Tracking Policy Forces that Drive Technology, Capital Formation & Growth















Consumer Confidence 6/28/05
The consumer confidence index rose in June for the second straight month to 105.8, up from 103.1 in May. The rise puts consumer confidence at a three-year high. Consumer job concerns remained relatively steady. The component of the index that asked people whether jobs were hard to get dropped to 22.6 from 24.1. One component of the consumer confidence report, the expectations index, which measures consumers' outlook over the next six months, increased to 95.8, from 93.4 last month. The present situation index rose to 120.7 from 117.8. The complete report is available at:

New Residential Sales May 2005 6/24/05
May sales of new homes rose to 1,298,000 (seasonally adjusted annual rate) as buyers continue to respond to low mortgage rates. This is 2.1% * over the revised April rate of 1,271,000 and is 4.4% * higher than the May 2004 estimate of 1,243,000. Sales were down sharply (-24.5%) in the Northeast, with the biggest gains (+22.9%) in the Midwest . The West (+1.7%) and the South (-.8%) had more modest changes from April. The median sales price rose to $217,000; the average sales price was $281,400. The seasonally adjusted estimate of new houses for sale at the end of May was 442,000. This represents a supply of 4.2 months at the current sales rate, averaging 4.3 months YTD in 2005, slightly higher than the averages for 2004 (4.1) and 2003 (3.6).

May Non-Manufacturing ISM Report on Business 6/3/05
Business activity in the non-manufacturing sector increased in May 2005 9.5 points to 62%, according to the Institute of Supply Management (ISM) Report. This was the 26 th consecutive monthly increase. Business activity increased at a slower rate in May than in April, but with faster rates of increase for New Orders and Backlog of Orders in May. The report suggested that business activity in non-manufacturing industries should continue at relatively healthy levels in the near-term. The Prices Index declined in May compared to April due to assimilation by various industries of recent increases in energy and steel prices. Of the industries reporting, 11 saw increased activity (Insurance; Real Estate; Communication; Utilities; Other Services; Retail Trade; Health Services; Construction; Business Services; Public Administration; and Wholesale Trade). Five industries reported business activity as unchanged from the previous month (Agriculture; Mining; Transportation; Finance & Banking; and Legal Services). The only industry reporting decreased activity was Entertainment.


Employment 6/3/2005
May nonfarm employment went up by 78,000 after a much larger increase in April. The unemployment rate was essentially unchanged at 5.1%, according to the U.S. Bureau of Labor Statistics. Payroll employment showed continued increases in health care and construction, but was little changed in the other major industry sectors.


Productivity and Costs 6/2.05
The U.S. Labor Department released the revised productivity data for the first quarter of 2005 showing gains somewhat higher than the initial reports of May 5: 2.6 %in the business sector and 2.9 % in the nonfarm business sector. Revised productivity changes in manufacturing were: 4.4% in manufacturing, 6.3% in durable goods manufacturing, and 2.4% in nondurable goods manufacturing. The complete report is available at:


April Consumer Price Index 5/18/05
The Consumer Price Index rose 0.5% in April (seasonally adjusted) according to the U.S. Bureau of Labor Statistics, following an increase of 0.6% in March. Energy prices increased sharply (+4.5%) in April. Within energy, the index for petroleum-based energy increased 6.3% and the index for energy services rose 2.3%. The food index rose 0.7%, with food at home increasing 1.1%, its largest rise since May 2004. Other price increases were moderate. The core CPI, all items excluding food and energy, was virtually unchanged from March to April. This is the lowest rate of underlying inflation since November 2003. Declines in apparel and for lodging while away from home, which had accounted for the acceleration in March, contributed to the deceleration in April. The complete report is available at


Producer Price Indexes 5/17/05
The Producer Price Index for Finished Goods increased 0.6% in April according to the U.S. Bureau of Labor Statistics. This increase followed a 0.7% rise in March and a 0.4% gain in February. Manufacturers' prices of intermediate goods rose 0.8%, after advancing 1.0% in the previous month, and the crude goods index moved up 2.7%, following a 4.3% rise in March.

