Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090319a.jpg" align="left" border="0" height="265" width="353">
It is the largest drop in e-Zone IP since records have been
kept. Intermediate goods, capital goods and consumer goods output
trends are being clobbered. Each sector is worsening sequentially. Each
of the countries displayed: Germany, France, Italy, and the UK, is
experiencing sequentially worsening rates of growth for their selected
measures of IP. 
 

It is getting worse. The EU is in the belly of the beast and
beast is recession. 
 

Statements for Germany today confirm that things are getting
worse there and that there are no signs of a turnaround. In France
INSEE is now looking for Q1-2009 to be weaker than Q4-2008. In France
despite the lobbying Sarkozy has done for more stimulus and relaxation
within the Zone, French workers are striking as if he could DO
SOMETHING about the severity of the recession. They are in fact wanting
him to do more to mitigate it. But France, like other EMU members, has
to be mindful of the Maastricht rules that apply to budget deficits.
Europeans, despite seeing this worsening in their respective economies,
are amazingly blasé about doing more to mitigate the effects. Moreover,
within the Group of 20 European member are far more interested in rules
and regulations for the future than in dealing with current issues. If
they were firemen they&#8217;d be calling in the arson investigators instead
of dousing the still-raging and expanding flames. Europeans are
different. 
 


<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">03/14/09</th>
<th scope="col">03/07/09</th>
<th scope="col">02/28/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>646</td>
<td>658</td>
<td>645</td>
<td>72.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,473</td>
<td>5,288</td>
<td>91.0%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
UK Orders Decline To New Low But
Pace Of Decline Slows...Sort Of 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 19, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090319c.jpg" align="left" border="0" height="265" width="353">
The UK CBI survey for industry shows a new low at -58. Exports
also are on a new low despite the weakness in sterling that should aid
competitiveness. 
 

New orders slipped to -58 in March from -56 in February. The
outlook index continues to slide. At -48 it is on a new low as well.
The outlook for the volume of output three-months ahead has slipped by
6 points since November while orders have slipped much more, by 20
points. Still both readings are on at their lows since 2000. 
 

The six month changes (declines) seem to have slowed down for
as orders are dropping at a slower pace. The three-month change in
orders has been cycling and is well off it lows. Only the Yr/Yr measure
of declines continues to move relentlessly lower, indicating deeper
declines. All of this is consistent with the notion that the UK is
going to leave the most severe part of its downturn behind it. It is
not yet certain, but the data are consistent with such a transition in
the phase of the UK cycle. 
 
 


 
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col">UK Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Reported:</td>
<td>Mar 09</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>Dec 08</td>
<td>Nov 08</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>-58</td>
<td>-56</td>
<td>-48</td>
<td>-35</td>
<td>-38</td>
<td>-20</td>
<td>0%</td>
<td>9</td>
<td>-56</td>
<td>65</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Export Orders</td>
<td>-51</td>
<td>-49</td>
<td>-39</td>
<td>-33</td>
<td>-31</td>
<td>-18</td>
<td>0%</td>
<td>3</td>
<td>-49</td>
<td>52</td>
</tr>
<tr class="odd">
<td class="firstcol">Stocks: FinGds</td>
<td>31</td>
<td>27</td>
<td>27</td>
<td>21</td>
<td>25</td>
<td>18</td>
<td>100%</td>
<td>27</td>
<td>-2</td>
<td>29</td>
</tr>
<tr class="even">
<td class="firstcol">Looking ahead</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</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">Output Volume :Nxt 3M</td>
<td>-48</td>
<td>-44</td>
<td>-43</td>
<td>-42</td>
<td>-42</td>
<td>-16</td>
<td>0%</td>
<td>28</td>
<td>-44</td>
<td>72</td>
</tr>
<tr class="odd">
<td class="firstcol">Avg Prices 4Nxt 3m</td>
<td>-13</td>
<td>-12</td>
<td>0</td>
<td>0</td>
<td>10</td>
<td>18</td>
<td>13%</td>
<td>34</td>
<td>-19</td>
<td>53</td>
</tr>
<tr>
<td colspan="11" class="firstcol">From end 2000</td>
</tr>
</tbody>
</table>
U.S. Leading Indicators Fall To
Cycle Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 19, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090319f.jpg" align="left" border="0" height="265" width="353">
The Conference Board reported that the February composite
index of leading economic indicators fell 0.4% to a new low for this
cycle. The decline followed a 0.1% January increase that was downwardly
revised.
Six of the ten components of the leading index rose last month
including a sharp steepening of the yield curve, but these gains were
offset by materially higher claims for unemployment insurance, shorter
hours worked, lower stock prices and reduced consumer expectations.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090319g.jpg" align="right" border="0" height="265" width="353">
The breadth of one-month increase amongst the leaders' 10
components improved to 60% but over a six-month period the breadth of
gain amongst the components fell to just 20%.
The leading index is based on actual reports for eight
economic data series. The Conference Board initially estimates two
series, orders for consumer goods and orders for capital goods.
Continuing to reflect economic recession, the coincident
indicators dropped a sharp 0.4% and they are off 4.0% during the last
year. Half of the four component series fell with outsized declines
registered by employment and production. Over the last ten years there
has been a 76% correlation between this y/y change and real GDP.
The lagging index fell 0.4% after a 0.3% January decline. The
ratio of coincident-to-lagging indicators (a measure of economic
excess) was stable at its lowest level since 1975.
The Conference Board figures are available in Haver's BCI
database. Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


