Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303h.jpg" align="left" border="0" height="265" width="353">
Swiss GDP is taking a hit like the rest of European GDP.
Capital formation in Switzerland is being hit especially hard.
Switzerland, the graph above shows, has been somewhat resistant to
decline in its GDP aggregate until recently when the drop has been very
severe. With banking as a key Swiss industry and the economy hit so
hard, it is no wonder than Switzerland has been drawn into the vortex
of European decline. Switzerland is also a trade-dependent country with
exports plus imports topping aggregate GDP in value. Exports are more
than 50% of GDP by themselves. With the European economy in a shambles,
Swiss exports are being clobbered. Of course Switzerland imports a lot
too, and imports have fallen in percentage terms even more than exports
for the year, but not for the quarter. The trade situation is a big
detractor to Swiss GDP over the quarter as well as over the year due to
the relative size of exports in the Swiss economy. 
 

So far Switzerland has weathered the storm of European
weakness by pumping up government spending. Public sector spending was
up at a 2.9% pace in Q4 and is up by 3.4% Yr/Yr. That helped to drive
up domestic demand in the quarter but Yr/Yr domestic demand is still
dropping. Europe&#8217;s weakness has Switzerland fully in its grasp and the
troubles in Swiss banking will pose an added problem for the Swiss
authorities, trying to the keep the economy afloat. 
 

Longer term, Switzerland&#8217;s banking sector may prove to be even
more of a problem. With a global banking crisis in full bloom the rest
of the world is pushing hard for transparency. Switzerland has long
held a unique position in the global markets with bank secrecy. But
banking problems have become so severe that in the European summit of
one week ago the Europeans called for strong actions against tax
havens. UBS, a major Swiss bank, currently is embroiled in a major
fight in the US where it helped US citizens perpetrate tax fraud. The
Americans are pushing for the release of the names of about 50,000
American citizens that have accounts at UBS. UBS has offered up a much
smaller number of about 250 names. US authorities are pressing UBS and
do not seem likely to accept interventions by the Swiss authorities as
cover. Although the situation gets complicated because a suit filed in
Switzerland is trying to enjoin UBS from releasing these names as it is
a crime &#8211; a violation of Swiss bank secrecy laws - to do so. The issue
and question of bank secrecy and whether it will remain a right is now
under a full court press. With so many scandals and allegations of
fraud in play the international banking authorities do not want to
encounter and black box of secrecy at the end of their chase- as is
happening to the US right now. To Switzerland this is a very important
issue- but it is also important to other banking sectors where
authorities have become increasing suspicious of secrecy anywhere. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Swiss GDP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3"> Consumption</td>
<td> Capital</td>
<td colspan="2"> Trade Domestic</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> GDP</td>
<td> Private</td>
<td> Public</td>
<td> Formation</td>
<td> Exports</td>
<td> Imports</td>
<td> Demand</td>
</tr>
<tr>
<td colspan="8" class="firstcol"> % change Q/Q</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-08</td>
<td>-1.2%</td>
<td>0.4%</td>
<td>2.9%</td>
<td>-12.0%</td>
<td>-28.5%</td>
<td>-21.3%</td>
<td>7.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-08</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>5.7%</td>
<td>-7.2%</td>
<td>1.1%</td>
<td>-2.9%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-08</td>
<td>0.5%</td>
<td>2.5%</td>
<td>3.2%</td>
<td>-2.9%</td>
<td>14.0%</td>
<td>14.0%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-08</td>
<td>0.5%</td>
<td>0.6%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>-2.7%</td>
<td>-12.0%</td>
<td>-4.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol"> % change Yr/Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-08</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>3.4%</td>
<td>-5.4%</td>
<td>-5.4%</td>
<td>-6.4%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-08</td>
<td>1.3%</td>
<td>1.5%</td>
<td>1.2%</td>
<td>-1.3%</td>
<td>4.9%</td>
<td>2.0%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-08</td>
<td>2.3%</td>
<td>2.2%</td>
<td>-1.8%</td>
<td>-2.0%</td>
<td>6.5%</td>
<td>3.4%</td>
<td>0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-08</td>
<td>3.1%</td>
<td>2.2%</td>
<td>-2.6%</td>
<td>1.9%</td>
<td>3.7%</td>
<td>0.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">5-Yrs</td>
<td>2.5%</td>
<td>1.7%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>5.5%</td>
<td>3.5%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
</body></html>

Swiss GDP is taking a hit like the rest of European GDP. Capital formation in Switzerland is being hit especially hard. Switzerland, the graph above shows, has been somewhat resistant to decline in its GDP aggregate until recently [...]

