purchasing Managers Index of activity in the manufacturing sector declined to 49.0 during March after easing to 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 49.8 for March. The series reached a monthly high of 63.8 in March 2021.

Four of the five component indexes weakened last month. The new orders index declined to 45.2 last month from 48.6 in February. It was the lowest level since May 2023. A greatly lessened 19.9% (NSA) of respondents reported higher orders while an increased 23.3% indicated declines. The March production index fell to 48.3 after declining to 50.7 in February. It was the lowest level in four months. A higher 21.0% (NSA) of respondents reported higher production while an increased 20.9% reported lower output. The employment index fell to 44.7 in March, its lowest point in six months, from 47.6 in February. A lessened 8.3% (NSA) of respondents reported more hiring while an increased 18.0% indicated fewer hires. The supplier delivery index declined to 53.5 from 54.5 in February. A lessened 13.4% (NSA) of respondents reported slower delivery speeds while an increased 6.4% reported a quickening.

Moving higher, the inventories reading surged to 53.4 last month from 49.9 in February. The reading stands well above its low of 43.2 in October of last year. A greatly increased 21.5% (NSA) of respondents reported higher inventories while a significantly lessened 12.8% reported lower.

The prices index, which is not part of the composite series, surged to 69.4 (NSA) in March after increasing to 62.4 in February. It was the highest level since June 2022, up from a December 2022 low of 39.4. A greatly increased 46.0% of respondents reported higher prices last month, up from 12.2% in November, while a slightly higher 7.3% reported lower prices.

In other series, the export orders index fell to 49.6 in March from 51.4 during February. These readings remained above a low 45.2 in January of last year. The imports index weakened to 50.1 from 52.6 in February. It was the lowest reading in three months. The order backlog index dropped to 44.5 (NSA) last month from 46.8 in February. It was the lowest level in four months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Index indicates factory sector contraction.
- New orders, production & employment readings weaken.
- Prices index jumps to another three-year high.

U.S. ISM Manufacturing Index Declines in March; Prices Strengthen

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The value of construction put in place rose a more-than-expected 0.7% m/m in February after a 0.5% decline in January (-0.2% initially) and a 0.3% increase in December (+0.5% previously), data from the U.S. Census Bureau showed. The February reading was the fourth m/m rise in five months. A 0.3% m/m February rise had been expected in the Action Economics Forecast Survey. The year-on-year rate rose to 2.9% in February after decelerating to 2.7% in January (the lowest since May 2019). The latest y/y figure was lower than 9.7% in February 2024, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction recovered 0.9% (2.0% y/y) in February, up for the fourth month in five, after a 0.7% decrease in January (-0.2% initially) and a 0.4% rise in December (+0.7% previously). Residential private construction rebounded 1.3% (1.6% y/y) in February, the fourth m/m increase in five months, after a 1.2% decline in January (-0.4% initially). Home improvement building rose 2.0% (8.9% y/y), the first m/m rise since November, following a 3.8% January drop; it was 40.1% of the residential private construction. Single-family building grew 1.0% (-0.1% y/y), the sixth consecutive m/m gain, after a 1.0% January rise; it was 47.4% of the residential private construction. Meanwhile, multi-family building was virtually unchanged m/m (-11.6% y/y) in February following 14 straight m/m decreases; it was 12.5% of the residential private construction. 

Nonresidential private construction rose 0.4% (2.5% y/y) in February, the third m/m rise in four months, following a 0.2% decline in January (0.0% initially) and a 0.5% increase in December (+0.1% previously). The February rise reflected m/m increases in the following nonresidential private constructions. These included religious (4.2%; 14.9% y/y), amusement & recreation (2.6%; 7.3% y/y), commercial (0.9%; -5.0% y/y), educational (0.4%; -0.1% y/y), transportation (0.3%; 10.6% y/y), office (0.2%; 3.7% y/y), manufacturing (0.1%; 4.7% y/y), and utilities (0.1%; 5.0% y/y). In contrast, lodging private construction, the only category with a monthly decline in February, fell 0.4% (-0.2% y/y), the fourth m/m fall in five months, after a 0.1% January easing. Meanwhile, communication private construction (-0.03%; +3.6% y/y) and health care private construction (+0.03%; -0.9% y/y) were virtually unchanged m/m in February.