Risk management in the banking industry is
yesterday's U.S. Senate testimony of Roger T. Cole, Director, Division
of Banking Supervision and Regulation, U.S. Federal Reserve. It can be
found <a href="http://www.federalreserve.gov/newsevents/testimony/cole20090318a.htm">here.</a>
<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/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Nov. 6-Month % (AR)</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">Leading</td>
<td>-0.4</td>
<td>0.1</td>
<td>-0.1</td>
<td>-4.1</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.4</td>
<td>-0.6</td>
<td>-0.7</td>
<td>-6.1</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>-0.3</td>
<td>-0.1</td>
<td>0.9</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Indicates
Further Economic Contraction 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 19, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090319d.jpg" align="left" border="0" height="265" width="353">
The latest figures from the Philadelphia Federal Reserve Bank
indicate that economic contraction continued. During March, the Index
of General Business conditions in the manufacturing sector came in at
-35.0 versus a reading of -41.3 last month. Expectations were for -39.
The latest was near the lowest since 1991.
During the last ten years there has been a 70% correlation
between the level of the Philadelphia Fed Business Conditions Index and
the three-month growth in factory sector industrial production. There
has been a 64% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total
business activity and each of the sub-indexes. The business conditions
index reflects a separate survey question.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090319e.jpg" align="right" border="0" height="265" width="353">
Amongst the sub-indexes, the employment index fell out of bed.
The 6.2 point decline pulled the index to another record low. Fifty-two
percent of respondents expected to reduce employment levels, another
record, while none expected to raise them. During the last ten years
there has been a 79% correlation between the index level and the m/m
change in manufacturing sector payrolls.
The new orders figure again was quite weak and deteriorated to
the lowest level since 1980. The shipments index improved from its
record low, but the move was slight.
The prices paid index at -31.3 was near the record low. Five
percent of respondents planned to raise prices while thirty seven
percent expected to lower them. During the last ten years there has
been a 73% correlation between the prices paid index and the
three-month growth in the intermediate goods PPI. There has been an 82%
correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six
months fell slightly but remained near its highest level since
September. The expectations index for new orders fell back to the
lowest level since December but the expectations index for employment
held steady at a slightly improved reading versus the lows this past
fall.
The figures from the Philadelphia Federal Reserve can be found
in Haver's SURVEYS database.
The latest Business Outlook Survey from the Federal
Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0309.cfm">here.</a>
The Peopling of Macroeconomics: Microeconomics of
Aggregate Consumer Expenditures from the Federal Reserve Bank
of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q1/brq109_peopling-of-macroeconomics.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March&nbsp; '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-35.0</td>
<td>-41.3</td>
<td>-15.9</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-31.3</td>
<td>&nbsp;-13.7</td>
<td>&nbsp;53.4</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body></html>

It is the largest drop in e-Zone IP since records have been kept. Intermediate goods, capital goods and consumer goods output trends are being clobbered. Each sector is worsening sequentially. Each of the countries displayed: Germany, [...]