Swiss GDP: In The Soup With The Rest Of Europe

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303g.jpg" width="353">
Chain store sales dipped 0.6% last week (Feb.28) and that did reverse the prior week&#39;s increase, according to the International Council of Shopping Centers-Goldman Sachs Index. But the combination of large gains at the end of January and further, modest February increases raised sales for all of last month by 1.0% above the January average.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The outlook for sales, however, remains cautious. The weekly leading indicator of chain store sales from ICSC-Goldman Sachs slipped 0.2% last week and so far for February was down 2.3% from January (-3.4% y/y).
The Recent Increase in the Volatility of Economic Indicators from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2009/0309/03ecoact.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/28/09</th>
<th scope="col">02/21/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>483.0</td>
<td>485.9</td>
<td>-0.8%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


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Chain store sales dipped 0.6% last week (Feb.28) and that did reverse the prior week's increase, according to the International Council of Shopping Centers-Goldman Sachs Index. But the combination of large gains at the end of January [...]

U.S. Chain Store Sales Dipped Last Week, But Rose For The Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303e.jpg" width="353">
According to the U.S. Department of Energy, regular gasoline prices rose two cents last week and the increase left them in the middle of the $1.89 to $1.96 range in place since early February. At an average $1.93 per gallon prices remained near their recent high, up 32 cents from the December low. Yesterday, the spot market price for regular gasoline reversed course and fell to $1.22, down eight cents from Friday and down eight cents from the early February high of $1.32 per gallon.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303f.jpg" width="353">
Downward momentum in gasoline demand continued to ease last week according to the U.S. Department of Energy. The year-to-year change of -0.5% compared to its worst comparison of -4.8% last October after gasoline prices were hitting their peak. The change in demand is the latest four weeks versus the same four weeks in 2008. Demand for all petroleum products was down 0.8% year-to-year after the -8.0% comparison last October. These numbers are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude rose last week to $41.81 per barrel. Like gasoline, crude oil prices have been trading this year in a tight range between $37.00 and $44.50 per barrel. Prices reached a high of $145.66 last July. In futures trading yesterday, the one-month price for crude oil was $40.15 per barrel. Last week&#39;s average was $42.18.
The price of natural gas fell further last week to $4.16 per mmbtu (-54.7% y/y), the lowest level since September 2006. The latest average price was down more than two-thirds from the high reached in early-July of $13.19/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">03/02/09</th>
<th scope="col">02/23/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>1.93</td>
<td>1.91</td>
<td>-38.8%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>41.81</td>
<td>36.99</td>
<td>-58.6%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
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According to the U.S. Department of Energy, regular gasoline prices rose two cents last week and the increase left them in the middle of the $1.89 to $1.96 range in place since early February. At an average $1.93 per gallon prices [...]

U.S. Gasoline Prices Remained Just Above $1.90; Demand Stabilizing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303a.jpg" width="353">
The news on building activity continues grim. The value of construction put-in-place tumbled 3.3% during January for the third consecutive, sharp decline. The drop was was roughly double the Consensus expectation.
Residential building activity continued its downward march with a 2.9% shortfall which started 2009 activity 18.6% below the 2008 average. Single-family construction activity fell 9.3% and remained off by nearly one half year-to-year. Building activity on multi-family units also was weak and it posted a 1.2% decline (-9.1% y/y). Spending on improvements did increase 3.8% from December but versus one year ago it fell 1.5%.
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The value of nonresidential building activity continued lower, down for the sixth month in the last seven. January activity fell 4.3% led by a 5.8% decline in the health care sector (+6.4% y/y). Spending on office construction fell another 1.5% and it was off 10.4% from one year earlier. Building in the multi-retail sector flopped 1.8% and that decline pulled activity down 20.2% from last January.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303b.jpg" width="353">
Public construction may have started to suffer the recession&#39;s effect of tax revenues. Activity fell 2.3% and that lowered year-to-year growth to 4.4%, the least since early 2005. To amplify the notion of weakness, the level of activity began this year 0.9% below 2008. The value of spending on transportation facilities fell 2.6% (-2.4% y/y), down hard for the third straight month. Spending on highways &amp; streets also fell for the second month but the 1.0% decline still left activity up 6.1% y/y, in line with the firm gains since early 2007. The value of construction on highways &amp; streets is roughly one-third of the value of total public construction spending.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002, and that constant-dollar data are no longer computed.
The construction put-in-place figures are available in Haver&#39;s USECON database.

