Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050321b.jpg" width="353">
The European Union Finance Ministers agreed to loosen the terms of the Growth and Stability Pact that was designed to ensure fiscal discipline among the member countries. The pact has virtually been suspended since November, 2003 when France and Germany failed to be censured for their failure to adhere to the letter of the law. With Italy now added to France and Germany having deficits above 3% of Gross Domestic Product (GDP), the need for a review of the criteria of the Growth and Stability Pact became more pressing.
Under the original terms of the Pact, countries having budget deficits in excess of 3% of GDP in two successive years were subject to sanctions and fines unless they experienced a 2% decline in growth. Now, while the 3% limit is maintained, countries may subtract certain expenditure from the calculation of the deficit. Germany, for example, may deduct the costs of reunification and France has been allowed to deduct certain military and research expenditures. Moreover, countries with excessive deficits may take two years to get back under the limit, a period that is renewable for two more years. To mitigate problems for some of the potential new members, the finance ministers agreed to give a five year reprieve to those countries reforming their pension schemes. It is expected that these changes will be ratified at the Brussels summit on March 22-23. While these changes will benefit the big spenders, they are not likely to do much for Greece. Greece will need fundamental restructuring if it is to remain in the Euro zone.
Data on the deficits and surpluses as a percentage of GDP of the European Union countries are available on an annual basis in Haver&#39;s Eurostat data base. Data for the Euro zone countries are shown in the table below and the data for France and Germany are shown in the attached chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Deficit (-)/Surplus (+) %of GDP</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp; 2002</th>
<th scope="col">&nbsp; 2001</th>
<th scope="col">&nbsp; 2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Austria</td>
<td>-1.3</td>
<td>-1.1</td>
<td>-0.2</td>
<td>0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Belgium</td>
<td>0.1</td>
<td>0.4</td>
<td>0.1</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Finland</td>
<td>2.1</td>
<td>2.5</td>
<td>4.3</td>
<td>5.2</td>
<td>7.1</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>-3.7</td>
<td>-4.3</td>
<td>-3.2</td>
<td>-1.3</td>
<td>-1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-3.7</td>
<td>-3.1</td>
<td>-3.7</td>
<td>-2.8</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>-6.1</td>
<td>-5.2</td>
<td>-4.1</td>
<td>-3.6</td>
<td>-4.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>1.3</td>
<td>0.2</td>
<td>-1.4</td>
<td>0.9</td>
<td>4.4</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-3.0</td>
<td>-2.9</td>
<td>-2.6</td>
<td>-3.0</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Luxembourg</td>
<td>-1.1</td>
<td>0.5</td>
<td>2.3</td>
<td>6.2</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>-2.5</td>
<td>-3.2</td>
<td>-1.9</td>
<td>-0.1</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Portugal</td>
<td>n.a.</td>
<td>-2.8</td>
<td>-2.7</td>
<td>-4.4</td>
<td>-2.8</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-0.3</td>
<td>0.2</td>
<td>-1.3</td>
<td>-1.5</td>
<td>0.9</td>
</tr>
</tbody>
</table>
</body>
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The European Union Finance Ministers agreed to loosen the terms of the Growth and Stability Pact that was designed to ensure fiscal discipline among the member countries. The pact has virtually been suspended since November, 2003 when [...]

European Finance Ministers Agree to Modify Terms of the Stability and Growth Pact

