Tom Moeller

Producer prices continued strong last month led by another jump in fuel costs. In addition, food price inflation has picked up considerably. Together, this strength lifted the finished goods PPI by 1.4% last month and increased the [...]

U.S. PPI Jumps Again With EnergyPrice Strength

Robert Brusca

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217j.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Exports rebounded strongly in December after coming up flat in
November. Overall exports rose by 3.1% in December as MFG exports rose
by 2.7% in December. Three month growth rates continue to show strong
growth, accelerating slightly for overall exports but with MFG exports
losing a bit of momentum compared to their six-month pace
Import growth is positive. Its three-and six-month rates of
growth have steadied at or below the 10% growth rate mark.
Manufacturing import growth is positive but barely growing at all,
rising at 0.3% annualized rate of growth over three months, having
slowed from nearly a 7% pace over six months.
Europe&#8217;s trade surplus is at a five year high. Exports are at
their highest level in 12-months as well. Europe continues to act as a
region with export-led growth. Exports are digging out from the
recession faster than imports. Imports are lower by 8% Yr/yr compared
to exports that are lower by just 2%.
Domestic demand is lagging in the Euro-Area. Exports are
pulling the region into recovery faster than its own consumers.
Europe&#8217;s recovery depends on the continuation of global growth as much
as any region.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro-Area
Trade trends for goods 
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="2">m/m%</td>
<td style="font-weight: bold;" colspan="3">% Saar</td>
<td style="font-weight: bold;">&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3M</td>
<td style="font-weight: bold;">6M</td>
<td style="font-weight: bold;">12M</td>
<td style="font-weight: bold;">12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&nbsp; 7,003 </td>
<td>&#8364;&nbsp; 5,294 </td>
<td>&#8364;&nbsp; (3,252)</td>
<td>&#8364;&nbsp; 4,482 </td>
<td>&#8364;&nbsp; (3,450)</td>
<td>&#8364;&nbsp; 1,384 </td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">Exports</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exp</td>
<td>3.1%</td>
<td style="color: red;">0.0%</td>
<td>25.6%</td>
<td>22.6%</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>4.8%</td>
<td>1.7%</td>
<td>18.3%</td>
<td>10.6%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>7.7%</td>
<td style="color: red;">-0.7%</td>
<td>51.4%</td>
<td>31.5%</td>
<td>24.6%</td>
<td style="color: red;">-19.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>2.9%</td>
<td style="color: red;">-0.2%</td>
<td>25.6%</td>
<td>23.4%</td>
<td style="color: red;">-2.9%</td>
<td style="color: red;">-7.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; MFG</td>
<td>2.7%</td>
<td style="color: red;">-0.3%</td>
<td>17.7%</td>
<td>21.3%</td>
<td style="color: red;">-5.2%</td>
<td style="color: red;">-7.2%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">IMPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All IMP</td>
<td>1.7%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>10.7%</td>
<td style="color: red;">-7.8%</td>
<td style="color: red;">-9.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td style="color: red;">-1.3%</td>
<td>3.2%</td>
<td style="color: red;">-14.0%</td>
<td style="color: red;">-3.1%</td>
<td style="color: red;">-8.7%</td>
<td style="color: red;">1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>4.4%</td>
<td>3.2%</td>
<td>41.2%</td>
<td>43.8%</td>
<td style="color: red;">-19.0%</td>
<td style="color: red;">-6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>1.7%</td>
<td>0.6%</td>
<td>7.5%</td>
<td>10.5%</td>
<td style="color: red;">-7.2%</td>
<td style="color: red;">-9.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; MFG</td>
<td>1.5%</td>
<td style="color: red;">-0.1%</td>
<td>0.3%</td>
<td>6.9%</td>
<td style="color: red;">-9.2%</td>
<td style="color: red;">-8.5%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">*Eur mlns;
mo or period
average</td>
</tr>
</tbody>
</table>
</body></html>

Exports rebounded strongly in December after coming up flat in November. Overall exports rose by 3.1% in December as MFG exports rose by 2.7% in December. Three month growth rates continue to show strong growth, accelerating slightly [...]

Euro-Area Trade Surplus Moves Up Sharply

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217g.jpg" style="width: 353px; height: 265px;" align="right">
Higher oil
prices and the lower dollar have been the primary factors behind the
movement in import prices this past year. Just for January, a 1.4% rise
in prices was nearly the strongest since last June and beat Consensus
expectations for a 1.0% gain.
Petroleum prices jumped 4.8% last month
and they have roughly doubled since last January. This month, the
strength in Brent crude oil prices tapered off with a decline to an
average $72.91 after reaching a daily high near $80 per barrel early in
January.
Conversely the lower value of the U.S. dollar has helped lift
non-oil import prices. A 0.6% January increase was near the elevated
gains during the prior four months. Since their low last March non-oil
import prices have risen 2.4% after a 5.3% decline during the prior
twelve months. (During the last ten years, there has been a negative
81% correlation between the nominal trade-weighted exchange value of
the US dollar vs. major currencies and the y/y change in non-oil import
prices.)&nbsp;
 Prices for nonauto consumer goods rose for the
first month in the last three but the slight y/y increase is improved
from the deflation as of last Fall. Prices for durable consumer goods
increased a firm 0.6% to lift the y/y increase to 0.6% from a 1.1%
decline as of last fall. Capital goods also slipped m/m but the pace of
price deflation has slowed.
Total export prices increased 0.8% (3.4%
y/y) reflecting a 1.4% (4.5% y/y) increase in agricultural export
prices and a 0.7% gain (3.3% y/y) in non-agricultural prices. These
declines reversed just some of the strength through 2008
The
import and export price series can be found in Haver's USECON
database. Detailed figures are available in the USINT
database.
Is
the International Role of the Dollar Changing? from
the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci16-1.pdf">here</a>.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217h.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217i.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA, %)</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.4</td>
<td>0.2</td>
<td>1.5</td>
<td>11.5</td>
<td>-11.5</td>
<td>11.5</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.8</td>
<td>-1.4</td>
<td>5.4</td>
<td>95.5</td>
<td>-36.0</td>
<td>37.7</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.6</td>
<td>0.5</td>
<td>0.6</td>
<td>1.2</td>
<td>-4.2</td>
<td>5.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>0.8</td>
<td>0.6</td>
<td>0.8</td>
<td>3.4</td>
<td>-4.6</td>
<td>6.0</td>
<td>4.9</td>
</tr>
</tbody>
</table>

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Higher oil prices and the lower dollar have been the primary factors behind the movement in import prices this past year. Just for January, a 1.4% rise in prices was nearly the strongest since last June and beat Consensus expectations [...]