<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/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-3.3</td>
<td>-2.4</td>
<td>-9.1</td>
<td>-5.6</td>
<td>-2.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-3.7</td>
<td>-2.6</td>
<td>-14.1</td>
<td>-9.8</td>
<td>-6.9</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.9</td>
<td>-4.4</td>
<td>-28.0</td>
<td>-27.6</td>
<td>-19.8</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-4.3</td>
<td>-1.2</td>
<td>0.3</td>
<td>14.9</td>
<td>19.6</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-2.3</td>
<td>-1.8</td>
<td>4.4</td>
<td>6.8</td>
<td>12.3</td>
<td>9.3</td>
</tr>
</tbody>
</table>
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The news on building activity continues grim. The value of construction put-in-place tumbled 3.3% during January for the third consecutive, sharp decline. The drop was was roughly double the Consensus expectation. Residential building [...]

U.S. Construction Spending Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303c.jpg" width="353">
The National Association of Realtors indicated that pending sales of existing homes fell 7.7% in January to a record low. The decline left sales 7.4% below the 2008 average and it was roughly twice the Consensus expectation.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
Lower prices continued to bolster home sales. The median sales price of an existing home fell in January for the seventh straight month and was down 14.8% year-to-year. Prices were down 25.7% from their peak during June 2007. For single-family homes alone, prices fell 2.9% during January and they were off 25.9% from their peak. Lower prices combined with lower interest rates significantly raised the affordability index of a home by 24.9% year-to-year. The latest level was a record high for the series which extends back to 1970.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303d.jpg" width="353">
Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell by 13.5% last month versus January of last year.
At the current sales rate there was a 9.6 months&#39; supply of homes on the market and there was a 10.4 months&#39; supply during all of last year, up from the 8.9 months supply during 2007 and 6.5 months during 2006. For single family homes, there was a 9.2 months&#39; supply in January versus a full-year figure of 10.0 months.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR database.
Current economic and financial conditions and the federal budget is today&#39;s testimony by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090303a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>80.4</td>
<td>87.1</td>
<td>&nbsp;&nbsp; -6.4%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>57.8</td>
<td>66.2</td>
<td>-19.7</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>72.6</td>
<td>80.0</td>
<td>-13.8</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>82.2</td>
<td>93.3</td>
<td>-9.1</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>103.6</td>
<td>101.1</td>
<td>13.5</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
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The National Association of Realtors indicated that pending sales of existing homes fell 7.7% in January to a record low. The decline left sales 7.4% below the 2008 average and it was roughly twice the Consensus expectation. The home [...]

Falling Rates & Prices Push Affordability to New High

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302f.jpg" align="left" border="0" height="265" width="353">
Industrial production in South Korea increased 1.35% in
January, the first increase in four months. However, compared to a year
ago, the unadjusted index is down some 25%. Production of motor
vehicles continues to be the biggest drag with production down more
than 10% in January and down over 40% from a year ago. Production in
Electronic equipment and devices increased 22% in January, but was
still 32% below the year ago figure. Production in the Pharmaceuticals,
medical chemicals and botanical products industry was up only 2.5% in
January, but production in this industry has held relatively steady
and, although only 4% above January 2007,it is one of the few
industries where production is greater than a year ago. These four
indexes are shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302g.jpg" align="right" border="0" height="265" width="353">
Data on international trade in goods in US dollars and Korean
won were released yesterday. The Bank of Korea publishes balance of
payments data in USD and much of the discussion of Korea's trade takes
place in USD terms. However, for domestic considerations the won data
may be more relevant. The two series can differ significantly when
there is a substantial appreciation or depreciation in the won. For
example, in February seasonally unadjusted data on exports in USD show
a year to year decline of 17%, while the seasonally unadjusted data in
won show and increase of 26%. The difference is due to the change that
has taken place in the won over the year. As can be seen in the third
chart which shows the won versus the USD on an inverted scale, the won
has depreciated substantially over the past year. As a result, the
increase in exports in yen, when converted to USD, turn into a decline.
Recent data are shown in the table below.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SOUTH
KOREA&nbsp;</th>
<th scope="col">Jan&nbsp; 09&nbsp;</th>
<th scope="col">Dec 08&nbsp;</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep 08</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Industrial Production
(2005=100)&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>97.9</td>
<td>*6.6</td>
<td>106.8</td>
<td>118.8</td>
<td>121.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Pharmaceuticals, medical chemicals and botanic products</td>
<td>140.1</td>
<td>136.7</td>
<td>124.6</td>
<td>129.5</td>
<td>130.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Motor
Vehicles</td>
<td>69.2</td>
<td>77.5</td>
<td>102.2</td>
<td>117.2</td>
<td>103.3</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Electronic
equipment and devices&nbsp;</td>
<td>117.2</td>
<td>96.2</td>
<td>119.8</td>
<td>143.9</td>
<td>159.9</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>Feb 09</td>
<td>Jan&nbsp; 09&nbsp;</td>
<td>Dec 08&nbsp;</td>
<td>Nov 08&nbsp;</td>
<td>Oct 08</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y %
Change in Yen Exports</td>
<td>25.55</td>
<td>-4.83</td>
<td>20.06</td>
<td>22.61</td>
<td>56.57</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y %
Change in Yen Depreciation</td>
<td>52.50</td>
<td>43.70</td>
<td>42.03</td>
<td>52.57</td>
<td>45.05</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y $
Change in USD Exports</td>
<td>-17.67</td>
<td>-33.76</td>
<td>-18.36</td>
<td>-19.64</td>
<td>7.94</td>
</tr>
</tbody>
</table>
</body></html>

