Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401g.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401h.jpg" border="0" height="265" width="312">
The Bank of Japan's Tankan Survey released today shows growing
concerns among large manufacturers and non manufacturers, as can be
seen in the first and second charts. The excess of optimists over
pessimists among large manufacturers appraising current conditions
declined to 11% from 19% in December. A slightly smaller decline was
registered for non manufacturers--12% from 16%. In looking to the
second quarter, the excess of optimists over pessimists among large
manufacturers dropped to 7%. For non manufacturers, the excess of
optimists dropped to 13%. One of the factors influencing the
manufacturers, in particular, has been the steep rise in the yen over
the past nine months, can be seen in the third chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401i.jpg" align="right" border="0" height="265" width="312">
Among the most closely watched items in the Tankan survey are
the forecasts of capital spending.In the current survey, manufacturers
plan to increase capital spending in the current fiscal year ending
last month, March, 2008 by 9.5% and non manufacturers by 5.2%. For next
fiscal year ending March 2009, however, both large manufacturers and
non manufacturers are planning to cut capital spending, the
manufacturers by 3.3% and the non manufacturers by 0.6%, as can be seen
in the fourth and fifth charts.
Much more detail from the Tankan can be found in the Haver
Database, JAPAN. Data are available for medium and
small enterprises and for specific industries as well as sales and
profit expectations.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401j.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401k.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:&nbsp;
TANKAN SURVEY&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="9" class="firstcol">Actual
Business Conditions
(% balance)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co. &nbsp;</td>
<td></td>
<td>11</td>
<td>19</td>
<td>23</td>
<td>23</td>
<td>22</td>
<td>23</td>
<td>18</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td></td>
<td>12</td>
<td>16</td>
<td>20</td>
<td>22</td>
<td>20</td>
<td>20</td>
<td>15</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">Forecast
of Business
Conditions Next Quarter ( % balance)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co. &nbsp;</td>
<td>7</td>
<td>15</td>
<td>19</td>
<td>22</td>
<td>20</td>
<td>21</td>
<td>21</td>
<td>16</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td>13</td>
<td>15</td>
<td>21</td>
<td>23</td>
<td>23</td>
<td>22</td>
<td>20</td>
<td>13</td>
</tr>
<tr class="even">
<td colspan="9">&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital
Spending % Change</td>
<td>&nbsp;Fiscal '07</td>
<td>Fiscal '08</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co.</td>
<td>9.5</td>
<td>-3.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td>5.2</td>
<td>-0.6</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Bank of Japan's Tankan Survey released today shows growing concerns among large manufacturers and non manufacturers, as can be seen in the first and second charts. The excess of optimists over pessimists among large manufacturers [...]

Japan: TANKAN Results Show Growing Concerns Among Business

Tom Moeller

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401e.jpg" width="353">
The value of construction put in place slipped 0.3% during February and January was revised to less of a decline of 1.0%. The latest decline was the fifth consecutive monthly drop and the level was 8.5% below the March 2006 peak.
The value of nonresidential building activity ticked down 0.1% after a 1.0% January decline which was half that reported initially. Momentum here recently has diminished substantially. Three month growth in activity is -5.3%. Education facility building slipped 0.2% (+17.3% y/y) after a 2.4% January surge. Spending in the factory sector rose 2.7% (27.4% y/y) and made up a revised 1.6% decline in January. Office construction fell 2.2% (+6.4% y/y) and commercial construction rose 2.6% (2.1% y/y).
The value of residential building activity fell another 0.9%. Construction activity on new single family units collapsed an additional 5.7% (-33.6% y/y). Building activity on multi-family units also slipped 0.3% (-18.5% y/y) but spending on improvements surged 5.1% (8.8% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401f.jpg" width="353">
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.
Public construction spending rose a slight 0.4% for the second month. Construction on highways &amp; streets rose 0.9% (3.7% y/y) after a very much upwardly revised 0.5% January increase. The value of construction on highways &amp; streets is nearly one third of the value of total public construction spending. Building activity of educational facilities slipped 0.2% (+15.0% y/y).
These more detailed categories 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.</div>

<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">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>-1.0%</td>
<td>-3.5%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.5%</td>
<td>-1.5%</td>
<td>-7.1%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-0.9%</td>
<td>-1.9%</td>
<td>-18.8%</td>
<td>-18.1%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>-1.0%</td>
<td>13.2%</td>
<td>18.0%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>0.4%</td>
<td>0.4%</td>
<td>8.2%</td>
<td>12.2%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place slipped 0.3% during February and January was revised to less of a decline of 1.0%. The latest decline was the fifth consecutive monthly drop and the level was 8.5% below the March 2006 peak. The [...]

U.S. Construction Spending Slipped; Nonresidential Activity Slackened

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401d.jpg" width="353">
Chain store sales slipped another 0.2% last week, according to the International Council of Shopping Centers ICSC-UBS Chain Store survey. Together with the prior week&#39;s 0.4% slip, the two declines left sales in March essentially flat with the February average after 0.4% increase.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS 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.
During the latest week the leading indicator of chain store sales from ICSC-UBS surged 0.7% and recovered after the prior week&#39;s 0.5% decline. 
Assessing Employment Growth in 2007 from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-09.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/29/08</th>
<th scope="col">03/22/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>487.5</td>
<td>488.3</td>
<td>0.5%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales slipped another 0.2% last week, according to the International Council of Shopping Centers ICSC-UBS Chain Store survey. Together with the prior week's 0.4% slip, the two declines left sales in March essentially flat [...]

