Tom Moeller

240502J5.jpg

240502K5.jpg

The U.S. trade deficit in goods and services (BOP basis) of $69.4 billion in March compared to a $69.5 billion in February, revised from $68.9 billion, and an unrevised $67.6 billion in January, according to the U.S. Census Bureau. The deficit remained nearly the largest since April 2023 which was $72.2 billion. A $69.1 billion deficit had been expected in the Action Economics Forecast Survey. Exports fell 2.0% and were roughly unchanged y/y, reversing a 2.2% February rise. Imports declined 1.6% (+3.1% y/y) in March, following three straight months of moderate gain.

The deficit in goods trade (BOP basis) increased to $92.5 billion in March from $91.7 billion in February. Goods exports fell 2.9% (-2.8% y/y) after rising 2.8% in February. Imports of goods declined 1.6% (+2.5% y/y) following three straight monthly increases. The services trade surplus increased to $23.1 billion in March from $22.2 billion in February but remained down from a peak surplus of $25.2 billion last August. Services exports eased 0.2% (+6.0% y/y) following four consecutive monthly increases. Services imports declined 1.7% (+5.4% y/y) after rising 4.7% in February.

The real (inflation-adjusted) goods trade deficit (customs value; chained 2017 dollars), widened to $88.6 billion in March, the largest deficit since April of last year, from $87.4 billion in February. Real exports of goods declined 3.2% (-0.7% y/y) after rising 2.0% in February. Real imports of goods fell 1.5% (+2.5% y/y) after three straight monthly increases. In the first quarter of this year, a widening of the trade deficit (net exports) subtracted 0.86 percentage points from GDP growth after adding 0.25 percentage points to growth in Q4 2023.

The customs value goods trade deficit widened to $91.5 billion in March from $90.5 billion in February. The latest figure compared to a $91.8 billion deficit in the advance report released on April 25. Customs value exports fell 3.0% (-1.7% y/y) in March after a 2.8% February increase. Automotive vehicles, parts & engines rose 0.6% (-1.7% y/y) while nonfood consumer goods excluding autos declined 1.8% (-5.1% y/y). Capital goods exports excluding autos weakened 3.7% (+3.1% y/y) while exports of industrial supplies & materials fell 3.0% (-4.1% y/y). Foods, feeds & beverages exports were off 8.2% (-1.5% y/y).

Customs value imports of goods declined 1.6% (+2.6% y/y) in March after increasing for three straight months. Automotive vehicles, parts & engines imports fell 11.1% (+6.1% y/y) while capital goods imports excluding autos rose 0.1% (7.4% y/y). Foods, feeds & beverage imports declined 3.5% (+5.2% y/y). Imports of industrial supplies & materials fell 2.9% (-7.0% y/y) but nonfood consumer goods excluding autos rose 4.8% (4.1% y/y). Meanwhile, petroleum imports declined 2.5% and were unchanged y/y in March, following a 1.6% February rise. Nonpetroleum imports weakened 1.5% (+2.8% y/y) following three straight monthly increases.

The rise in services exports reflected a 0.7% increase (12.4% y/y) in personal, cultural & recreational services and a 1.3% decline (+24.9% y/y) in travel services exports. Exports of construction services declined 1.3% (+2.6% y/y) while government goods & services exports declined 0.9% (-23.0% y/y). The increase in services imports was due to construction services imports which rose 1.0% (35.1% y/y) but travel services imports fell 2.6% (+21.7% y/y). Imports of transport services declined 5.8% (-0.1% y/y) while charges for the use of intellectual property eased 0.1% (+3.2 y/y) in March.

The U.S. goods trade deficit with China widened to a seasonally adjusted $24.1 billion in March from $21.9 billion in February. Exports fell 3.6% (-10.3% y/y) while imports rose 4.8% (unchanged y/y). The goods trade deficit with the European Union deepened to $19.5 billion from $17.6 billion in February as exports fell 3.4% (-6.4% y/y), off for the third straight month, and imports rose 1.8% (4.2% y/y). The trade deficit with Japan narrowed to a seasonally adjusted $5.3 billion in March after narrowing to $6.2 billion in the previous month. Exports declined 1.9% (+3.0% y/y) while imports fell 8.7% (-2.2% y/y).