U.S. Import Price Gains Continue Strong

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217d.jpg" style="width: 353px; height: 265px;" align="right"> With a 0.9%
January increase, U.S. industrial output posted its strongest monthly
gain since August. Moreover, the run-up since the June bottom has
totaled 5.3%. That compares with a 13.2% decline during the prior year
which exceeded the declines during most other postwar recessions. A
1.1% increase in the output of consumer goods paced the January
production increase. The y/y gain of 3.2% has been driven by a nearly
one-half increase in auto products output during the last year. Output
of computers, video &amp; audio output also rose 1.0% (-5.3% y/y)
for the fifth consecutive strong monthly gain. Output of appliances,
furniture &amp; carpeting was unchanged last month (-7.5% y/y)
after a sharp December fall which was part of an 18.1% 2009 drop.
Business equipment output was strong for the second consecutive month
but still was off 3.7% y/y after the 12.5% decline during all of last
year. Finally, apparel output jumped 3.4% last month (0.7% y/y) and
since its bottom has risen 5.9%.&nbsp;Capacity utilization rose
further to 72.67%, its highest level since December 2008. In the
factory sector alone utilization rose to 69.4% from the 2009 low of
65.2%. Utilization in the primary metals area has risen sharply to
61.9% from a 2009 average of 51.2% with the rebound in output. There's
also been rise in utilization in the motor vehicle sector to 55.0% from
a low of 36.8% in June. Utilization was 77.0% in 2005. The rise in
utilization was accompanied by another 0.1% m/m decline in capacity
which was off a record 1.1%y/y.&nbsp;The industrial
production data are available in Haver's USECON
database.Using FOMC Forecasts to Forecast the
Economy from the Federal Reserve Bank of St. Louis can be
found <a href="http://research.stlouisfed.org/publications/net/20100201/netpub.pdf">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Industrial
Production (SA,%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output</td>
<td>0.9</td>
<td>0.7</td>
<td>0.6</td>
<td>1.0</td>
<td>-9.7</td>
<td>-2.2</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Manufacturing</td>
<td>0.9</td>
<td>0.0</td>
<td>0.9</td>
<td>1.6</td>
<td>-11.3</td>
<td>-3.2</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Consumer
Goods</td>
<td>1.1</td>
<td>0.7</td>
<td>-0.3</td>
<td>3.2</td>
<td>-5.2</td>
<td>-2.6</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Business
Equipment</td>
<td>1.0</td>
<td>1.3</td>
<td>-0.3</td>
<td>-3.7</td>
<td>-12.5</td>
<td>-1.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Construction
Supplies</td>
<td>0.9</td>
<td>-1.7</td>
<td>1.6</td>
<td>-5.4</td>
<td>-17.6</td>
<td>-6.3</td>
<td>-2.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Materials</td>
<td>0.8</td>
<td>0.5</td>
<td>1.3</td>
<td>2.0</td>
<td>-10.9</td>
<td>-1.9</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>0.7</td>
<td>6.3</td>
<td>-3.0</td>
<td>-0.5</td>
<td>-2.6</td>
<td>0.3</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization
(%)</td>
<td>72.6</td>
<td>71.9</td>
<td>71.3</td>
<td>71.1 (Jan. '09)</td>
<td>70.1</td>
<td>77.5</td>
<td>80.6</td>
</tr>
</tbody>
</table>
</body></html>

With a 0.9% January increase, U.S. industrial output posted its strongest monthly gain since August. Moreover, the run-up since the June bottom has totaled 5.3%. That compares with a 13.2% decline during the prior year which exceeded [...]

Industrial Output Firms

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217a.jpg" style="width: 353px; height: 265px;" align="right">
Housing
starts increased a modest 2.8% last month to 591,000 (AR) units
following a slightly revised decline to 575,000 during December. The
small gain was only enough, however, to lift starts back to the level
reached last summer. In fact, the 21.1% twelve-month increase from near
the recession low pales in comparison to the 50%-90% increases
following downturns since the 1970s. Since their peak in January of
2006, starts remain down by three-quarters. January's figure slightly
beat Consensus expectations for 580,000 starts.&nbsp; Last month,
starts of single-family homes ticked up just 1.5% to 484,000 after
December's 3.0% decline. Year-to-year starts have risen by one-third
but they're up just 1.5% from the 4Q average. During the last ten
years, there has been an 84% correlation between the q/q change in
single-family starts and their contribution to quarterly GDP growth.
The increase in January starts of single-family units was contained by
declines in the Midwest (63.0% y/y) and in the Southern (28.5% y/y)
regions of the country. In the Northeast starts rose moderately m/m
(82.1% y/y) and in the West starts just recouped the moderate December
decline (21.7% y/y).A 9.2% increase in starts of multi-family units
added to firmer increases during the prior two months. Starts of
apartments, condominiums &amp; town houses still were down 76.2%
from the January 2006 peak. Despite a moderate 4.9% m/m decline,
January building permits remain up by one-quarter from their low last
March. Permits to build a single-family home rose slightly m/m
and have risen one-half from their low last January.The
housing starts figures can be found in Haver's USECON database.Mortgage
Choice and the Pricing of Fixed-Rate and Adjustable-Rate Mortgages
from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2010/el2010-03.html">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Nov. Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>591</td>
<td>575</td>
<td>579</td>
<td>21.1%</td>
<td>553</td>
<td>900</td>
<td>1,342</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>484</td>
<td>477</td>
<td>492</td>
<td>35.6</td>
<td>440</td>
<td>616</td>
<td>1,036</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>107</td>
<td>98</td>
<td>87</td>
<td>-18.3</td>
<td>113</td>
<td>285</td>
<td>306</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>621</td>
<td>653</td>
<td>589</td>
<td>16.9</td>
<td>558</td>
<td>895</td>
<td>1,392</td>
</tr>
</tbody>
</table>
</body></html>

Housing starts increased a modest 2.8% last month to 591,000 (AR) units following a slightly revised decline to 575,000 during December. The small gain was only enough, however, to lift starts back to the level reached last summer. In [...]

