Tom Moeller

According to the payroll processor ADP in the latest National Employment Report, private nonfarm payrolls fell 742,000 last month after a 706,000 decline. The February figure was revised from the initial estimate of a 697,000 drop. [...]

ADP Report: Payroll Employment Down Another 742,000

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331i.jpg" align="left" border="0" height="265" width="353">
Fourth quarter Turkish Gross Domestic Product, released today,
declined on a seasonally adjusted basis 4.9% from the third quarter
continuing the declines of 3.6% and 1.7% in the second and third
quarters, respectively. For the year as a whole, GDP increased only
1.1%, the lowest annual increase since 2001.
There were two factors having a positive effect on GDP in the
last three quarters of the year that were actually suggesting weakness
in the economy. The decline in imports of 1.4 billion lira from
7.6.billion lira in the first quarter to 6.2 billion lira in the last
quarter affected GDP positively, but it suggested weakness in consumer
and business demand. The other was the increase in inventories in the
first three quarters of the year, which, again, had a positive effect
on GDP, but was beginning to reflect the piling up of unsold goods
rather than the piling up of goods in response to vigorous demand. The
major factors affecting GDP--consumption expenditures, gross fixed
capital formation, exports and changes in stocks--are show in the first
chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331j.jpg" align="right" border="0" height="265" width="353">
The magnitude of the fourth quarter decline in total GDP was
largely due to a sharp decline in stocks as can be seen in the second
chart which shows the changes in consumption expenditures, gross
capital formation, exports, and stocks.
Inflation, in Turkey, as measured by the year to year increase
in the GDP deflator rose steadily through the year and was 10.1% in the
fourth quarter. In spite of the rise in inflation, the Central Bank of
Turkey concluded that the weakness in the economy was more important
than inflation and reduced its Policy rate--the overnight borrowing
rate--from 16.25% in October to 10.50% currently.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">TURKEY
ACCOUNT (100 Mil Yen)</th>
<th scope="col">Q4 08&nbsp;</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total GDP (NSA) Y/Y
%chg&nbsp;</td>
<td> -6.17</td>
<td> 1.19</td>
<td> 2.75</td>
<td> 7.33</td>
</tr>
<tr>
<td class="firstcol">Household Consumption</td>
<td>-4.62</td>
<td>-1.25</td>
<td>1.54</td>
<td>6.07</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Capital
Formation</td>
<td>-17.48</td>
<td>-6.89</td>
<td>-1.16</td>
<td>9.55</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>-23.05</td>
<td>-2.79</td>
<td>2.25</td>
<td>14.94</td>
</tr>
<tr>
<td class="firstcol">Exports&nbsp;</td>
<td>8.21</td>
<td>3.59</td>
<td>38.7</td>
<td>13.27</td>
</tr>
<tr>
<td class="firstcol">Stocks</td>
<td>-1613535</td>
<td>1286937</td>
<td>92754</td>
<td>-69591</td>
</tr>
<tr class="odd">
<td class="firstcol">Total GDP (SA) Y/Y %chg</td>
<td>-4.87</td>
<td>-1.70</td>
<td>-3.58</td>
<td>4.10</td>
</tr>
<tr>
<td class="firstcol">Household Consumption</td>
<td>-2.55</td>
<td>-1.18</td>
<td>-1.57</td>
<td>0.67</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Capital
Formation</td>
<td>-8.22</td>
<td>-3.36</td>
<td>-8.41</td>
<td>1.16</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>-18.02</td>
<td>-0.11</td>
<td>-8.86</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>-8.13</td>
<td>-2.62</td>
<td>-7.87</td>
<td>11.37</td>
</tr>
<tr>
<td class="firstcol">Stocks</td>
<td>-824576</td>
<td>360674</td>
<td>233648</td>
<td>426821</td>
</tr>
</tbody>
</table>
</body></html>

Fourth quarter Turkish Gross Domestic Product, released today, declined on a seasonally adjusted basis 4.9% from the third quarter continuing the declines of 3.6% and 1.7% in the second and third quarters, respectively. For the year [...]

Turkey -- Another Emerging Economy Reports A Dismal 4Th Quarter Gross Domestic Product

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331h.jpg" align="left" border="0" height="265" width="353">Fat Chance&#8230; 
The EMU FLASH HICP is at an all time low skinny 0.6% gain
Yr/Yr. If it were human we&#8217;d say it is anorexic. Italy also got on the
board with a weak HICP, posting the lowest reading since &#8216;Ed Sullivan&#8217;
and &#8216;Leave it to Beaver&#8217; were first run shows. (roughly 1968). 
 