U.S. Chain Store Sales Slipped Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401a.jpg" width="353">
The Institute of Supply Management (ISM) reported that in March its Composite Index of Manufacturing Sector Activity ticked up to 48.6 from 48.3 in February. The rise exceeded Consensus expectations for a decline to 47.5. However, the index remained below the break even level for activity of 50 for the third month in the last four.
Last month&#39;s composite reading was down from 50.7 in January and 48.4 in December. The three month average level of 49.2 remained near its lowest since early 2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401b.jpg" width="353">
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by being constructed using all of the absolute positive changes in activity added to one half of the no change in activity measures.
The employment index rose a sharp 3.2 points to 49.2 and made up all of the declines during the prior two months. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment. The supplier deliveries index also surged 3.5 points to its highest level since late 2006.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401c.jpg" width="353">
Three of the index&#39;s component series fell. The new orders index declined sharply to its lowest level since late in the recession year of 2001. Production also fell sharply to its lowest level since early 2003 and the inventory component slipped to its lowest level since last September.
The new export orders sub-series rose slightly by 0.5 points and recovered just a piece of a large 2.5 point February drop.
The prices paid index surged to its highest level since October 2005. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.
The Economic Review 2008 from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2008/er2008.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>48.6</td>
<td>48.3</td>
<td>50.7</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>46.5</td>
<td>49.1</td>
<td>51.5</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>49.2</td>
<td>46.0</td>
<td>49.2</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>83.5</td>
<td>75.5</td>
<td>65.5</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The Institute of Supply Management (ISM) reported that in March its Composite Index of Manufacturing Sector Activity ticked up to 48.6 from 48.3 in February. The rise exceeded Consensus expectations for a decline to 47.5. However, the [...]

ISM Factory Sector Index Ticked Higher But Still Was Below 50

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401a.jpg" align="left" border="0" height="265" width="353">
The Institute of Supply Management (ISM) reported that in
March its Composite Index of Manufacturing Sector Activity ticked up to
48.6 from 48.3 in February. The rise exceeded Consensus expectations
for a decline to 47.5. However, the index remained below the break even
level for activity of 50 for the third month in the last four.
Last month's composite reading was down from 50.7 in January
and 48.4 in December. The three month average level of 49.2 remained
near its lowest since early 2003.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401b.jpg" align="right" border="0" height="265" width="353">
During the last twenty years there has been a 64% correlation
between the level of the Composite Index and the three month growth in
factory sector industrial production.
It is appropriate to correlate the ISM index level
with factory sector growth because the ISM index
is a diffusion index. It measures growth by being constructed using all
of the absolute positive changes in activity added to one half of the
no change in activity measures.
The employment index rose a sharp 3.2 points to 49.2 and made
up all of the declines during the prior two months. During the last
twenty years there has been a 67% correlation between the level of the
ISM employment Index and the three month growth in factory sector
employment. The supplier deliveries index also surged 3.5 points to its
highest level since late 2006.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401c.jpg" align="left" border="0" height="265" width="353">
Three of the index's component series fell. The new orders
index declined sharply to its lowest level since late in the recession
year of 2001. Production also fell sharply to its lowest level since
early 2003 and the inventory component slipped to its lowest level
since last September.
The new export orders sub-series rose slightly by 0.5 points
and recovered just a piece of a large 2.5 point February drop.
The prices paid index surged to its highest level since
October 2005. During the last twenty years there has been a 77%
correlation between the price index and the three month change in the
PPI for intermediate goods.
The Economic Review 2008 from the Federal
Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2008/er2008.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM
Mfg</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>48.6</td>
<td>48.3</td>
<td>50.7</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>46.5</td>
<td>49.1</td>
<td>51.5</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>49.2</td>
<td>46.0</td>
<td>49.2</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>83.5</td>
<td>75.5</td>
<td>65.5</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
U.S. Construction Spending
Slipped; Nonresidential Activity Slackened 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 1, 2008



<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401e.jpg" align="left" border="0" height="265" width="353">

The value of construction put in place slipped 0.3% during
February and January was revised to less of a decline of 1.0%. The
latest decline was the fifth consecutive monthly drop and the level was
8.5% below the March 2006 peak.
The value of nonresidential building activity ticked down 0.1%
after a 1.0% January decline which was half that reported initially.
Momentum here recently has diminished substantially. Three month growth
in activity is -5.3%. Education facility building slipped 0.2% (+17.3%
y/y) after a 2.4% January surge. Spending in the factory sector rose
2.7% (27.4% y/y) and made up a revised 1.6% decline in January. Office
construction fell 2.2% (+6.4% y/y) and commercial construction rose
2.6% (2.1% y/y).
The value of residential building activity fell another 0.9%.
Construction activity on new single family units collapsed an
additional 5.7% (-33.6% y/y). Building activity on multi-family units
also slipped 0.3% (-18.5% y/y) but spending on improvements surged 5.1%
(8.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401f.jpg" align="right" border="0" height="265" width="353">
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.
Public construction spending rose a slight 0.4% for the second
month. Construction on highways &amp; streets rose 0.9% (3.7% y/y)
after a very much upwardly revised 0.5% January increase. The value of
construction on highways &amp; streets is nearly one third of the
value of total public construction spending. Building activity of
educational facilities slipped 0.2% (+15.0% y/y).
These more detailed categories represent the Census Bureau&#8217;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.
</div>


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<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">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>-1.0%</td>
<td>-3.5%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.5%</td>
<td>-1.5%</td>
<td>-7.1%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-0.9%</td>
<td>-1.9%</td>
<td>-18.8%</td>
<td>-18.1%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>-1.0%</td>
<td>13.2%</td>
<td>18.0%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>0.4%</td>
<td>0.4%</td>
<td>8.2%</td>
<td>12.2%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Slipped
Again 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 1, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401d.jpg" align="left" border="0" height="265" width="353">
Chain store sales slipped another 0.2% last week, according to
the International Council of Shopping Centers ICSC-UBS Chain Store
survey. Together with the prior week's 0.4% slip, the two declines left
sales in March essentially flat with the February average after 0.4%
increase.

During the last ten years there has been a 45% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.

The ICSC-UBS 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.


