Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070302a.jpg" width="353">
The 9% decline in the Chinese stock market last Wednesday was followed by a good deal of turmoil in most of the stock markets of world. There were smaller declines in most other countries and some recoveries later in the week in China and elsewhere. However, in some cases, Brazil for example, the decline continued and by Friday of last week, the Brazilian stock market was 8.3% below the February 26 peak, while the Chinese market had recovered a bit and was 5.8% below its February 26 peak. The first chart compares the daily stock prices in China and Brazil.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070302a.jpg" width="353">
By Friday of last week, the stock markets in India and Japan were down 5.6% and 5.5% respectively, but the market in South Korea was down only 3.8%. The stock markets in South Korea and Japan are shown in the second chart.
Markets in the United State, United Kingdom and in the Euro Area are highly correlated as can be seen in the third and fourth charts. By Friday, the FTSE Eurozone 300 index was down 5.8%, while the U. K. FTSE All shares was down 4.9% and the U. S. Standard and Poor&#39;s 500 was down 4.29%
The above charts show only a few of the many stock markets indexes that Haver carries. The most up to date data are in the DAILY, INTDAILY and MSCID (Morgan Stanley Capital International ). There are also up to date weekly data in the WEEKLY, INTWKLY and MSCIW. National indexes are also given in the country sourced data.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070302a.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070302a.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">STOCK MARKET INDEXES&nbsp;</th>
<th scope="col">2/26/07</th>
<th scope="col">2/27/07</th>
<th scope="col">2/28/07</th>
<th scope="col">3/2/07</th>
<th scope="col">2/26-2/27 %</th>
<th scope="col">2/26-3/2 %&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China Dow Jones Chenzhen (12/31/93=100)</td>
<td>264.5</td>
<td>241.3</td>
<td>250.62</td>
<td>248.96</td>
<td>-8.77</td>
<td>-5.88</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Japan Nikkei 225 (5/16/49=100)</td>
<td>18215</td>
<td>18120</td>
<td>17604</td>
<td>17218</td>
<td>-0.52</td>
<td>-5.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; India Bombay Sensex (1979=100)</td>
<td>13650</td>
<td>13479</td>
<td>12938</td>
<td>12886</td>
<td>-1.25</td>
<td>-5.59</td>
</tr>
<tr>
<td class="firstcol"> South Korea Composite (1/4/80=100) </td>
<td>1470.0</td>
<td>1454.6</td>
<td>1417.3</td>
<td>1414.5</td>
<td>--1.05</td>
<td>-3.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Brazil Bovespa (12/29/83=100)</td>
<td>46207</td>
<td>43145</td>
<td>43892</td>
<td>42670</td>
<td>-6.63</td>
<td>-8.31</td>
</tr>
<tr>
<td class="firstcol">FTSE Euro Zone 300 (7/29/97=100)</td>
<td>1692.7</td>
<td>1643.2</td>
<td>1620.7</td>
<td>1594.0</td>
<td>-2.92</td>
<td>-5.83</td>
</tr>
<tr class="odd">
<td class="firstcol">FTSE U K All Shares (4/10/62=100)</td>
<td>3336.2</td>
<td>3252.3</td>
<td>3198.3</td>
<td>3172.3</td>
<td>-2.51</td>
<td>-4.91</td>
</tr>
<tr>
<td class="firstcol">S&amp;P 500 (41-43=100)</td>
<td>1449.4</td>
<td>1399.0</td>
<td>1406.8</td>
<td>1387.2</td>
<td>-3.47</td>
<td>-4.29</td>
</tr>
</tbody>
</table>
</body>
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The 9% decline in the Chinese stock market last Wednesday was followed by a good deal of turmoil in most of the stock markets of world. There were smaller declines in most other countries and some recoveries later in the week in China [...]

