Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302c.jpg" width="353">
For February, the Institute for Supply Management (ISM) reported that its Composite Index of Activity in the manufacturing sector remained about unchanged at 35.8 versus the 35.6 January reading. The latest was still near the lowest level since the recession year of 1980. The break-even level for this diffusion index of factory sector activity is a level of 50.
During the last twenty years there has been a 72% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production. The latest reading of the composite index suggests that the recent 10% rate of decline in industrial output will continue.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302d.jpg" width="353">
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 using all of the positive changes in activity added to one half of the zero change in activity measures.
The separate index of prices paid also was unchanged from January and still barely above the lowest level since 1949. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
The February new orders index was about unchanged from January as 13% of survey participants reported higher orders but 44% reported that orders fell. The export order index also was unchanged as economic weakness outside of the U.S. continued. It was still near the lowest level in this index&#39;s short twenty year history. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
The ISM data is 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/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#39;08</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">Composite Index</td>
<td>35.8</td>
<td>35.6</td>
<td>48.8</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>33.1</td>
<td>33.2</td>
<td>48.9</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>26.1</td>
<td>29.9</td>
<td>47.0</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>29.0</td>
<td>29.0</td>
<td>75.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
</body>
</html>

For February, the Institute for Supply Management (ISM) reported that its Composite Index of Activity in the manufacturing sector remained about unchanged at 35.8 versus the 35.6 January reading. The latest was still near the lowest [...]

ISM Index Flat Month-To-Month, Still Near Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302a.jpg" width="353">
The personal &amp; outlays report from the U.S. Bureau of Economic Analysis indicated that the savings rate continued its recent improvement. During January, individuals pared spending against the background of the current economic uncertainties and the personal savings rate rose to 5.0%, up from the monthly low of 0.0% reached last April. The saving rate averaged less than 1.0% from 2005 to 2007.
The personal income &amp; consumption figures are available in Haver&#39;s USECON and USNA databases.
Life expectancy and old age savings from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/workingpapers/wp2008_18.pdf"> here</a>
Personal consumption expenditures did rise last month, but the 0.6% increase was the first monthly increase since last June. The figure was slightly better than expectations for a 0.4% increase. Nevertheless, the three-month annualized rate of growth of -4.9% followed even more negative growth rates during the prior three months. The recent figures have been very much influenced by the change in energy prices. Real personal spending rose 0.4% during January and three-month growth amounted to 0.7%. The latest monthly increase was only the second since May.
Real spending on discretionary items continued weak. Motor vehicle &amp; parts purchases fell 0.8% in January after a 13.3% decline during all of last year. Real spending on household furniture &amp; appliances rose a moderate 0.6% and it has been flat since last summer while real spending on apparel fell 0.5% (-2.7% year-to-year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302b.jpg" width="353">
The pullback in personal spending continues to reflect the weakness in personal income. Though it rose 0.4% last month, it was the first monthly increase since September and the three month growth rate stood at -1.0%. The latest monthly figure was better than expectations for a 0.2% monthly decline. Disposable personal income also firmed and rose 1.7% last month (4.0% y/y) thanks to a 9.3% monthly drop in taxes. Real disposable income growth increased by 1.5% last month (3.3% y/y).
Wages &amp; salaries continued to move lower last month. Declines in employment levels dropped wage income by 0.2% during January and at a 3.3% rate during the last three months. That was the weakest growth rate since 2004. Private sector wages fell at a 5.2% rate during those three months while government sector wages remained immune to the recession and rose at a 5.9% annual rate.
Lower interest rates caused another decline in interest income which is down at a 17.6% annual rate during the last three months. Dividend income also fell at a 3.7% annual rate during that three-month period as corporate profits fell.
The PCE chain price index continued to reflect the weakness in income &amp; spending and rose just 0.2%. Prices rose 0.7% year-to-year, held back by the decline in energy prices. Core power logged just a 0.1% rise following the slight decline in December. The dip matched Consensus expectations. Durable goods prices fell 0.1% (-1.9% y/y).
The U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20090302a.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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)&nbsp;</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">Personal Income</td>
<td>0.4</td>
<td>-0.2</td>
<td>1.9</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>1.7</td>
<td>-0.2</td>
<td>4.0</td>
<td>4.7</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption Expenditures</td>
<td>0.6</td>
<td>-1.0</td>
<td>-1.0</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>5.0</td>
<td>3.9</td>
<td>0.1 (Jan. 08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2</td>
<td>-0.5</td>
<td>0.7</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The personal & outlays report from the U.S. Bureau of Economic Analysis indicated that the savings rate continued its recent improvement. During January, individuals pared spending against the background of the current economic [...]