During the latest week the leading indicator of chain store
sales from ICSC-UBS surged 0.7% and recovered after the
prior week's 0.5% decline. 
Assessing Employment Growth in 2007 from
the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-09.pdf">
here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">03/29/08</th>
<th scope="col">03/22/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>487.5</td>
<td>488.3</td>
<td>0.5%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
&nbsp;Japan: TANKAN
ResultsShow Growing Concerns Among Business&nbsp; 
by <a href="/comment/Curley.html">Louise
Curley</a> April 1, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401g.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401h.jpg" border="0" height="265" width="312">
The Bank of Japan's Tankan Survey released today shows growing
concerns among large manufacturers and non manufacturers, as can be
seen in the first and second charts. The excess of optimists over
pessimists among large manufacturers appraising current conditions
declined to 11% from 19% in December. A slightly smaller decline was
registered for non manufacturers--12% from 16%. In looking to the
second quarter, the excess of optimists over pessimists among large
manufacturers dropped to 7%. For non manufacturers, the excess of
optimists dropped to 13%. One of the factors influencing the
manufacturers, in particular, has been the steep rise in the yen over
the past nine months, can be seen in the third chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401i.jpg" align="right" border="0" height="265" width="312">
Among the most closely watched items in the Tankan survey are
the forecasts of capital spending.In the current survey, manufacturers
plan to increase capital spending in the current fiscal year ending
last month, March, 2008 by 9.5% and non manufacturers by 5.2%. For next
fiscal year ending March 2009, however, both large manufacturers and
non manufacturers are planning to cut capital spending, the
manufacturers by 3.3% and the non manufacturers by 0.6%, as can be seen
in the fourth and fifth charts.
Much more detail from the Tankan can be found in the Haver
Database, JAPAN. Data are available for medium and
small enterprises and for specific industries as well as sales and
profit expectations.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401j.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401k.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:&nbsp;
TANKAN SURVEY&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="9" class="firstcol">Actual
Business Conditions
(% balance)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co. &nbsp;</td>
<td></td>
<td>11</td>
<td>19</td>
<td>23</td>
<td>23</td>
<td>22</td>
<td>23</td>
<td>18</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td></td>
<td>12</td>
<td>16</td>
<td>20</td>
<td>22</td>
<td>20</td>
<td>20</td>
<td>15</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">Forecast
of Business
Conditions Next Quarter ( % balance)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co. &nbsp;</td>
<td>7</td>
<td>15</td>
<td>19</td>
<td>22</td>
<td>20</td>
<td>21</td>
<td>21</td>
<td>16</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td>13</td>
<td>15</td>
<td>21</td>
<td>23</td>
<td>23</td>
<td>22</td>
<td>20</td>
<td>13</td>
</tr>
<tr class="even">
<td colspan="9">&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital
Spending % Change</td>
<td>&nbsp;Fiscal '07</td>
<td>Fiscal '08</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co.</td>
<td>9.5</td>
<td>-3.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td>5.2</td>
<td>-0.6</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
European Economic Data Hits Blow
Hot and Cold: This Time Cold: German Retail Sales 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 1, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401j.jpg" align="left" border="0" height="265" width="353">
While German unemployment fell more than expected in March
there has been no relief to German retailers or by association
consumers. The growth rate series in the chart is remarkable for its
tranquility. German real retail sales are simply flat after some
turbulence early in 2007 stemming from the VAT tax that shifted sales
into 2007 then sucked them out of 2008. Sales
are settling down into a very narrow growth band in late 2007 and 2008.
Even though Germany continues to post acceptable rates of growth, the
consumer has long been forecast as a force to join in to extend the
expansion but he simply has not. Indeed, real retail sales ex-auto
sales (see table, at the bottom) fell sharply in February. Sales by
this measure at the two-month mark in the new quarter are declining at
a 1.3% annual rate. Real ex auto sales would have to rise by 1.6% in
March to &#8216;elevate&#8217; the quarter&#8217;s sales pace to zero.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Real and Nominal Retail Sales </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
<td>QTR, SAAR</td>
</tr>
<tr>
<td class="firstcol">Retaill Ex auto</td>
<td>-0.7%</td>
<td>1.6%</td>
<td>-0.6%</td>
<td>1.2%</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicle and Parts</td>
<td>#N/A</td>
<td>-3.8%</td>
<td>2.9%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>-4.7%</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Food, Beverages &amp;
Tobacco</td>
<td>-2.2%</td>
<td>2.1%</td>
<td>-2.3%</td>
<td>-9.1%</td>
<td>-4.5%</td>
<td>-3.9%</td>
<td>-0.3%</td>
<td>-5.1%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>2.5%</td>
<td>1.6%</td>
<td>0.8%</td>
<td>21.6%</td>
<td>4.4%</td>
<td>4.0%</td>
<td>3.6%</td>
<td>16.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>-1.6%</td>
<td>0.9%</td>
<td>-0.1%</td>
<td>-3.2%</td>
<td>-5.0%</td>
<td>-3.2%</td>
<td>-0.9%</td>
<td>-1.3%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331e.jpg" align="left" border="0" height="265" width="353">
Inflation in the Euro Area continues to climb. The flash
estimate for March was released today and reached 3.5%, up from 3.3% in
February and the highest level since the creation of the Euro Area in
January, 1999. Not surprisingly, business sentiment has been eroding as
a result, not only of rising inflation but also the turmoil in
financial markets. The Economic Sentiment Indicator for the entire
area, also released today, fell to 99.6 in March, the first time it has
been below its long term average of 100 since November, 2005. The first
chart show inflation and confidence in the Euro Area.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331d.jpg" align="right" border="0" height="265" width="353">
While sentiment for the entire area has declined, there has
been considerable variation in the way sentiment has changed among the
big four large countries--Germany, France, Italy and Spain. In Germany,
confidence actually rose slightly--0.3%--to 104.0 in March. In France,
it was unchanged at 105.6. In Italy, however, it was down 1.3% and in
Spain, 4.1%, taking their respective levels to 93.7 and 83.9, well
below their long term averages of 100. In year over year comparisons,
sentiment in Germany was down 4.9% compared with only 2.8% for France.
The big losses in sentiment were in Italy and Spain where the level of
sentiment was 16% and 17%, respectively, below the year ago levels.
Economic Sentiment Indicators for Germany, France, Italy and Spain are
shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CONFIDENCE
MEASURES&nbsp;</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb&nbsp; 08&nbsp;</th>
<th scope="col">Mar&nbsp; 07&nbsp;</th>
<th scope="col">M/M % Chg&nbsp;</th>
<th scope="col">Y/Y % Chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area: Inflation
(Percent)</td>
<td>3.5*</td>
<td>3.3</td>
<td>1.9</td>
<td>0.2</td>
<td>1.6</td>
<td>2.14</td>
<td>2.18</td>
<td>2.19</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Euro Area: Economic
Sentiment Indicator (Long term average =100)&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total
</td>
<td>99.6</td>
<td>100.2</td>
<td>110.6</td>
<td>-0.60</td>
<td>-9.95</td>
<td>108.4</td>
<td>106.3</td>
<td>97.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Germany&nbsp;</td>
<td>104.0</td>
<td>103.7</td>
<td>109.3</td>
<td>0.29</td>
<td>-4.85</td>
<td>108.4</td>
<td>105.2</td>
<td>94.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>105.6</td>
<td>105.6</td>
<td>108.0</td>
<td>0.0</td>
<td>-2.76</td>
<td>109.8</td>
<td>106.2</td>
<td>102.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Italy&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>93.7</td>
<td>94.9</td>
<td>111.4</td>
<td>-1.26</td>
<td>-15.89</td>
<td>105.4</td>
<td>108.4</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spain</td>
<td>83.9</td>
<td>87.5</td>
<td>101.5</td>
<td>-4.11</td>
<td>-17.34</td>
<td>97.7</td>
<td>98.9</td>
<td>100.6</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">*Flash Estimate (Changes are
differences)</td>
</tr>
</tbody>
</table>
</body></html>