In finished goods, energy goods drove much of April's 2.1% increase. Excluding prices for energy goods, the finished goods index was up only 0.1%. The indexes for finished consumer goods other than foods and energy, capital equipment, and finished consumer foods also increased in April, up 0.2, 0.2, and 0.1%, respectively. Excluding prices for foods and energy, finished goods grew 0.3% in April, compared with a 0.1% gain in March. The complete report is available at


U.S. April retail sales  
April U.S. retail sales rose to $344.9 billion in April (+1.4%), the largest gain in seven months, according to estimates by the Commerce Department. The sales gains were widespread across most kinds of retail outlets, including autos, gasoline, department stores and hardware stores. Excluding autos, sales increased 1.1%. Excluding gasoline, sales increased 1.3%. The February to March 2005 percent change was revised from +0.3% to +0.4%. Retail trade sales were up 1.4% from March and were 8.7% above last year. Gasoline station sales were up 19.8% from April 2004 and sales of nonstore retailers were up 12.4% from last year. The full report is available at

+1.4% ($344.9B)
US. Trade Deficit $54.5.0B
Commerce Department reported that the gap between U.S. imports and exports grew smaller by 9.2% in March to $54.99B. This follows a record deficit of $60.57B in February and is the lowest level in 6 months. Exports increeased to $102.2B ($72.1B in goods, $30.1B in services) following $100.7B in February. Imports fell to $157.2B ($131.5B in goods, $25.7B in services) from a total $161.2B in February. The deficit for goods was down $5.2B, the surplus in services was up $.4B. Increases came in capital goods; foods, feeds, and beverages; and other goods. Decreases occurred in industrial suuplies and materials and automatic vehicles, parts and engines. Imports of consumer goods; automative vehicles, parts and engines; capital goods; adn industrical supplies and materials all showed declines. Foods, feeds, and beverages and other goods were essentially unchanged.
-9.2% ($55.0B)

Housing Starts
Housing starts for February (2,195,000 seasonally adjusted annual rate) were 0.5% above the revised January estimate and an increase of 15.8% over one year ago. Single family housing starts were 0.3% over January numbers. January housing starts were up in all areas of the country except the South. Building permits (2,074,000 seasonally adjusted annual rate) for February were 2.7% below the revised January rate (2,132,000). The report can be found at .


Industrial Production
Industrial production increased 0.3% in February, following January's increase of 0.1% (revised) as well as increases in both November and December of 2004. Capacity utilization rose 0.2% from 79.2% in January to 79.4% in February. The report is available at


Retail Sales
Click for larger versionAdvance estimates for February retail and food service sales were $352.1B, up 0.5% from the previous month. This is the third straight month of rising sales, as January was revised to 0.3% after initial estimates of a decline. Sales in electronic and appliance stores (+1.6%), clothing and accessories (+1.1%), food services (+1.2%), and auto sales (+0.9%) helped drive the increase. Excluding autos, sales increased 0.4%. Building materials and garden equipment and supplies dealers was the only category that posted a decline in sales over January (-1.3%).


Manufacturing and Trade Inventories
January trade sales and manufacturing shipments, combined, were up 0.8% from December to $994.5B. While motor vehicle and parts dealers saw a decline in sales of $1.7B, sales in other categories (furniture, building materials, food and beverage, clothing, and general merchandise) all posted gains. Inventories were up 0.9% from December to $1,290.6B.


February Employment
Click for larger versionFebruary nonfarm payroll employment added 262,000 jobs, the largest amount of jobs added since October 2004. The unemployment rate rose slightly to 5.4%, up from 5.2% in January. The service sector delivered 207 of the new jobs, with the largest contribution coming from professional and business services (81,000), government services (33,000), and retail trade (30,000). Goods producing sector gained 55,000 jobs, 20,000 in manufacturing and 30,000 in construction. See the report at .


The Bureau of Labor Statistics reported the revised Q4/2004 productivity numbers sharply up over their previous estimates. The business sector productivity estimate is now at 3.7%, up from the preliminary estimate of 2.5%, and nonfarm business at 2.1%, revised up from the previous 0.8% estimate. These revisions leave the productivity for all of 2004 rising by 4%, ending the strongest 3-year period for productivity growth in more than 50 years of record keeping. People continue to have hair-trigger inflation fears, but this is productivity driven growth which will keep prices in check.


ISM Nonmanufacturing
The ISM nonmanufacturing Index for February rose to 59.8%, with significant increases in indices for Employment (+7.4%), Imports (+4.5%), New Export Orders (+3.5%), Backlog of Orders (+3.5%) and Inventories (+2.5%). Click here to see a comparison of the ISM nonmanufacturing and manufacturing indices. The complete report is available at: .


ISM Manufacturing
Economic activity continued to grow for the 21 st straight month, according to the Manufacturing ISM Report on Business. According to the report, the rate of growth is slowing, but price increases and shortages are becoming less of a problem. Exports and imports continue to be strong and recent inventory growth has reversed, reducing concerns about too much inventory build-up. The PMI index at 55.3% is down1.1% from a year ago, but reading above 50% indicate general expansion in the manufacturing sector and over 42.7% indicates an expansion in the overall economy. The complete report is available at .