World Stock Markets

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070305a.jpg" width="353">
The 9% decline in the Chinese stock market last Wednesday was followed by a good deal of turmoil in most of the stock markets of world. There were smaller declines in most other countries and some recoveries later in the week in China and elsewhere. However, in some cases, Brazil for example, the decline continued and by Friday of last week, the Brazilian stock market was 8.3% below the February 26 peak, while the Chinese market had recovered a bit and was 5.8% below its February 26 peak. The first chart compares the daily stock prices in China and Brazil.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070305b.jpg" width="353">
By Friday of last week, the stock markets in India and Japan were down 5.6% and 5.5% respectively, but the market in South Korea was down only 3.8%. The stock markets in South Korea and Japan are shown in the second chart.
Markets in the United State, United Kingdom and in the Euro Area are highly correlated as can be seen in the third and fourth charts. By Friday, the FTSE Eurozone 300 index was down 5.8%, while the U. K. FTSE All shares was down 4.9% and the U. S. Standard and Poor&#39;s 500 was down 4.29%
The above charts show only a few of the many stock markets indexes that Haver carries. The most up to date data are in the DAILY, INTDAILY and MSCID (Morgan Stanley Capital International ). There are also up to date weekly data in the WEEKLY, INTWKLY and MSCIW. National indexes are also given in the country sourced data.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070305c.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070305d.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">STOCK MARKET INDEXES&nbsp;</th>
<th scope="col">2/26/07</th>
<th scope="col">2/27/07</th>
<th scope="col">2/28/07</th>
<th scope="col">3/2/07</th>
<th scope="col">2/26-2/27 %</th>
<th scope="col">2/26-3/2 %&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China Dow Jones Chenzhen (12/31/93=100)</td>
<td>264.5</td>
<td>241.3</td>
<td>250.62</td>
<td>248.96</td>
<td>-8.77</td>
<td>-5.88</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Japan Nikkei 225 (5/16/49=100)</td>
<td>18215</td>
<td>18120</td>
<td>17604</td>
<td>17218</td>
<td>-0.52</td>
<td>-5.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; India Bombay Sensex (1979=100)</td>
<td>13650</td>
<td>13479</td>
<td>12938</td>
<td>12886</td>
<td>-1.25</td>
<td>-5.59</td>
</tr>
<tr>
<td class="firstcol"> South Korea Composite (1/4/80=100) </td>
<td>1470.0</td>
<td>1454.6</td>
<td>1417.3</td>
<td>1414.5</td>
<td>--1.05</td>
<td>-3.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Brazil Bovespa (12/29/83=100)</td>
<td>46207</td>
<td>43145</td>
<td>43892</td>
<td>42670</td>
<td>-6.63</td>
<td>-8.31</td>
</tr>
<tr>
<td class="firstcol">FTSE Euro Zone 300 (7/29/97=100)</td>
<td>1692.7</td>
<td>1643.2</td>
<td>1620.7</td>
<td>1594.0</td>
<td>-2.92</td>
<td>-5.83</td>
</tr>
<tr class="odd">
<td class="firstcol">FTSE U K All Shares (4/10/62=100)</td>
<td>3336.2</td>
<td>3252.3</td>
<td>3198.3</td>
<td>3172.3</td>
<td>-2.51</td>
<td>-4.91</td>
</tr>
<tr>
<td class="firstcol">S&amp;P 500 (41-43=100)</td>
<td>1449.4</td>
<td>1399.0</td>
<td>1406.8</td>
<td>1387.2</td>
<td>-3.47</td>
<td>-4.29</td>
</tr>
</tbody>
</table>
</body>
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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/070302a.jpg" width="353">