Inflation in the Euro Area continues to climb. The flash estimate for March was released today and reached 3.5%, up from 3.3% in February and the highest level since the creation of the Euro Area in January, 1999. Not surprisingly, [...]

Inflation and Economic Sentiment in the Euro Area

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331a.jpg" width="353">
Not only have petroleum prices and gold prices surged, but in their wake has been broad based strength in commodity prices.
Industrial metals have remained strong recently despite the weakening of U.S. industrial sector activity. Continued strength in activity in the rest of the world accounts for the increase in metals prices. The table below indicates that aluminum prices are 10% above their 2007 average and they are 46% above 2005. Stainless steel scrap is up 6% from 2007 and more than double the 2005 average price. Prices for copper scrap round out the story of price strength and are 21% higher than last year and they are they are up one and a half times since 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331b.jpg" width="353">
Food prices show less broad based strength. Beef prices generally have moved sideways during the last few years. Milk prices have been volatile. Recently a sharp decline offset what previously was a huge milk price gain and left prices up by nearly one third from the 2005 average. Grain prices are another story with corn prices up strongly in part due to demand for ethanol. Corn prices have nearly tripled the 2005 average and wheat prices similarly have surged.
Strength in oil prices comes from several sources that have nearly doubled crude costs since 2005. 1) Growth in U.S. demand for oil remains firm. It only recently turned slightly negative y/y. 2) Demand from the rest of the world, notably China, is firm. 3) Supply is questionable with the War in Iraq ongoing.
Then there&#39;s the price of gold which has nearly doubled since 2005 and touched $1,000 per ounce mostly due to global unrest.
Why hasn&#39;t all this commodity price strength shown up more in consumer prices? That&#39;s because processing and distribution costs of food account for most of the price consumers pay. Distribution &amp; processing costs have gone up but not nearly as dramatically. The same is true for industrial materials prices, at least in the U.S. As for crude oil, the price gain has fed through and lifted gasoline prices by nearly 50% since 2005 (That&#39;s not to mention that gas prices have more than tripled since 1995.)<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331c.jpg" width="353">
How does all this shake out? For a while the price strength caused slower than anticipated declines in U.S. interest rates. That has now changed as the Federal Reserve is reacting more to the weakening in economic activity. For U.S. inflation the price gains likely will add further upward pressure, especially since labor costs are rising as is economic liquidity. Will consumer price inflation, therefore, move much higher? A Consensus of economists says no. Weaker U.S. economic growth is expected to diffuse the price pressure and leave the GDP price index up just 2.2% this year and next, down from a 2.7% rise last year and 3.2% during the prior two years.
The commodity price series in the table below can be found in Haver&#39;s WEEKLY database
Current Events in the Economy and Financial Markets is last week&#39;s speech by Sandra Pianalto, President and CEO Federal Reserve Bank of Cleveland and it can be found <a href="http://www.clevelandfed.org/NewsEvents/32708.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Commodity Prices</a></th>
<th scope="col">Latest Week</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Industrial Metals</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Aluminum ($/ Metric Ton)</td>
<td>1.30</td>
<td>1.23</td>
<td>1.10</td>
<td>1.26</td>
<td>1.18</td>
<td>1.18</td>
<td>0.89</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Stainless Steel Scrap ($/Ton)</td>
<td>2,961</td>
<td>2,603</td>
<td>2,570</td>
<td>3,156</td>
<td>2,786</td>
<td>2,918</td>
<td>1,268</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Copper Scrap ($/lb)</td>
<td>3.70</td>
<td>3.57</td>
<td>3.20</td>
<td>2.61</td>
<td>3.06</td>
<td>3.04</td>
<td>2.28</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Foods</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Milk (Cents/lb.)</td>
<td>130</td>
<td>140</td>
<td>158</td>
<td>145</td>
<td>173</td>
<td>98</td>
<td>95</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Beef Carcass (Index Value)</td>
<td>133</td>
<td>138</td>
<td>139</td>
<td>139</td>
<td>141</td>
<td>136</td>
<td>136</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Corn ($/bushel)</td>
<td>5.10</td>
<td>4.88</td>
<td>4.54</td>
<td>3.87</td>
<td>3.49</td>
<td>2.41</td>
<td>1.90</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Wheat ($/bushel)</td>
<td>8.69</td>
<td>9.82</td>
<td>8.44</td>
<td>4.30</td>
<td>5.91</td>
<td>3.78</td>
<td>3.21</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Light Sweet Crude Oil, WTI ($/bbl.)</td>
<td>104.2</td>
<td>94.9</td>
<td>93.4</td>
<td>58.5</td>
<td>72.2</td>
<td>66.1</td>
<td>56.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Gold, Handy &amp; Harmon ($/oz.)</td>
<td>926.8</td>
<td>1,006.8</td>
<td>916.4</td>
<td>884.0</td>
<td>810.5</td>
<td>628.7</td>
<td>507.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Not only have petroleum prices and gold prices surged, but in their wake has been broad based strength in commodity prices. Industrial metals have remained strong recently despite the weakening of U.S. industrial sector activity. [...]