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** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

240502L5.jpg

240502M5.jpg

- Exports and imports both fall.
- Adjusted for inflation, goods trade deficit increases to eleven-month high.
- Goods trade deficits with China & Europe deepen.

U.S. Trade Deficit Deepens in March

240502M1.jpg

240502J1.jpg

The Commerce Department reported that inventories in the factory sector remained unchanged (0.6% y/y) during March after a 0.2% February rise. Transportation equipment inventories held steady (6.9% y/y). Furniture inventories increased 0.3% (-4.4% y/y) while electrical equipment inventories dropped 0.4% (-0.5% y/y). Amongst nondurable goods industries, petroleum inventories were 0.5% higher (2.6% y/y) and plastics & rubber inventories rose 0.2% (-4.8% y/y). These changes were accompanied by a 0.5% rise (-1.7% y/y) in apparel. Basic chemical inventories were unchanged (-0.6% y/y) for a second consecutive month while paper product inventories gained 0.2% (-2.6% y/y).

Orders to all manufacturers improved 1.6% (1.7% y/y) in March following a 1.2% February rise. The gain was led by a 2.6% rise (1.2% y/y) in durable goods orders, as commercial aircraft surged 30.6% (-50.9% y/y) in. New orders excluding transportation gained 0.5% (1.6% y/y). Orders for nondurable goods (which equal shipments) rose 0.6% (2.1% y/y). The rise reflected a 1.5% increase (4.9% y/y) in shipments from oil refineries and a 0.7% gain (2.1% y/y) in basic chemicals. Orders for textile products declined 1.4% (-1.7% y/y) and apparel orders fell 0.2% (-1.9% y/y). Orders for food products rose 0.2% (-0.3% y/y). Paper product shipments held steady (-2.0% y/y).

Unfilled orders improved 0.4% in March (9.1% y/y) and, excluding the transportation sector, they eased 0.1% (-0.9% y/y). Backlogs of electrical equipment slipped 0.1% (+0.7% y/y). Unfilled orders in the machinery sector eased 0.3% (-3.9% y/y) and unfilled orders for transportation equipment rose 0.7% (15.5% y/y). Unfilled orders of furniture rose 0.6% (-5.6% y/) and fabricated metals backlogs were off 0.1%, unchanged y/y.

The factory sector figures are available in Haver's **USECON** database.

240502K1.jpg

240502L1.jpg

- Inventories levels are flat.
- Order improvement led by aircraft.
- Unfilled orders rise.

U.S. Factory Inventories Hold Steady While Orders Rise in March

Kathleen Stephansen, CBE

240502N1.jpg

240502O1.jpg

Nonfarm business sector productivity increased 0.3% (SAAR) during Q1’24, following upwardly revised gains of 3.5% in Q4’23 and 4.6% in Q3’23. The rises in productivity were originally reported as being 3.4% in Q4 and 4.4% in Q3. Expectations had been for a 0.8% rise in the Action Economics Forecast Survey. On a year-on-year comparison, Q1 productivity rose 2.9%, up from 2.7% in Q4 and 2.4% in Q3. The y/y gain was the quickest since 2020. Real value-added output rose 1.3% (SAAR) (3.2% y/y) in Q1 from a 3.8% (3.3% y/y) gain in Q4.

Hours-worked in the nonfarm business sector rose 1.0% (0.3% y/y) in Q1 from a 0.2% (0.6% y/y) rise in Q4. Nonfarm hourly compensation increased 5.0% (4.7% y/y) in Q1 from a 3.5% gain (5.2% y/y) in Q4. Adjusted for price inflation, real compensation per hour rose 1.1% (1.5% y/y) in Q1, following a 0.8% (1.9% y/y) rise in Q4.

Weaker productivity brought an acceleration in unit labor costs to 4.7% (1.8% y/y) in Q1 after a 0.0% (2.4%) rise in Q4. The Action Economics Forecast Survey called for a 2.3% quarterly rise in unit labor costs.