The value of public construction grew 0.2% (6.0% y/y) in February, the seventh m/m gain in eight months, on top of a 0.2% rise in January (+0.1% initially), reflecting a 0.2% rebound (2.5% y/y) in residential public construction and a 0.2% increase (6.1% y/y) in nonresidential public construction. The February gain reflected m/m rises in the following nonresidential public constructions. These included commercial (4.1%; 53.1% y/y), conservation & development (2.4%; 8.2% y/y), water supply (1.4%; 15.6% y/y), health care (1.3%; 14.8% y/y), amusement & recreation (0.3%; 20.4% y/y), and educational (0.3%; 8.4% y/y). Notably, spending on highways & streets, which made up 28.9% of public construction spending, rose 1.2% (0.2% y/y) in February after a 0.8% increase in January, registering the fourth successive m/m rise and the sixth in seven months. To the downside, the following public constructions fell m/m in February: office (-2.8%; +1.3% y/y), utilities (-1.3%; -7.1% y/y), public safety (-1.2%; +4.3% y/y), transportation (-1.2%; +4.1% y/y), and sewage & waste disposal (-1.1%; +11.1% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- Construction spending +0.7% m/m (+2.9% y/y) in Feb. vs. -0.5% m/m (+2.7% y/y) in Jan.
- Residential private construction recovers 1.3% m/m, up for the fourth month in five, led by a 2.0% gain in home improvement building.
- Nonresidential private construction rebounds 0.4% m/m, up for the third month in four.
- Public sector construction increases 0.2% m/m, reflecting a 0.2% rise in both residential & nonresidential public buildings.

U.S. Construction Spending Rebounds in February, the Fourth M/M Gain in Five Months

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Retail gasoline prices for all grades rose last week to the highest level since the second week of October and averaged $3.29 per gallon (-9.6% y/y) after rising to $3.24 in the prior week. Prices have risen from a low of $3.13 in the week of December 9. The recent high was $3.79 in the week ending April 22, 2024. Its all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel increased to $3.59 per gallon (-10.1% y/y) in the week of March 31 after rising to $3.57 in the prior week. The latest diesel price remained well below a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil rose to $69.41 per barrel (-15.7% y/y) in the week ended March 28, after increasing to $67.64 per barrel in the prior week. Prices remain well below their peak of $120.46 in the week of June 10, 2022. Yesterday, the price was $71.48 per barrel. The price of European Brent crude oil increased to $74.35 per barrel (-13.3% y/y) in the week of March 28 compared to $72.21 in the prior week and a high of $82.79 in mid-January of this year. Prices remained well below a peak of $127.40 in the week of June 10, 2022. Yesterday, the price was $77.23 per barrel.

Natural gas prices slipped to an average $3.92 per mmbtu (+164.9% y/y) in the week ended March 29 after easing to $4.14/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday, the price was $4.11 per mmbtu.

Gasoline demand slipped 0.2% y/y in the four weeks ending March 21 after holding steady y/y in the prior four weeks. Demand for all petroleum products rose 0.5% y/y in the four weeks ending March 21 after a 2.5% y/y rise in the previous four-week period. Crude oil input to refineries slipped 0.2% y/y in the four weeks ending March 21 after a 1.8% y/y increase in the prior four weeks.

Gasoline inventories rose 3.0% y/y in the week ending March 21 after a 4.2% y/y rise in the week ending March 14. Residual fuel oil inventories fell 19.5% y/y in the week of March 21, after a 21.3% y/y fall in the prior week. Crude oil inventories rose 2.3% y/y in the week of March 21 after a 3.2% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell to 26.9 days in the week of March 21 from 27.2 days in the prior week. The recent low was 22.9 days in the week of November 8. The supply of crude oil was 27.7 days in the week of March 21, after three straight weeks at 28.0 days. It remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline costs continue to move up from December low.
- Crude oil prices rise to four-week high.
- Natural gas costs ease.