Commodity Prices Surge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331a.jpg" width="353">
Not only have petroleum prices and gold prices surged, but in their wake has been broad based strength in commodity prices.
Industrial metals have remained strong recently despite the weakening of U.S. industrial sector activity. Continued strength in activity in the rest of the world accounts for the increase in metals prices. The table below indicates that aluminum prices are 10% above their 2007 average and they are 46% above 2005. Stainless steel scrap is up 6% from 2007 and more than double the 2005 average price. Prices for copper scrap round out the story of price strength and are 21% higher than last year and they are they are up one and a half times since 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331b.jpg" width="353">
Food prices show less broad based strength. Beef prices generally have moved sideways during the last few years. Milk prices have been volatile. Recently a sharp decline offset what previously was a huge milk price gain and left prices up by nearly one third from the 2005 average. Grain prices are another story with corn prices up strongly in part due to demand for ethanol. Corn prices have nearly tripled the 2005 average and wheat prices similarly have surged.
Strength in oil prices comes from several sources that have nearly doubled crude costs since 2005. 1) Growth in U.S. demand for oil remains firm. It only recently turned slightly negative y/y. 2) Demand from the rest of the world, notably China, is firm. 3) Supply is questionable with the War in Iraq ongoing.
Then there&#39;s the price of gold which has nearly doubled since 2005 and touched $1,000 per ounce mostly due to global unrest.
Why hasn&#39;t all this commodity price strength shown up more in consumer prices? That&#39;s because processing and distribution costs of food account for most of the price consumers pay. Distribution &amp; processing costs have gone up but not nearly as dramatically. The same is true for industrial materials prices, at least in the U.S. As for crude oil, the price gain has fed through and lifted gasoline prices by nearly 50% since 2005 (That&#39;s not to mention that gas prices have more than tripled since 1995.)<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331c.jpg" width="353">
How does all this shake out? For a while the price strength caused slower than anticipated declines in U.S. interest rates. That has now changed as the Federal Reserve is reacting more to the weakening in economic activity. For U.S. inflation the price gains likely will add further upward pressure, especially since labor costs are rising as is economic liquidity. Will consumer price inflation, therefore, move much higher? A Consensus of economists says no. Weaker U.S. economic growth is expected to diffuse the price pressure and leave the GDP price index up just 2.2% this year and next, down from a 2.7% rise last year and 3.2% during the prior two years.
The commodity price series in the table below can be found in Haver&#39;s WEEKLY database
Current Events in the Economy and Financial Markets is last week&#39;s speech by Sandra Pianalto, President and CEO Federal Reserve Bank of Cleveland and it can be found <a href="http://www.clevelandfed.org/NewsEvents/32708.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Commodity Prices</a></th>
<th scope="col">Latest Week</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Industrial Metals</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Aluminum ($/ Metric Ton)</td>
<td>1.30</td>
<td>1.23</td>
<td>1.10</td>
<td>1.26</td>
<td>1.18</td>
<td>1.18</td>
<td>0.89</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Stainless Steel Scrap ($/Ton)</td>
<td>2,961</td>
<td>2,603</td>
<td>2,570</td>
<td>3,156</td>
<td>2,786</td>
<td>2,918</td>
<td>1,268</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Copper Scrap ($/lb)</td>
<td>3.70</td>
<td>3.57</td>
<td>3.20</td>
<td>2.61</td>
<td>3.06</td>
<td>3.04</td>
<td>2.28</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Foods</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Milk (Cents/lb.)</td>
<td>130</td>
<td>140</td>
<td>158</td>
<td>145</td>
<td>173</td>
<td>98</td>
<td>95</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Beef Carcass (Index Value)</td>
<td>133</td>
<td>138</td>
<td>139</td>
<td>139</td>
<td>141</td>
<td>136</td>
<td>136</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Corn ($/bushel)</td>
<td>5.10</td>
<td>4.88</td>
<td>4.54</td>
<td>3.87</td>
<td>3.49</td>
<td>2.41</td>
<td>1.90</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Wheat ($/bushel)</td>
<td>8.69</td>
<td>9.82</td>
<td>8.44</td>
<td>4.30</td>
<td>5.91</td>
<td>3.78</td>
<td>3.21</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Light Sweet Crude Oil, WTI ($/bbl.)</td>
<td>104.2</td>
<td>94.9</td>
<td>93.4</td>
<td>58.5</td>
<td>72.2</td>
<td>66.1</td>
<td>56.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Gold, Handy &amp; Harmon ($/oz.)</td>
<td>926.8</td>
<td>1,006.8</td>
<td>916.4</td>
<td>884.0</td>
<td>810.5</td>
<td>628.7</td>
<td>507.4</td>
</tr>
</tbody>
</table>
 Inflation and Economic Sentiment in the Euro Area  
by <a href="/comment/Curley.html">Louise Curley</a> March 31, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331e.jpg" width="353">
Inflation in the Euro Area continues to climb. The flash estimate for March was released today and reached 3.5%, up from 3.3% in February and the highest level since the creation of the Euro Area in January, 1999. Not surprisingly, business sentiment has been eroding as a result, not only of rising inflation but also the turmoil in financial markets. The Economic Sentiment Indicator for the entire area, also released today, fell to 99.6 in March, the first time it has been below its long term average of 100 since November, 2005. The first chart show inflation and confidence in the Euro Area.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331d.jpg" width="353">
While sentiment for the entire area has declined, there has been considerable variation in the way sentiment has changed among the big four large countries--Germany, France, Italy and Spain. In Germany, confidence actually rose slightly--0.3%--to 104.0 in March. In France, it was unchanged at 105.6. In Italy, however, it was down 1.3% and in Spain, 4.1%, taking their respective levels to 93.7 and 83.9, well below their long term averages of 100. In year over year comparisons, sentiment in Germany was down 4.9% compared with only 2.8% for France. The big losses in sentiment were in Italy and Spain where the level of sentiment was 16% and 17%, respectively, below the year ago levels. Economic Sentiment Indicators for Germany, France, Italy and Spain are shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CONFIDENCE MEASURES&nbsp;</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb&nbsp; 08&nbsp;</th>
<th scope="col">Mar&nbsp; 07&nbsp;</th>
<th scope="col">M/M % Chg&nbsp;</th>
<th scope="col">Y/Y % Chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area: Inflation (Percent)</td>
<td>3.5*</td>
<td>3.3</td>
<td>1.9</td>
<td>0.2</td>
<td>1.6</td>
<td>2.14</td>
<td>2.18</td>
<td>2.19</td>
</tr>
<tr>
<td class="firstcol">Euro Area: Economic Sentiment Indicator (Long term average =100)&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>99.6</td>
<td>100.2</td>
<td>110.6</td>
<td>-0.60</td>
<td>-9.95</td>
<td>108.4</td>
<td>106.3</td>
<td>97.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Germany&nbsp;</td>
<td>104.0</td>
<td>103.7</td>
<td>109.3</td>
<td>0.29</td>
<td>-4.85</td>
<td>108.4</td>
<td>105.2</td>
<td>94.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>105.6</td>
<td>105.6</td>
<td>108.0</td>
<td>0.0</td>
<td>-2.76</td>
<td>109.8</td>
<td>106.2</td>
<td>102.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Italy&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>93.7</td>
<td>94.9</td>
<td>111.4</td>
<td>-1.26</td>
<td>-15.89</td>
<td>105.4</td>
<td>108.4</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spain</td>
<td>83.9</td>
<td>87.5</td>
<td>101.5</td>
<td>-4.11</td>
<td>-17.34</td>
<td>97.7</td>
<td>98.9</td>
<td>100.6</td>
</tr>
<tr class="odd">
<td class="firstcol">*Flash Estimate (Changes are differences)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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The NFIB Small Business Optimism Index eased 0.6% (+4.8%) to 98.2 in October after falling 2.0% to a 98.8 in September and rising 0.5% to 100.8 in August, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. Four of the ten index components increased last month while five fell and one was unchanged. The NFIB Small Business Uncertainty Index fell 12.0% (-20.0% y/y) last month to 88 after rising 7.5% in September.