In the manufacturing sector, real output per hour slowed to a rise of 0.2% (1.2% y/y) last quarter after a gain of 2.4% (0.9% y/y) in Q4. Manufacturing output was unchanged over the quarter (-0.1% y/y) after declining 1.0% (-0.2% y/y) in Q4. Hours-worked declined 0.2% (-1.3% y/y) in Q1 after a drop of 3.3% (-1.1% y/y) in Q4.

Compensation per hour in manufacturing slowed to a gain of 3.4% (6.3% y/y) last quarter following a rise of 6.8% (6.7% y/y) in Q4. Real compensation declined 0.4% (3.0% y/y) in Q1, after a rise of 4.0% (3.4% y/y) in Q4. Unit labor costs in manufacturing slowed to a rise of 3.2% (5.0% y/y) in Q1 following a gain of 4.2% (5.8% y/y) the prior quarter.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

240502P1.jpg

240502Q1.jpg

- Productivity slows in Q1.
- Unit labor costs rise sharply.
- Slowdown in factory productivity and unit labor cost growth.

U.S. Productivity Growth Slows and Unit Labor Cost Growth Accelerates in Q1

Carol Stone, CBE

240502A8.jpg

240502B8.jpg

Initial claims for unemployment insurance were steady last week, ended April 27, at 208,000 seasonally adjusted; the April 20 week’s number was revised marginally from 207,000.  The latest week was close to the Action Economics Forecast Survey estimate of 210,000. The four-week moving average of initial claims was 210,000 in the April 27 week, down from 213,500 the week before. The latest week’s data extends the tight range of initial claims, which has hovered from 194,000 to 228,000 since September 3, 2023.

The number of continued claims for unemployment insurance, also called “insured unemployment,” was 1.774 million in the April 20 week, unchanged from the prior week; that earlier amount was revised from 1.781 million reported last week. As with initial claims, the number of continuing claims has maintained a tight range for several months, running from 1.728 million to 1.829 million since June 3, 2023.

The insured unemployment rate, that is, the number of unemployment benefits recipients as a percent of covered employment, was again 1.2% in the April 20 week. This rate has been steady at 1.2% since March 11, 2023.

Insured unemployment rates vary widely among individual states. In the April 13 week, the highest rates were in New Jersey (2.50%), California (2.31%), Rhode Island (1.91%), Minnesota and Illinois (both 1.85%), and Massachusetts (1.84%). The lowest rates were in Kansas (0.33%), Florida (0.37%), South Dakota (0.39%), North Carolina and Virginia (both 0.41%) and Alabama (0.42%). Rates in other prominent states include Arizona (0.74%), Texas (1.07%), Pennsylvania and Connecticut (both 1.54%) and New York (1.74%).  These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor, 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.

240502C8.jpg

240502D8.jpg

- Initial claims flat at 208,000 in April 27 week.
- Continued claims also unchanged in April 20 week.
- Insured unemployment rate maintains 1.2% level since March 2023.


U.S. Initial Unemployment Insurance Claims Maintain Tight Range

240501F2.jpg

240501G2.jpg

At today’s meeting of the Federal Open Market Committee, the target range for the Federal funds rate was left unchanged at 5.25% - 5.50%. Each member of the FOMC voted in favor of today’s action. The Fed’s focus continues to be reducing price inflation, as mentioned several times in the meeting summary.

Text accompanying today’s meeting indicated, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

“The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”

“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

In addition, “Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities. The Committee is strongly committed to returning inflation to its 2 percent objective.”

240501H2.jpg

240501I2.jpg

- Fed maintains focus on inflation reduction.
- Federal funds rate range remains at 5.25% - 5.50%, where it’s been since early-August 2023.
- Rate stays at highest level since March 2001.

FOMC Holds Funds Rate Steady

240501F8.jpg

240501G8.jpg

The Autodata Corporation reported that U.S. light vehicle sales rose 2.8% (1.5% y/y) to 16.00 million units (SAAR) in April after falling 1.9% to 15.56 million in March. Sales averaged 15.43 million in Q1.

Sales of light trucks rose 2.9% (3.4% y/y) during April to 12.9 million units (SAAR) after falling 1.3% in March. Purchases of domestically-made light trucks edged 0.5% higher to 9.68 million units (unchanged y/y), after falling 2.5% in March. Sales of imported light trucks strengthened 10.7% (15.0% y/y) to 3.22 million units, the highest level in three years,  after a 3.6% March increase.