Industrial production in South Korea increased 1.35% in January, the first increase in four months. However, compared to a year ago, the unadjusted index is down some 25%. Production of motor vehicles continues to be the biggest drag [...]

South Korea: Industrial Production Improves a Bit; Exports in Won Rise, but in USD, Fall

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302e.jpg" align="left" border="0" height="265" width="353">
Despite the slippage some consolidation is evident. 
 

Germany Spain and Austria were among the ground hogs that left
their heads in February and did not scurry lower for the winter. There,
MFG PMIs managed to stay higher even though for most of the region
manufacturing was seeing darker days in February. France, a country
that had been holding off the declines succumbed in February with its
MFG index dropping to 34.81 from 37.90; Ireland&#8217;s MFG sector made a
similarly large drop. EMU as a whole, France, Ireland and The
Netherlands this month sport MFG PMI readings that are the lowest ever.
The UK, Italy and Germany each are less than 1% up from their
respective lows. To be sure it remains a very weak February for
European manufacturing. But the good news is that the downturn is NOT
getting worse in several key countries and that the pace of
deterioration where things are unraveling is largely slowing. France
and Ireland are to be taken as notable exceptions. Looks like the Irish
have run out of luck and the French continue to buck the trends to
which everyone else is subject. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">NTC/Markit MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-09</td>
<td> Jan-09</td>
<td> Dec-08</td>
<td> 3Mo</td>
<td> 6Mo</td>
<td> 12Mo</td>
<td> Percentile</td>
</tr>
<tr>
<td class="firstcol"> Euro-13</td>
<td> 33.55</td>
<td> 34.42</td>
<td> 33.87</td>
<td> 33.95</td>
<td> 37.25</td>
<td> 43.41</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>32.14</td>
<td> 31.96</td>
<td> 32.66</td>
<td>32.25</td>
<td>37.11</td>
<td>44.84</td>
<td> 0.7%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td> 34.81</td>
<td>37.90</td>
<td> 34.91</td>
<td>35.87</td>
<td>38.08</td>
<td>43.75</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td> 34.99</td>
<td>36.06</td>
<td>35.54</td>
<td>35.53</td>
<td>37.61</td>
<td>42.55</td>
<td> 0.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>31.85</td>
<td>31.51</td>
<td> 28.49</td>
<td>30.62</td>
<td>32.37</td>
<td>37.65</td>
<td> 11.7%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>34.58</td>
<td> 33.12</td>
<td> 35.01</td>
<td>34.24</td>
<td>38.40</td>
<td>43.95</td>
<td> 5.7%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td> 33.20</td>
<td>38.94</td>
<td>37.87</td>
<td>36.67</td>
<td>38.42</td>
<td>41.62</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td> 35.47</td>
<td> 36.29</td>
<td> 38.42</td>
<td>36.73</td>
<td>40.41</td>
<td>45.62</td>
<td> 0.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td> 34.68</td>
<td>35.79</td>
<td>34.94</td>
<td>35.14</td>
<td>36.94</td>
<td>42.26</td>
<td> 0.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">percentile is over range since March
2000</td>
</tr>
</tbody>
</table>
</body></html>

Despite the slippage some consolidation is evident. Germany Spain and Austria were among the ground hogs that left their heads in February and did not scurry lower for the winter. There, MFG PMIs managed to stay higher even though for [...]