The outlook for business conditions was mixed in the latest survey. The net balance of respondents planning to add to inventories declined to a six-month low of -2% from +1% in September. The net percent expecting the economy to improve fell to 20% last month after weakening to 23% in September. A lessened 6% expected higher real sales in six months, compared to 8% in September. A lessened 15% of respondents indicated that now was a good time to increase employment compared to 16% in September. Earnings trends deteriorated sharply.

Offsetting these declines, plans to make capital outlays rose to a ten-month high of 23% of firms after steadying at 21%. The index of expected credit conditions jumped to -3% from -7%. It remained up from a low of -11 in November 2023. A modestly increased 13% of respondents felt that now was a good time to expand. Inventories were assessed as being too low by a lessened 4% of respondents after 7% in September.

On the labor front, 49% of businesses reported few or no qualified workers to fill job openings in October, down slightly from 50% in September. That remained up, however, from a low of 43% in August. These readings remained below a high of 56% in August of 2024.

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The net percent raising their average selling prices fell to 21% last month compared to 24% in September. It had grown to 32% in February. The percentage planning to raise prices eased to 30% in October, down from a 32% high in June. Worker compensation deteriorated as a net 26% of respondents lifted compensation during the last three months versus 31% in the last survey. Compensation gains peaked at 50% of firms in January 2022. A steady net 19% of firms are making plans to raise worker compensation in the next three months, below the November 2024 high of 28%.

The quality of labor was reported by 27% of member firms as the single most important issue facing small businesses. That was increased from 18% in September, and the highest in five years. Moving lower, the cost of labor was ranked by 8% of respondents as the largest problem, compared to 11% in September, while financial & interest rates worries dropped to 2%, the lowest in two years. A lessened 12% cited inflation as the most important problem. Other major concerns were taxes (16%) and poor sales (10%). 

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

- Inventory, economy & employment concerns weigh on optimism.
- Percentage of respondents raising prices moves down; price expectations ease.
- Concerns about quality of labor surge but labor cost worries recede.

U.S. NFIB Small Business Optimism Index Slips in October

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Initial claims for unemployment insurance rose 9,379 during the week ended November 1 to 228,899 (3.4% y/y) and mostly reversed the prior week’s 12,643 decline to 219,520. The four-week moving average of initial claims eased to 225,213 from 226,766. The four-week average hit a low of 200,323 in January 2024.