Trucks' share of the light vehicle market held steady at a record 80.6% last month compared to 79.1% in April of last year.

Auto sales rose 1.3% (-5.8% y/y) to 3.10 million units (SAAR) in April following a 2.9% March decline. Purchases of domestically-produced cars improved 2.8% (-7.2% y/y) last month to 2.19 million units after falling 3.6% in March. Sales of imported autos weakened 2.2% both m/m and y/y to 0.91 million units after easing 1.1% in March.

Imports' share of the U.S. light vehicle market rose to 25.8% in April from 24.7% in March, up versus a May 2023 low of 22.3%. Imports' share of the passenger car market declined to 29.4% from 30.4% in March. It reached a high of 37.9% in September 2021. Imports' share of the light truck market improved to 25.0%, a five-month high, from 23.2% in March.

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

240501H8.jpg

240501I8.jpg

- Light truck sales improve considerably while passenger car sales edge higher.
- Imports' market share gains ground.

U.S. Light Vehicle Sales Move Up in April

Winnie Tapasanun

240501A13.jpg

240501B13.jpg

The ISM U.S. manufacturing PMI fell to 49.2 in April after rising to 50.3 in March, according to the Institute for Supply Management. The April manufacturing PMI, below the 50 expansion-contraction dividing line, indicated that the U.S. manufacturing sector contracted for the 17th time in 18 months. While slightly higher than 47.0 in April 2023 and a low of 46.5 in March 2023, the April reading remained below a peak of 64.0 in March 2021. A reading of 50.0 had been expected in the Action Economics Forecast Survey for April.

The production index declined to 51.3 in April from 54.6 in March, suggesting production expanded for the third time in four months but at a slower pace compared to March; it was below a high of 66.8 in March 2021. A 22.1% (NSA) of respondents reported higher production in April while 15.3% reported lower. The employment index increased to 48.6 in April from 47.4 in March, indicating employment contracted for the seventh successive month but at a slightly less severe pace. The index remained down from a high of 57.7 in March 2021. An increased 16.3% (NSA) of respondents reported higher employment in April while 15.8% reported less hiring.

The new orders index dropped to 49.1 in April after increasing to 51.4 in March, indicating new orders contracted for the second time in three months to the lowest level since December. It was up from a low of 42.8 in January 2023 but below a high of 61.3 in February 2022. A 19.9% (NSA) of respondents reported higher new orders in April while 16.9% reported a decline. The inventories index was at 48.2 in April and March after 45.3 in February, showing inventories contracted for the 15th consecutive month. The index remained down from a high of 56.5 in July 2022. Meanwhile, the supplier deliveries index was at 48.9 in April, compared to 49.9 in March and 50.1 in February, indicating the delivery performance of suppliers to manufacturing organization was slightly faster for the second successive month. An 8.1% (NSA) of respondents reported slower delivery speeds in April while an increased 10.3% reported faster speeds.

Inflation has remained sticky. The prices paid index jumped to 60.9 (NSA) in April after rising to 55.8 in March, indicating raw materials prices rose for the fourth straight month to the highest reading since June 2022. The April index was well above a low of 39.4 in December 2022 but meaningfully below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. An increased 30.8% (NSA) of respondents reported higher prices in April while only 9.1% reported price declines.

In other ISM series not included in the composite index, the new export orders index dropped to 48.7 in April after registering at 51.6 in March and February, indicating new export orders contracted for the first time in three months. It was down from a high of 57.1 in February 2022. The imports index fell to 51.9 in April from 53.0 in March and February, remaining at an expansion level for the fourth consecutive month; it was down from a high of 61.0 in June 2021. The order backlog index decreased to 45.4 (NSA) in April from 46.3 in March and February, indicating falling backlog levels for the 19th straight month. It was up from a low of 37.5 in May 2023 but down from a high of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. 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.

240501C13.jpg

240501D13.jpg

- 49.2 in April vs. 50.3 in March, lower than expected.
- Production expands for the third month in four.
- Employment contracts for the seventh straight month.
- New orders contract to a four-month low after March’s expansion.
- Amid ongoing inflationary pressures, prices index rises to 60.9, the highest since June ’22.