Consumer spending appears to be recovering in Japan. After a three-month-long decline last summer and early autumn, the index of household living expenditures gained 1.4% in January to 99.3 (seasonally adjusted, 2005=100), the highest value since October 2005, according to a report today by the Statistics Bureau of the Ministry of Internal Affairs and Communications. In real terms, the index was also up 1.4% in January.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070302b.jpg" width="353">
The average spending amounts per household are published in yen on a nominal, not seasonally adjusted basis. The January figures show a 0.63% rise from a year ago, the first year-on-year increase since December 2005. By types of goods and services, the biggest advances were in clothing (8.3%), transportation &amp; communication (6.6%) and recreation &amp; culture (4.4%). The Statistics Bureau also reports a division by motivation: fundamental or selective. Spending on &quot;fundamental&quot; items was up 0.26%, while &quot;selective&quot; outlays gained 1.17%; each of these has shown a positive year-ago comparison in recent months, but this is the first time both have moved ahead in the same month.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070302c.jpg" width="353">
Labor market data were also reported today for January, and they might be seen as helping to give consumer spending a firmer base. The number employed did decline in each December and January, by 210,000 and 220,000, respectively. But that followed four consecutive increases totaling almost the same: 440,000. So the January level of employment, 63.730 million, was about the same as the 63.720 million in July. The accompanying unemployment data show January as the third month running at 4.0%, an almost nine-year low. With the skittish conditions for employment, the low unemployment rate is obviously due in part to a downtrend in labor force participation, not a totally healthy development. Still, progress of sorts is being made in the Japanese economy. The base that is forming in the labor market and the consumer sector may well be better for longer-term expansion than spikes that might be followed by frightening plunges.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN: Household Living Expenditures</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Index, Nominal, SA, 2005=100</td>
<td>99.3</td>
<td>97.9</td>
<td>98.4</td>
<td>98.6</td>
<td>98.1</td>
<td>100.0</td>
<td>100.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Real, SA, 2005=100</td>
<td>99.1</td>
<td>97.7</td>
<td>98.3</td>
<td>98.5</td>
<td>97.8</td>
<td>100.0</td>
<td>100.5</td>
</tr>
<tr class="odd">
<td colspan="8">Amounts, NSA, Y/Y %Chg</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.63</td>
<td>-1.46</td>
<td>-0.26</td>
<td></td>
<td>-1.86</td>
<td>-0.81</td>
<td>0.38</td>
</tr>
<tr class="odd">
<td class="firstcol">Fundamental Items</td>
<td>0.26</td>
<td>1.63</td>
<td>-2.40</td>
<td></td>
<td>-0.96</td>
<td>0.09</td>
<td>-1.23</td>
</tr>
<tr>
<td class="firstcol">Selective Items</td>
<td>1.17</td>
<td>-6.09</td>
<td>2.80</td>
<td></td>
<td>-3.05</td>
<td>-1.97</td>
<td>2.55</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer spending appears to be recovering in Japan. After a three-month-long decline last summer and early autumn, the index of household living expenditures gained 1.4% in January to 99.3 (seasonally adjusted, 2005=100), the highest [...]