Gooey Good News 
Despite al this gooey good news the pace of inflation&#8217;s drop
actually is slowing, not speeding up. The Yr/Yr at 0.6% is higher than
the six month pace of -1.4% but then over three-months the pace
flattens at 0%. Core inflation is still stepping down. But we know what
is going on and what is driving these trends. Headline inflation is
driven by food and energy and in this cycle energy has taken the wheel,
not some deity. Spot oil prices had collapsed but the have climbed back
to the vicinity of $50.bbl. It is hard to tell where oil goes short
term, but prices are the up from their lowest, meaning headline
inflation will perform that same magic trick. 
 

Peak oil not an issue now&#8230; 
In broader terms inflation is clearly under control. When the
world economy grows again there will once again be all those questions
about peak oil or not. China is a new factor underpinning demand. But
we can put those questions off for a while. 
 

Reality bites and the OECD worries 
For now, and for some time to come, inflation seems to be
under control. The big news on our plate is the G-20 meeting and how
policy will respond to the current diverse challenges. The OECD
introduced a series of forecasts ahead of this meeting that have gotten
even glummer. The OECD is urging more stimulus as a result. All this is
going to put more pressure on the ECB to move rates lower, especially
with Euro-stimulus policy in the shape it&#8217;s in. The summit seems to be
a done deal as euro-stubbornness has won out. In addition French
intransigence is trying to make headway as France has threatened to
boycott if the regulation proposals are not enacted. Summit policy is
always pre-determined but it isn&#8217;t always this clear. 
 

Policy options are alive&#8230;but not well&#8230;not even good 
All in all it is not really surprising with such economic
weakness to find inflation is under control. That development puts more
leeway in the hands of policymakers. But what happens when they refuse
to take up the opportunity? Europe admits its 200bln euro plan will not
have much impact until 2010. That was Junker&#8217;s contribution to the
discussion today as the OECD ramped up the bad news. The US seems to be
living in a different world where action is required while Europe sits
back to watch. Some of this is that Europe already has a better social
safety net than the US. But that is &#8216;cushion&#8217; and what the world needs
now is &#8216;stimulus,&#8217; sweet stimulus. But it&#8217;s not happening in London.
London 2009 will make the same mistake as London 1977. It will reject a
chance for more stimulus and stretch out the pain. If London 1977 is a
learning experience, it launched Bonn 1978 and the result was that too
much stimulus was enacted too late. I hope that is not our true path.
On the other hand part of me says, &#8216;Fat chance&#8217;. 
 





<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Trends in
EMU HICP: Flash Index</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-13</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>-1.4%</td>
<td>0.6%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods&nbsp;</td>
<td>#N/A</td>
<td>0.3%</td>
<td>-1.2%</td>
<td>-6.3%</td>
<td>-3.2%</td>
<td>0.3%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>3.9%</td>
<td>0.6%</td>
<td>2.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol" colspan="8">HICP</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-1.3%</td>
<td>0.4%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-1.0%</td>
<td>1.0%</td>
<td>3.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-0.6%</td>
<td>-0.7%</td>
<td>-0.9%</td>
<td>1.0%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.2%</td>
<td>-0.4%</td>
<td>-2.4%</td>
<td>-2.7%</td>
<td>0.7%</td>
<td>4.4%</td>
</tr>
<tr>
<td colspan="2">Core excl Food Energy
&amp; Alcohol</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>1.5%</td>
<td>0.8%</td>
<td>1.2%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>0.5%</td>
<td>-0.6%</td>
<td>0.4%</td>
<td>1.1%</td>
<td>2.2%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-1.3%</td>
<td>-0.1%</td>
<td>1.6%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td colspan="8">Blue shaded area data trail by one
month</td>
</tr>
</tbody>
</table>

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Fat Chance… The EMU FLASH HICP is at an all time low skinny 0.6% gain Yr/Yr. If it were human we’d say it is anorexic. Italy also got on the board with a weak HICP, posting the lowest reading since ‘Ed Sullivan’ and ‘Leave it to [...]