U.S. ISM Manufacturing PMI Contracts in April, w/ Prices Highest Since June ’22

240501X1.jpg

240501Y1.jpg

Job openings decreased 325,000 in March to 8.488 million after rising 65,000 in February, revised from 8,000 reported before, according to the Job Openings and Labor Turnover Survey conducted by the Bureau of Labor Statistics. The March amount is down -11.8% from 9.623 million a year ago, that is, March 2023, and down even more from 12.182 million in March 2022. The job openings rate, that is, the number of job openings as a percent of employment plus job openings on the last business day of the month, was 5.1% this March, down from 5.3% the prior month.

Private sector job openings fell 364,000 this March, following a 9,000 decline in February. The private sector rate was 5.3%, down from February’s 5.5%. The biggest change in private sector job openings was a 182,000 drop in construction; the rate in that industry fell from 5.3% in February to 3.2% in March. Another sizable decline was in finance and insurance, where opening fell 158,000 in March, and the rate dropped to 5.0% from 7.1% in February. Retail trade saw a 64,000 decrease in openings and a fall in the rate from 3.7% to 3.3%.  Industries with positive moves include the information sector, +43,000 openings in March and a rate change from 4.0% to 5.3%. The state and local education sector saw an increase in openings of 68,000 in March, with the associated rate moving to 2.9% from 2.3% the prior month.

Hiring showed widespread declines across industries with total hirings down 281,000 in March, making a rate of 3.5%, down from February’s 3.7%. The rates here are the amount of hiring during the entire month as a percent of total employment. Construction also saw a hiring decline, 59,000, with its rate moving down to 4.1% from 4.9% in February. Transportation, warehousing and utilities saw a 50,000 decrease in March’s hiring, and a decline in the rate to 3.4% from 4.1%. There were just a few increases, notably in private educational services, +10,000 in March and a move in the rate from 2.1% to 2.4%. Another notable increase took place in durable goods manufacturing, 6,000 in March, although this was not large enough to raise the rate in that industry, which stayed flat at 2.2%.

Layoffs actually fell in March by 155,000; the associated rate, that is, layoffs during the whole month as a percent of total employment, was 1.0%, down from 1.1% in February. These decreases in layoffs were spread across numerous industries; interestingly the most sizable decrease was in construction, 63,000, following an increase in that industry’s layoffs in February of 21,000. The March layoff rate in construction was 1.8% in March, down from 2.5% in February. The highest layoff rate among industries was 3.5% in arts, entertainment and recreation, and this was down from 5.0% in February.

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

- Job openings rise in just a few industries in March.
- Hiring declined among many industries in March.
- Construction job openings fell in March, but so did construction industry layoffs.

U.S. Job Openings Fell in March, but So Did Layoffs

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

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

Persistent negative US economic surprises leading to big rate-cut expectations

Germany is Euro area weakling

Flash PMIs show good start to Q3 in US; loss of momentum in the euro area

Chinese economy on downtrend could threaten global economy

Working age population labor force participation near all-time high as retirements increase

Blue Chip forecasters look for widespread policy rate cuts just ahead

Flash June PMIs point to a widespread slowdown apart from the US

Announcement of snap French election is causing concern across Europe

The UK economy’s post-pandemic under-performance relative to its pre-pandemic trend

US Beveridge Curve back to near pre-pandemic levels

Negative economic surprises in the US but positive in Europe, especially the UK

Latest PMIs show US losing momentum while RoW is gaining momentum

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

**Global equity markets**
The resilience of its economy in recent months and the dominance of its technology sector in particular have been key to the outperformance of the US equity market so far this year. The degree to which sentiment toward broader global equity markets has soured over the past few weeks compared with sentiment toward the US has, nevertheless, been striking (see chart 1). Uncertainty about the potential policy choices of a new US administration is likely a key factor behind this shift.

241107Z1.jpg

**Global uncertainty**
This message from equity markets chimes too with gauges of economic policy uncertainty. As chart 2 below suggests, this gauge has remained relatively low over the past few months in the US compared with the norms of the past 10 years. A gauge of global policy uncertainty, in contrast, has remained relatively high.