Euro Area MFG PMIs Drop

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

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Andrew Cates

**US trade with Europe** 
Geopolitical tensions surrounding Greenland have abruptly sharpened investor sensitivity to US trade and foreign-policy risk. What might once have been dismissed as rhetorical brinkmanship has taken on greater macro-financial relevance as Donald Trump has coupled renewed interest in Greenland’s strategic importance with explicit threats of higher tariffs on European imports. The first chart below highlights that the US is materially more exposed to EU goods than the EU is to US trade, making any escalation asymmetrically more costly for the US economy. Beyond the direct inflationary impact of higher tariffs, the more immediate risk lies in confidence effects and capital flows: early signs of capital reallocation away from US assets over the past 24 hours suggest that markets could be beginning to price a broader erosion of policy predictability. In this environment, tariffs risk functioning less as a targeted trade tool and more as a systemic confidence shock—tightening financial conditions, unsettling the dollar’s safe-haven status and increasing downside risks to US growth via weaker investment and higher risk premia.

260122Z1.jpg

**Japan’s JGB yields**
That said, recent capital outflows from US assets may owe as much to developments in Japan as to geopolitical and trade-related shocks. While tariff threats and policy unpredictability have clearly unsettled sentiment, an underappreciated driver of the sell-off in US Treasuries has been the sharp repricing in the Japanese government bond market. Renewed domestic political uncertainty and intensifying concerns over Japan’s debt dynamics have triggered a rapid rise in JGB yields, prompting portfolio rebalancing by Japanese investors and reducing the relative appeal of US duration. Given Japan’s role as one of the largest foreign holders of US Treasuries, yield gyrations at home can translate quickly into capital repatriation, hedging adjustments and reduced demand for US bonds. In this sense, recent moves in US yields may reflect less a direct reaction to geopolitical risk and more a globally transmitted capital-flow shock—originating in Japan but felt most acutely in US financial markets.

260122Z2.jpg

**Inflation expectations and oil prices**
Capital-flow dynamics may have also begun to spill over into how markets are pricing US inflation risk and monetary credibility. Historically, medium-term US inflation expectations have remained closely anchored to global energy prices, as illustrated by the strong co-movement between the 5-year forward inflation rate and Brent crude prices. More recently, however, that relationship has begun to fray: inflation expectations have proven notably resilient even as oil prices have softened, suggesting that markets are increasingly pricing political and policy risk rather than cost-push fundamentals alone. Renewed tariff threats under President Trump, combined with heightened geopolitical tensions involving Greenland and transatlantic relations, risk reinforcing concerns that future inflation outcomes could be shaped as much by political intervention as by macroeconomic conditions. Any perception that the Federal Reserve may face constraints on its operational independence would compound this shift—loosening inflation anchors, raising term premia and increasing the sensitivity of capital flows to US policy credibility.

260122Z3.jpg

**UK inflation** 
UK inflation data released this week show a small upside surprise in headline CPI at year-end. Headline CPI inflation specifically rose from 3.2% y/y in November to 3.4% in December, a little more than expected. The chart below shows that the pickup was driven by persistent underlying pressures—most notably in services. While a negative drag from energy prices has largely faded, services inflation continues to account for a disproportionate share of overall price growth, probably reflecting ongoing wage pressures and limited slack in parts of the domestic economy.

260122Z4.jpg

**Wage growth in the US and Europe** 
Labour-market data from the Indeed Hiring Lab reinforce the picture of persistent services-side pressure in the UK inflation mix. As the chart shows, UK posted wage growth remains elevated relative to both the euro area and the US, even though momentum has eased from its 2023 peak. At around the mid-5% range on a three-month moving average basis, UK wage growth is still running at a pace that is difficult to reconcile with a rapid return of services inflation to target. By contrast, posted wage growth in the euro area has slowed more decisively, while the US has seen a sharper deceleration from earlier extremes.

260122Z5.jpg

**China’s property market**
Finally, the Q4 GDP figures released in China this week sit uneasily alongside continued weakness in its domestic property sector, which remains a key drag on both investment and consumption. While Q4 growth of 4.5% y/y brought full-year GDP broadly in line with the authorities’ 5% target, the chart highlights how property-market adjustment is still running deep beneath the surface. Prices of existing homes across China’s 70 cities remain in year-on-year decline, while real estate investment continues to contract sharply, underscoring the scale and persistence of the sector’s retrenchment. This helps explain why fixed asset investment has softened further and why household demand remains subdued, despite more resilient industrial output.