U.S. Housing Starts Rise But Forward Momentum Is Weak

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217a.jpg" style="width: 353px; height: 265px;" align="right">Housing
starts increased a modest 2.8% last month to 591,000 (AR) units
following a slightly revised decline to 575,000 during December. The
small gain was only enough, however, to lift starts back to the level
reached last summer. In fact, the 21.1% twelve-month increase from near
the recession low pales in comparison to the 50%-90% increases
following downturns since the 1970s. Since their peak in January of
2006, starts remain down by three-quarters. January's figure slightly
beat Consensus expectations for 580,000 starts.&nbsp;
 Last month,
starts of single-family homes ticked up just 1.5% to 484,000 after
December's 3.0% decline. Year-to-year starts have risen by one-third
but they're up just 1.5% from the 4Q average. During the last ten
years, there has been an 84% correlation between the q/q change in
single-family starts and their contribution to quarterly GDP growth.
The increase in January starts of single-family units was contained by
declines in the Midwest (63.0% y/y) and in the Southern (28.5% y/y)
regions of the country. In the Northeast starts rose moderately m/m
(82.1% y/y) and in the West starts just recouped the moderate December
decline (21.7% y/y).
A 9.2% increase in starts of multi-family units
added to firmer increases during the prior two months. Starts of
apartments, condominiums &amp; town houses still were down 76.2%
from the January 2006 peak.
 Despite a moderate 4.9% m/m decline,
January building permits remain up by one-quarter from their low last
March. Permits to build a single-family home rose slightly m/m
and have risen one-half from their low last January.
The
housing starts figures can be found in Haver's USECON database.
Mortgage
Choice and the Pricing of Fixed-Rate and Adjustable-Rate Mortgages
from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2010/el2010-03.html">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Nov. Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>591</td>
<td>575</td>
<td>579</td>
<td>21.1%</td>
<td>553</td>
<td>900</td>
<td>1,342</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>484</td>
<td>477</td>
<td>492</td>
<td>35.6</td>
<td>440</td>
<td>616</td>
<td>1,036</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>107</td>
<td>98</td>
<td>87</td>
<td>-18.3</td>
<td>113</td>
<td>285</td>
<td>306</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>621</td>
<td>653</td>
<td>589</td>
<td>16.9</td>
<td>558</td>
<td>895</td>
<td>1,392</td>
</tr>
</tbody>
</table>

Industrial Output Firms 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 17, 2010



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217d.jpg" style="width: 353px; height: 265px;" align="right">With
a 0.9%
January increase, U.S. industrial output posted its strongest monthly
gain since August. Moreover, the run-up since the June bottom has
totaled 5.3%. That compares with a 13.2% decline during the prior year
which exceeded the declines during most other postwar recessions.
 A
1.1% increase in the output of consumer goods paced the January
production increase. The y/y gain of 3.2% has been driven by a nearly
one-half increase in auto products output during the last year. Output
of computers, video &amp; audio output also rose 1.0% (-5.3% y/y)
for the fifth consecutive strong monthly gain. Output of appliances,
furniture &amp; carpeting was unchanged last month (-7.5% y/y)
after a sharp December fall which was part of an 18.1% 2009 drop.
Business equipment output was strong for the second consecutive month
but still was off 3.7% y/y after the 12.5% decline during all of last
year. Finally, apparel output jumped 3.4% last month (0.7% y/y) and
since its bottom has risen 5.9%.
&nbsp;Capacity utilization rose
further to 72.67%, its highest level since December 2008. In the
factory sector alone utilization rose to 69.4% from the 2009 low of
65.2%. Utilization in the primary metals area has risen sharply to
61.9% from a 2009 average of 51.2% with the rebound in output. There's
also been rise in utilization in the motor vehicle sector to 55.0% from
a low of 36.8% in June. Utilization was 77.0% in 2005. The rise in
utilization was accompanied by another 0.1% m/m decline in capacity
which was off a record 1.1%y/y.&nbsp;
The industrial
production data are available in Haver's USECON
database.
Using
FOMC Forecasts to Forecast the
Economy from the Federal Reserve Bank of St. Louis can be
found <a href="http://research.stlouisfed.org/publications/net/20100201/netpub.pdf">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Industrial
Production (SA,%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output</td>
<td>0.9</td>
<td>0.7</td>
<td>0.6</td>
<td>1.0</td>
<td>-9.7</td>
<td>-2.2</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Manufacturing</td>
<td>0.9</td>
<td>0.0</td>
<td>0.9</td>
<td>1.6</td>
<td>-11.3</td>
<td>-3.2</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Consumer
Goods</td>
<td>1.1</td>
<td>0.7</td>
<td>-0.3</td>
<td>3.2</td>
<td>-5.2</td>
<td>-2.6</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Business
Equipment</td>
<td>1.0</td>
<td>1.3</td>
<td>-0.3</td>
<td>-3.7</td>
<td>-12.5</td>
<td>-1.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Construction
Supplies</td>
<td>0.9</td>
<td>-1.7</td>
<td>1.6</td>
<td>-5.4</td>
<td>-17.6</td>
<td>-6.3</td>
<td>-2.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Materials</td>
<td>0.8</td>
<td>0.5</td>
<td>1.3</td>
<td>2.0</td>
<td>-10.9</td>
<td>-1.9</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>0.7</td>
<td>6.3</td>
<td>-3.0</td>
<td>-0.5</td>
<td>-2.6</td>
<td>0.3</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization
(%)</td>
<td>72.6</td>
<td>71.9</td>
<td>71.3</td>
<td>71.1 (Jan. '09)</td>
<td>70.1</td>
<td>77.5</td>
<td>80.6</td>
</tr>
</tbody>
</table>

U.S. Import Price Gains Continue
Strong 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 17, 2010