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050321a.jpg" width="353">
The Weekly Leading Index of the US economy from the Economic Cycle Research Institute (ECRI) rose 0.5% in the latest week, continuing the moderate growth of the prior two weeks. The six month growth rate of 3.5% was the strongest in nearly a year.
The latest increase was due to a rise in mortgage applications and lower claims for jobless insurance.
During the last ten years there has been a 69% correlation between six-month growth in the ECRI leading index and two quarter growth in real U.S. GDP.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The ECRI Leading Index&#39;s recent pattern generally mirrors the Conference Board&#39;s Index of Leading Economic Indicators, with a slight lead. Construction of the ECRI Leading Index differs from the Conference Board Index but there has been a 70% correlation between the y/y percent change in the two series over the last 10 years.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months.
The latest from ECRI is available <a href="http://www.businesscycle.com/">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/@W8/@W801/@W801.HTM">ECRI Leading Index</a></th>
<th scope="col">03/11/05</th>
<th scope="col">03/04/05</th>
<th scope="col">Growth Rate</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Weekly</td>
<td>135.9</td>
<td>135.2</td>
<td>3.6%</td>
<td>4.2%</td>
<td>6.7%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Feb</td>
<td>Jan</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly</td>
<td>134.4</td>
<td>132.7</td>
<td>2.1%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
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The Weekly Leading Index of the US economy from the Economic Cycle Research Institute (ECRI) rose 0.5% in the latest week, continuing the moderate growth of the prior two weeks. The six month growth rate of 3.5% was the strongest in [...]

ECRI Leading Index of U.S. Economy Up

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318c.jpg" width="353">
Italy&#39;s merchandise trade accounts have turned to a deficit position, with the total balance for 2004 in deficit for the first time since 1992. In January, reported today by Italy&#39;s National Institute of Statistics, the deficit was &#128;554 million, seasonally adjusted, nearly the same as December&#39;s &#128;609 million. Exports eased &#128;168 million, while imports were off &#128;223 million. Longer trends in exports and imports indicate that adverse developments on both sides of the trade accounts generated the deficit.
Exports drifted downward from late 2001 until early last spring. This slack was reflected in shipments to customers elsewhere in the EU and also to non-EU areas; see the accompanying graph. By type of product, all three major categories were flat: consumer goods, investment goods and intermediate products. The latter two have rebounded in recent months, while consumer goods exports remain sluggish.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318d.jpg" width="353">
Imports didn&#39;t expand in that 2001-2003 period, but they did stay steady as exports declined, and they have run up rapidly since last April. The surge in energy prices is an obvious driver of this growth, but notably, consumer, investment and intermediate goods categories have all participated, nearly equally. It will be interesting in coming months to see if the continuing pressure on energy prices will eventually eat into demand for other goods and services, in Italy, but also among Italy&#39;s trading partners.

<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/ITALY/ITALY.HTM">Italy: Trade</a></th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Trade Balance, Months SA, Mil.Euros</td>
<td>-554</td>
<td>-609</td>
<td>-170</td>
<td>-1513</td>
<td>+2751</td>
<td>+8815</td>
</tr>
<tr>
<td class="firstcol">Exports, NSA, Yr/Yr % Chg </td>
<td>11.0</td>
<td>18.7</td>
<td>15.3</td>
<td>7.7</td>
<td>-2.0</td>
<td>-1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports, NSA, Yr/Yr % Chg</td>
<td>7.4</td>
<td>20.5</td>
<td>19.1</td>
<td>9.4</td>
<td>0.3</td>
<td>-1.1</td>
</tr>
<tr>
<td class="firstcol">Energy, NSA, % of Imports</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">&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">EU25, Months SA, Mil.Euros</td>
<td>-490</td>
<td>-486</td>
<td>-117</td>
<td>-2799</td>
<td>-197</td>
<td>+1045</td>
</tr>
<tr class="odd">
<td class="firstcol">Non-EU25, Months SA, Mil.Euros</td>
<td>-64</td>
<td>-123</td>
<td>-53</td>
<td>+1288</td>
<td>+2949</td>
<td>+7772</td>
</tr>
</tbody>
</table>
</body>
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Italy's merchandise trade accounts have turned to a deficit position, with the total balance for 2004 in deficit for the first time since 1992. In January, reported today by Italy's National Institute of Statistics, the deficit was [...]