U.S. January Personal Savings Rate Highest Since 1995

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302a.jpg" align="left" border="0" height="265" width="353">
The personal &amp; outlays report from the U.S. Bureau of
Economic Analysis indicated that the savings rate continued its recent
improvement. During January, individuals pared spending against the
background of the current economic uncertainties and the personal
savings rate rose to 5.0%, up from the monthly low of 0.0% reached last
April. The saving rate averaged less than 1.0% from 2005 to 2007.
The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.
Life expectancy and old age savings from
the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/workingpapers/wp2008_18.pdf">
here</a>
Personal consumption expenditures did rise last month, but the
0.6% increase was the first monthly increase since last June. The
figure was slightly better than expectations for a 0.4% increase.
Nevertheless, the three-month annualized rate of growth of -4.9%
followed even more negative growth rates during the prior three months.
The recent figures have been very much influenced by the change in
energy prices. Real personal spending rose 0.4% during January and
three-month growth amounted to 0.7%. The latest monthly increase was
only the second since May.
Real spending on discretionary items continued weak. Motor
vehicle &amp; parts purchases fell 0.8% in January after a 13.3%
decline during all of last year. Real spending on household furniture
&amp; appliances rose a moderate 0.6% and it has been flat since
last summer while real spending on apparel fell 0.5% (-2.7%
year-to-year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302b.jpg" align="right" border="0" height="265" width="353">
The pullback in personal spending continues to reflect the
weakness in personal income. Though it rose 0.4% last month, it was the
first monthly increase since September and the three month growth rate
stood at -1.0%. The latest monthly figure was better than expectations
for a 0.2% monthly decline. Disposable personal income
also firmed and rose 1.7% last month (4.0% y/y) thanks to a 9.3%
monthly drop in taxes. Real disposable income growth increased by 1.5%
last month (3.3% y/y).
Wages &amp; salaries continued to move lower last month.
Declines in employment levels dropped wage income by 0.2% during
January and at a 3.3% rate during the last three months. That was the
weakest growth rate since 2004. Private sector wages fell at a 5.2%
rate during those three months while government sector wages remained
immune to the recession and rose at a 5.9% annual rate.
Lower interest rates caused another decline in interest income
which is down at a 17.6% annual rate during the last three months.
Dividend income also fell at a 3.7% annual rate during that three-month
period as corporate profits fell.
The PCE chain price index continued to
reflect the weakness in income &amp; spending and rose just 0.2%.
Prices rose 0.7% year-to-year, held back by the decline in energy
prices. Core power logged just a 0.1% rise following the slight decline
in December. The dip matched Consensus expectations. Durable goods
prices fell 0.1% (-1.9% y/y).
The U.S. Treasury and Federal Reserve Board Announce
Participation in AIG Restructuring Plan can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20090302a.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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</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">Personal Income</td>
<td>0.4</td>
<td>-0.2</td>
<td>1.9</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>1.7</td>
<td>-0.2</td>
<td>4.0</td>
<td>4.7</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.6</td>
<td>-1.0</td>
<td>-1.0</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>5.0</td>
<td>3.9</td>
<td>0.1 (Jan. 08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2</td>
<td>-0.5</td>
<td>0.7</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
ISM Index Flat Month-To-Month,
Still Near Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 2, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302c.jpg" align="left" border="0" height="265" width="353">
For February, the Institute for Supply Management (ISM)
reported that its Composite Index of Activity in the manufacturing
sector remained about unchanged at 35.8 versus the 35.6 January
reading. The latest was still near the lowest level since the recession
year of 1980. The break-even level for this diffusion index of factory
sector activity is a level of 50.
During the last twenty years there has been a 72% correlation
between the level of the Composite Index and the three-month growth in
factory sector industrial production. The latest reading of the
composite index suggests that the recent 10% rate of decline in
industrial output will continue.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302d.jpg" align="right" border="0" height="265" width="353">
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 using all of the positive
changes in activity added to one half of the zero change in activity
measures.
The separate index of prices paid also was unchanged from
January and still barely above the lowest level since 1949.
During the last twenty years there has been a 79% correlation between
the price index and the three-month change in the PPI for intermediate
goods.
The February new orders index was about unchanged from January
as 13% of survey participants reported higher orders but 44% reported
that orders fell. The export order index also was unchanged as economic
weakness outside of the U.S. continued. It was still near the lowest
level in this index's short twenty year history. During the last ten
years there has been a 53% correlation between the index and the q/q
change in real exports of goods in the GDP accounts.
The ISM data is available in Haver'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/SURVEYS/@S2/@S201/@S201.HTM">ISM
Mfg</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February '08</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">Composite Index</td>
<td>35.8</td>
<td>35.6</td>
<td>48.8</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>33.1</td>
<td>33.2</td>
<td>48.9</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>26.1</td>
<td>29.9</td>
<td>47.0</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>29.0</td>
<td>29.0</td>
<td>75.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
Euro Area MFG PMIs Drop 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 2, 2009