241107Z2.jpg

**The consensus view on monetary policy**
Against that backdrop there remains a firm consensus nevertheless that monetary policy in most major economies will continue to be loosened over the next 12 months. The ECB, for example, is expected to lower its key policy rates by 106 basis points over the next 12 months with a next cut in the cycle universally expected in December. Meanwhile, the BoE is expected to lower its Bank rate by 133 bps over the same time frame, with a clear majority having expected a 25bps cut on November 7th. These forecasts contrast with the US where the fed funds rate is expected to be lowered by 132 basis point between now and this time next year.

241107Z3.jpg

**Oil and yields**
Those aforementioned interest rate forecasts are subject to some upside risks if forthcoming policy shifts turn out to be more inflationary. One area to watch will be the energy sector and oil prices in particular. Oil prices have remained relatively low in recent weeks even though market-based gauges of US inflation expectations have shifted higher. A previously tight correlation between oil prices and US Treasury yields has broken down as a result.

241107Z4.jpg

**China’s economy**
Another focal point in the weeks ahead will be the Asian region and China in particular. The latter’s fortunes have, however, improved a little recently, thanks in part to a series of easing measures by the authorities. This is reflected in chart 5 below, which shows stronger composite PMI readings for October, based on both official and private sector indicators. Additionally, recent data surprises—captured by Citigroup’s economic surprise index—suggest positive momentum. Despite this, the Chinese economy may not be out of the woods just yet, not least if this week’s election news signals renewed tensions between China and the US.

241107Z5.jpg

**Japan’s politics**
Japan’s politics has also been grabbing headlines in recent days as the country is now set to elect a new Prime Minister on November 11th. That has led markets to scale back their expectations for further policy easing by the Bank of Japan in the near term. As it stands, market-implied probabilities indicate reduced expectations for a Bank of Japan rate hike in December, with the timing now pushed to January. Furthermore, the result of the US election has also generated a ripple effect across Asia’s financial markets, with the yen, along with several other Asian currencies, having weakened against the US dollar.

241107Z6.jpg

The policy decisions of a new US administration could potentially impact the global economy in a number of ways. Key areas that might be affected include trade and tariffs, geopolitical stability, fiscal policy (US tax cuts), deregulation, and immigration policy. And possibly in anticipation of some economic instability, sentiment toward global equity markets (excluding the US) has soured over the past few weeks (see chart 1). Gauges of global policy uncertainty, in the meantime, have remained relatively high (see chart 2). There remains a strong consensus, nevertheless, that most major central banks will continue to loosen monetary policy over the next 12 months (chart 3). That consensus view, however, might be challenged if prospective US policy decisions prove to be more inflationary (chart 4). One economy that will of course be an immediate area of focus will be China (chart 5). Japan is also in the spotlight at present though that’s more because of some uncertainty surrounding its domestic politics and prospective policy choices in the period ahead (chart 6).

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/0kWt3bxyoMRQqwNTJjI3ru?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Uncertainty Is the Easy Part

241107F2.jpg

241107G2.jpg

At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was reduced by 25 basis points to 4.50% to 4.75% following a 50 basis point reduction at the last meeting. The decline matched expectations in the Action Economics Forecast Survey.

The statement following the meeting indicated, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated.”

It went on to state, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”

The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.

Today’s **FOMC** statement can be found [here](https://www.federalreserve.gov/newsevents/pressreleases/monetary20241107a.htm).

241107H2.jpg

241107I2.jpg

FOMC Lowers Funds Rate Target by 25 Basis Points

241107R12.jpg

241107S12.jpg

Consumer credit outstanding increased $6.0 billion (2.2% y/y) during September after rising $7.6 billion in August, revised from $8.9 billion, and $27.3 billion in July, revised from $26.6 billion. A $14.0 billion increase had been expected in the Action Economics Forecast Survey. The ratio of consumer credit outstanding to disposable personal income was little changed at 23.3% in September, a ratio that has drifted lower the last two years.

Nonrevolving credit outstanding increased $5.0 billion (1.3% y/y) in September after increasing $9.8 billion in August and $17.0 billion in July. Nonrevolving credit held by banks fell 1.4% y/y, down from a +11.0% y/y high in April 2022 while finance company nonrevolving credit rose 3.4% y/y, half the increase early this year. Credit union nonrevolving balances declined 2.1% y/y in September, off from 20.3% y/y growth in January 2023. Federal government balances surged 3.6% y/y to $1.52 trillion in September.