Italian Trade Renews Expansion, but Sustains First Annual Deficit in 12 Years

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318b.jpg" width="353">
The preliminary March reading of consumer sentiment from the University of Michigan fell to 92.9. The 1.3% m/m fall was similar to the declines logged during the prior two months. Consensus expectations had been for a slight rise to 94.8. During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
The reading of current conditions fell for the second month. The 1.7% decline was led by a 6.0% drop (-7.3% y/y) in the sentiment of families earning more than $50,000 per year. Sentiment in families earning less than $50,000 per year rose 7.0% (0.8% y/y).
Consumer expectations slipped 0.9% (-5.9% y/y) for the third consecutive monthly decline as the expected change in real income fell 4.7% (-8.0% y/y).
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
Reexamining the Consumption-Wealth Relationship: The Role of Uncertainty from the Federal Reserve Bank of New York is Available <a href="http://www.newyorkfed.org/research/staff_reports/sr202.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>92.9</td>
<td>94.1</td>
<td>-3.0%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>107.3</td>
<td>109.2</td>
<td>0.5%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>83.6</td>
<td>84.4</td>
<td>-5.9%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
</body>
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The preliminary March reading of consumer sentiment from the University of Michigan fell to 92.9. The 1.3% m/m fall was similar to the declines logged during the prior two months. Consensus expectations had been for a slight rise to [...]

U.S. Consumer Sentiment Faded Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318a.jpg" width="353">
Import prices rose 0.8% last month and about matched Consensus expectations for a 0.7% rise. The prior month&#39;s increase was revised down slightly due to a lessened gain in petroleum prices but the estimated rise in nonpetroleum prices was revised higher.
Petroleum prices jumped 3.9% on top of the 3.4% surge the prior month. So far in March the price of Brent Crude oil has averaged $52.15 per barrel, up 14.2% versus the $45.66 averaged last month.
Other than oil, import prices continued to move moderately higher. Prices for nonauto consumer goods rose 0.2% (1.0% y/y) though prices in most categories were little changed. Capital goods prices also were unchanged m/m (-0.6% y/y) but lower computer prices (-0.4% m/m, -6.8% y/y) accounted for most of the weakness. Excluding computers capital goods prices rose 0.2% (2.5% y/y) and contrasted with price deflation in excess of 2% early in 2002.
Export prices were unchanged last month as a 0.9% decline (-8.2% y/y) in agricultural prices offset a 0.1% (4.7% y/y) gain in nonagricultural export prices.
<a href="http://www.bos.frb.org/economic/neer/neer2002/neer102a.pdf">Exchange Rates and the Prices of Manufacturing Products Imported into the United States</a> is a 2002 article from the Federal Reserve Bank of New England.

<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/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.8%</td>
<td>0.7%</td>
<td>6.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>3.9%</td>
<td>3.4%</td>
<td>26.6%</td>
<td>30.4%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.0%</td>
<td>0.9%</td>
<td>3.4%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

Import prices rose 0.8% last month and about matched Consensus expectations for a 0.7% rise. The prior month's increase was revised down slightly due to a lessened gain in petroleum prices but the estimated rise in nonpetroleum prices [...]

Imported Price Inflation Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318a.jpg" width="353">
Import prices rose 0.8% last month and about matched Consensus expectations for a 0.7% rise. The prior month&#39;s increase was revised down slightly due to a lessened gain in petroleum prices but the estimated rise in nonpetroleum prices was revised higher.
Petroleum prices jumped 3.9% on top of the 3.4% surge the prior month. So far in March the price of Brent Crude oil has averaged $52.15 per barrel, up 14.2% versus the $45.66 averaged last month.
Other than oil, import prices continued to move moderately higher. Prices for nonauto consumer goods rose 0.2% (1.0% y/y) though prices in most categories were little changed. Capital goods prices also were unchanged m/m (-0.6% y/y) but lower computer prices (-0.4% m/m, -6.8% y/y) accounted for most of the weakness. Excluding computers capital goods prices rose 0.2% (2.5% y/y) and contrasted with price deflation in excess of 2% early in 2002.
Export prices were unchanged last month as a 0.9% decline (-8.2% y/y) in agricultural prices offset a 0.1% (4.7% y/y) gain in nonagricultural export prices.
<a href="http://www.bos.frb.org/economic/neer/neer2002/neer102a.pdf">Exchange Rates and the Prices of Manufacturing Products Imported into the United States</a> is a 2002 article from the Federal Reserve Bank of New England.