U.S. Continuing Claims for Unemployment Insurance Touch New Record; Initial Claims Dip

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318g.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s industrial production (IP) dropped again in January
but the decline was puny in comparison with the recent string of
monthly disasters. This month&#8217;s drop of 0.2% keeps the string of
declines alive but, ironically, gives some room for hope to come alive
that these declines will not go on forever. 
 

The declines in the quarter&#8211;to-date are still quite severe &#8211;
despite the small drop in January. That&#8217;s because the level of
industrial activity at the end of the quarter in Q4-2008 is so low that
the first month of 2009 leaves the early quarter reading at a very low
level compared to the Q4 2008 average level. 
 

All the main sectors industrial sectors have been showing
strong declines. Italy&#8217;s GDP has been dropping and its neighbors in the
Euro Area are experiencing continuing weakness. It is far too early to
treat the smaller IP decline in Italy as the beginning of good news on
the industrial front. The news is welcome but the good news is the
first such news and appears totally out of context and so far without
support elsewhere. Generally this is not the sector where you expect to
see good new appear first. 
 


 
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Italy IP Excluding Construction</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr>
<td class="firstcol">IP-MFG</td>
<td>-0.2%</td>
<td>-2.7%</td>
<td>-3.2%</td>
<td>-21.9%</td>
<td>-20.7%</td>
<td>-14.6%</td>
<td>-17.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.7%</td>
<td>-0.9%</td>
<td>0.4%</td>
<td>-8.5%</td>
<td>-8.4%</td>
<td>-8.2%</td>
<td>-12.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.5%</td>
<td>-3.5%</td>
<td>-2.9%</td>
<td>-21.3%</td>
<td>-19.5%</td>
<td>-15.0%</td>
<td>-15.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-2.0%</td>
<td>-4.7%</td>
<td>-3.5%</td>
<td>-33.9%</td>
<td>-30.9%</td>
<td>-21.8%</td>
<td>-32.2%</td>
</tr>
</tbody>
</table>
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Italy’s industrial production (IP) dropped again in January but the decline was puny in comparison with the recent string of monthly disasters. This month’s drop of 0.2% keeps the string of declines alive but, ironically, gives some [...]

January IP Drops but the Pace of Decline Slows

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318d.jpg" align="right" border="0" height="265" width="353">In an anticipated move the
Federal Open Market Committee today
left the Federal funds rate in a "range from 0 to 1/4
percent."&nbsp; The discount also was left unchanged at
0.50%.&nbsp; The Fed funds rate remained the lowest ever.
Regarding economic liquidity, the Fed focused on the housing
market indicating that "To provide greater support to mortgage lending
and housing markets, the Committee decided today to increase the size
of the Federal Reserve&#8217;s balance sheet further by purchasing up to an
additional $750 billion of agency mortgage-backed securities, bringing
its total purchases of these securities to up to $1.25 trillion this
year, and to increase its purchases of agency debt this year by up to
$100 billion to a total of up to $200 billion."&nbsp; Additional
action to provide liquidity also was taken.
Regarding economic growth, the Fed indicated that "that the
economy continues to contract.&nbsp; Job losses, declining equity
and housing wealth, and tight credit conditions have weighed on
consumer sentiment and spending.&nbsp; Weaker sales prospects and
difficulties in obtaining credit have led businesses to cut back on
inventories and fixed investment."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318e.jpg" align="right" border="0" height="265" width="353">

"... the Committee anticipates that policy actions to
stabilize financial markets and institutions, together with fiscal and
monetary stimulus, will contribute to a gradual resumption of
sustainable economic growth."
Regarding inflation the same statement was offered as at the
last meeting. "... that inflation will remain subdued.&nbsp;
Moreover, the Committee sees some risk that inflation could persist for
a time below rates that best foster economic growth and price stability
in the longer term.
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090318a.htm">link</a>.
The Fed's effort to liquefy the economic system has
succeeded.&nbsp; Growth in the money supply measure M2 has been
running at double-digit rates versus five-to-six percent from 2006 and
during all of 2008.&nbsp; Over the last three months growth in MZM
(M2 less time deposits, plus all money market funds) has been 22%
versus 14% during all of last year and 9% during 2007.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318f.jpg" align="right" border="0" height="265" width="353">
Growth
in the monetary base ran at a 32% annual rate from November to March
after the level of the base doubled last autumn.&nbsp; This year,
the bond market has met these liquidity injections with uncertainty but
on balance has been not overly concerned about the eventual
inflationary consequences.
The Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.&nbsp;
Credit and Liquidity Programs and the Balance Sheet
from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/monetarypolicy/bst.htm">here.</a>
G-20 Asks IMF to Track, Assess Global Crisis Response
is a recent article published in the IMF Survey Magazine: In
the News and it can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW031409A.htm">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>

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In an anticipated move the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever. Regarding [...]