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217g.jpg" style="width: 353px; height: 265px;" align="right">Higher
oil
prices and the lower dollar have been the primary factors behind the
movement in import prices this past year. Just for January, a 1.4% rise
in prices was nearly the strongest since last June and beat Consensus
expectations for a 1.0% gain.
Petroleum prices jumped 4.8% last month
and they have roughly doubled since last January. This month, the
strength in Brent crude oil prices tapered off with a decline to an
average $72.91 after reaching a daily high near $80 per barrel early in
January.
Conversely the lower value of the U.S. dollar has helped lift
non-oil import prices. A 0.6% January increase was near the elevated
gains during the prior four months. Since their low last March non-oil
import prices have risen 2.4% after a 5.3% decline during the prior
twelve months. (During the last ten years, there has been a negative
81% correlation between the nominal trade-weighted exchange value of
the US dollar vs. major currencies and the y/y change in non-oil import
prices.)&nbsp;
 Prices for nonauto consumer goods rose for the
first month in the last three but the slight y/y increase is improved
from the deflation as of last Fall. Prices for durable consumer goods
increased a firm 0.6% to lift the y/y increase to 0.6% from a 1.1%
decline as of last fall. Capital goods also slipped m/m but the pace of
price deflation has slowed.
Total export prices increased 0.8% (3.4%
y/y) reflecting a 1.4% (4.5% y/y) increase in agricultural export
prices and a 0.7% gain (3.3% y/y) in non-agricultural prices. These
declines reversed just some of the strength through 2008
The
import and export price series can be found in Haver's USECON
database. Detailed figures are available in the USINT
database.
Is
the International Role of the Dollar Changing? from
the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci16-1.pdf">here</a>.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217h.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217i.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export
Prices (NSA, %)</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.4</td>
<td>0.2</td>
<td>1.5</td>
<td>11.5</td>
<td>-11.5</td>
<td>11.5</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.8</td>
<td>-1.4</td>
<td>5.4</td>
<td>95.5</td>
<td>-36.0</td>
<td>37.7</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.6</td>
<td>0.5</td>
<td>0.6</td>
<td>1.2</td>
<td>-4.2</td>
<td>5.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>0.8</td>
<td>0.6</td>
<td>0.8</td>
<td>3.4</td>
<td>-4.6</td>
<td>6.0</td>
<td>4.9</td>
</tr>
</tbody>
</table>

Euro-Area Trade Surplus Moves Up
Sharply 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 17, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217j.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Exports rebounded strongly in December after coming up flat in
November. Overall exports rose by 3.1% in December as MFG exports rose
by 2.7% in December. Three month growth rates continue to show strong
growth, accelerating slightly for overall exports but with MFG exports
losing a bit of momentum compared to their six-month pace
Import growth is positive. Its three-and six-month rates of
growth have steadied at or below the 10% growth rate mark.
Manufacturing import growth is positive but barely growing at all,
rising at 0.3% annualized rate of growth over three months, having
slowed from nearly a 7% pace over six months.
Europe&#8217;s trade surplus is at a five year high. Exports are at
their highest level in 12-months as well. Europe continues to act as a
region with export-led growth. Exports are digging out from the
recession faster than imports. Imports are lower by 8% Yr/yr compared
to exports that are lower by just 2%.
Domestic demand is lagging in the Euro-Area. Exports are
pulling the region into recovery faster than its own consumers.
Europe&#8217;s recovery depends on the continuation of global growth as much
as any region.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro-Area
Trade trends for goods 
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="2">m/m%</td>
<td style="font-weight: bold;" colspan="3">%
Saar</td>
<td style="font-weight: bold;">&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3M</td>
<td style="font-weight: bold;">6M</td>
<td style="font-weight: bold;">12M</td>
<td style="font-weight: bold;">12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&nbsp; 7,003 </td>
<td>&#8364;&nbsp; 5,294 </td>
<td>&#8364;&nbsp; (3,252)</td>
<td>&#8364;&nbsp; 4,482 </td>
<td>&#8364;&nbsp; (3,450)</td>
<td>&#8364;&nbsp; 1,384 </td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">Exports</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exp</td>
<td>3.1%</td>
<td style="color: red;">0.0%</td>
<td>25.6%</td>
<td>22.6%</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>4.8%</td>
<td>1.7%</td>
<td>18.3%</td>
<td>10.6%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>7.7%</td>
<td style="color: red;">-0.7%</td>
<td>51.4%</td>
<td>31.5%</td>
<td>24.6%</td>
<td style="color: red;">-19.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>2.9%</td>
<td style="color: red;">-0.2%</td>
<td>25.6%</td>
<td>23.4%</td>
<td style="color: red;">-2.9%</td>
<td style="color: red;">-7.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; MFG</td>
<td>2.7%</td>
<td style="color: red;">-0.3%</td>
<td>17.7%</td>
<td>21.3%</td>
<td style="color: red;">-5.2%</td>
<td style="color: red;">-7.2%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">IMPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All IMP</td>
<td>1.7%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>10.7%</td>
<td style="color: red;">-7.8%</td>
<td style="color: red;">-9.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td style="color: red;">-1.3%</td>
<td>3.2%</td>
<td style="color: red;">-14.0%</td>
<td style="color: red;">-3.1%</td>
<td style="color: red;">-8.7%</td>
<td style="color: red;">1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>4.4%</td>
<td>3.2%</td>
<td>41.2%</td>
<td>43.8%</td>
<td style="color: red;">-19.0%</td>
<td style="color: red;">-6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>1.7%</td>
<td>0.6%</td>
<td>7.5%</td>
<td>10.5%</td>
<td style="color: red;">-7.2%</td>
<td style="color: red;">-9.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; MFG</td>
<td>1.5%</td>
<td style="color: red;">-0.1%</td>
<td>0.3%</td>
<td>6.9%</td>
<td style="color: red;">-9.2%</td>
<td style="color: red;">-8.5%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">*Eur mlns;
mo or period
average</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Housing Starts Rise ButForward Momentum Is Weak