Flash Dance - Inflation Waltzes to New Lows as Risk Soars to Dizzying Heights

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331e.jpg" align="right" border="0" height="265" width="353">
The Conference Board reported that its March index of consumer
confidence stabilized this month near its record low level reached
during February. The reading of 26.0 was roughly stable with February
but it left confidence three-quarters lower than the July 2007 peak.
The latest figure was slightly lower than Consensus expectations.
The Conference Board data can be found in Haver's CBDB database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331f.jpg" align="right" border="0" height="265" width="353">During
the last ten years there has been an 86% correlation between the level
of consumer confidence and the y/y change in real consumer spending.
Consumers' economic outlook improved slightly as indicated by a
higher expectations index, but the latest reading made up little of
February's more than one-third decline from January. The latest figure
also was off by more than one-half from last February. The percentage
of respondents expecting business conditions to worsen in six months
was little changed at 39.1%, near the highest since 1974. Just 9.1%
expected improvement in conditions. More jobs were expected by only
7.1% of respondents. As a result of that jobs outlook a near-record
23.9% foresaw less income. That was versus 15.0% last year and just
8.6% in 2007.
The present conditions index added 3.6% to the more-than one
quarter February drop. It remained off more than three-quarters from a
year earlier. Jobs were seen as hard to get by 48.7% of respondents,
the highest (by just a bit) since 1992 and jobs were seen as plentiful
by only 4.6%. Business conditions were seen as good by just 6.8% and
that matched the 1991 low. Those who thought conditions were bad rose
to 51.1%, the highest since 1983. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331g.jpg" align="right" border="0" height="265" width="353">
Expectations for the inflation rate in twelve months have been roughly
stable since November at 5.9%. That's down from last year's high of
7.7%. Expectations about interest rates has started to sort out for an
increase with 35.6% of respondents expecting higher interest rates
while 29.7% expect rates to fall. A separate question indicated that a
near record 54.3% of respondents expected lower stock prices. The
decline in overall consumer confidence over the last year has been
greatest amongst higher income earners. It has been fairly uniform by
age group.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>26.0</td>
<td>25.3</td>
<td>-60.5</td>
<td>57.9</td>
<td>103.4</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>21.5</td>
<td>22.3</td>
<td>-76.3</td>
<td>69.9</td>
<td>128.8</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>28.9</td>
<td>27.3</td>
<td>-52.6</td>
<td>50.0</td>
<td>86.4</td>
<td>89.7</td>
</tr>
</tbody>
</table>
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The Conference Board reported that its March index of consumer confidence stabilized this month near its record low level reached during February. The reading of 26.0 was roughly stable with February but it left confidence three- [...]

U.S. Consumer Confidence Stabilizes Near Record Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090330c.jpg" width="353">
Petroleum prices continued to rally last week as sentiment continued to shift on the economy. Firmer data on U.S. consumer spending, home sales &amp; factory orders helped lift crude oil prices to their highest level since last November. For a barrel of West Texas Intermediate prices rose to $53.09, up more than 50% from the December low of $32.37 per barrel. That bullish economic sentiment reversed somewhat yesterday, however. In futures trading the May contract price for crude oil fell back to $48.41 per barrel. Prices reached a high of $145.66 last July.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331d.jpg" width="353">
Regular gasoline prices followed the rise in crude and increased last week to $2.05 per gallon, also the highest level since last November. The latest was up 43 cents from the December low. Yesterday, the spot market price for regular gasoline turned with the drop in crude oil prices and fell nearly ten cents from Friday&#39;s level. These prices compare to those that were slightly below $1.00 at the end of last year. The figures are reported by the U.S. Department of Energy.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
The price effect on driving has been little changed. Gasoline demand continued to suffer due to the effects of the U.S. recession although earlier declines in gasoline prices have given some lift to driving. The latest y/y change of -0.4% moderated from the 4.8% rate of decline seen last October. (Gasoline prices at the time were just off their peak.) The change in demand is measured using the latest four weeks versus the same four weeks in 2008. Demand for all petroleum products was down 3.2% y/y. That negative comparison was led by a 10.1% decline in distillate demand and a 7.2% drop in residual fuel oil consumption. These numbers are available in Haver&#39;s OILWKLY database.
The price of natural gas continued downward with the coming end to the winter heating season. Though prices did tick up last week to $3.92 per mmbtu (-57.7% y/y) they still were near the lowest level since 2002. The latest average price was down more than two-thirds from the high reached in early-July of $13.19/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">03/30/09</th>
<th scope="col">03/23/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.05</td>
<td>1.96</td>
<td>-37.8%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>53.09</td>
<td>49.46</td>
<td>-49.1%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Petroleum prices continued to rally last week as sentiment continued to shift on the economy. Firmer data on U.S. consumer spending, home sales & factory orders helped lift crude oil prices to their highest level since last November. [...]