<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>
South Korea: Industrial Production
Improves a Bit; Exports in Won Rise, but in USD, Fall
 
by <a href="/comment/Curley.html">Louise
Curley</a> March 2, 2009



<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>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227d.jpg" align="left" border="0" height="265" width="353">
Deflation strikes back -- Uh, oh&#8230; Japan&#8217;s prices are falling
again. The chart of Japan&#8217;s Core CPI looks like the path of the ground
hog on ground hog&#8217;s day. In this case it is not four more weeks of
winter but another bout with deflation that is in prospect. Japan&#8217;s
quantitative easing seemed to have been successful in dispatching
Japan&#8217;s deflation as inflation began to rise in 2008. Then as oil
prices plunged, as the yen soared and as financial crisis gripped the
global economy, Japan&#8217;s recession took hold and now deflation is back.
Just today Japan issued a report of a 10% Yr/yr drop in industrial
production and with dwindling consumer spending. The downturn fuels the
deflation and deflation fuels the downturn. Japan&#8217;s economy has been
performing badly enough that the yen has reversed its course and is now
depreciating. The near 50% drop in Japan&#8217;s exports yr/yr is a clear
demonstration of how much the global economic downturn is battering
Japan. But the re-emergence of Japan&#8217;s deflation is a bad sign and an
event that will make Japan&#8217;s recovery that much more difficult. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Japan CPI
Trends</th>

</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">All Items</td>
<td>-0.4%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td> -5.0%</td>
<td> -3.1%</td>
<td> 0.0%</td>
<td>2.8%</td>
<td> -5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">All items less food and
energy-0.2%</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td> -1.2%</td>
<td> -0.4%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>-1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Allitems except fresh food</td>
<td>-0.2%</td>
<td>-0.5%</td>
<td>-0.6%</td>
<td> -5.0%</td>
<td> -3.1%</td>
<td> 0.0%</td>
<td>3.2%</td>
<td> -4.3%</td>
</tr>
<tr>
<td colspan="9" class="firstcol">
Seasonally
Adjusted By Haver</td>
</tr>
<tr class="odd">
<td class="firstcol">Food&amp; Beverage</td>
<td>-0.5%</td>
<td>0.1%</td>
<td>0.4%</td>
<td> 0.0%</td>
<td> 0.8%</td>
<td>3.4%</td>
<td>2.0%</td>
<td> -1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">housing</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td> -0.4%</td>
<td> -0.2%</td>
<td>0.0%</td>
<td>0.0%</td>
<td> -0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing $ Persoanl</td>
<td>-1.2%</td>
<td>0.0%</td>
<td>0.1%</td>
<td> -4.2%</td>
<td> -1.8%</td>
<td> -0.9%</td>
<td>3.6%</td>
<td> -6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.8%</td>
<td> 0.6%</td>
<td> 0.7%</td>
<td>2.8%</td>
<td> 0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Medical are</td>
<td>0.6%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>1.2%</td>
<td>0.4%</td>
<td> 0.1%</td>
<td> 0.8%</td>
<td> 3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Misc</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td> -0.8%</td>
<td> -0.4%</td>
<td> -0.1%</td>
<td>2.4%</td>
<td> -0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Reading &amp; Rec</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td> -4.9%</td>
<td> -1.9%</td>
<td>-1.3%</td>
<td> -2.0%</td>
<td> -6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport&amp;Comm</td>
<td>-1.2%</td>
<td>-2.1%</td>
<td>-2.7%</td>
<td> -21.8%</td>
<td> -16.7%</td>
<td> -6.3%</td>
<td>10.8%</td>
<td> -19.5%</td>
</tr>
</tbody>
</table>
</body></html>

Deflation strikes back -- Uh, oh… Japan’s prices are falling again. The chart of Japan’s Core CPI looks like the path of the ground hog on ground hog’s day. In this case it is not four more weeks of winter but another bout with [...]

Deflation Is Back!