<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/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.8%</td>
<td>0.7%</td>
<td>6.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>3.9%</td>
<td>3.4%</td>
<td>26.6%</td>
<td>30.4%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.0%</td>
<td>0.9%</td>
<td>3.4%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Faded Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318b.jpg" width="353">
The preliminary March reading of consumer sentiment from the University of Michigan fell to 92.9. The 1.3% m/m fall was similar to the declines logged during the prior two months. Consensus expectations had been for a slight rise to 94.8. During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
The reading of current conditions fell for the second month. The 1.7% decline was led by a 6.0% drop (-7.3% y/y) in the sentiment of families earning more than $50,000 per year. Sentiment in families earning less than $50,000 per year rose 7.0% (0.8% y/y).
Consumer expectations slipped 0.9% (-5.9% y/y) for the third consecutive monthly decline as the expected change in real income fell 4.7% (-8.0% y/y).
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
Reexamining the Consumption-Wealth Relationship: The Role of Uncertainty from the Federal Reserve Bank of New York is Available <a href="http://www.newyorkfed.org/research/staff_reports/sr202.html"> 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/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>92.9</td>
<td>94.1</td>
<td>-3.0%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>107.3</td>
<td>109.2</td>
<td>0.5%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>83.6</td>
<td>84.4</td>
<td>-5.9%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
Italian Trade Renews Expansion, but Sustains First Annual Deficit in 12 Years 
by <a href="/comment/Stone.html">Carol Stone</a> March 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318c.jpg" width="353">
Italy&#39;s merchandise trade accounts have turned to a deficit position, with the total balance for 2004 in deficit for the first time since 1992. In January, reported today by Italy&#39;s National Institute of Statistics, the deficit was &#128;554 million, seasonally adjusted, nearly the same as December&#39;s &#128;609 million. Exports eased &#128;168 million, while imports were off &#128;223 million. Longer trends in exports and imports indicate that adverse developments on both sides of the trade accounts generated the deficit.
Exports drifted downward from late 2001 until early last spring. This slack was reflected in shipments to customers elsewhere in the EU and also to non-EU areas; see the accompanying graph. By type of product, all three major categories were flat: consumer goods, investment goods and intermediate products. The latter two have rebounded in recent months, while consumer goods exports remain sluggish.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318d.jpg" width="353">
Imports didn&#39;t expand in that 2001-2003 period, but they did stay steady as exports declined, and they have run up rapidly since last April. The surge in energy prices is an obvious driver of this growth, but notably, consumer, investment and intermediate goods categories have all participated, nearly equally. It will be interesting in coming months to see if the continuing pressure on energy prices will eventually eat into demand for other goods and services, in Italy, but also among Italy&#39;s trading partners.