Petroleum Prices Strengthen, Then Fall Back

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331a.jpg" align="left" border="0" height="265" width="353">
The January S&amp;P/Case-Shiller 20
Home Price Composite Index fell 2.2% from December. That
pulled prices down 19.0% during the last twelve months and by 29.1%
since their peak in May 2006. The series dates back only to
2000. The January decline in prices was as expected.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331b.jpg" align="right" border="0" height="265" width="353">
The S&amp;P/Case-Shiller home price series can be found in
Haver's USECON database but the city data is in the
REGIONAL database.
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is weighted to reflect price changes due to extensive remodeling,
home additions or extreme neglect. For example, smaller weights are
assigned to sales of homes that have undergone extensive remodeling.
The Case-Shiller composite index of homes in 10 metropolitan
areas, which has a longer history and dates back to 1987, fell 2.0% and
was down 19.4% year-to-year. The measure was down 29.7% since the 2006
peak.
Weakest Regions: Home prices in Phoenix,
Nevada were quite weak and fell 35.0% y/y and in San Diego prices fell
24.9% y/y, off 40.4% from their early 2006 peak. Home prices in Las
Vegas, Nevada fell 32.5% y/y and were down 46.2% from their peak.
Prices in Miami fell 29.4% y/y while home prices in Los Angeles were
down 25.8% y/y. In San Francisco home prices were off 32.4%
year-to-year. In Tampa they fell 23.3% and in Detroit home prices fell
by 22.6% y/y.
Less Weak Regions: In the Northeast, the
decline in home prices continued less severe. Prices in New York fell
9.6% y/y, off 16.2% from their 2006 peak. Prices were down 7.3%
year-to-year in Boston and in Dallas prices were off by a modest 4.8%
y/y and by 8.8% from the 2007 peak. In Charlotte, North Carolina prices
fell a moderate 8.8% y/y and in Denver home prices prices fell just
5.1% y/y. In Cleveland, Ohio prices were off 5.1% y/y but in Chicago
home prices were down a larger 16.4% y/y, 22.0% from the 2007 peak.
The latest press release from Standard &amp; Poor's can be
found <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_033114.pdf">here</a>.
An overview of the S&amp;P/Case-Shiller home price series can be
found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
The Case-Shiller data is available in Haver's USECON
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>147.45</td>
<td>150.75</td>
<td>-19.0%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>
</body></html>

The January S&P/Case-Shiller 20 Home Price Composite Index fell 2.2% from December. That pulled prices down 19.0% during the last twelve months and by 29.1% since their peak in May 2006. The series dates back only to 2000. The January [...]

Case-Shiller Home Price Index Falls Further

Case-Shiller Home Price IndexFalls Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090330d.jpg" align="left" border="0" height="265" width="353">
In the EMU framework it is pretty clear that things are not
going very well. In the March report even though the Markit (formerly
Reuter) PMIs had bottomed and risen, the similar gauges from the EU
Commission show no such trend. Indeed, the EU Commission framework
shows universal weakness and near universal worst case readings. The overall sentiment index as at a
low as is the industrial measure, consumer confidence, and the service
sector barometer. Above their lowest readings are the retail and
construction sectors each of which is still in about the lower 10% of
its respective range. And
that&#8217;s as good as it gets - bottom 10% - a clear &#8216;F&#8217; if we were grading.
Moreover, the overall sentiment gauges for EMU are at their
lowest in EMU as a whole, in Germany and in Italy . The UK , an EU
member, is also on a low. France and Spain are not at their respective
all time (since 1985) lows, but are not far from them.