Construction Spending
January construction spending was $1,047B (annual rate) or 0.7% above the revised December estimate. Increases across residential (private +0.4%; public +02.6%) and nonresidential (private 1.2%; public 0.7%) contributed to the increase over December. .


New Home Sales
Sales of new one family homes for January came in at 1,106,000 according to the US Census Bureau. This is down 9.2% from the revised December rate and 4.2% below January 2004. . The biggest drop in sales came in the Midwest (-40.3%) with the Northeast (-17.1%) and the South (-3.3%) also falling compared to December. Only the West (+5.6%) was up in sales during this period. The median sales price was $199,400. The report is available at


Personal Income and Consumption
Personal income for January decreased $238.6B (-2.3%) and disposable personal income fell $241.4B (-2.6%) according to the Bureau of Economic Analysis. Personal dividend income decreased in January, following December's boost by Microsoft's special dividend payment. Personal consumption for the period was also down $3.9B, less than 1%. The report is available at .


US Durable Goods Orders
New orders for manufactured durable goods declined in January to $200.4B, down $1.7B (0.9%) from December. The biggest declines in new orders came from transportation (-5.3%), motor vehicles and parts (-3.8%), and nondefense aircraft and parts (-27.1%). Excluding transportation, new orders rose 0.8%. Excluding defense, which rose 56.9% in January, new orders fell 0.8%. Shipments of manufactured durable goods increased to $209.2B, up $3.0B (1.5%) from the previous month. Decreases in transportation goods shipments were offset by increased in shipment across other categories, such as semiconductors (+13.3%), defense aircraft and parts (+19.0%), and computers and electronic products (+4.0%). While shipments of computers and electronic products rose, new orders declined 1.2%. Unfilled orders declined (-0.2%) and inventories rose for the 14 th consecutive month by 0.9% to $285.9B. The complete report is available at .


FOMC Minutes
The Fed concluded that its policy of measured interest rate increases would keep inflation in check, despite some indication of rising prices according to minutes of the February 1-2 FOMC meeting released today. On February 2, the Fed raised the federal funds rate for the 6 th successive time on by .25 percent, brining the rate target to 2.5%.


January CPI
The CPI increased 0.1% (seasonally adjusted) in January. December CPI was revised to no change up from the previously estimated 0.1% decline. Excluding food and energy prices, the core CPI rose 0.2%. The biggest contributors to the rise were apparel (+0.3%), medical care (+0.4%) and other goods and services (+0.4%). Declines came from transportation (-0.1%) and energy (-1.3%). .


February Consumer Confidence
The Conference Board's Consumer Confidence Index dropped in February to 104.0 from 105.1 in January, the first decline since November. The Present Situation Index increased to 116.4 from 112.1. The Expectations Index declined to 95.7 from 100.4 in January. Overall, consumers are more optimistic today than a year ago, indicating that consumers have confidence that the economy conditions and labor market will continue to grow, according to the report. See .


January PPI
The PPI for Finished Goods increased 0.3% in January (seasonally adjusted) following a 0.3% decline in December and a 0.7% rise in November. Prices of intermediate goods rose 0.4% in January after a slight drop of 0.1% in December. The crude goods index dropped by 2.0% in January, following a 3.0% decline in December.

Prices for finished goods excluding food and energy rose 0.8%. Finished energy goods prices decreased at a slower pace in January (-2.5%) than December (-1.0%). Finished consumer foods dropped in January (-0.2%) after rising in December (+0.1%). The report is available at .


January Import Prices
Import prices increased 0.9% in January, following a 1.4% drop in December. Both petroleum and nonpetroleum prices rose, with petroleum prices the main contributor (+4.6%) to the overall increase after two months of declines (December -11.5%; November -6.0%). January export prices rose 0.7% after a 0.2% rise in December. The complete report is available at .