260122Z6.jpg

This week’s data and market moves have been framed by an abrupt escalation in geopolitical tensions surrounding Greenland, which has served as a catalyst for broader financial unease rather than a standalone shock. The episode has sharpened investor focus on US policy predictability, amplifying concerns already evident in the charts on EU–US trade exposure, where tariff threats risk feeding directly into confidence effects and capital flows. At the same time, recent turbulence in Japanese government bonds appears to have been an underappreciated driver of the sell-off in US Treasuries, highlighting how global capital reallocation—rather than geopolitics alone—has contributed to higher US yields. These forces intersect with growing questions around the durability of US monetary credibility, as inflation expectations have shown signs of decoupling from traditional oil-price anchors, raising the sensitivity of markets to any perceived constraints on the Federal Reserve. Beyond the US, UK data delivered a modest upside surprise in headline inflation, with persistent services and wage pressures reinforcing a cautious policy backdrop for the Bank of England. In China, meanwhile, Q4 GDP growth of 4.5% y/y kept full-year expansion aligned with the government’s target, but continued weakness in the property sector remains a significant drag on investment and household confidence. Taken together, the week’s developments point to a global outlook increasingly shaped by geopolitical risk, capital-flow dynamics and domestic  structural constraints, rather than by straightforward cyclical momentum alone.

Charts of the Week: Seeing Green

Sandy Batten

260122N8.jpg

260122C8.jpg

Real GDP increased 4.4% q/q saar in the third quarter of 2025 in the final estimate, up marginally from 4.3% in the first release. The Action Economics Forecast Survey expected no revision. Growth from a year ago was unrevised at 2.3% y/y. Growth of corporate profits was revised up to 4.5% q/q not annualized from 4.2% in the previous report.

The revision to GDP mostly reflected slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventory investment. Nonresidential fixed investment increased a revised 3.2% q/q saar versus a 2.8% gain in the previous release. This reflected a smaller decline in structures, a smaller increase in equipment and a larger increase in intellectual property products than previously estimated. Residential investment was revised weaker with a 7.1% quarterly decline versus -5.1% in the previous estimate.

Upon revision, exports rose 9.6% q/q in Q3 versus 8.8% in the first estimate. Consequently, the trade deficit narrowed a little more than in the first estimate, resulting in net exports adding 1.62%-points to overall growth, 0.03%-point more previously estimated. The decline in inventory investment in Q3 was smaller than previously estimated, reducing the drag from inventories by 0.1%-point versus the previous estimate. The decline in inventories subtracted 0.12%-point in Q3 on top of a 3.44%-point subtraction in Q2.

Domestic demand growth remained solid in Q3 but was revised down 0.1%-point. Final sales to domestic purchasers grew a revised 2.8% q/q saar in Q3 versus 2.9% in the first estimate. Final sales to private domestic purchasers increased 2.9% q/q, down slightly from 3.0% previously.

260122O8.jpg

260122P8.jpg

The primary driver of overall growth continued to be personal consumption expenditures. They increased an unrevised 3.5% q/q saar in Q3, adding 2.34%-points to total GDP growth. This reflected a 3.0% increase in spending on goods versus 3.1% previously and a 3.6% gain in spending on services versus 3.7% previously. The rise in government spending was unrevised at 2.2% q/q. However, spending by the federal government was revised slightly slower to 2.7% from 2.9% while spending by state and local governments was revised up slightly to 2.0% from 1.8%.

Key measures of inflation were unrevised. Inflation as measured by the GDP price index remained at 3.8% q/q saar in Q3, but this was up markedly from 2.1% in Q2. Similarly, PCE inflation in Q3 was unrevised at 2.8% versus 2.1% in Q2. Core PCE inflation was also unrevised at 2.9% in Q3.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

260122Q8.jpg

260122S8.jpg

- Real GDP grew 4.4% q/q saar in Q3 2025, up slightly from 4.3% previously reported.
- The modest upward revision was due mostly to slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventories.
- Growth of domestic demand remained solid in Q3 but was revised down 0.1%-point.
- GDP and PCE inflation were unrevised at 3.8% and 2.8%, respectively. Both are meaningful accelerations from Q2.

U.S. Q3 GDP Growth Revised Slightly Faster

Kathleen Stephansen, CBE

260122A2.jpg

260122B2.jpg

Initial claims for unemployment insurance edged up 1,000 to 200,000 in the week ending January 17, from 199,000 in the week ending January 10, revised from 198,000. The four-week moving average of initial claims was 201,500 in the January 17 week, down 3,750 from 205,250 in the January 10 week, revised from 205,000, and reaching the lowest level for this average since January 13, 2024, when it was 200,000.

Federal government employees initially filed 1010 (NSA) jobless insurance claims in the week ended January 10, after filing 646 (NSA) claims in the week ended January 3.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 26,000 to 1.849 million in the week ended January 10 from 1.875 million in the week ending January 3, revised from 1.884 million. The four-week moving average was 1.871 million in the latest week, down from 1.887 million in the January 3 week, revised from 1.889 million. The insured unemployment rate remained at 1.2% in the week of January 10, unchanged from previous 6 weeks.