<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/ITALY/ITALY.HTM">Italy: Trade</a></th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Trade Balance, Months SA, Mil.Euros</td>
<td>-554</td>
<td>-609</td>
<td>-170</td>
<td>-1513</td>
<td>+2751</td>
<td>+8815</td>
</tr>
<tr>
<td class="firstcol">Exports, NSA, Yr/Yr % Chg </td>
<td>11.0</td>
<td>18.7</td>
<td>15.3</td>
<td>7.7</td>
<td>-2.0</td>
<td>-1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports, NSA, Yr/Yr % Chg</td>
<td>7.4</td>
<td>20.5</td>
<td>19.1</td>
<td>9.4</td>
<td>0.3</td>
<td>-1.1</td>
</tr>
<tr>
<td class="firstcol">Energy, NSA, % of Imports</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">&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">EU25, Months SA, Mil.Euros</td>
<td>-490</td>
<td>-486</td>
<td>-117</td>
<td>-2799</td>
<td>-197</td>
<td>+1045</td>
</tr>
<tr class="odd">
<td class="firstcol">Non-EU25, Months SA, Mil.Euros</td>
<td>-64</td>
<td>-123</td>
<td>-53</td>
<td>+1288</td>
<td>+2949</td>
<td>+7772</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317c.jpg" width="353">
Canada&#39;s overall financial condition improved markedly in 2004, according to National Balance Sheet data report today by Statistics Canada. Total assets grew 5.7% and nonfinancial assets also grew 5.7%, both more than in 2003. Nonfinancial assets include buildings, equipment, consumer durable goods and the value of land; this sum is also known as &quot;national wealth&quot;. Total liabilities expanded by 5.1%, more than the year before, but less than assets. So the difference, a measure of net worth for the entire economy, grew by 6.9% to nearly C$4.4 trillion. These data are all contained in Haver&#39;s CANSIM database.
Total assets in Canada have grown more rapidly than total liabilities since the middle of 1999, as seen in the first chart. Growth of both slowed with sagging share values and the slowdown in activity during 2001, but assets have remained on a stronger uptrend than liabilities. Nonfinancial assets have increased at a higher rate than liabilities since 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317d.jpg" width="353">
These overall relationships in the Canadian economy and financial system have an interesting relationship to the value of the Canadian currency. The second chart shows a substantial 92% correlation between the ratio of net worth to total liabilities and an index of the Canadian dollar against six other currencies. This ratio may be seen as an indication of leverage: how big is the role of debt in financing macroeconomic activity the nation. It seems intuitive that such a fundamental measure of economic conditions might influence the currency value. In the last couple of years, the weakness of the US dollar may have dominated as a determinant of the exchange rate. Even so, through the 15-year history of the balance sheet data, it is fascinating that the Canadian dollar weakened as long as net worth deteriorated relative to borrowing, but has tended higher since that ratio turned upward in 1999.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CANADA.HTM">Canada</a> Billions Canadian $</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Assets</td>
<td>12,865.0</td>
<td>12,171.0</td>
<td>11,789.5</td>
<td>11,240.1</td>
<td>10,636.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.7</td>
<td>3.2</td>
<td>4.9</td>
<td>5.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Nonfinancial Assets (National Wealth)</td>
<td>4,420.8</td>
<td>4,182.2</td>
<td>3,977.6</td>
<td>3,747.6</td>
<td>3,559.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.7</td>
<td>5.1</td>
<td>6.1</td>
<td>5.3</td>
<td>5.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Liabilities*</td>
<td>8,495.4</td>
<td>8,084.8</td>
<td>7,883.4</td>
<td>7,572.1</td>
<td>7,174.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.1</td>
<td>2.6</td>
<td>4.1</td>
<td>5.5</td>
<td>6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth (Assets - Liabilities)</td>
<td>4,369.5</td>
<td>4,086.2</td>
<td>3,906.1</td>
<td>3,668.0</td>
<td>3,461.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>6.9</td>
<td>4.6</td>
<td>6.5</td>
<td>6.0</td>
<td>7.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Canada's overall financial condition improved markedly in 2004, according to National Balance Sheet data report today by Statistics Canada. Total assets grew 5.7% and nonfinancial assets also grew 5.7%, both more than in 2003. [...]

Canadian Asset Growth Outstrips Liabilities in 2004, A Fundamental Improvement Supporting Currency Value

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Winnie Tapasanun

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General business activity in Texas declined further in December, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure, the general business activity index, fell to -10.9 in December, the lowest level since June, from -10.4 in November and -5.0 in October. The index, while above a low of -35.8 in April, was well below a high of +14.1 in January and +4.5 in December 2024. The index had been in negative territory from February through December 2025, except for a one-month positive reading of +0.9 in July. In December, 12.7% of respondents reported improved business activity, down from 18.9% in November, while 23.6% of respondents reported worsened business conditions, down from November's 29.3%. The company outlook index dropped to -11.9 in December, the fourth consecutive negative reading and the lowest since April, from -6.3 in November. Just 10.8% of respondents expected improved company outlook this month while 22.7% expected deterioration. Data were collected between December 15 and 23 from 74 Texas manufacturers.