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100216f.jpg" style="width: 353px; height: 265px;" align="right">Low
interest rates and improved affordability have yet to generate strong
improvement in the housing market. The National Association of Home
Builders' index of housing market activity improved this month to 17
from 15 in January, but that was only back to the 4Q average.
Nevertheless, the index remained double the low of 8 hit last January.
The index is compiled from survey questions asking builders to rate
market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to &#8220;very
low&#8221;. The figure is thus a diffusion index
with numerical results over 50 indicating a predominance of &#8220;good&#8221;
readings.&nbsp;The present sales index improved m/m to 17 and
equaled the 4Q and 3Q averages. The sub-index of sales during the next
six months also improved modestly versus January.&nbsp;The Home
Builders' Association also reported that the traffic of prospective
buyers languished at a reading of 12 which was below the averages from
2Q to 4Q of last year.&nbsp;The regional housing market
indexes showed improvement versus last year throughout the country but
there has been modest backpedaling in the Northeast &amp; the
Midwest and relative stability in the South &amp; the
West.The Home Builders' Housing Opportunity Index, which is
the share of homes sold that could be considered affordable to a family
earning the median income, fell in 3Q '09 (the latest available figure)
to 70.1%. It had jumped earlier to a record high of 72.5% buoyed by
lower home prices, lower interest rates and higher income. (There is a
break in the series from 2002 to 2003.).&nbsp;The NAHB has compiled
the Housing Market Index since 1985. The
weights assigned to the individual index components are .5920 for
single family detached sales, present time; .1358 for single family
detached sales, next six months; and .2722 for traffic of prospective
buyers. The results, along with other housing and remodeling indexes
from NAHB Economics, are included in Haver&#8217;s SURVEYS
database.&nbsp;IMF Explores Contours of Future
Macroeconomic Policy from the International Monetary Fund can
be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2010/INT021210A.htm">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100216g.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100216h.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM" style="color: black;">Nat'l Association of Home Builders</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">&nbsp;February '09</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good=100)</td>
<td>17</td>
<td>15</td>
<td>16</td>
<td>9</td>
<td>15</td>
<td>16</td>
<td>27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>17</td>
<td>15</td>
<td>16</td>
<td>7</td>
<td>13</td>
<td>16</td>
<td>27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>27</td>
<td>26</td>
<td>26</td>
<td>15</td>
<td>24</td>
<td>25</td>
<td>37</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>12</td>
<td>12</td>
<td>13</td>
<td>11</td>
<td>13</td>
<td>14</td>
<td>21</td>
</tr>
</tbody>
</table>
</body></html>

Low interest rates and improved affordability have yet to generate strong improvement in the housing market. The National Association of Home Builders' index of housing market activity improved this month to 17 from 15 in January, but [...]

U.S. Home Builders’ Index Improves Slightly

Louise Curley

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100216d.jpg" style="width: 353px; height: 265px;" align="right">
The financial community in Germany has become less enthusiastic about
economic prospects in Germany and in the Euro Area as a whole. The
results of the latest ZEW survey of analysts and institutional
investors showed that the balance of those looking for improved
conditions six months ahead in Germany over those looking for
deteriorating conditions was 45.4% in February, down 1.8 points from
47.2% in January and down 12.6 points from the peak, 57.7%, in
September of last year. Although the majority of the participants still
view current conditions negatively, the excess of pessimists over
optimists declined slightly from 56.6% to 54.8%.
 <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100216e.jpg" style="width: 353px; height: 265px;" align="right">The
participants in the latest survey are generally less optimistic about
profit prospects. Among the thirteen industries covered, only
construction and services showed an increased balance of optimists over
pessimists. The negative balances of opinion on the outlook for profits
in the automobile and the retail/consumer goods industries increased in
February. The balance on the profit outlook for the automobile industry
was -29.7% in February compared with -23.2% in January. The comparable
figures for the consumption/trade industries were-18.9% and -12.1%. The
balances of opinion on the out look for profits in the remaining
industries are still positive after declines in February. The balances
of opinion for the thirteen industries in February and their changes
from January are shown in the table below.
 In addition to an appraisal of current economic conditions
and expectations of conditions six months ahead for Germany, the
participants in the ZEW survey also provide a similar appraisal for the
Euro Area. The balance of those expecting an improvement in the economy
of the entire Euro Area was 40.2% in February, 4.9 points lower than
that for Germany and the balance on current conditions was -62.7%, 6.1
points more unfavorable than the -56.6% for Germany. The two attached
charts compare the balances of opinion on (1) current conditions and
(2) expectations for Germany and for the Euro Area. No doubt the
severity of the financial crisis in Greece together with continued
concern over the economies of Ireland, Portugal and Spain account for
the more cautious appraisal of prospects for the entire Euro Area than
that for Germany.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ZEW
INDICATORS (% Balance)</th>
<th scope="col">Feb 10&nbsp;</th>
<th scope="col">Jan 10</th>
<th scope="col">&nbsp;Peak</th>
<th scope="col">M/M Chg</th>
<th scope="col">Chg from Peak</th>
<th scope="col">Industry</th>
<th scope="col">Feb 10&nbsp;</th>
<th scope="col">M/M Chg</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td colspan="6">Germany</td>
<td>Banks</td>
<td>15.8</td>
<td>-6.8</td>
</tr>
<tr class="grey3">
<td class="firstcol">Current Conditions</td>
<td>-54.8</td>
<td>-56.6</td>
<td>-92.8**</td>
<td>1.8</td>
<td>38.0</td>
<td>Insurance</td>
<td>11.0</td>
<td>-5.6</td>
</tr>
<tr class="grey3">
<td class="firstcol">Expectations</td>
<td>45.1</td>
<td>47.2</td>
<td>57.7*</td>
<td>-1.9</td>
<td>-12.6</td>
<td>Automobile</td>
<td>-29.7</td>
<td>-6.5</td>
</tr>
<tr class="grey4">
<td colspan="6" class="firstcol">&nbsp;</td>
<td>Chem/Pharma</td>
<td>35.8</td>
<td>-4.9</td>
</tr>
<tr class="grey4">
<td colspan="6" class="firstcol">Euro
Area</td>
<td>Steel</td>
<td>23.8</td>
<td>-5.5</td>
</tr>
<tr class="grey3">
<td class="firstcol">Current Conditions</td>
<td>-62.1</td>
<td>-62.7</td>
<td>-93.2**</td>
<td>1.6</td>
<td>31.1</td>
<td>Electronics</td>
<td>22.0</td>
<td>-5.0</td>
</tr>
<tr class="grey3">
<td class="firstcol">Expectations</td>
<td>40.2</td>
<td>46.2</td>
<td>59.6*</td>
<td>-6.0</td>
<td>-19.4</td>
<td>Mech. Eng</td>
<td>29.6</td>
<td>-4.2</td>
</tr>
<tr class="grey2">
<td colspan="6" class="firstcol">&nbsp;</td>
<td>Retail/ Cons</td>
<td>-18.9</td>
<td>-6.8</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">&nbsp;</td>
<td>Construction</td>
<td>4.2</td>
<td>+3.8</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">&nbsp;</td>
<td class="firstcol"> Utilities
</td>
<td>21.4</td>
<td>-0.6</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">&nbsp;</td>
<td>Services</td>
<td>22.1</td>
<td>+1.0</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">&nbsp;</td>
<td>Telecom</td>
<td>6.4</td>
<td>-3.1</td>
</tr>
<tr class="grey4">
<td colspan="6" class="firstcol">* September
2009&nbsp; ** May 2009</td>
<td>Info Tech</td>
<td>33.5</td>
<td>-2.9</td>
</tr>
</tbody>
</table>


</body></html>

The financial community in Germany has become less enthusiastic about economic prospects in Germany and in the Euro Area as a whole. The results of the latest ZEW survey of analysts and institutional investors showed that the balance [...]