Federal government employees filed 7,482 initial jobless insurance claims last week after 9,435 in the prior week. These figures are increased from 588 at the end of September.

Continuing claims for unemployment insurance rose to 1.964 million (4.4% y/y) in the week ended October 25 from 1.957 million in the prior week. The four-week moving average rose to 1.949 million from 1.940 million. It was the highest level since the last week of August.

Federal government employees continuing benefits rose to 30,649 in the week ended October 25 from 23,188 in the prior week. These figures are increased from 8,676 at the end of September.

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.

- Increase in initial claims reverses most of earlier decline.
- Continuing claims continue to increase.

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

Robert Brusca

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Industrial production for the European Monetary Union (EMU) is not yet available for the union as a whole; however, a number of European countries have reported production, and they give us a good sense of what's happening. In September, among the 13 European countries that reported in the table, all but four of them showed increases in industrial production. Declines were posted in Ireland where production fell by 9.4% in one month, Luxembourg where it fell by 6.1%, Malta where it fell by 1.7%, and in Finland where it fell by 0.4%. In the remaining nine countries, production increased. The median increase for monetary union members in the table was a rise of 0.8% month-to-month. 45.5% of the reporters in the monetary union showed production acceleration.

In August, there were 5 European members with production decreasing. Among European Monetary Union members, the median was a decline of 0.5% with 46.2% of the reporters showing output accelerating on the month. July had been a much worse month with 8 reporting European countries showing declines and with the monetary union median showing a decline of 0.3% and only 38.5% of the reporting EMU members showing output accelerating month-to-month.

There has been gradual moderate improvement in these monthly statistics both in terms of improvement in the median and improvement in the breadth as output has accelerated, with a step back in August.

Looking at the sequential data that compare three-month results to six-month results to 12-month results, we see a median annualized increase of 2.9% for output across monetary union members over three months; that's up from 0.8% over six months and compares to a 2.1% increase for monetary union members over twelve months. The breadth of increase over the period is above 50% on all the horizons and it's fairly steady over three months and six months at about a 54-percentile standing.

September data conclude the results for the third quarter. In this quarter-to-date calculation, 6 of the 13 reporters in the table shows output declining in the third quarter. Monetary Union members generate a median increase of 0.3% in terms of annualized quarter-to-quarter industrial output changes. The pattern and the monthly data seem to be slightly stronger than what we see in the quarter-to-date.

The final column of the table presents the queue standings that calculate the positioning of the year-over-year growth rates across country-reporters among growth rates back to late-2007. Ranked among this cluster of growth rates, only five of the current year-over-year rates stand at levels that are below their median growth rate for the period. Countries with below median growth rates (below a standing of 50%) for industrial production growth are Austria, Germany, Finland, Luxembourg, and Malta. Among these, only one belongs to the four largest economies in the monetary union—Germany, which is also the largest of them. Germany has the standing only its 39th percentile. The unweighted median ranking for the group of monetary union economies is at 57.3%, above the 50% mark and therefore above the historic median.

The industrial production data for the monetary union in September is somewhat encouraging but certainly not crystal clear. There continues to be a lot of weaknesses displayed in the data. While the aggregate ranking is above its historic median, it's not above it by very much and clearly the growth rates are still relatively weak. There still is not a clear trend of acceleration in the group. However, what's lacking in the data is any sign of real deterioration. There clearly is weakness across countries but not a sense of deterioration. The best news in the report may be that there's not any really bad news.

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Europe

Production in a Gradual Recovery in Europe Despite Recent Setbacks

Tian Yong Woon

This week, we review key developments across several Asian economies as the year nears its close. On balance, many of investors’ and policymakers’ worst fears did not materialize. Despite US tariffs, regional exports have shown resilience (chart 1), partly supported by stronger intra-Asia trade, even as exports to the US declined in some cases.

In China, factors including importer front-loading, stronger exports to non-US markets, and government efforts to boost consumption—albeit with potentially one-off effects—have kept the economy on track to meet its 5% growth target this year (chart 2), barring a substantial slowdown in Q4. In Japan, political uncertainty has eased following Prime Minister Takaichi’s rise, though her pro-growth, pro-loose monetary stance has contributed to further yen weakness (chart 3). India, while still likely Asia’s fastest-growing major economy this year, has seen trade setbacks (chart 4) as US–India discussions continue, though recent progress suggests a deal may be near.

However, not all developments in Asia have avoided worst-case outcomes. For example, the Philippines, which has already been hit by a string of storms this year, continues to reel from the effects of Typhoons Fung-wong and Kalmaegi. These storms have highlighted corruption in the Philippines’ flood control systems, rattling investors and pressuring the peso (chart 5), in a manner reminiscent of the rupiah’s decline during Indonesia’s political turmoil earlier this year. In Thailand, political uncertainty continues ahead of general elections eyed at next March, while the expected full return of Chinese tourists has yet to materialize (chart 6).

**Trade in Asia**
For Asia, the year has ultimately not played out as bleakly as investors once feared, particularly on the trade front. Despite US President Trump’s tariffs and a persistent backdrop of uncertainty, export performance in several Asian economies has proven more resilient than expected. This is most clearly reflected in export growth readings for China and key Southeast Asian economies (chart 1), which have remained firm—and at times exceeded expectations—even as China’s shipments to the US fell sharply. Much of this resilience reflects a redirection of exports toward other markets, often within the region. India, however, has seen more limited gains, with exports in US dollar terms struggling to materially surpass last year’s levels.