The production index, a key measure of state manufacturing conditions, plunged to -3.2 in December after a 15.3-point jump to 20.5 in November, indicating production contracted for the first time since February. A lessened 17.2% of respondents reported higher production this month while an increased 20.4% reported a decline. The capacity utilization index plummeted to -4.5 in December, the lowest reading since February, following a four-year-high 19.4 in November; it was up from a low of -15.0 in January 2024 but well below a record-high 46.3 in March 2021.

The growth rate of orders index declined steeply to -16.0 in December from -1.3 in November, marking the weakest of four successive negative readings and the lowest level since June. The index was above a low of -22.0 in April and a low of -24.3 in November 2023 but significantly below a peak of 29.6 in April 2021. The new orders index fell to -6.4 this month after rising to 4.8 in November, indicating a decline in demand for the third time in four months and the lowest level since June. The index was above a low of -20.0 in April and a low of -21.8 in November 2022 but well below a high of 22.6 in February 2022 and a record-high 38.6 in April 2021. The shipments index plunged to -10.6 this month after jumping to 15.1 in November, marking its first negative reading since June and the lowest since July 2024. The unfilled orders index dropped to -13.5 in December from -6.6 in November, registering the 16th straight negative reading and the lowest since November 2024. The index was below a high of 1.4 in August 2024 but above a low of -26.3 in July 2024. Meanwhile, the delivery time index increased to 3.3 this month, the highest reading since March, from -8.4 in November.

Labor market indexes showed flat employment conditions and shorter workweeks in December. The employment index slipped to -1.1 this month from 1.2 in November, marking its first negative reading since September, with the near-zero level indicating little change in employment. The latest reading, while up from a low of -9.7 in January 2024, was far below a high of 17.9 in January 2023 and a record-high 31.8 in April 2021. A lessened 12.3% of respondents reported net hiring in December while 13.4% reported net layoffs. The hours worked index fell sharply to -7.5 this month, the lowest reading since June, after rising to 9.9 in November. Meanwhile, the wages & benefits index climbed to 21.8 in December, the highest level since October 2024 and near its series average of 21.0, up from 15.4 in November; nevertheless, having been trending downward since a peak of 55.0 in March 2022.

Inflationary pressures were little changed this month. The index for prices received for finished goods declined to 8.2 in December following a 3.1-point rise to 10.8 in November; it was up from a low of -7.0 in November 2023 but meaningfully below a high of 47.4 in March 2022 and a peak of 51.4 in October 2021. In December, 13.1% of respondents reported raising prices while only 4.9% reported lowering prices. The index of prices paid for raw materials rose to 36.0 this month, the highest reading since September, after a 1.9-point increase to 35.3 in November. The index was well above a low of 1.0 in June 2023 but significantly below 73.2 in March 2022 and a record-high 83.8 in November 2021.

Expectations on future manufacturing activity remained positive this month. The future general business activity index dipped to 10.8 in December after rising to 11.0 in November, registering the eighth straight positive reading. The future production index rose to a four-month-high 34.2 from November’s 33.7. Other indexes of future manufacturing activity also rose in December (vs. November), signaling increased activity six months ahead: company outlook (16.5 vs. 16.2), shipments (33.9 vs. 27.0), wages & benefits (42.5 vs. 39.1), and capital expenditures (17.7 vs. 12.9). Meanwhile, future indexes for capacity utilization (28.9 vs. 34.0), new orders (30.5 vs. 39.2), growth rate of new orders (24.9 vs. 27.8), and employment (20.9 vs. 22.3) declined in December (vs. November), but they remained in positive territory.

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's **SURVEYS** database.