If we turn to the industrial sector details we find that most
of the component readings are at or near all time lows except for
inventories; they are in the top 10% of their range &#8211; not a good
&#8216;top-10&#8217; reading at all.
Consumer confidence is also at its all-time low although its
components are not so universally at extremes.
Still, the economic situation in the past 12-months and
expectations for the next 12-months are each at all time lows. The environment for making major
purchases now is only &#8216;only&#8217; in the bottom 30% of its range. For the
next 12months the reading is in the bottom 15% of its range, a bit
worse that eh current reading: that is not good. Still
the consumer does not seem as beleaguered as the industrial sector.
German and French consumer responses are at all-time lows. Italy , the
UK and Spain are, respectively, in the bottom 17th,
17th and 9th percent of
their ranges.
With the consumers not being as impacted as badly as industry
it is not surprising that the retail sector is &#8216;only&#8217; in the bottom 10%
of its range. Across the largest EMU/EU countries the results are even
better. In France the responses are only in the bottom 63rd
percentile of their range (top 37%!), Italy&#8217;s retail sector is in the
bottom 34th percentile, Germany and Spain are in
the lower 20th percentile and the UK is the
weakest in the bottom 17th percentile.
The services sector has no bright spots or readings. The
overall gauges for EU is at its all time low as are all its component
readings; the main countries have readings that are at their all-time
lows or quite near them.
Construction as a sector is in the lower 25th
percentile of its range on an EU-wide basis. Across countries, Germany
and Italy show near midpoint readings in construction; France is a 30th
percentile reading; the UK is a bottom 25th
percentile reading; Spain is a bottom 20 percentile reading.
Expected and current employment readings are at their worst or
bottom 10% across the various sectors with the obvious exception of the
expected unemployment reading which is at an all time high.
The EU/EMU is a still every weak region. It is not showing the
upward momentum or abatement of downward momentum that is becoming
increasingly common in the US . Its leaders are less active in
implementing new stimulus programs, although in fairness, Europe in
general has a better social safety-net than does the US . Still As I
pointed out at the time of the Obama plan, &#8216;cushion&#8217; is not &#8216;stimulus&#8217;.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">EU
Sectors and Country level Overall Sentiment</th>
<th colspan="2" scope="col">R-SQ</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">EU</td>
<td>Mar 
09</td>
<td>Feb 
09</td>
<td>Jan 
09</td>
<td>Dec 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>w/ 
Overall</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Overall</td>
<td style="font-weight: bold;">60.3</td>
<td style="font-weight: bold;">60.9</td>
<td style="font-weight: bold;">63.2</td>
<td style="font-weight: bold;">66.6</td>
<td style="font-weight: bold;">0.0</td>
<td style="font-weight: bold;">220</td>
<td style="font-weight: bold;">116</td>
<td style="font-weight: bold;">60</td>
<td style="font-weight: bold;">56</td>
<td style="font-weight: bold;">99</td>
<td style="font-weight: bold;">1.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial</td>
<td>-39</td>
<td>-37</td>
<td>-33</td>
<td>-32</td>
<td>0.0</td>
<td>220</td>
<td>7</td>
<td>-39</td>
<td>46</td>
<td>-8</td>
<td>0.89</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confid</td>
<td>-32</td>
<td>-32</td>
<td>-31</td>
<td>-28</td>
<td>0.0</td>
<td>219</td>
<td>2</td>
<td>-32</td>
<td>34</td>
<td>-11</td>
<td>0.86</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-22</td>
<td>-24</td>
<td>-25</td>
<td>-25</td>
<td>9.7</td>
<td>217</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-6</td>
<td>0.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-38</td>
<td>-38</td>
<td>-36</td>
<td>-32</td>
<td>8.9</td>
<td>205</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-18</td>
<td>0.44</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-31</td>
<td>-29</td>
<td>-28</td>
<td>-23</td>
<td>0.0</td>
<td>145</td>
<td>32</td>
<td>-31</td>
<td>63</td>
<td>15</td>
<td>0.87</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>Mar 
09</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>-1.1%</td>
<td>-2.8%</td>
<td>-2.5%</td>
<td>64.6</td>
<td>0.0</td>
<td>220</td>
<td>117</td>
<td>65</td>
<td>52</td>
<td>99</td>
<td>0.96</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-1.1%</td>
<td>-1.6%</td>
<td>-4.0%</td>
<td>72.4</td>
<td>0.0</td>
<td>220</td>
<td>121</td>
<td>72</td>
<td>48</td>
<td>99</td>
<td>0.70</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-1.3%</td>
<td>-0.9%</td>
<td>-0.7%</td>
<td>73.1</td>
<td>2.4</td>
<td>219</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>99</td>
<td>0.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-6.3%</td>
<td>-0.4%</td>
<td>-1.4%</td>
<td>67.1</td>
<td>0.0</td>
<td>220</td>
<td>121</td>
<td>67</td>
<td>54</td>
<td>99</td>
<td>0.82</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>1.2%</td>
<td>-3.2%</td>
<td>3.7%</td>
<td>67.8</td>
<td>2.2</td>
<td>218</td>
<td>117</td>
<td>67</td>
<td>50</td>
<td>100</td>
<td>0.72</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo:UK</td>
<td>-0.7%</td>
<td>-6.3%</td>
<td>-10.9%</td>
<td>56.0</td>
<td>0.0</td>
<td>220</td>
<td>117</td>
<td>56</td>
<td>61</td>
<td>100</td>
<td>0.58</td>
</tr>
<tr class="even">
<td colspan="5">Since 1990 except
Services (Oct
1996)247</td>
<td>-Count</td>
<td>Services:</td>
<td>145</td>
<td>-Count</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures</td>
</tr>
</tbody>
</table>
</body></html>

In the EMU framework it is pretty clear that things are not going very well. In the March report even though the Markit (formerly Reuter) PMIs had bottomed and risen, the similar gauges from the EU Commission show no such trend. [...]

EMU Still Sinking In EU Index Report

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

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Andrew Cates

**US trade with Europe** 
Geopolitical tensions surrounding Greenland have abruptly sharpened investor sensitivity to US trade and foreign-policy risk. What might once have been dismissed as rhetorical brinkmanship has taken on greater macro-financial relevance as Donald Trump has coupled renewed interest in Greenland’s strategic importance with explicit threats of higher tariffs on European imports. The first chart below highlights that the US is materially more exposed to EU goods than the EU is to US trade, making any escalation asymmetrically more costly for the US economy. Beyond the direct inflationary impact of higher tariffs, the more immediate risk lies in confidence effects and capital flows: early signs of capital reallocation away from US assets over the past 24 hours suggest that markets could be beginning to price a broader erosion of policy predictability. In this environment, tariffs risk functioning less as a targeted trade tool and more as a systemic confidence shock—tightening financial conditions, unsettling the dollar’s safe-haven status and increasing downside risks to US growth via weaker investment and higher risk premia.

