Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310f.jpg" align="left" border="0" height="265" width="353">
IP drops sharply &#8211; Record drop in France 
Industrial production continues to show steep declines in the Zone.
France reported the largest decline to day since 1990 when the INSEE
series first began. Spain&#8217;s volatile index fell by 8.4% in January.
Italy&#8217;s index dropped by 2.8%. For these three countries of the EU,
three month declines in output range from an annual pace of -45% in
Spain to -26% in France. Over the past year Spain is off by 23% while
France and the UK see IP however by about 13%. Quarter-to-date in
January of 2009 IP is falling at an annual rate drop of greater than
20% in each of these countries and as much as -35% in Spain. 
 

Europe is STILL in denial: What? Me worry? 
Despite all this and despite new warnings of slower growth and a global
decline in growth from the IMF Europe seems distant. Trichet sounds
upbeat. Weber says there is no reason for the ECBs key lending rate to
go below 1%. Europe has spurned the US request for more stimulus. The
German&#8217;s have tuned a cold shoulder to France&#8217;s idea of cutting back
the VAT tax. Yet the EU commission, that bastion of fiscal
responsibility, is issuing a warning to Germany about excess spending. 
 

Alfred E Newman meets Euroland: Europe is
not on the same page as the IMF, the World Bank, or the US. Economists
in the US are talking about the prospect of DEPRESSION. In Europe they
are &#8216;la tee da&#8217; about the downturn treating it like a minor
inconvenience, not even as the powerful recession that it clearly is,
let alone acknowledging the risk of worsening. The EU Commission is
concerned about the Mass-Trick criterion for debt to GDP and about
annual fiscal deficits as if Europe were out of sorts with its fiscal
pledges in a boom year. A boom year it is not. Europe is in denial from
the EU Commission to the ECB itself. 
 

The industrial output index is not out of touch. It is taking
noting lightly, it is taking it on the chin. And that raises some
issues for Europe if policy is not going to be responsive to its
clearly deteriorating situation. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Main E-zone Countries and UK IP in MFG
</th></tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Jan-09</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Only</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Jan-09</td>
<td>Jan-09</td>
<td>Jan-09</td>
<td>Q-2-Date</td>
</tr>
<tr>
<td class="firstcol">France: IP excl Construction</td>
<td>-3.1%</td>
<td>-1.5%</td>
<td>-2.8%</td>
<td>-26.0%</td>
<td>-21.3%</td>
<td>-13.8%</td>
<td>-26.9%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-8.4%</td>
<td>3.8%</td>
<td>-9.5%</td>
<td>-45.1%</td>
<td>-38.0%</td>
<td>-23.7%</td>
<td>-34.7%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-2.8%</td>
<td>-1.9%</td>
<td>-3.0%</td>
<td>-26.8%</td>
<td>-19.9%</td>
<td>-12.8%</td>
<td>-23.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Mo/Mo are simple percent changes
others are at SAARs</td>
</tr>
</tbody>
</table>
</body></html>

IP drops sharply – Record drop in France Industrial production continues to show steep declines in the Zone. France reported the largest decline to day since 1990 when the INSEE series first began. Spain’s volatile index fell by 8.4% [...]