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- General Business Activity down in Dec. to -10.9, lowest level since June.
- Company Outlook (-11.9) negative for the fourth straight mth. and at an eight-month low; Production (-3.2) negative for the first time since Feb.
- New Orders Growth (-16.0) and New Orders (-6.4) at a six-month low.
- Employment (-1.1) negative for the first time since Sept.
- Prices Received down 2.6 pts. to 8.2; Prices Paid up 0.7 pts. to a three-month-high 36.0.
- Future General Business Activity down to 10.8, still positive for the eighth consecutive mth.

Texas General Business Activity Still Negative in December, But Expectations Remain Positive

251229F.jpg

251229G.jpg

The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, rose 3.3% m/m to 79.2 in November after increases of 2.4% in October (+1.9% initially) and 0.1% in September (unrevised), according to the National Association of Realtors (NAR). The November reading registered the fourth consecutive m/m gain after declining in July and June. The year-on-year growth rate accelerated to 2.6% in November, the highest since August, from 0.1% in October, though still below +6.0% y/y in November 2024. Despite recent gains, the PHSI had fallen 36.7% since its October 2021 high of 125.1.

The m/m rise in November pending home sales coincided with a decline in the average 30-year mortgage rate to 6.24% in November, the lowest since September 2024, down from 6.25% in October and 6.35% in September. 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 rose m/m in November across all four major regions. Sales in the West recovered 9.2% (2.4% y/y) in November, the first m/m increase since August, following a 1.4% decline in October. Sales in the South rose 2.4% (3.3% y/y), the fourth straight m/m rise, on top of a 2.7% October advance. Sales in the Northeast grew 1.8% (1.8% y/y), the third successive m/m increase, after a 2.3% October gain. Sales in the Midwest rose 1.3% (2.2% y/y), up for the third time in four months, after a 5.3% November rebound.

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 +3.3% (+2.6% y/y) in Nov., driven by lower mortgage rates.
- Home sales m/m up in all four major regions, w/ the highest rate in the West (+9.2%).
- Home sales y/y up across all regions, w/ the highest rate in the South (+3.3%).

U.S. Pending Home Sales Rise for the Fourth Straight Month in November

Robert Brusca

251229E.jpg

Swedish exports advanced month-to-month for the second month in a row while imports continued on a losing streak declining by 0.9% in November.

Exports have gradually been firming with exports falling by 6.1% over 12 months, rising at an annual rate of 4.8% over six months, and then rising at a 3.9% annual rate over three months. Exports are not on a steady acceleration path, but they have transitioned from a year-over-year growth rate that's negative to moderate positive short-term rates of growth.

Swedish imports, on the other hand, are weakening relatively sharply. Imports were down 4.4% over 12 months, down at a 1.2% annual rate over six months, and falling at a 17% annual rate over three months.

The global trade picture remains somewhat mixed. The Baltic Dry goods index, which is an indicator of global trade volume, has backed off of its highs but continues to post relatively steady volume indications. However, the S&P global manufacturing survey has been showing weakness; when manufacturing is weak, typically international trade is weak as well. Swedish trade may be picking up some of that weakness as well.

251229.jpg

On balance, Sweden's trade surplus has continued to recover and hold to a relatively high level over recent months as exports have maintained momentum better than imports.

Swedish domestic barometers of economic growth have remained relatively upbeat including orders and industrial production as well as employment growth and GDP. There is no reason there to expect weak imports based on the recent data we have seen. But then sometimes trade data show economic weakness first.   

At this time, the yearend weakness in Sweden’s imports is without a specific cause. Year-end flows can be surprising. Domestic demand, however, does not appear to be weak. But there is a good deal of weakness in Europe and the Ukraine-Russia war is still a nagging factor – a cloud that hangs over all of Europe with no certain end date or result in sight.

Sweden

Sweden’s Trade; Exports Surge as Imports Recede

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 10,000 to 214,000 in the week of December 20, from 224,000 during the week of December 13. The four-week moving average of initial claims was 216,750, a decrease of 750 from the prior week’s unrevised 217,500.