FOMC Leaves Rates Unchanged At Historically Low Level; Fed's Balance Sheet Expanded

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318a.jpg" align="right" border="0" height="265" width="353">Last
year's sharp decline in energy prices came to an abrupt end with the
turn of the calendar page to 2009; and the consumer price index
published by the Bureau of Labor Statistics (along with consumers'
wallets) noted the shift. During February, the CPI rose for only the
second time since July. The 0.4% increase followed an unrevised 0.3%
January gain as a 3.3% rise in energy prices roughly doubled their
January increase. The latest increase in the CPI&nbsp; slightly
outpaced Consensus expectations for a 0.3% rise.
The increase in
energy prices reflected higher gasoline prices which jumped by 8.3%
following the 6.0% January rise. Despite these gains, however, prices
are more than one-third lower versus last February. This month gasoline
prices have held the higher February level of $1.92 per gallon of
regular but this week have moved even higher. Offsetting some of that
upward pressure have been lower fuel oil prices. They fell 1.8% last
month (-21.4% y/y) and have fallen in each month since July. Similarly,
prices for natural gas &amp; electricity have fallen in all but one
of the last seven months though they still are 5.7% higher than last
February.
Some of that upward pressure has been relieved by a
moderation in food &amp; beverage price increases. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318b.jpg" align="right" border="0" height="265" width="353">
Prices actually
slipped 0.1% last month after 0.1% upticks during January and&nbsp;
December. Nevertheless, food prices still are a firm 4.7% higher than
last year but that's versus a 6.3% comparison this past fall. Recent
weakness has been led by lower dairy product prices (-1.7% y/y) and
five consecutive months of slight decline in meat and dairy product
prices (+4.2% y/y).
Core prices (CPI less food and energy)
rose for the second month by 0.2%. Those gains were the strongest since
August and moved the year-to-year increase up slightly to
1.8%.
 Core goods prices increased a firm
0.4% and that was enough to lift the three-month change to 1.2% (AR),
its highest since last August. Prices of new &amp; used motor
vehicles rose 0.5% (-2.5% y/y) while apparel prices jumped 1.3% (0.8%
y/y). Prices for household furnishings &amp; operations firmed by
0.2% after the slight January decline and the y/y change remained
healthy at 1.9%. Tobacco prices again were quite strong and rose 0.7%
to leave them up 6.3% y/y. 
 Gains in core services prices moderated
even further and posted a 0.1% uptick. The three-month rate of increase
remained a low at 1.6% (AR) after growing at a 3.9% rate this past
summer. That moderation owes mostly to weakness in the housing market
which caused February shelter prices to fall slightly. That was enough
to pull the three-month change down to 0.7%. Owners equivalent rent of
primary residence, a measure not equivalent to other house price
measures, ticked up 0.1% (2.1% y/y). <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318c.jpg" align="right" border="0" height="265">
The increase in medical care
services prices fell back to 0.3% (3.1% y/y) while education costs rose
a moderate 0.4% (5.5% y/y).&nbsp; Public transportation prices fell
hard like they did during the prior month by 1.9%. They were down for
the sixth consecutive period (-1.8% y/y). The increase in recreation
prices held firm at 0.4% (1.9% y/y). v The chained CPI, which adjusts
for shifts in consumption patterns, rose 0.6%, about as it did during
January. Less food and energy, chained prices firmed even more and
doubled the January increase of 0.2%. 
 The consumer price data is
available in Haver's USECON database while detailed
figures can be found in the CPIDATA database. 
The
Impact of Credit Easing So Far from the Federal Reserve Bank
of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2009/0309/02monpol.cfm">here</a>.&nbsp;
<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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>0.4</td>
<td>0.3</td>
<td>0.1</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>0.2</td>
<td>1.8</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.4</td>
<td>0.1</td>
<td>-0.0</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.5</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>3.3</td>
<td>1.7</td>
<td>-19.1</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.1</td>
<td>0.1</td>
<td>4.7</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.6</td>
<td>0.5</td>
<td>-0.3 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.4</td>
<td>0.2</td>
<td>1.3</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>

</body></html>

Last year's sharp decline in energy prices came to an abrupt end with the turn of the calendar page to 2009; and the consumer price index published by the Bureau of Labor Statistics (along with consumers' wallets) noted the shift. [...]