260122Z1.jpg

**Japan’s JGB yields**
That said, recent capital outflows from US assets may owe as much to developments in Japan as to geopolitical and trade-related shocks. While tariff threats and policy unpredictability have clearly unsettled sentiment, an underappreciated driver of the sell-off in US Treasuries has been the sharp repricing in the Japanese government bond market. Renewed domestic political uncertainty and intensifying concerns over Japan’s debt dynamics have triggered a rapid rise in JGB yields, prompting portfolio rebalancing by Japanese investors and reducing the relative appeal of US duration. Given Japan’s role as one of the largest foreign holders of US Treasuries, yield gyrations at home can translate quickly into capital repatriation, hedging adjustments and reduced demand for US bonds. In this sense, recent moves in US yields may reflect less a direct reaction to geopolitical risk and more a globally transmitted capital-flow shock—originating in Japan but felt most acutely in US financial markets.

260122Z2.jpg

**Inflation expectations and oil prices**
Capital-flow dynamics may have also begun to spill over into how markets are pricing US inflation risk and monetary credibility. Historically, medium-term US inflation expectations have remained closely anchored to global energy prices, as illustrated by the strong co-movement between the 5-year forward inflation rate and Brent crude prices. More recently, however, that relationship has begun to fray: inflation expectations have proven notably resilient even as oil prices have softened, suggesting that markets are increasingly pricing political and policy risk rather than cost-push fundamentals alone. Renewed tariff threats under President Trump, combined with heightened geopolitical tensions involving Greenland and transatlantic relations, risk reinforcing concerns that future inflation outcomes could be shaped as much by political intervention as by macroeconomic conditions. Any perception that the Federal Reserve may face constraints on its operational independence would compound this shift—loosening inflation anchors, raising term premia and increasing the sensitivity of capital flows to US policy credibility.

260122Z3.jpg

**UK inflation** 
UK inflation data released this week show a small upside surprise in headline CPI at year-end. Headline CPI inflation specifically rose from 3.2% y/y in November to 3.4% in December, a little more than expected. The chart below shows that the pickup was driven by persistent underlying pressures—most notably in services. While a negative drag from energy prices has largely faded, services inflation continues to account for a disproportionate share of overall price growth, probably reflecting ongoing wage pressures and limited slack in parts of the domestic economy.

260122Z4.jpg

**Wage growth in the US and Europe** 
Labour-market data from the Indeed Hiring Lab reinforce the picture of persistent services-side pressure in the UK inflation mix. As the chart shows, UK posted wage growth remains elevated relative to both the euro area and the US, even though momentum has eased from its 2023 peak. At around the mid-5% range on a three-month moving average basis, UK wage growth is still running at a pace that is difficult to reconcile with a rapid return of services inflation to target. By contrast, posted wage growth in the euro area has slowed more decisively, while the US has seen a sharper deceleration from earlier extremes.

260122Z5.jpg

**China’s property market**
Finally, the Q4 GDP figures released in China this week sit uneasily alongside continued weakness in its domestic property sector, which remains a key drag on both investment and consumption. While Q4 growth of 4.5% y/y brought full-year GDP broadly in line with the authorities’ 5% target, the chart highlights how property-market adjustment is still running deep beneath the surface. Prices of existing homes across China’s 70 cities remain in year-on-year decline, while real estate investment continues to contract sharply, underscoring the scale and persistence of the sector’s retrenchment. This helps explain why fixed asset investment has softened further and why household demand remains subdued, despite more resilient industrial output.

260122Z6.jpg

This week’s data and market moves have been framed by an abrupt escalation in geopolitical tensions surrounding Greenland, which has served as a catalyst for broader financial unease rather than a standalone shock. The episode has sharpened investor focus on US policy predictability, amplifying concerns already evident in the charts on EU–US trade exposure, where tariff threats risk feeding directly into confidence effects and capital flows. At the same time, recent turbulence in Japanese government bonds appears to have been an underappreciated driver of the sell-off in US Treasuries, highlighting how global capital reallocation—rather than geopolitics alone—has contributed to higher US yields. These forces intersect with growing questions around the durability of US monetary credibility, as inflation expectations have shown signs of decoupling from traditional oil-price anchors, raising the sensitivity of markets to any perceived constraints on the Federal Reserve. Beyond the US, UK data delivered a modest upside surprise in headline inflation, with persistent services and wage pressures reinforcing a cautious policy backdrop for the Bank of England. In China, meanwhile, Q4 GDP growth of 4.5% y/y kept full-year expansion aligned with the government’s target, but continued weakness in the property sector remains a significant drag on investment and household confidence. Taken together, the week’s developments point to a global outlook increasingly shaped by geopolitical risk, capital-flow dynamics and domestic  structural constraints, rather than by straightforward cyclical momentum alone.