January Industrial Production and Capacity Utilization
Industrial Production, at 117.7, was essentially unchanged in January following a 0.7% increase in December. This is 3.9% over the January 2004 level. Manufacturing production rose 0.4%, but both mining (-0.3%) and utilities (-3.0%) declined. Capacity utilization measured 79.0%, growing 1.2% from a year ago, but down 0.1% from December. Manufacturing capacity utilization edged up slightly (+0.1%), but both mining (-0.3%) and utilities (-2.7%) were down compared with a month ago. See the report at


January Housing Starts and Building Permits
Building permits for January at 2,105,000 were up 1.7% above the revised December rate and is up 6.8% over a year ago. The biggest contributor to the increase in January was the South (+9.7%) and the West (+1.7%). The Midwest saw a drop of 14.2%. Housing starts, at 2,159,000, were us 4.7% over the revised December estimate and is 11.6% over January 2004. The South was the major contributor with housing starts up 18.8% over December. The West was up 1.9%. Starts in both the Northeast (-23.9%) and Midwest (-12.5%) declined from December. See the report at

2,105,000 (+1.7%)
January Retail Sales
January retail sales declined 0.3% from December, but were up 7.2% compared to a year ago. The decline was driven by falls in motor vehicle and parts dealers (-3.3%). Building material and garden equipment and supplies dealers (-0.3%), furniture and home furnishing stores (-01.%), and electonics and applicance stores (-0.6%) were also down. Retail sales excluding motor vehicles and parts increased 0.6%. The biggest contributors to the gain were from gasoline stations (+1.8%), clothing and clothing accessories (+1.8%) and general merchandise stores (+0.9%). The report is available at:

January Employment
January U.S. nonfarm payrolls grew by 146,000 jobs. The unemployment rate fell to 5.2%, down from 5.7% a year ago. The job gains came from the service sectors, which was up across all categories: retail trade (+19,000); professional and business services (+25,000); education and health (+35,000); leisure and hospitality (+20,000); and government (+12,000). There were declines in both construction (-9,000) and manufacturing (-25,000) jobs. The report is available at .


Preliminary estimates of productivity change for Q4/2004 came in at +0.8% for the nonfarm business sector, bringing the annual average for 2004 to 4.1%. This was down from the previous quarter, when it increased 1.8%. The business sector productivity increased 2.5%, essentially unchanged from the previous quarter. Hourly compensation (+3.1%), unit labor costs (+2.3%) total output (+2.8%), and hours of all person (+1.9%) were all up. Manufacturing productivity increased 5.6%, due to increases in both durable (+7.3%) and nondurable goods (+3.7%) manufacturing. For manufacturing, the hourly compensation (+6.0%), unit labor costs (+0.4%) and total output (+4.5%) also showed increases, but hours declined (-1.0%). .


Fed Raises Rates
For the sixth straight time, the Federal Open Market Committee raised the interest rate target by .25% to 2.50%. As with previous rate announcements, the Fed emphasized that its monetary policy stance is accommodative given that there is underlying productivity growth. The Fed reports that they believe inflation and long-term inflation expectations are well-contained. The next Open Market Committee meeting is in March. Productivity growth will continue to fuel US growth, keeping inflation in check and defusing the pressure on the Fed to significantly raise rates.


Q4/2004 GDP
The Bureau of Economic Analysis announced that real GDP increased at 3.1%, compared to a third quarter rate of 4.0%. Recent reports, however, indicate that this may be revised upward due to errors in trade numbers. US growth is driven by productivity. I expect growth to be 4% for 2005, with low inflation and low interest rates.


December U.S. Leading Index
The Conference Board reported that the U.S. leading index rose 0.2% in December. The leading index now stands at 115.4 (1996=100). The coincident index also rose, gaining 0.3%, but the lagging index was unchanged in December. The December rise in the leading indicators followed an increase in November as well. In spite of five months of declining numbers, the increases in December and November suggest that the softness in the leading indicators is somewhat less pervasive, according to the Conference Board. The report says that it is now more likely that the five-month decline was only a lull in the upward trend that began in March 2003.

Of the ten indicators, four increased in December. Indices of consumer expectations, stock prices, real money supply, and average weekly initial claims for unemployment insurance were positive contributors to the December increase. While the indices for performance, interest rate spread, manufacturers' new orders for nondefense capital goods, building permits, and manufacturers' new orders for consumer goods and materials declined. The average weekly manufacturing hours remained unchanged in December.


December CPI
December CPI closed out the year with a 0.4% decrease, seasonally adjusted. The December level, at 109.3, was 3.3% higher than a year ago. The December decrease followed a rise of 0.2% in November. The index for food remained unchanged, but energy costs dropped 1.8% driven a 3.7% drop in the petroleum-based energy index which offset the 0.4% in the prices of energy services. For items less food and energy, the index rose 0.2%. This is the same rate as in both November and October.


New Residential Construction
Building permits for privately-owned housing units were 2,021,000; this is 0.3% below the revised November rate. Housing starts were up 10.9% to 2,004,000 above the revised November estimate; however, this is 3.0% below the rate a year ago.