Higher Energy Prices Lift U.S. CPI By Most Since July; Core Pricing Power Firm

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318a.jpg" align="right" border="0" height="265" width="353">Last
year's sharp decline in energy prices came to an abrupt end with the
turn of the calendar page to 2009; and the consumer price index
published by the Bureau of Labor Statistics (along with consumers'
wallets) noted the shift. During February, the CPI rose for only the
second time since July. The 0.4% increase followed an unrevised 0.3%
January gain as a 3.3% rise in energy prices roughly doubled their
January increase. The latest increase in the CPI&nbsp; slightly
outpaced Consensus expectations for a 0.3% rise.
The increase in
energy prices reflected higher gasoline prices which jumped by 8.3%
following the 6.0% January rise. Despite these gains, however, prices
are more than one-third lower versus last February. This month gasoline
prices have held the higher February level of $1.92 per gallon of
regular but this week have moved even higher. Offsetting some of that
upward pressure have been lower fuel oil prices. They fell 1.8% last
month (-21.4% y/y) and have fallen in each month since July. Similarly,
prices for natural gas &amp; electricity have fallen in all but one
of the last seven months though they still are 5.7% higher than last
February.
Some of that upward pressure has been relieved by a
moderation in food &amp; beverage price increases. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318b.jpg" align="right" border="0" height="265" width="353">
Prices actually
slipped 0.1% last month after 0.1% upticks during January and&nbsp;
December. Nevertheless, food prices still are a firm 4.7% higher than
last year but that's versus a 6.3% comparison this past fall. Recent
weakness has been led by lower dairy product prices (-1.7% y/y) and
five consecutive months of slight decline in meat and dairy product
prices (+4.2% y/y).
Core prices (CPI less food and energy)
rose for the second month by 0.2%. Those gains were the strongest since
August and moved the year-to-year increase up slightly to
1.8%.
 Core goods prices increased a firm
0.4% and that was enough to lift the three-month change to 1.2% (AR),
its highest since last August. Prices of new &amp; used motor
vehicles rose 0.5% (-2.5% y/y) while apparel prices jumped 1.3% (0.8%
y/y). Prices for household furnishings &amp; operations firmed by
0.2% after the slight January decline and the y/y change remained
healthy at 1.9%. Tobacco prices again were quite strong and rose 0.7%
to leave them up 6.3% y/y. 
 Gains in core services prices moderated
even further and posted a 0.1% uptick. The three-month rate of increase
remained a low at 1.6% (AR) after growing at a 3.9% rate this past
summer. That moderation owes mostly to weakness in the housing market
which caused February shelter prices to fall slightly. That was enough
to pull the three-month change down to 0.7%. Owners equivalent rent of
primary residence, a measure not equivalent to other house price
measures, ticked up 0.1% (2.1% y/y). <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318c.jpg" align="right" border="0" height="265">
The increase in medical care
services prices fell back to 0.3% (3.1% y/y) while education costs rose
a moderate 0.4% (5.5% y/y).&nbsp; Public transportation prices fell
hard like they did during the prior month by 1.9%. They were down for
the sixth consecutive period (-1.8% y/y). The increase in recreation
prices held firm at 0.4% (1.9% y/y). v The chained CPI, which adjusts
for shifts in consumption patterns, rose 0.6%, about as it did during
January. Less food and energy, chained prices firmed even more and
doubled the January increase of 0.2%. 
 The consumer price data is
available in Haver's USECON database while detailed
figures can be found in the CPIDATA database. 
The
Impact of Credit Easing So Far from the Federal Reserve Bank
of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2009/0309/02monpol.cfm">here</a>.&nbsp;
<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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>0.4</td>
<td>0.3</td>
<td>0.1</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>0.2</td>
<td>1.8</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.4</td>
<td>0.1</td>
<td>-0.0</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.5</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>3.3</td>
<td>1.7</td>
<td>-19.1</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.1</td>
<td>0.1</td>
<td>4.7</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.6</td>
<td>0.5</td>
<td>-0.3 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.4</td>
<td>0.2</td>
<td>1.3</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>