Federal government employees initially filed 805 (NSA) jobless insurance claims in the week ended December 13, after filing 1091 claims in the week ended December 6.

Continuing claims for unemployment insurance rose 38,000 to 1.923 million in the week ending December 13, after rising 55,000 to 1.885 million, revised from 1.897 million in the week ending December 6. The four-week moving average was 1.894 million in the week ending December 13, down 5,250 from 1.899 million, revised from 1,902,000 in the week ending December 6. The insured unemployment rate stood at 1.3% in the week of December 13, up from 1.2% in the week of December 6.

Federal government employees’ continuing benefits claims were 12,887 (NSA) in the week ending December 6, from 14,077 (NSA) in the week of November 29. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 6, the highest unemployment rates were in New Jersey and Washington (both 2.40%), Massachusetts and Minnesota (both 2.10%), California and Rhode Island (both 2.00%). The lowest rates were in Florida (0.30%), and Alabama, Louisiana, North Carolina (all 0.40%). Rates in other notable states include New York (1.80%), Illinois and Pennsylvania (both 1.70%), and Texas (1.10%). 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.


251224c1.jpg

251224e1.jpg

- Initial claims declined from the prior week.
- Continuing claims rose from the prior week.
- The insured unemployment rate edged up.


U.S. Initial Claims for Unemployment Insurance Dropped in Latest Week

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Mortgage applications dropped 5.0% w/w (+49.8% y/y) in the week of December 19, after a drop of 3.8% w/w (+40.9% y/y) in the week of December 12, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 3.7% w/w (+15.9% y/y) in the latest week, the third consecutive weekly decline, following a drop of 2.8% w/w (+12.3% y/y) in the December 12 week. Applications for loan refinancing dropped 5.6% w/w (+110.1% y/y) in the December 19 week after a decline of 3.6% w/w (+86.0% y/y) in the week of December 12. 

The effective interest rate on a 30-year fixed-rate loan fell 8bps to 6.48% in the week ending December 19 from 6.56% in the week ending December 12. The rate on 15-year fixed-rate mortgages dropped 5bps to 5.86% in the latest week from 5.91% in the prior week. The 30-year Jumbo rate rose 8bps to 6.63% in the December 19 week from 6.55% in the December 12 week. The rate on a 5-year ARM jumped 20bps to 5.96% in the latest week from 5.76% in the December 12 week.

The share of applications for refinancing an existing loan edged up to 59.1% of total applications in the December19 week from 59.0% in the week ending December 12. The adjustable-rate mortgage (ARM) share of activity rose to 8.1% in the latest week from 7.2% in the December 12 week.

The average size of a mortgage loan edged down 0.1% w/w (+7.8% y/y) to $399,700 in the week ending December 19, following a rise of 1.5% w/w (6.4% y/y) to $400,000 in the December 12 week. The average size of a purchase loan rose 1.0% w/w (1.1% y/y) to $428,600 in the latest week, after rising 0.6% w/w (-0.3% y/y) to $424,200 in the prior week. The average size of a loan to refinance a mortgage declined 0.9% w/w (+24.9% y/y) to $379,700 in the December 19 week, following a rise of 2.3% w/w (19.8% y/y) to $383,300 in the week ending December 12.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.


- Both purchase applications and refinancing loan applications fell in the latest week.
- Effective interest rate on 30-year fixed loans fell to 6.48%.
- Average loan size edged down.


Economy in Brief: 2005

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European Finance Ministers Agree to Modify Terms of the Stability and Growth Pact

ECRI Leading Index of U.S. Economy Up

ECRI Leading Index of U.S. Economy Up

Italian Trade Renews Expansion, but Sustains First Annual Deficit in 12 Years

U.S. Consumer Sentiment Faded Further

Imported Price Inflation Up

Imported Price Inflation Up

Canadian Asset Growth Outstrips Liabilities in 2004, A Fundamental Improvement Supporting Currency Value