Permits +0.3%
Housing Starts +10.9%

Producer Price Index
The December producer price index for finished goods fell 0.7%, following increases the previous months (November +0.5%; October +1.7%). Prices for producers of intermediate goods (-0.3%) and crude goods (-2.9%) were also down in December following two months of gains. The price drop in finished goods was driven by a 4.0% drop in energy prices. Goods except food and energy rose 0.1%. Finished goods prices for the year rose 4.1%, compared 4.0% in 2003. The complete report is available at:


Industrial Production and Capacity Utilization
December industrial production rose 0.8 % following increases in both November (+0.2%) and October (+0.8%). Manufacturing sector output gained 0.7% in December with increases in most major industry groups. Total industrial production year over year increased 4.4%. This is 117.8 % of the 1997 average. Total industrial capacity expanded a modest 1.2%. The December rate of capacity utilization (79.2%) was 2.4% above a year ago, but remains 1.9% below points the 1972-2003 average. The report is available at:


Retail Sales
Retail sales, driven by strong sales in auto, rose 1.2% in December. This raised total spending for the month to $349.4B, and was up significantly from the 0.1% gain in November. Auto and other motor vehicle dealer sales were up 4.4% from November. The strong December number brought 2004 to a solid 8% annual rate for the year. This is the best performance since 1999 at 8.5%.


International Trade
Click for larger imageTotal November exports of $95.6B and imports of $155.8B resulted in a trade deficit of $60.3B. This is $4.3B greater than October ($56.0B). November exports dropped $2.2B from October while November imports were $2.0B greater than the previous month.

The change in exports reflected drops in capital goods, industrial supplies and materials, and automotive vehicles and parts. The increase in imported goods was driven by increased in industrial supplies and materials and consumer goods. Service exports were up $0.4B in November, reflecting increases in travel, passenger fares, and private business, professional and technical services. Service imports of $0.7 were mostly due to an increase in other transportation, such as freight and port services.


Nonfarm payroll employment rose by 157,000 in December. The unemployment rate was unchanged at 5.4%. The biggest increase came in the service sector, which contributed 144,000 jobs. Within the service sector, retail trade employment was down, both professional and business services and education and health services were up over previous months. The goods-producing sector contributed 13,000 jobs, with manufacturing employment contributing significantly less than in previous months


Consumer Credit
Consumer credit for November decreased at an annual rate of 5%, falling to $8.7B. The decline in non-mortgage debt was the first in a year and followed increases of 9.9% and 5.5% in September and October respectively. Revolving credit, including charge accounts, fell by $7.2B which was also a record. Non-revolving credit, such as loans for autos, mobile homes, schooling and vacations, fell by $1.5B according to the Fed.

-5% ($8.7B)

ISM Mon-Manufacturing Index
Business activity in the non-manufacturing sector rose to 63.1% in December according to the latest Non-Manufacturing ISM Report on Business. This is up 1.8% over November and the fastest rate of change since July 2004. The backlog of orders increased at a higher rate than in November and continued the growth trends for the 20 th consecutive month. Prices also increased in December for the 33 rd straight month, with the pace increasing slightly over November. Inventories also increased in December with members reporting a rising concern that inventories are too high.

63.1% ( 1.8%)

Manufacturers' Shipments, Inventories, and Orders
1/4/2005November's new orders for manufactured goods rose by $4.5B (+1.2%) to $377.4B according the preliminary report released by the Department of Commerce . The rise in November followed a 0.9% increase in October. Shipments increased $1.6B (+0.4%) to $379 B following a 1.6% rise in October and now at the highest level since measured on the NAICS basis in 1992. Unfilled orders of durable goods increased $5.8B (+1.1%), revised from $6.8B. Inventories also rose in November for the 12 th straight month, reaching $282.3B. This is up $2.2B (+0.8%) revised from the previously published $2.7B increase.

$377.4B (+1.2%)

Manufacturing ISM Index
Business activity in the manufacturing sector increased in December for the 19 th straight month to 58.6%. The overall economy grew for the 38 th consecutive month, according to the Manufacturing ISM Report on Business. December is up 0.8 points over November's 57.8%. All aspects of the ISM Index are growing, with the rate of change increasing in PMI, New Orders, and Inventories compared to November. ISM's Price Index indicates manufacturers are continuing to pay higher prices for the 34 th straight month.


Construction Spending
November construction was estimated at $1,013.3B or down 0.4% below the revised October estimate of $1,016.9B (seasonally adjusted.) For the year, January to November, construction spending at $920.3B was 9% above the same period in 2003. Private construction decreased 0.6% to $777.1B, while public construction rose slightly to $236.2B (+0.4%) over October.

$1,013B (-0.4%)
Link to Earlier Heads Up Numbers