FOMC Leaves Rates Unchanged At
Historically Low Level; Fed's Balance Sheet Expanded 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318d.jpg" align="right" border="0" height="265" width="353">In an anticipated move the
Federal Open Market Committee today
left the Federal funds rate in a "range from 0 to 1/4
percent."&nbsp; The discount also was left unchanged at
0.50%.&nbsp; The Fed funds rate remained the lowest ever.
Regarding economic liquidity, the Fed focused on the housing
market indicating that "To provide greater support to mortgage lending
and housing markets, the Committee decided today to increase the size
of the Federal Reserve&#8217;s balance sheet further by purchasing up to an
additional $750 billion of agency mortgage-backed securities, bringing
its total purchases of these securities to up to $1.25 trillion this
year, and to increase its purchases of agency debt this year by up to
$100 billion to a total of up to $200 billion."&nbsp; Additional
action to provide liquidity also was taken.
Regarding economic growth, the Fed indicated that "that the
economy continues to contract.&nbsp; Job losses, declining equity
and housing wealth, and tight credit conditions have weighed on
consumer sentiment and spending.&nbsp; Weaker sales prospects and
difficulties in obtaining credit have led businesses to cut back on
inventories and fixed investment."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318e.jpg" align="right" border="0" height="265" width="353">

"... the Committee anticipates that policy actions to
stabilize financial markets and institutions, together with fiscal and
monetary stimulus, will contribute to a gradual resumption of
sustainable economic growth."
Regarding inflation the same statement was offered as at the
last meeting. "... that inflation will remain subdued.&nbsp;
Moreover, the Committee sees some risk that inflation could persist for
a time below rates that best foster economic growth and price stability
in the longer term.
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090318a.htm">link</a>.
The Fed's effort to liquefy the economic system has
succeeded.&nbsp; Growth in the money supply measure M2 has been
running at double-digit rates versus five-to-six percent from 2006 and
during all of 2008.&nbsp; Over the last three months growth in MZM
(M2 less time deposits, plus all money market funds) has been 22%
versus 14% during all of last year and 9% during 2007.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318f.jpg" align="right" border="0" height="265" width="353">
Growth
in the monetary base ran at a 32% annual rate from November to March
after the level of the base doubled last autumn.&nbsp; This year,
the bond market has met these liquidity injections with uncertainty but
on balance has been not overly concerned about the eventual
inflationary consequences.
The Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.&nbsp;
Credit and Liquidity Programs and the Balance Sheet
from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/monetarypolicy/bst.htm">here.</a>
G-20 Asks IMF to Track, Assess Global Crisis Response
is a recent article published in the IMF Survey Magazine: In
the News and it can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW031409A.htm">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>

January IP Drops but the Pace of
Decline Slows 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 18, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090318g.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s industrial production (IP) dropped again in January
but the decline was puny in comparison with the recent string of
monthly disasters. This month&#8217;s drop of 0.2% keeps the string of
declines alive but, ironically, gives some room for hope to come alive
that these declines will not go on forever. 
 

The declines in the quarter&#8211;to-date are still quite severe &#8211;
despite the small drop in January. That&#8217;s because the level of
industrial activity at the end of the quarter in Q4-2008 is so low that
the first month of 2009 leaves the early quarter reading at a very low
level compared to the Q4 2008 average level. 
 