German Investors Continue To Lower Expectations

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

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

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Michael J. Moran

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The Conference Board’s index of Consumer Confidence inched higher in April from an upwardly revised reading in March. The combined changes left the measure 1.1% higher than the preliminary tally in March. Despite the improvement, the index remained in the low end of the range for the current expansion. The index in April totaled 92.8, down from an average of 96.1 in 2025 and an annual cyclical high of 105.4 in 2023.

The Improvement in April reflected a pickup in the expectations component, which rose 1.7%. The current conditions component inched 0.2% lower. Overall views on current conditions slipped despite more favorable assessments of the labor market. The so-called measure of the jobs gap (share of respondents indicating that jobs are plentiful less the share saying that jobs are hard to get) rose 1.4 percentage points higher to 7.5%. The pickup reflected a drop in the share indicating that jobs are hard to get (down 1.5 percentage points to 19.8%). The share indicating that jobs are plentiful eased 0.1 percentage point to 27.3%.

Although expectations improved in April, from a long-term perspective they could be viewed as the more important factor restraining the headline measure of confidence. As shown in the left chart below, the expectations component of confidence shows considerably less volatility than the current conditions component does. The contrasting patterns suggest that individuals realize that the economy will undergo possibly sharp cyclical swings, but they expect conditions at some point to return to an underlying norm.

The current conditions index in the current cycle has indeed dropped noticeably, but it is still above the long run average (123.8 in April versus the average of approximately 108 from 1990 to 2025). The expectations component, as usual, has eased less than the current conditions component, but its shift has pushed the measure to the low end of its long-run range (72.2 in April versus an average of approximately 88).

Interestingly, concern about the labor market seems to be a factor affecting expectations. While current views on the labor market are favorable (plentiful less hard to get jobs gap of 7.5%), Individual are concerned about the future. The survey asks respondents if they expect more jobs or fewer jobs six months hence. The share indicating fewer jobs has moved well into the upper end of the historical range. Such observations in the past were typically seen only during recession (chart, below right). An unfavorable view on interest rates also seems to be playing a role in depressing the expectations component. More than 60% of respondents to the current survey expect higher interest rates 12 months from now.

The results from the Conference Board survey of consumers differ markedly from those of the University of Michigan Survey Research Center. The Michigan results show consumer sentiment at a record low, while the Conference Board index is only slightly below its long-run average. The difference most likely reflects the nature of the questions in the surveys. The Conference Board focuses on business and employment conditions, while Michigan emphasizes personal finances. The focus on finances, along with questions on inflation, probably picks up concerns about affordability.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

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- Expectations improved slightly in April, but are still subdued relative to norms.
- Moderately favorable view of current conditions.

Consumer Confidence: Modest Change in April

Winnie Tapasanun

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U.S. house prices were essentially unchanged m/m in February after rises of 0.2% in January (+0.1% initially) and 0.3% in December (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. February marked the first flat reading since September following four consecutive m/m increases. The HPI was at 441.43 in February, up 14.8% from its August 2022 low of 384.59. The year-on-year growth rate eased to 1.7% in February—the lowest since March 2012—from 1.8% in January (+4.1% in February 2025), down from a high of 6.9% in February 2024 and well below a peak of 18.5% in February 2022.

By region, February FHFA house prices showed a mixed performance. House prices fell m/m in February (vs. January) in four of the nine census divisions. Declines were led by Mountain (-1.1% vs. +0.4%), followed by Pacific (-0.5% vs. +0.6%), West North Central (-0.4% vs. +0.3%), and Middle Atlantic (-0.1% vs. +0.3%). To the upside, house prices rose m/m in four census divisions in February (vs. January): South Atlantic (+0.6% vs. -0.2%), East South Central (+0.2% vs. +1.2%), New England (+0.2% vs. +0.6%), and West South Central (+0.2% vs. -0.3%). Meanwhile, house prices in East North Central were virtually unchanged m/m for the second successive month in February following seven straight m/m gains.

Year-on-year house prices continued to rise in February in most regions, except Mountain, Pacific, and West South Central. The y/y growth rate accelerated in February (vs. January) in only two of the nine census divisions: East South Central (+4.0% vs. +3.2%) and South Atlantic (+0.9% vs. +0.4%). Meanwhile, house price growth decelerated y/y in February (vs. January) in four regions: New England (+3.1% vs. +3.9%), West North Central (+3.1% vs. +3.6%), East North Central (+3.8% vs. +4.5%), and Middle Atlantic (+4.2% vs. +4.5%). To the downside, Mountain (-0.7% vs. 0.0%), Pacific (-0.4% vs. -0.3%), and West South Central (-0.1% vs. -0.4%) posted y/y declines in February.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

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- February FHFA HPI 0.0% m/m; +1.7% y/y, lowest since Mar. ’12.
- House prices down m/m in four of nine census divisions, led by Mountain (-1.1%); up in four, driven by South Atlantic (+0.6%); flat in East North Central.
- House prices up y/y in six of nine regions, led by Middle Atlantic (+4.2%), but down in Mountain (-0.7%), Pacific (-0.4%), and West South Central (-0.1%).

U.S. FHFA House Prices Flat in February After Four Straight M/M Gains

Tian Yong Woon

In this week’s Letter, we cover the latest developments and implications of the Middle East conflict for Asia, while also making space for other important themes, including artificial intelligence (AI). The Middle East conflict remains in a no deal state coming out of the weekend, though some early Monday optimism emerged in Asian markets following Iran’s reported offer to reopen the Strait of Hormuz (chart 1). Nonetheless, as the Strait closure drags on, so too do the fiscal costs of domestic fossil fuel subsidies across Asia, which have been shown to move closely with crude oil prices (chart 2). While such measures offer direct relief by cushioning household energy costs, they remain difficult to sustain over the long haul.