Federal government employees’ continuing benefits claims were 12,977 (NSA) in the week ending January 3, from 12,803 (NSA) in the week of December 27.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 3, the highest unemployment rates were in Rhode Island (3.27%), New Jersey (3.17%), Washington (2.85%), Minnesota (2.75%), Massachusetts (2.74%), Oregon (2.37%), Connecticut (2.31%), Montana (2.26%), California (2.21%), and Alaska (2.06%). The lowest rates were in Florida (0.29%), North Carolina (0.40%), and Louisiana (0.43%). Rates in other notable states include New York (2.28%), Pennsylvania (2.23%), Illinois (2.21%), and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

260122C2.jpg

260122D2.jpg

U.S. Initial Claims for Unemployment Insurance Edged Up in Latest Week

260122E.jpg

The National Bank of Belgium index for January 2026 rose to +4 from -1 in December, stronger than its November 2025 reading of +2. The survey value is exceptionally strong, lying in the top 6% of all observations back to 1991, even as the survey contains significant variations that range from strong to quite weak across its various components. What is most notable is that the index itself is extremely high-ranking; the current situation appraisal is also quite high-ranking; and, that the forecast for unemployment embedded in this survey is at a 35-year low. Considering current circumstances, against the events of the last 35 years, that's a rather remarkable finding especially considering the world situation.

**The times, they are a changin’ was Dylan 50 years early?** 
These have been remarkable times in a number of different ways with a clear transition from the circumstances of the post-war period under way. The solidarity of the NATO alliance is clearly in a situation in flux, revealed since Russia invaded Ukraine. Prior to that, the Europeans had resisted putting more money into the NATO pot as the United States had been frantically asking them while it funded most of the security umbrella. Now, in the wake of these new events, and with the changes to the global stage wrought by climate shifting, the U.S. finds Greenland to be a more important piece on the geopolitical chess board and wants to have more say there in order to protect its own flank as Arctic ice packs recede. This is after a period when NATO basically failed to engage in the front-line protections of its own doorstep that the U.S. had thought were necessary. Not surprisingly, the U.S. found that whole episode unsatisfactory and is now reluctant to give up control to NATO of what it regards as the protection of its own back door for the area around Greenland. But at last, Europe and the U.S. appear to have a deal or the makings of one, so, stay tuned. Maybe all civility is not lost.

**Geopolitical shifts meld with economic issues to change the landscape**
Geopolitical shifts are part of the problem because geopolitics and economics help shape one another. And there has been a great deal of economic turmoil as well. The U.S., after reassessing the Post War order, is bringing back to life tariffs, in order to try to get economic leverage after running 33 consecutive years of current account deficits under what people want to call a free trade system. The U.S. finds itself with a still very overvalued dollar and in a situation where its current account deficits are poised to continue to run high and perhaps get higher. Economists say tariffs are not the solution, but maybe they ARE the wake-up call that will lead to a solution? Europeans have also shifted to embracing a larger and larger government sector and ever larger fiscal deficits and more fiscal debt while absorbing migrants. This is constraining its ability to have any kind of a flexible macroeconomic policy and is a severe problem already for the U.K. and France. And these changes are wreaking havoc with what has been a very solid post-war Atlantic alliance.

**Views change**
But the changes that the U.S. has pushed on to the system from its geopolitical adventurism to its use of tariffs and other strong rhetorical comments have led economists to focus on the elevation of uncertainty in the economic system. Elevating uncertainty has an adverse impact on the economy and on growth. I mentioned this with the obvious caveat that this warning by economists seems to have been completely wrong. U.S. growth has turned out to be quite resilient and even strong. It is not the only adamant position that has proved to be wrong and malleable. Despite the reality of climate change, the view that once took carbon as the main and unequivocal climate change agent, itself is shifting. Opposition to carbon has dwindled, more as the U.S. is embracing nuclear power. Artificial intelligence is becoming a strong bet for stronger growth in the future, and this explains why there have been so many shifting views on energy since artificial intelligence requires massive amounts of energy and would make it impossible to make progress on carbon and to push ahead with the AI agenda at the same time. So, instead of delaying AI, the view on carbon had to go. So much for ‘science.’

**Why are Belgians so satisfied?**
The finding that in Belgium consumer confidence has risen sharply in this environment and fears of unemployment are the lowest they've been in 35 years is another shocking development in this pantheon of incredible and shocking changes. As the above discussion points out, a lot is changing and NATO is at odds with the U.S., its lynchpin. Yet, there is no clear increase in uncertainty in Belgium, while they maybe more in Brussels.