All the main sectors industrial sectors have been showing
strong declines. Italy&#8217;s GDP has been dropping and its neighbors in the
Euro Area are experiencing continuing weakness. It is far too early to
treat the smaller IP decline in Italy as the beginning of good news on
the industrial front. The news is welcome but the good news is the
first such news and appears totally out of context and so far without
support elsewhere. Generally this is not the sector where you expect to
see good new appear first. 
 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Italy IP
Excluding Construction</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr>
<td class="firstcol">IP-MFG</td>
<td>-0.2%</td>
<td>-2.7%</td>
<td>-3.2%</td>
<td>-21.9%</td>
<td>-20.7%</td>
<td>-14.6%</td>
<td>-17.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.7%</td>
<td>-0.9%</td>
<td>0.4%</td>
<td>-8.5%</td>
<td>-8.4%</td>
<td>-8.2%</td>
<td>-12.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.5%</td>
<td>-3.5%</td>
<td>-2.9%</td>
<td>-21.3%</td>
<td>-19.5%</td>
<td>-15.0%</td>
<td>-15.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-2.0%</td>
<td>-4.7%</td>
<td>-3.5%</td>
<td>-33.9%</td>
<td>-30.9%</td>
<td>-21.8%</td>
<td>-32.2%</td>
</tr>
</tbody>
</table>
</body></html>

Higher Energy Prices Lift U.S. CPIBy Most Since July; Core Pricing Power Firm

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090317h.jpg" align="right" border="0" height="265" width="353">
The German investors and analysts who participated in the ZEW
survey conducted between March 2 and March 16, were slightly less
pessimistic about expectations six months ahead and slightly more
pessimistic about current conditions. The excess of pessimists over
optimists regarding the outlook declined from 5.8% in February to 3.5%
in March, while the excess of pessimists regarding current conditions
increased from 86.2% in February to 89.4% in March. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090317i.jpg" align="right" border="0" height="265" width="353">
The percent
balances on current conditions and expectations are shown in the first
chart.
The release of the January data for new orders in
manufacturing and industrial production during the period of the
survey, provided little evidence that current economic conditions were
improving. Industrial production fell 7.5% in the month of January and
new orders were down 8.0%. The year over year declines in new orders
and industrial production, shown in the second chart, are significantly
greater than those of the last recession.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090317j.jpg" align="right" border="0" height="265" width="353">

The reduction from 2% to 1.5% in its key interest rate by the
European Central Bank on March 5 may have played a role in the slight
improvement in the participants expectations of the outlook six months
ahead. And the stock market stopped declining. From March 2 to March
16, the Frankfurt Xetra Dax Index rose 9%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMANY</th>
<th scope="col">Mar 09</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan&nbsp; 09&nbsp;</th>
<th scope="col">Dec 08&nbsp;</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct O8</th>
<th scope="col">Sep 08</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">ZEW SURVEY&nbsp;(%
balance)</td>
<td>&nbsp;</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">Current Conditions </td>
<td>-89.4</td>
<td>-86.2</td>
<td>-77.1</td>
<td>-64.5</td>
<td>-50.4</td>
<td>-35.9</td>
<td>-1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations 6 months
ahead</td>
<td>-3.5</td>
<td>-5.8</td>
<td>-31.0</td>
<td>-45.2</td>
<td>-53.5</td>
<td>-63.0</td>
<td>-41.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Profit Expectations
Telecommunications</td>
<td>-16.1</td>
<td>-20.2</td>
<td>-28.3</td>
<td>-27.7</td>
<td>-29.7</td>
<td>-35.7</td>
<td>-12.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Profit Expectations
Vehicle/Car</td>
<td>-70.2</td>
<td>-75.3</td>
<td>-90.3</td>
<td>-89.3</td>
<td>-94.6</td>
<td>-91.7</td>
<td>-51.7</td>
</tr>
<tr class="even">
<td class="firstcol">Industrial Production
(Y/Y %)&nbsp;</td>
<td>N. A.</td>
<td>N. A.</td>
<td>-19.24</td>
<td>-11.58</td>
<td>-7.25</td>
<td>-3.53</td>
<td>-1.50</td>
</tr>
<tr>
<td class="firstcol">&nbsp;New Orders
Manufacturing&nbsp; (Y/Y %)</td>
<td>N. A.</td>
<td>N. A.</td>
<td>-35.11</td>
<td>-30.5</td>
<td>-26.07</td>
<td>-18.80</td>
<td>-9.80</td>
</tr>
</tbody>
</table>
</body></html>

The German investors and analysts who participated in the ZEW survey conducted between March 2 and March 16, were slightly less pessimistic about expectations six months ahead and slightly more pessimistic about current conditions. [...]