IP Drops Sharply in the Euro Area's Early Reports

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310g.jpg" align="right" border="0" height="265" width="353">Country after country has
been reporting declines in its
foreign trade. Imports are down as a result of falling incomes at home,
and exports are down as a result of falling incomes abroad. Today
France reported a 6.7% decline in exports in January from December
while Germany reported a 4.4% decline. From January 2008 to January
2009, French exports declined 21% while those in Germany declined
18.4%. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310h.jpg" align="right" border="0" height="265" width="353">
Imports in France were down17.6% in January from a year ago and
imports in Germany were down 11.1% over the same period. Exports from
France and Germany are shown in the first chart and imports into France
and Germany are shown in the second chart.
Germany typically runs a substantial trade surplus. It reached
a peak of 19.34 billion euros in November 2007. With exports declining
at a faster rate than imports, the balance on trade in goods has
trended downward and in January, 2009 was only 8.3 billion euros.
France, on the other hand has been running a growing trade deficit
since early 2004. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310i.jpg" align="right" border="0" height="265" width="353">
The deficit improved in December to minus 2.95
billion euro from minus 5.67 billion in November but has worsened again
in January and is now at minus 4.55 billion euros. The balances on
trade in goods for France and Germany are shown in the third chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310j.jpg" align="right" border="0" height="265" width="353">
Automobiles and related products have been responsible for a
good part of the decline in exports in France and Germany. The fourth
chart shows exports of these products. The data only go through
December, but even by then the exports of these products were down
31.6% in Germany from a year ago and 44.4% in France. The fourth chart
shows these exports for France and Germany. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">FOREIGN
TRADE (Bil Euros)</th>
<th scope="col">Jan 09</th>
<th scope="col">Dec 08&nbsp;</th>
<th scope="col">Jan&nbsp; 08&nbsp;</th>
<th scope="col">M/M CHG&nbsp;</th>
<th scope="col">Y/Y CHG</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GERMANY</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Exports&nbsp;</td>
<td>68.95</td>
<td>72.13</td>
<td>84.25</td>
<td>-4.41%</td>
<td>-18.35%</td>
<td>990.18</td>
<td>968.36</td>
</tr>
<tr>
<td class="firstcol">Imports&nbsp;&nbsp;</td>
<td>60.64</td>
<td>61.11</td>
<td>68.23</td>
<td>-0.77%</td>
<td>-11.12%</td>
<td>813.46</td>
<td>771.96</td>
</tr>
<tr>
<td class="firstcol">Balance</td>
<td>8.31</td>
<td>11.02</td>
<td>16.22</td>
<td>-2.71</td>
<td>-7.91</td>
<td>176.7</td>
<td>196.40</td>
</tr>
<tr class="odd">
<td class="firstcol">FRANCE</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Exports (Bil Euros)</td>
<td>28.74</td>
<td>30.80</td>
<td>36.37</td>
<td>-6.70%</td>
<td>-20.99%</td>
<td>412.00</td>
<td>403.12</td>
</tr>
<tr>
<td class="firstcol">Imports&nbsp;&nbsp;</td>
<td>33.28</td>
<td>33.75</td>
<td>40.38</td>
<td>-1.38%</td>
<td>-17.57%</td>
<td>465.40</td>
<td>443.07</td>
</tr>
<tr>
<td class="firstcol">Balance</td>
<td>-4.55</td>
<td>-2.95</td>
<td>-4.01</td>
<td>-1.59</td>
<td>-0.54</td>
<td>-53.4</td>
<td>-39.95</td>
</tr>
</tbody>
</table>
</body></html>

Country after country has been reporting declines in its foreign trade. Imports are down as a result of falling incomes at home, and exports are down as a result of falling incomes abroad. Today France reported a 6.7% decline in [...]

Foreign Trade in France and Germany: Casualties of the Recession

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310d.jpg" width="353">
According to the National Federation of Independent Business (NFIB), small business optimism fell even further last month. The index level of 82.6 was down 1.8% month-to-month after a slightly revised 1.3% January decline. The latest level was 8.0% below the 2008 average and it was the second lowest level on record.
During the last ten years there has been a 49% correlation between the level of the NFIB index and the two-quarter change in real GDP.
The percentage of firms planning to raise prices dropped to 1%, a new record low. Price discounts were evident as the percentage of firms actually raising prices fell further into negative territory, and the reading was a record low. During the last ten years there has been a 69% correlation between the y/y change in the producer price index and the level of the NFIB price index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310e.jpg" width="353">
The percent expecting credit conditions to ease fell further and was near its lowest level since 1980. The percent expecting higher real sales in six months fell to a net negative 29%, a record low.
The percentage expecting the economy to improve fell further into negative territory. The percentage reporting that now is a good time to expand the business fell to 3% which was the second lowest reading on record. During the next 3-6 months, plans for capital spending fell slightly and was still near the lowest level since 1975.
The percentage planning to raise employment improved just slightly to a net negative 3% while the percentage of respondents with one or more job openings was stable at 11%, the least since 1992. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls.
The largest, single most important problems seen by business were poor sales (33%), taxes (19%), government requirements (10%), insurance cost and availability (8%), competition from large businesses (6%) and inflation (6%).
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver&#39;s SURVEYS database. 
Financial Reform to Address Systemic Risk is this morning&#39;s speech by Fed Chairman Ben S. Bernanke at the Council on Foreign Relations, Washington, D.C. It is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090310a.htm">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/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">February</th>
<th scope="col">January</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">Small Business Optimism Index (SA, 1986=100)</td>
<td>82.6</td>
<td>84.1</td>
<td>-11.1%</td>
<td>89.8</td>
<td>96.7</td>
<td>98.9</td>
</tr>
</tbody>
</table>
</body>
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According to the National Federation of Independent Business (NFIB), small business optimism fell even further last month. The index level of 82.6 was down 1.8% month-to-month after a slightly revised 1.3% January decline. The latest [...]