Over the week, we also saw a further fraying in regional monetary policy trends, with the Philippines hiking its policy rate for the first time in about two years amid inflation concerns, while Indonesia stood pat on rates (chart 3). Investor attention is likely to remain fixed on monetary policy this week, with the Bank of Japan due to decide on policy. Expectations for an April hike have faded amid the persistent Middle East conflict, though yen weakness continues to present a source of concern (chart 4). The week also brings China’s latest PMI readings (chart 5), adding to the recent run of hard data accompanying the Q1 GDP release.

Beyond the Middle East conflict, the evolution of AI continues to demand close attention. Before geopolitical tensions took centre stage, AI was the dominant market narrative — and that enthusiasm has hardly faded. If anything, recent developments suggest the story is broadening: use cases are expanding, scalability is improving, and access is widening beyond large corporates to the mass market — increasingly spilling into the realm of physical AI. It may well be this persistent wave of optimism that is helping to underpin equity valuations, even as the geopolitical backdrop darkens (chart 6).

**The Middle East conflict**
About two months in, we remain stuck in the limbo of the US-Iran conflict, which has left the Strait of Hormuz largely closed and much of the world starved of the critical oil flows needed to power the global economy. The back and forth between the US and Iran has persisted in recent weeks, with both sides again failing to reach a peace deal over the weekend, though Monday’s news of Iran offering to reopen the Strait has revived some hope in markets. In truth, commodity and market valuations do not hinge so much on a peace deal itself, but rather on the resumption of oil flows through the Strait, something that could materialise even in the absence of a formal deal, though any agreement that includes and credibly delivers such a reopening would likely be warmly received by markets. Until then, market gyrations are likely to persist, with prices fluctuating in response to each new snippet of news. And until then, the world will continue both to be starved of, while gradually adapting to, the drip feed of oil flows emerging from the Strait.

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**The fiscal costs of the Middle East conflict**
As the Middle East conflict drags on, so too does the strain on fiscal resources across parts of Asia, as the costs of energy-related subsidy programmes continue to mount. While such programmes have an immediate, direct, and tangible impact in shielding households from surging energy costs, they are far from sustainable, particularly if oil prices remain well above targeted levels or stay elevated for an extended period. As chart 2 illustrates, the costs of these explicit subsidy programmes tend to rise closely with crude oil prices, as seen in India and Indonesia. Other measures adopted elsewhere, such as drawing down oil reserves, may be less fiscally costly, but are similarly difficult to sustain indefinitely. In both respects, the clock is ticking, and the world continues to hold its breath as the conflict drags on.

260427T2.jpg

**The latest central bank responses to the conflict**
Over the past week, Asia saw two central bank decisions. The Philippines’ (BSP) opted to deliver its first rate hike in about two years, while Indonesia’s (BI) chose to stand pat on policy rates and instead committed to stepped up FX intervention (chart 3). This latest round of decisions points to a further fraying of what had been a broad regional monetary policy consensus, namely that central banks would delay additional easing while maintaining a high bar for outright tightening. Domestic considerations, however, remain paramount. In the Philippines’ case, the central bank has moved to rein in inflation, which is already showing notable signs of price pass through stemming from disruptions linked to the Strait of Hormuz. That said, BSP is not the first in the region to buck the reluctance to tighten. Singapore’s central bank had already tightened policy in mid-April, albeit through its own distinct framework, given its use of the exchange rate rather than policy rates as the primary channel for monetary policy.

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**The week ahead**
Looking to the week ahead, a major central bank decision looms in Japan. Market expectations for the Bank of Japan to deliver a rate hike at its April meeting have ebbed amid the persistence of the Middle East conflict, to which Japan remains particularly vulnerable given its reliance on oil imports flowing through the Strait of Hormuz. At the same time, inflation in Japan has yet to become a major concern, with recent readings having picked up but not yet entering troubling territory. One potential source of concern, however, lies with the Japanese yen, which has remained on a weakening trend since early last year (chart 4). That depreciation has been one of the key arguments underpinning calls for further rate hikes.

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The week also brings China’s latest PMIs into focus. March saw a divergence between China’s official PMI readings, which improved, and the unofficial readings from RatingDog, which instead pulled back. Nonetheless, both official and unofficial gauges remained in expansionary territory (chart 5), with investors now watching closely to see whether that resilience can be sustained amid ongoing stresses from the Middle East, or whether offsetting drivers can continue to keep Chinese business sentiment and prospects buoyant.

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**Beyond the strait**
Moving beyond the Middle East conflict, a whole host of developments continue to unfold globally, many of which have in fact helped offset some of the pessimism wrought by the Strait’s chokehold. One such development is artificial intelligence (AI), which had dominated headlines before the outbreak of the conflict and continues to advance at breakneck pace. AI capabilities are still rapidly evolving, while practical applications, such as physical AI embodied in humanoid robots, are beginning to show broader and stronger use cases. Production of such robots is also becoming increasingly scalable and within reach not just for industrial complexes and healthcare, but for the mass market as well. It is perhaps growing optimism around these prospects that has helped keep equity valuations buoyant, even in the face of the festering conflict in the Middle East. Moreover, while concerns over AI-driven job displacement persist, new opportunities are emerging as well, particularly for AI adopters, with a growing share of job postings in Western economies increasingly referencing AI-related skills, as shown in chart 6.

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Asia

Economic Letter from Asia: Not Just About the Strait

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**The Distributive Trades Survey**

The U.K. Distributive Trades Survey for April 2026 and the look-ahead expectation readings for May paint an extremely soured outlook for the U.K. economy.

**Retail ranking**: Surveys for retail sales compared to a year ago, orders compared to a year ago, and sales evaluated for the time of year all have rankings near zero, which is the worst result on this timeline. This zero distinction applies to retail sales compared to a year ago. The best ranking is 11.6%; that is for sales evaluated for the time of year. Orders compared to a year ago have a 4.2 percentile standing. The stock-to-sales ratio—which is a completely different concept—shows that the inventory-to-sales ratio has a 29.9 percentile standing.

**Retail diffusion**: The raw April diffusion readings (up minus down diffusion) show that sales compared to a year ago slipped to a reading of -68 in April from -52 in March. Orders fell to -46 in April from -26 in March. Sales evaluated for the time of year fell to -32 April from -23 in March. All three measures weakened, and all three weakened decisively, resulting in extremely weak rankings. All of the rankings are executed on data back to 2002.