ZEW Survey: German Finance Types More Pessimistic On Current Conditions, Less Pessimistic On Expectations

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090317f.jpg" width="353">
Regular gasoline prices dipped last week to $1.91 per gallon. That&#39;s at the bottom end of the $1.89 to $1.96 range in place since early February. Nevertheless the latest was up 30 cents from the December low. Yesterday, the spot market price for regular gasoline rose from Friday to $1.27 per gallon, up from $1.20 averaged last week. 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.
Gasoline demand has recovered due to the earlier declines in prices. The latest y/y change of -0.8% 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 2.1% y/y after the -8.0% comparison last October. These numbers are available in Haver&#39;s OILWKLY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090317g.jpg" width="353">
The rise in gasoline prices reflects the modest firming of crude oil prices. For a barrel of West Texas Intermediate crude oil, prices rose last week to $45.68, up 41% from the December low of $32.37 per barrel. Prices reached a high of $145.66 last July. In futures trading yesterday, the one-month price for crude oil rose even further to $47.35 per barrel.
The price of natural gas continued to slide last week with a sharp decline to $3.88 per mmbtu (-60.2% y/y), 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.
Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/bulletin/2009/pdf/scf09.pdf"> here</a>.

<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">03/16/09</th>
<th scope="col">03/09/09</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>1.91</td>
<td>1.94</td>
<td>-41.8%</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>45.68</td>
<td>43.26</td>
<td>-58.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
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Regular gasoline prices dipped last week to $1.91 per gallon. That's at the bottom end of the $1.89 to $1.96 range in place since early February. Nevertheless the latest was up 30 cents from the December low. Yesterday, the spot [...]

U.S. Gasoline Prices Dip While Crude Oil Prices Rise

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090317d.jpg" width="353">
The severe downturn in housing starts took a breather last month as starts of multi-family homes nearly doubled. The Commerce Department indicated that total housing starts for February rose 22.2% from January to 583,000 (AR). January starts were revised up slightly and the latest figure compares to Consensus expectations for 450,000 starts.
Starts of multi-family homes rose 82.3%. That followed four consecutive months of sharp decline and returned starts to the highest level since October.
More indicative of the condition of the housing market is starts of single-family homes. Though they rose 1.0% last month to 357,000 (AR), starts remained near the record low for the series which dates back to 1959. The latest level is down eighty percent since the peak in early 2006. Permits to build single-family homes, a leading indicator of starts, rose and reversed their January decrease. However, they remained off by more than one-third over just the last three months. 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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090317e.jpg" width="353">
By region, starts of single-family units in the Northeast reversed their January collapse and rose by 54.2%. Nevertheless, that gain left them still off by nearly one half from the year ago level. Starts in the Midwest rose a lesser 12.8% (-51.8 % y/y) after their sharp 21.7% January falloff. In the South, starts also reversed the January decline and rose a modest 2.5% (-45.7% y/y). In the West, starts ran counter to the m/m trend in the rest of the country and fell by nearly one quarter (-62.7% y/y). That followed a slight January increase.
The housing starts figures can be found in Haver&#39;s USECON database.
Quick Exits of Subprime Mortgages from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/09/03/Demyanyk.pdf"> here</a>.
Facts and Myths about the Financial Crisis of 2008 from Federal Reserve Bank of Minneapolis is available <a href="http://www.minneapolisfed.org/research/WP/WP666.pdf">here</a>.

<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">February</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 class="odd">
<td class="firstcol">Total</td>
<td>583</td>
<td>477</td>
<td>558</td>
<td>-47.3%</td>
<td>903</td>
<td>1,341</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>357</td>
<td>353</td>
<td>394</td>
<td>-50.6</td>
<td>617</td>
<td>1,034</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>226</td>
<td>124</td>
<td>164</td>
<td>-41.3</td>
<td>286</td>
<td>307</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>547</td>
<td>531</td>
<td>547</td>
<td>-44.2</td>
<td>880</td>
<td>1,389</td>
<td>1,844</td>
</tr>
</tbody>
</table>
</body>
</html>

The severe downturn in housing starts took a breather last month as starts of multi-family homes nearly doubled. The Commerce Department indicated that total housing starts for February rose 22.2% from January to 583,000 (AR). January [...]

Surprising Rebound In U.S. Housing Starts Owes To Multi-Family

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

260121N4.jpg

260121O4.jpg

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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