U.S. Small Business Optimism Nearing All-time Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310c.jpg" width="353">
Chain store sales ticked up 0.2% last week and began this month slightly above the February average, according to the International Council of Shopping Centers-Goldman Sachs Index. A moderate rebound in consumer spending is indicated by the 3.0% increase in the level of spending from the late-January low.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The outlook for sales, however, remains cautious. The weekly leading indicator of chain store sales from ICSC-Goldman Sachs slipped another 0.2% last week and for all of February fell 2.3% from January (-4.4% y/y).
Inflation Targeting&#151;Central Bank Practice Overseas from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/economic/ppb/2008/ppb081.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></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</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>484.1</td>
<td>483.0</td>
<td>-0.9%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


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Chain store sales ticked up 0.2% last week and began this month slightly above the February average, according to the International Council of Shopping Centers-Goldman Sachs Index. A moderate rebound in consumer spending is indicated [...]

U.S. Chain Store Sales Are Up in Early March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310a.jpg" width="353">
Regular gasoline prices were roughly stable last week, up one penny to $1.94 per gallon. That left the price still near the middle of the $1.89 to $1.96 range in place since early February but the latest was up 33 cents from the December low. Yesterday, the spot market price for regular gasoline was also about stable at $1.23. 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 continued downward last week, according to the U.S. Energy Department. The y/y change of -0.4%, however, has moderated from the rate of decline seen last October when demand was falling 4.8% y/y. (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 1.3% year-to-year 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/090310b.jpg" width="353">
The price for a barrel of West Texas Intermediate crude oil rose last week to $43.26 per barrel. That pulled prices to the high end of their recent range between $37.00 and $44.50 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 $47.07 per barrel. Last week&#39;s average was $43.26 and the February low was $36.91.
Also reported by the U.S. Energy Information Agency was that inventories of crude oil &amp; petroleum products rose 6.2% year-to-year after a 7.5% decumulation rate this past September. Distillate fuel oil inventories have risen by 21.8% year-to-year while gasoline inventories are off 8.0%. These demand &amp; inventory figures also are available in Haver&#39;s OILWKLY database.
The price of natural gas ticked up last week to $4.24 per mmbtu (-55.2% y/y), near the lowest level since September 2006. The latest average price was down more than two-thirds from the high reached in early-July of $13.19/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">03/09/09</th>
<th scope="col">03/02/09</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>1.94</td>
<td>1.93</td>
<td>-39.8%</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>43.26</td>
<td>41.81</td>
<td>-58.2%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Regular gasoline prices were roughly stable last week, up one penny to $1.94 per gallon. That left the price still near the middle of the $1.89 to $1.96 range in place since early February but the latest was up 33 cents from the [...]

U.S. Gasoline Prices Are Stable; Crude Oil Prices Rise

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090309a.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s economy watchers index is making further tentative
signs of rebounding from its very deep cyclical lows in this cycle. The
future index has made a more substantial bounced higher, but the
current index is rising too. The future index is still in the bottom
22% of its five year range. The headline index is only in the 8.5%
percentile of its range. But any improvement begins from where you are.
In December each of these measures was at a five year low. So this is
what the early signs of progress look like. It is too soon to take the
positive moves in these signs to the bank. But I think we have been
very oversold in markets and that commentators have been pessimistic
beyond what prudence would call for. Japan&#8217;s early signs join some from
the US that say conditions are not now getting worse. This may well be
among the first tentative steps on the road to eventual recovery. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Key Japanese surveys</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="grey4">
<td class="firstcol">Diffusion</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>Dec-08</td>
</tr>
<tr class="grey3">
<td class="firstcol">Economy Watchers</td>
<td>19.4</td>
<td>17.1</td>
<td>15.9</td>
<td>21.0</td>
<td>8.5%</td>
<td>2.9%</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Employment</td>
<td>11.9</td>
<td>10.1</td>
<td>8.5</td>
<td>15.7</td>
<td>5.9%</td>
<td>2.8%</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Future</td>
<td>26.5</td>
<td>22.1</td>
<td>17.6</td>
<td>24.7</td>
<td>22.8%</td>
<td>11.5%</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">NTC MFG</td>
<td>31.6</td>
<td>29.6</td>
<td>30.8</td>
<td>36.7</td>
<td>7.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="8">Econ Trends (Teikoku'/50
neutral/weighted diffusion)</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG</td>
<td>17.0</td>
<td>17.7</td>
<td>19.3</td>
<td>24.5</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Retail</td>
<td>20.5</td>
<td>21.6</td>
<td>21.3</td>
<td>24.4</td>
<td>0.0%</td>
<td>1.5%</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Wholesale</td>
<td>18.4</td>
<td>19.0</td>
<td>20.4</td>
<td>24.7</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Services</td>
<td>22.6</td>
<td>23.3</td>
<td>24.1</td>
<td>28.4</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Construction</td>
<td>18.2</td>
<td>18.6</td>
<td>19.1</td>
<td>21.4</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="8">100 is high; Zero is low</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s economy watchers index is making further tentative signs of rebounding from its very deep cyclical lows in this cycle. The future index has made a more substantial bounced higher, but the current index is rising too. The [...]