Household Expenditures in Japan Show First Yr/Yr Rise in 13 Months; Unemployment Holds at 4.0% for a Third Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070302a.jpg" width="353">
Consumer spending appears to be recovering in Japan. After a three-month-long decline last summer and early autumn, the index of household living expenditures gained 1.4% in January to 99.3 (seasonally adjusted, 2005=100), the highest value since October 2005, according to a report today by the Statistics Bureau of the Ministry of Internal Affairs and Communications. In real terms, the index was also up 1.4% in January.
The average spending amounts per household are published in yen on a nominal, not seasonally adjusted basis. The January figures show a 0.63% rise from a year ago, the first year-on-year increase since December 2005. By types of goods and services, the biggest advances were in clothing (8.3%), transportation &amp; communication (6.6%) and recreation &amp; culture (4.4%). The Statistics Bureau also reports a division by motivation: fundamental or selective. Spending on &quot;fundamental&quot; items was up 0.26%, while &quot;selective&quot; outlays gained 1.17%; each of these has shown a positive year-ago comparison in recent months, but this is the first time both have moved ahead in the same month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070302b.jpg" width="353">
Labor market data were also reported today for January, and they might be seen as helping to give consumer spending a firmer base. The number employed did decline in each December and January, by 210,000 and 220,000, respectively. But that followed four consecutive increases totaling almost the same: 440,000. So the January level of employment, 63.730 million, was about the same as the 63.720 million in July. The accompanying unemployment data show January as the third month running at 4.0%, an almost nine-year low. With the skittish conditions for employment, the low unemployment rate is obviously due in part to a downtrend in labor force participation, not a totally healthy development. Still, progress of sorts is being made in the Japanese economy. The base that is forming in the labor market and the consumer sector may well be better for longer-term expansion than spikes that might be followed by frightening plunges.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN: Household Living Expenditures</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Index, Nominal, SA, 2005=100</td>
<td>99.3</td>
<td>97.9</td>
<td>98.4</td>
<td>98.6</td>
<td>98.1</td>
<td>100.0</td>
<td>100.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Real, SA, 2005=100</td>
<td>99.1</td>
<td>97.7</td>
<td>98.3</td>
<td>98.5</td>
<td>97.8</td>
<td>100.0</td>
<td>100.5</td>
</tr>
<tr class="odd">
<td colspan="8">Amounts, NSA, Y/Y %Chg</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.63</td>
<td>-1.46</td>
<td>-0.26</td>
<td></td>
<td>-1.86</td>
<td>-0.81</td>
<td>0.38</td>
</tr>
<tr class="odd">
<td class="firstcol">Fundamental Items</td>
<td>0.26</td>
<td>1.63</td>
<td>-2.40</td>
<td></td>
<td>-0.96</td>
<td>0.09</td>
<td>-1.23</td>
</tr>
<tr>
<td class="firstcol">Selective Items</td>
<td>1.17</td>
<td>-6.09</td>
<td>2.80</td>
<td></td>
<td>-3.05</td>
<td>-1.97</td>
<td>2.55</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/070301b.jpg" width="353">
Personal income surged by a full 1% in January, following unrevised gains of 0.5% and 0.3% in December and November, respectively. Consensus expectations had envisioned a 0.3% increase. Income was 5.3% ahead of January 2006.
Wages &amp; salaries jumped 1.2% (5.0% y/y). Factory sector wages turned down 0.3%, reversing December&#39;s 0.4% increase; wages in this sector are now down from a year ago, by 0.6%. Wage and salary income in the private service-producing industries gained 1.6% in January (6.1% y/y) after 0.8% in December. Large bonuses and the exercise of stock options caused the outsized January increase. The annual federal government pay increase also added to total wages.
Interest income advanced 0.8% in January, offsetting part of three consecutive monthly declines of 0.4%. Dividend income rose 0.9% in the month and is 12.0% higher than in January 2006.
Personal current taxes increased 2.5% (8.7% y/y). Disposable personal income advanced 0.8% (4.8% y/y), better than the 0.5% increase during December. Real disposable personal income rose 0.8% (2.5% y/y) last month. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070301a.jpg" width="353">
Personal consumption increased 0.5% in January after an unrevised 0.7% gain in December and was marginally above expectations for 0.4%. Spending for motor vehicles, clothing, other nondurables and medical care rose noticeably. The return of colder weather pushed up outlays for home heating, but falling gasoline prices brought some offset to December&#39;s huge rise in gasoline outlays. In real terms, consumer spending rose 0.3% following increases of 0.4% in both December and November.
The personal saving rate was -1.2% in January, marginally better than December&#39;s -1.4%, a downward revision.
The increase in the PCE chain price index slowed to 0.2% in January from 0.3% in December. This overall PCE price gauge was up 2.0% from a year ago. Prices less food &amp; energy were up 0.3% after 0.1% rises in December and November. The three-month change in core prices remained low at 1.8% (annualized), and December&#39;s value was revised to 1.5% from 1.7% reported before. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>1.0%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>5.3%</td>
<td>6.4%</td>
<td>5.2%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.5%</td>
<td>0.7%</td>
<td>0.4%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>6.5%</td>
<td>6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>-1.2%</td>
<td>-1.4%</td>
<td>-1.1%</td>
<td>-0.3% (Jan 06)</td>
<td>-1.1%</td>
<td>-0.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.0%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.3%</td>
<td>2.2%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>