**The Belgian Survey: strong despite waffles**
Belgians do not read the economic situation over the next 12 months as that strong at a reading of -29 on the survey; it has weakened over the last few months, and the economic situation assessment is only at its 8.3 percentile, an extremely weak standing. Price trends are the opposite; they have eased somewhat in the recent months, but over the next 12 months the assessment still has a top 14-percentile evaluation. It is in this context that the unemployment forecast, which is the lowest in 35 years, emerges as surprising. The environment to make major household purchases over the next 12 months is only a mid-range at a 45.7 percentile standing. And people rate their financial situation over the next 12 months slightly better than at the end of last year but at only a 34.2 percentile standing. However, the appraisal of the current situation moved up sharply in January and has a 97.7 percentile standing, which is extremely strong.

260122.jpg

**Low unemployment fear spurs confidence**
The reason for consumer confidence to be strong is clear when you see how low concerns are about unemployment. But it's hard to understand why concerns about unemployment are so low with the rest of the economic metrics so varied in the survey. This is especially true with Belgium nestled in the heart of Europe and all of these concerns between the U.S. and NATO swirling around as well as a still very hot war occurring on Europe's border between Ukraine and Russia. Meanwhile, the U.S. position about this war continues to seem to back Ukraine a lot less than it should.

**Belgium is a good bellwether**
The Belgian survey is not the most important bit of economic activity. Belgium is not an extremely important country in Europe, although it's in the heart of the European Union, a member of the European Monetary Union, linked closely to Germany, and to other key European economies through trade, so that its performance likely is a good reflection of what's going on in Europe. It is not a European border country. It is in the heartland of Europe. That may explain a little bit why Belgians are not perhaps as nervous as Poles, are or Finns or the small Baltic countries, and others, with potentially more border proximity and vulnerability to the Russia-Ukraine conflict.

**Belgian optimism flies in out of the blue**
This is an observation. I think it's the kind of observation in this world economy that we find striking and unusual and will bear some further watching and some watching of other similar readings in Europe to see if there's evidence that there's some kind of new resilience that we might have missed. Economists seem hung-up broken-record style on uncertainty. Certainly, there's something here that economists have missed who have only seen these new actions by the U.S. as creating more uncertainty since we do not know what the new Greenland deal is. And uncertainty should create more adversity for growth except that it hasn't worked out that way. And it's a reminder that separating economics from geopolitics may take more than a crowbar. And also that uncertainty comes in many shapes and sizes while some may argue that there still is not a Greenland deal, what we see is a lowering of the temperature, a calming of the rhetoric and a sense that the parties have a horse trade they think they can do to resolve their differences. And while there is still uncertainty, there is also clear progress and a clear reduction in risk. Still, the times are changing.

Belgium

Belgian Consumer Confidence Up and Strong; Fear of Unemployment at 35-Year Low! Is That Possible?

Winnie Tapasanun

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, fell 9.3% m/m to 71.8 in December following unrevised increases of 3.3% in November and 2.4% in October, according to the National Association of Realtors (NAR). December marked the first m/m fall since July and the steepest since April 2020. The year-on-year rate was -3.0% in December, the first negative y/y reading since September, compared to +2.6% in November and -5.0% in December 2024. The index had fallen 42.6% since its October 2021 high of 125.1. In 2025, the PHSI declined 0.9% after drops of 3.0% in 2024 and 16.1% in 2023.

The m/m fall in December pending home sales occurred alongside a decline in the average 30-year mortgage rate to 6.20% in December, the lowest since September 2024, down from 6.24% in November and 6.25% in October. These rates, while below a peak of 7.62% in October 2023, had remained higher than a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales decreased m/m in December across all four major regions. The Midwest recorded the sharpest drop, with sales plunging 14.9% (-9.8% y/y) in December—the first m/m decline since September and the deepest since April 2020—after a 1.3% increase in November. Sales in the West slumped 13.3% (-5.1% y/y), the third m/m decrease in four months, following a 9.2% November rebound. Sales in the Northeast slid 11.0% (-3.6% y/y), the first m/m slide since August, after a 1.8% November rise. Sales in the South fell 4.0% (+2.0% y/y), the first m/m fall since June, after a 2.5% November gain.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- PHSI -9.3% m/m (-3.0% y/y) to 71.8 in Dec., lowest index level since July.
- Home sales m/m down in all four major regions, w/ the Midwest seeing the steepest drop (-14.9%).
- Home sales y/y down in the Northeast, Midwest, and West, but up in the South (+2.0%).

Economy in Brief: 2009

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