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**China**
Among the main investor concerns earlier this year was China, which once again came under close scrutiny as President Trump sought to address issues ranging from the large US–China trade imbalance to intensifying AI competition and perceived overcapacity. Yet China’s growth—particularly on the export front—has proven more resilient than expected, with increased shipments to other markets more than offsetting reduced trade with the US. Earlier front-loading by importers ahead of anticipated tariff hikes also temporarily supported export figures. Domestically, government initiatives to stimulate consumption led to a brief lift in retail spending, though signs suggest these effects may be fading, indicating their largely one-off nature. Even so, China has maintained year-to-date growth above its 5% annual target (chart 2), keeping that goal within reach provided momentum does not weaken significantly in Q4. Meanwhile, the more conciliatory tone in recent US–China discussions, including the halving of US fentanyl-related tariffs, offers a modest further relief. That said, longer-term structural issues still loom, including the difficult shift toward a more consumption-led economy, demographic pressures, and questions around sustained overcapacity in key industries.

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**Japan**
In Japan, the political uncertainty that followed the Liberal Democratic Party’s weak election performances earlier in the year has largely eased with Takaichi’s appointment as the country’s first female Prime Minister. Attention now turns to her supplementary budget—reported to be around $65 billion—which aims to address the rising cost of living while also bolstering defence and diplomatic capabilities. Investors, however, are already contemplating the policy implications. In particular, expectations that Takaichi’s agenda could make it harder for the Bank of Japan to pursue further significant tightening have added renewed pressure on the yen, pushing it to multi-year lows (chart 3). And while a weaker yen could, in theory, support tourism, forthcoming measures to curb overtourism—such as Kyoto’s planned 900% increase in accommodation taxes—may act as offsetting factors.

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**India**
Turning to India, the economy remains on track to be the region’s fastest-growing major economy. Growth forecasts were downgraded earlier in the year by the IMF and Blue Chip survey panellists, but these revisions were later reversed. These early-year downgrades reflected India’s heavy exposure to US trade, a concern that materialized when the US raised its reciprocal tariff rate on India from 25% to 50%. This contrasts with the situation of many other Asian economies, who successfully negotiated lower rates below the “Liberation Day” baseline. Although India managed to expand exports to other trading partners, this gain resulted in only a muted net impact on overall exports and, in turn, GDP growth. That said, US–India discussions have made some progress over the year, particularly on previously contentious issues such as India’s purchases of Russian crude. While these developments bring India closer to a potential trade deal, the benefits are likely to materialize beyond this year, meaning current growth readings still largely reflect the impact of the steep US tariffs in place today.

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**The Philippines**
Moving to the Philippines, the country is grappling with the impact of Typhoon Fung-wong, which struck the northern regions on Sunday, forcing over a million people to evacuate and causing widespread landslides and damaged roads. Fung-wong follows a string of storms this year, including Typhoon Kalmaegi, which also inflicted substantial damage just a few days ago. The disasters have reignited concerns over longstanding corruption in the country’s flood control systems, spooking investors and prompting capital outflows, which have weighed on the Philippine peso (chart 5). The currency’s weakness has been compounded by the central bank’s ongoing easing, which has cut the policy rate from last year’s peak of 6.5% to 4.75%—nearly 200 basis points—and with markets still pricing in further cuts.

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**Thailand**
Lastly, Thailand’s economy continues to struggle to regain the footing it had before the pandemic, weighed down by both domestic and external factors. Politically, the country remains in a transitional phase, with new Prime Minister Anutin under scrutiny to deliver on his pledge to hold general elections soon. Deputy Prime Minister indications suggest March 29, 2026 as a likely date, leaving a period of uncertainty in the meantime, as the durability of policies enacted during this interim phase remains unclear. Externally, tourism—which should have been a key growth driver—has underperformed, as the return of Chinese visitors to pre-pandemic levels did not materialize, partly due to tourism-related scares. In contrast, Vietnam appears to have captured a larger share of Chinese tourists this year (chart 6).

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Asia

Economic Letter from Asia: As the Dust Settles

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Consumer credit outstanding increased $13.1 billion (2.3% y/y) in September after rising $3.1 billion in August, revised from $0.4 billion, and $17.7 billion in July, revised from $18.1 billion. A $10.0 billion rise had been expected in the Action Economics Forecast Survey.

Nonrevolving credit outstanding rose $11.4 billion (2.1% y/y) in September after increasing $9.2 billion in August, revised from $6.3 billion, and increasing $6.7 billion in July, revised from $6.9 billion. Nonrevolving credit held by depository institutions declined 6.8% y/y in September after falling 7.4% y/y in August. Finance company debt holdings fell 1.5% y/y after declining 1.3%, while credit union holdings rose an increased 12.8% y/y in September, the quickest growth since in two years. Nonrevolving debt of the federal government rose 3.6% y/y in September, the same as in August.

In September, revolving credit outstanding, which includes credit cards, rose $1.7 billion (2.6% y/y) after falling $6.1 billion in August, revised from a $6.0 billion decline, and rising $11.0 billion in July, revised from $11.2 billion. Revolving credit outstanding held by depository institutions fell 3.0% y/y. Revolving credit held by finance companies fell a steady 14.7% y/y in September, while credit union debt rose 4.5% y/y in September, up from 3.7% y/y in August.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

**AI and the Economy** is the title of today’s speech by Federal Reserve Vice Chair Philip N. Jefferson and it can be found [here](https://www.federalreserve.gov/newsevents/speech/jefferson20251107a.htm).

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- Notable gain in credit usage follows prior month’s slowdown.
- Nonrevolving credit usage strengthens and revolving turns positive.

Economy in Brief: 2008

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Japan: TANKAN Results Show Growing Concerns Among Business

U.S. Construction Spending Slipped; Nonresidential Activity Slackened

U.S. Chain Store Sales Slipped Again

ISM Factory Sector Index Ticked Higher But Still Was Below 50

ISM Factory Sector Index Ticked Higher But Still Was Below 50

Inflation and Economic Sentiment in the Euro Area

Commodity Prices Surge

Commodity Prices Surge