**Expectations for retailing**: The expectations readings for May show slippage again across all three metrics: expected sales compared to a year ago, expected orders compared to a year ago, and expected sales for the time of year. Expected sales compared to a year ago fell to -60 in May from -49 in April. Orders compared to a year ago declined to -45 in May from -30 in April, and sales for the time of year slipped to -43 from -19. In May, these readings have rankings in a 0.4 percentile standing for sales compared to a year ago, a 1.8 percentile standing for sales evaluated relative to the time of year, and a 4.6 percentile standing for orders compared to a year ago. These two panels on current and expected retail sales volumes are just simply terrible: weak monthly, weak in ranking terms, and showing slipping momentum.

The distributor trade series also provides data on the wholesale sector. While the wholesale sector is not quite as beat up as the retail sector, it's still extremely weak. There is no cause for any kind of hope that things are getting better based on wholesaling trends.

**Wholesaling**: The wholesale survey for sales compared to a year ago edged lower to -32 in April from -31 in March. Orders compared to a year ago remained at a reading of -41 in April. Sales evaluated for the time of year improved to a reading of -20 in April from -39 in March—a significant step up, but still very weak. The percentile standings for these three categories show sales compared to a year ago at the 8.8 percentile, orders compared to a year ago at the 5.6 percentile, and sales evaluated for the time of year at the 14.8 percentile.

**Wholesale Expectations**: The look-ahead observations, which provide expectations for wholesaling in May, show a similar constellation of readings, with sales compared to a year ago falling to -37 in May from -27 in April and orders compared to a year ago falling to -42 from -38, while sales evaluated for the time of year improved to  16 from  37. That category for wholesale sales improved both in April in real time and in May for expectations; however, it continues to have a very weak percentile standing, at the 17.9 percentile in May, while sales for a year ago have a 6.7 percentile standing and orders for a year ago have a 6.0 percentile standing.

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While some of the global PMI data have improved, these survey data for the U.K. are particularly dour. The war in Ukraine drags on, and there's a new conflict in Iran that has shut the Strait of Hormuz, creating energy problems for much of Europe. More broadly, supply chains have been harmed. In addition, the U.K. is undergoing a bout of political instability, as its Prime Minister is under pressure and a good deal of political uncertainty is being worsened by deteriorating economic performance.

Both the U.K. and the European Monetary Union had been showing some progress on inflation until the Iran war hit. Now, as the oil prices are up so sharply, headline inflation is going to be worse everywhere and there will probably be a bit more attention directed to the core inflation rate. However, the U.K. has had inflation too hot for a while, and it has failed to settle down. At its last meeting, the Bank of England’s Monetary Policy Committee warned that if the war was still ongoing at the next meeting, there would be a risk of a rate hike. So, it would seem that a rate hike is going to be in play unless the economy falls off a cliff first, which, based on the distributive trades data, is also something that could happen. The U.K. economy appears to be on very unsound footing, and what happens next is just about anybody's guess.

United Kingdom

U.K. Retail Sales: Worse Than During Covid

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The onset of the war in Iran appears to have hit the German economy extremely hard as the Ifo survey shows very substantial and broad-based decline across its survey in April. The Ifo survey features readings for five sectors as well as an aggregate reading, and it surveys them for climate, current conditions, and expectations. The decline in the Ifo survey is present for all three concepts and across all five sectors, marking the weakening in April as a highly significant and extremely disturbing development. Only manufacturing in the current conditions survey escapes a month-to-month decline.

**The Ifo sequences**: The **climate** reading fell both overall and across each of the five sectors. **Current conditions** declined for the overall and for four of the five sectors, with manufacturing the sole exception. **Expectations** declined for the overall and for all sectors. Several of the sector declines were for a very substantial magnitude, especially when compared to historic changes in these indexes.

**Monthly changes in readings—severe broad deterioration**
The month-to-month change in the climate reading has weakened more month-to-month 19% of the time. That overall result, however, is boosted by manufacturing where the monthly change has been weaker 35% of the time (on data back to 2011). However, all other sectors have seen climate weaker m/m only 2.3% to 6.3% of the time! The current situation readings weakened, with the headline weakening more m/m 11% of the time. This was boosted by manufacturing, the only sector that improved on the month; its ranking on change was in its 85th percentile—quite good and truly stand-alone good news. The other current changes by sector ranged from construction being weaker 1.7% of the time, to retailing that has been weaker about 30% of the time in terms of m/m changes. Expectation changes were uniformly terrible, with the headline drop weaker only 6.3% of the time and sector change month-to-month weaker between 9% and 1.7% of the time. The monthly weakening was uniform and substantial. I document it with these calculations, but you can also see it on the chart above.

**Climate**: The bottom line is that the all-sector index for climate fell to -20.3 in April from -18 in March, placing it at a 10.5 percentile standing on data since 1993. The sector ranking is the highest for construction with a 42.2 percentile standing and the weakness for services at a 1.1 percentile standing—weaker than the table reading nearly 99% of the time. In terms of percentile standing levels or monthly changes, conditions are closing in on grim.

**Current conditions**: Current conditions saw the all-sector index slip to -5.3 in April from -2.4 in March. The headline ranking stands at a 9.8 percentile mark, making it—like the climate reading—weaker than its current reading only about 10% of the time. The strongest reading under current conditions is for construction which has a 60.6 percentile standing; it is the only ranking in the table above its historic median. Manufacturing, the only sector in the survey that improved month-to-month, has a 22.5 percentile standing, while services record the weakest percentile standing under current conditions, at an 8.4 percentile standing.

**Expectations:** The all-sector index for expectations fell to -25.3 in April from -19.9 in March, placing it at a 6.3 percentile standing. The percentile standings across sectors range from a high of 9.5% for manufacturing to a low of 1.5% for retailing. Up until earlier this year, the Ifo was showing signs of improvement; however, all of that has simply collapsed in the last month. Weakness is across economic concepts and sectors, as documented above. For reference, the table also gives a separate set of rankings on where the various indexes stand since the invasion of Ukraine, since that was another marked event that drove the index, that had been improving after Covid, down to lower levels.  Ranked even on this reduced scale looking at conditions only since the invasion of Ukraine, when conditions have generally been weaker, the current rankings across the Ifo survey remained extremely weak. This is a very disturbing survey for the German economy.

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