</html>

Personal income surged by a full 1% in January, following unrevised gains of 0.5% and 0.3% in December and November, respectively. Consensus expectations had envisioned a 0.3% increase. Income was 5.3% ahead of January 2006. Wages & [...]

U.S. Personal Income Boosted by Bonuses; Core Prices Pick Up to 0.3%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070228d.jpg" width="353">
A month ago here, Tom Moeller explained that mild weather was likely behind an unexpectedly strong performance for new home sales. They were up 4.8% from November, which itself had risen markedly. All of that has now been reversed as sales in January dropped 16.6% to 937,000 from a modestly revised December total of 1.123M. The January figure is the lowest since 936,000 in February 2003, nearly four years ago. Some change in the weather was probably responsible for this latest move too, as the national average of heating degree days rose from a very low number in December to a near-average number for January.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070228e.jpg" width="353">
January sales were down sharply in every region: in the Northeast, they fell 18.7% (but just 1.6% y/y). In the Midwest, they were off 8.1% and actually maintained a slim gain of 0.6% y/y. Sales in the South fell 9.7% in the month and were down 11.2% from the year earlier. Finally, as with existing home sales, the greatest weakness is in the West. New home sales there slid 37.4% in January to just 166,000, down 50.4% from January 2006 and the lowest since March 1995.
The decline in total sales brought to an end a string of reductions in the inventory of unsold homes, four in a row and five of the last six months. The change was not great, just 540,000 at end-January from 539,000 at end-December, but the drop in sales volume meant that the months&#39; supply at current volume jumped from 5.7 to 6.8, a large one-month increase.
The median new home price rose 0.2% from December to $239,800 (-2.1% from January 2006). There were noticeable upward revisions to prior months, however, including nearly $10,000 in November. The year 2006 now shows a 3.7% rise, not strong, surely, but also not nearly as weak as previously calculated.All the data discussed here are contained in Haver&#39;s USECON database, the home sales under &quot;Housing and Construction&quot; and the heating-degree days under &quot;Other Statistics&quot;, which also includes monthly average temperatures and inches of precipitation. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Sales (SAAR, 000s)</td>
<td>937</td>
<td>1,123</td>
<td>-16.6%</td>
<td>-21.3%</td>
<td>1,070</td>
<td>1,280</td>
<td>1,201</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>239,800</td>
<td>239,400</td>
<td>-0.2%</td>
<td>-2.1%</td>
<td>241,125</td>
<td>234,208</td>
<td>217,817</td>
</tr>
</tbody>
</table>
</body>
</html>

A month ago here, Tom Moeller explained that mild weather was likely behind an unexpectedly strong performance for new home sales. They were up 4.8% from November, which itself had risen markedly. All of that has now been reversed as [...]

New Home Sales Fall 16.6% in January, Pay Back Late 2006 Gains

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

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

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Robert Brusca

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Winnie Tapasanun

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260205Y15.jpg

**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

260205C15.jpg

260205D15.jpg

- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). 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.

260205C2.jpg

260205D2.jpg

- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief: 2007

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Household Expenditures in Japan Show First Yr/Yr Rise in 13 Months; Unemployment Holds at 4.0% for a Third Month

Household Expenditures in Japan Show First Yr/Yr Rise in 13 Months; Unemployment Holds at 4.0% for a Third Month

U.S. Personal Income Boosted by Bonuses; Core Prices Pick Up to 0.3%

U.S. Personal Income Boosted by Bonuses; Core Prices Pick Up to 0.3%

New Home Sales Fall 16.6% in January, Pay Back Late 2006 Gains