Revolving credit outstanding, which includes credit cards, rose $1.1 billion in September (4.9% y/y) following a $2.1 billion August decline and a $10.4 billion July rise. Revolving credit outstanding held by depository institutions rose 5.0% y/y, down from a high of 15.4% y/y growth in August 2022. Revolving credit held by finance companies fell 10.6% y/y while revolving credit held by credit unions rose a diminished 5.3% y/y in September.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

241107T12.jpg

241107U12.jpg

- Nonrevolving credit strength continues to diminish.
- Revolving credit usage rebounds.

U.S. Consumer Credit Usage Moderates in September

241107N1.jpg

241107O1.jpg

U.S. nonfarm business productivity (output per hour) increased 2.2% (SAAR) during last quarter after a 2.1% rise in Q2, revised from 2.5%, and a 0.7% Q1 gain, revised from 0.4%. Earlier figures were revised modestly. The Action Economics Survey Forecast expected a 2.6% productivity increase during Q3. The 2.0% y/y increase remained below its 2.7% gain in 2023 (Q4/Q4) but was improved from a 1.4% decline in 2022. Nonfarm business output increased 3.5% (2.8% y/y) after a 3.0% gain, revised from 3.5%, while hours-worked rose 1.2% (0.7% y/y) after increasing 0.9%, revised from 1.0%.

Compensation growth slowed to 4.2% (5.5% y/y) after a 4.6% gain, revised from 3.0%, and a 9.3% jump in Q1, revised from 4.2%. As a result, unit labor costs grew 1.9% (3.4% y/y) last quarter after a 2.4% rise, revised from 0.4% and an 8.5% Q1 gain, revised from 3.8%. The Action Economics survey expected unit labor costs to rise 1.1% last quarter.

In the manufacturing sector, productivity in Q3 improved 1.0% (0.7% y/y) after rising 0.3% in Q2, revised from 1.3%, and 0.7% in Q1, revised from a 0.7% decline. Compensation growth grew 6.4% (6.4% y/y) following a 6.2% rise, revised from 4.9%. Unit labor costs grew 5.3% (5.7% y/y) after a 5.8% jump, revised from 3.6%.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

241107P1.jpg

241107Q1.jpg

- Annual increase remains below last year’s gain.
- Compensation growth dips.
- Increase in unit labor costs slows.

U.S. Productivity Growth Is Steady in Q3’24

241107A8.jpg

241107B8.jpg

Initial claims for unemployment insurance were 221,000 seasonally adjusted in the week ended November 2, up slightly from 218,000 the week before; that prior week was revised from 216,000. The latest amount was modestly lower than the Action Economics Forecast Survey which had expected 225,000. The four-week moving average of initial claims was 227,250 through the November 2 week, down from 237.000 the prior week.

The total number of unemployment insurance beneficiaries was 1.892 million seasonally adjusted in the week ended October 26, larger than the prior week’s 1.853 million recipients. The earlier amount was revised from 1.862 million. The four-week moving average through the October 26 week was 1.875 million. The number of benefit recipients is also known as “continuing claims.”

Through the October 26 week, the insured unemployment rate was still 1.2%. That is the total number of beneficiaries as a percent of covered employment and has been at that amount since March 11, 2023.

Economic conditions vary widely across states and territories. In the week ended October 19, the highest unemployment rates were in New Jersey (2.18%), California (1.92%), Puerto Rico (1.82%), Washington (1.67%) and Rhode Island (1.62%). The lowest rates were in South Dakota (0.24%), North Dakota and Florida (both 0.36%), Virginia and Alabama (both 0.42%), Kentucky (0.43%) and New Hampshire and Nebraska (both 0.44%). Rates in other notable states include New York (1.47%), Illinois (1.42%), Pennsylvania (1.36%) and Texas (1.04%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor, 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.

241107C8.jpg

241107D8.jpg

- Initial claims increase just 3,000 in November 2 week.
- Continuing claims rise 39,000 in October 26 week.
- Insured unemployment rate still 1.2%.