Charts of the Week: Seeing Green

Sandy Batten

260122N8.jpg

260122C8.jpg

Real GDP increased 4.4% q/q saar in the third quarter of 2025 in the final estimate, up marginally from 4.3% in the first release. The Action Economics Forecast Survey expected no revision. Growth from a year ago was unrevised at 2.3% y/y. Growth of corporate profits was revised up to 4.5% q/q not annualized from 4.2% in the previous report.

The revision to GDP mostly reflected slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventory investment. Nonresidential fixed investment increased a revised 3.2% q/q saar versus a 2.8% gain in the previous release. This reflected a smaller decline in structures, a smaller increase in equipment and a larger increase in intellectual property products than previously estimated. Residential investment was revised weaker with a 7.1% quarterly decline versus -5.1% in the previous estimate.

Upon revision, exports rose 9.6% q/q in Q3 versus 8.8% in the first estimate. Consequently, the trade deficit narrowed a little more than in the first estimate, resulting in net exports adding 1.62%-points to overall growth, 0.03%-point more previously estimated. The decline in inventory investment in Q3 was smaller than previously estimated, reducing the drag from inventories by 0.1%-point versus the previous estimate. The decline in inventories subtracted 0.12%-point in Q3 on top of a 3.44%-point subtraction in Q2.

Domestic demand growth remained solid in Q3 but was revised down 0.1%-point. Final sales to domestic purchasers grew a revised 2.8% q/q saar in Q3 versus 2.9% in the first estimate. Final sales to private domestic purchasers increased 2.9% q/q, down slightly from 3.0% previously.

260122O8.jpg

260122P8.jpg

The primary driver of overall growth continued to be personal consumption expenditures. They increased an unrevised 3.5% q/q saar in Q3, adding 2.34%-points to total GDP growth. This reflected a 3.0% increase in spending on goods versus 3.1% previously and a 3.6% gain in spending on services versus 3.7% previously. The rise in government spending was unrevised at 2.2% q/q. However, spending by the federal government was revised slightly slower to 2.7% from 2.9% while spending by state and local governments was revised up slightly to 2.0% from 1.8%.

Key measures of inflation were unrevised. Inflation as measured by the GDP price index remained at 3.8% q/q saar in Q3, but this was up markedly from 2.1% in Q2. Similarly, PCE inflation in Q3 was unrevised at 2.8% versus 2.1% in Q2. Core PCE inflation was also unrevised at 2.9% in Q3.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

260122Q8.jpg

260122S8.jpg

- Real GDP grew 4.4% q/q saar in Q3 2025, up slightly from 4.3% previously reported.
- The modest upward revision was due mostly to slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventories.
- Growth of domestic demand remained solid in Q3 but was revised down 0.1%-point.
- GDP and PCE inflation were unrevised at 3.8% and 2.8%, respectively. Both are meaningful accelerations from Q2.

U.S. Q3 GDP Growth Revised Slightly Faster

Kathleen Stephansen, CBE

260122A2.jpg

260122B2.jpg

Initial claims for unemployment insurance edged up 1,000 to 200,000 in the week ending January 17, from 199,000 in the week ending January 10, revised from 198,000. The four-week moving average of initial claims was 201,500 in the January 17 week, down 3,750 from 205,250 in the January 10 week, revised from 205,000, and reaching the lowest level for this average since January 13, 2024, when it was 200,000.

Federal government employees initially filed 1010 (NSA) jobless insurance claims in the week ended January 10, after filing 646 (NSA) claims in the week ended January 3.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 26,000 to 1.849 million in the week ended January 10 from 1.875 million in the week ending January 3, revised from 1.884 million. The four-week moving average was 1.871 million in the latest week, down from 1.887 million in the January 3 week, revised from 1.889 million. The insured unemployment rate remained at 1.2% in the week of January 10, unchanged from previous 6 weeks.