Some Further Rebounding from Japan's Economy Watchers Index

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090309b.jpg" align="left" border="0" height="265" width="353">
Japan recorded a current account deficit in January of $172.8
billion yen, due largely to the collapse in exports. Exports of goods
declined by 1309.6 billion yen in January and were 2830.6 billion yen
below a year ago. Imports declined 663.2 billion yen in January and
were 1914.9 billion yen below January, 2008. The resulting deficit on
goods was 844.4 billion yen in January, compared with 197.9 billion yen
in December and a surplus of 71.3 in January, 2008. The balance between
income from foreign sources and payments to these sources increased
from 924.2 billion yen in December to 992.4 billion yen in January but
was substantially below the 1,448.4 billion yen of January, 2009. The
deficit on services in January was 255.8 billion yen, little changed
from the 251.6 billion yen of a year ago. The deficit on current
transfers was 65.0 billion yen, down from the 104.4 deficit of January
2008. The first chart shows the importance of the recent decline in the
balance on goods in the decline of the current account.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090309c.jpg" align="right" border="0" height="265" width="353">
January is typically a low month for the current account
balance, as can be seen in the second chart, which shows both the
seasonally unadjusted and adjusted data. After seasonal adjustment, the
data for the current account show a surplus of 259.0 billion yen for
January. This surplus is, however, the lowest recorded since the early
nineties, as can be seen in the second chart, just as the deficit in
the unadjusted data was the highest.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN
CURRENT ACCOUNT (100 Mil Yen)</th>
<th scope="col">Jan 09</th>
<th scope="col">Dec 08&nbsp;</th>
<th scope="col">Jan&nbsp; 08&nbsp;</th>
<th scope="col">M/M CHG&nbsp;</th>
<th scope="col">Y/Y CHG</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total NSA&nbsp;</td>
<td>-1728</td>
<td>1254</td>
<td>11637</td>
<td>-2982</td>
<td>-13365</td>
<td>162802</td>
<td>247938</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>-8444</td>
<td>-1929</td>
<td>+713</td>
<td>-6465</td>
<td>-9157</td>
<td>40337</td>
<td>123225</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>32822</td>
<td>45920</td>
<td>61128</td>
<td>-13096</td>
<td>-28306</td>
<td>773522</td>
<td>797254</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>41266</td>
<td>47266</td>
<td>60415</td>
<td>-6632</td>
<td>-19149</td>
<td>733183</td>
<td>674030</td>
</tr>
<tr class="even">
<td class="firstcol">Services&nbsp;</td>
<td>-2558</td>
<td>-3217</td>
<td>-2516</td>
<td>659</td>
<td>-42</td>
<td>-22366</td>
<td>-24971</td>
</tr>
<tr>
<td class="firstcol">Income</td>
<td>9924</td>
<td>7242</td>
<td>14484</td>
<td>2682</td>
<td>-4560</td>
<td>158324</td>
<td>163267</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Transfers</td>
<td>-650</td>
<td>-793</td>
<td>-1044</td>
<td>143</td>
<td>394</td>
<td>-13497</td>
<td>-13580</td>
</tr>
<tr class="odd">
<td class="firstcol">Total SA</td>
<td>2580</td>
<td>5570</td>
<td>18059</td>
<td>-2990</td>
<td>-15478</td>
<td>162599</td>
<td>250661</td>
</tr>
</tbody>
</table>
</body></html>

Japan recorded a current account deficit in January of $172.8 billion yen, due largely to the collapse in exports. Exports of goods declined by 1309.6 billion yen in January and were 2830.6 billion yen below a year ago. Imports [...]

Japan Starts 2009 with a Current Account Deficit

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

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**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

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**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

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**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

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

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

Economy in Brief: March 2009

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