Federal government employees’ continuing benefits claims were 12,977 (NSA) in the week ending January 3, from 12,803 (NSA) in the week of December 27.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 3, the highest unemployment rates were in Rhode Island (3.27%), New Jersey (3.17%), Washington (2.85%), Minnesota (2.75%), Massachusetts (2.74%), Oregon (2.37%), Connecticut (2.31%), Montana (2.26%), California (2.21%), and Alaska (2.06%). The lowest rates were in Florida (0.29%), North Carolina (0.40%), and Louisiana (0.43%). Rates in other notable states include New York (2.28%), Pennsylvania (2.23%), Illinois (2.21%), and Texas (1.14%). These state data 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.

260122C2.jpg

260122D2.jpg

U.S. Initial Claims for Unemployment Insurance Edged Up in Latest Week

Winnie Tapasanun

260121F.jpg

260121G.jpg

The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, fell 9.3% m/m to 71.8 in December following unrevised increases of 3.3% in November and 2.4% in October, according to the National Association of Realtors (NAR). December marked the first m/m fall since July and the steepest since April 2020. The year-on-year rate was -3.0% in December, the first negative y/y reading since September, compared to +2.6% in November and -5.0% in December 2024. The index had fallen 42.6% since its October 2021 high of 125.1. In 2025, the PHSI declined 0.9% after drops of 3.0% in 2024 and 16.1% in 2023.

The m/m fall in December pending home sales occurred alongside a decline in the average 30-year mortgage rate to 6.20% in December, the lowest since September 2024, down from 6.24% in November and 6.25% in October. These rates, while below a peak of 7.62% in October 2023, had remained higher than a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales decreased m/m in December across all four major regions. The Midwest recorded the sharpest drop, with sales plunging 14.9% (-9.8% y/y) in December—the first m/m decline since September and the deepest since April 2020—after a 1.3% increase in November. Sales in the West slumped 13.3% (-5.1% y/y), the third m/m decrease in four months, following a 9.2% November rebound. Sales in the Northeast slid 11.0% (-3.6% y/y), the first m/m slide since August, after a 1.8% November rise. Sales in the South fell 4.0% (+2.0% y/y), the first m/m fall since June, after a 2.5% November gain.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- PHSI -9.3% m/m (-3.0% y/y) to 71.8 in Dec., lowest index level since July.
- Home sales m/m down in all four major regions, w/ the Midwest seeing the steepest drop (-14.9%).
- Home sales y/y down in the Northeast, Midwest, and West, but up in the South (+2.0%).

U.S. Pending Home Sales Drop in December Following Four Consecutive M/M Gains

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Total construction spending fell 0.6% m/m (-1.5% y/y) in September to $2,164.3 billion following a 0.4% monthly gain in August. However, it rebounded in October, rising 0.5% m/m (-1.0% y/y) to $2,175.2 billion (saar). This is the ninth consecutive month that construction spending has been lower than a year ago. A 0.1% m/m decline in September and an unchanged reading in October had been expected in the Action Economics Forecast Survey. Over the first ten months of this year, construction spending amounted to $1,825.3 billion, 1.4% below the $1,851.4 billion for the same period in 2024.

Spending on private construction was at a seasonally adjusted annual rate of $1,651.3 billion in October, 0.6% above the September estimate of $1,640.8 billion (-3.0% y/y), which fell 0.9% m/m from August. Private residential construction was at a seasonally adjusted annual rate of $913.9 billion in October, up 1.3% m/m from September, which declined 1.4% from August. Private nonresidential construction was at a seasonally adjusted annual rate of $737.4 billion in October, down 0.2% m/m from September, which also had declined 0.2% in September from August.

The October increase in private residential investment was due entirely to a 4.5% m/m increase in spending on improvements, its largest monthly gain since April 2024, following a 2.2% monthly decline in September. Single family construction fell 1.3% m/m in October, its eight consecutive monthly decline, while multi-family construction slipped 0.2% m/m, its first monthly decline in five months. The decline in private nonresidential construction was more than accounted for by a 0.9% m/m drop in manufacturing construction, its ninth consecutive monthly decline.

The value of public construction spending edged up 0.1% m/m in October to $524.0 billion after having risen 0.4% m/m in September. Of particular importance, educational construction was at a seasonally adjusted annual rate of $114.8 billion, up 0.7% m/m in October on top of a 1.1% m/m increase in September. Highway construction was at a seasonally adjusted annual rate of $141.6 billion, 0.1% m/m above the September estimate after a 0.4% monthly decline in September from August. Spending on highways and educational facilities are by far the two largest components of public construction spending. Spending on water supply construction at $35.2 billion was also important in October, up 1.2% m/m on top of a 1.5% monthly gain in September.

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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- Total construction spending fell 0.6% m/m in September but rebounded 0.5% m/m in October.
- Private construction spending slumped 0.9% m/m in September but rose 0.6% m/m in October.
- Private nonresidential construction fell for the fourth consecutive month while private residential construction posted a 1.3% m/m gain.

Economy in Brief: 2009

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