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227e.jpg" align="left" border="0" height="265" width="353">
The University of Michigan reported that its February reading
of consumer sentiment fell a sharp 8.0% month-to-month, about equal to
the mid-month read. That nearly reversed all of the gains of the prior
two months and returned the index to its lowest level since 1980. The
latest figure was down 20.5% from last February and the reading about
matched Consensus expectations. During the last ten years there has
been a 62% correlation between the level of sentiment and the
three-month change in real personal consumption expenditures.
The expectations component of consumer sentiment led the
decline in the overall February index. The 12.6% month-to-month drop
reversed all of the increases during the prior several months and the
series landed at its lowest level since 1980.
Expectations for business conditions during the next
year plunged 34.0% m/m to the lowest level since 1980. Expectations
for conditions during the next five years also fell. The expected
change in personal finances also fell back to the lowest level since
last June with a sharp 9.6% decline.
The current economic conditions index fell 1.5% after the
sharp 4.3% January decline. Buying conditions for large household goods
were viewed as having improved very slightly but the index remained
down 16.3% from a year earlier. The view of current personal finances
fell sharply and the index remained down by nearly one-half from early
2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227f.jpg" align="right" border="0" height="265" width="353">
The opinion of government policy, which apparently influences
economic expectations, improved to the highest level since last
January. Fourteen percent of respondents thought that a good job was
being done by government while a reduced forty-three percent thought
that a poor job was being done.
Inflation expectations for the next year fell back to 2.3%. It
was as high as 7.0% in May. The range of expectations is from slight
price deflation to a 5.2% increase in prices, though that latter figure
is half the year-ago expectation. The expected inflation rate during
the next five years worked the other way and ticked up to 3.5%.
The University of Michigan survey data is not seasonally
adjusted. The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database
with details in the proprietary UMSCA database.
Budget of the United States Government Fiscal
Year 2010 The Budget Documents
from the Office of Management and Budget can be found <a href="http://www.whitehouse.gov/omb/budget/">here</a>.
The Shimer Puzzle and the Identification of
Productivity Shocks from the Federal Reserve Board is
available <a href="http://www.federalreserve.gov/pubs/feds/2009/200904/200904pap.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">February</th>
<th scope="col">Mid February</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">February 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">Consumer Sentiment</td>
<td>56.3</td>
<td>56.2</td>
<td>61.2</td>
<td>60.1</td>
<td>-20.5%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>65.5</td>
<td>67.1</td>
<td>66.5</td>
<td>69.5</td>
<td>-21.8</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>50.5</td>
<td>49.1</td>
<td>57.8</td>
<td>54.0</td>
<td>-19.1</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body></html>

The University of Michigan reported that its February reading of consumer sentiment fell a sharp 8.0% month-to-month, about equal to the mid-month read. That nearly reversed all of the gains of the prior two months and returned the [...]

Michigan Consumer Sentiment Estimate Little Changed At Lowest Since 1980

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227a.jpg" align="right" border="0" height="265" width="353">
The U.S.
Bureau of Economic Analysis today reported that real GDP contracted
at a 6.2% annual rate last quarter.&nbsp; It was the largest
decline since the "credit crunch" recession of 1980 and it exceeded
Consensus expectations for a 5.4% drop.&nbsp; One month ago, the
initial report showed that GDP had declined at a 3.8% rate with
expectations for a 6.0% decline. In the interim, estimates of virtually
all the economy's components were weaker than suggested by certain "top
down" estimates from the labor market, on which the early GDP estimates
are partially based.&nbsp; So, today's figure about matches
month-ago Consensus forecasts.The largest source
of the downward revision to GDP growth came from inventory changes
which added just 0.2 percentage points to growth instead of the
originally estimate of 1.3 points. To some extent this news is somewhat
positive for the GDP&nbsp; outlook because it suggests that the
"involuntary" accumulation was smaller. Therefore fewer inventories may
need to be shed if demand remains under pressure.&nbsp; The 4Q
inventory addition to GDP growth followed three consecutive quarters of
decumulation or modest accumulation as tight control methods kept
inventories under wraps.The next two sources of downward
revision to 4Q GDP are a bit more problematic for the economic growth
outlook.&nbsp;&nbsp;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227b.jpg" align="right" border="0" height="265" width="353">
Real
U.S. final sales to domestic purchasers contracted at a 5.7%
annual rate which was greater than the 4.9% estimated last
month.&nbsp; Again, that was the worst decline since the notably
sharp, "credit crunch" recession of 1980 when consumers pocketed their
credit cards.&nbsp; Personal consumption expenditures fell a
downwardly revised 4.3% (AR) which was somewhat greater than the
decline during 3Q.&nbsp; Spending on motor vehicles declined at a
huge 38.0% annual rate, which was quite a bit faster than the 26.6%
decline logged in 3Q.&nbsp; Spending on other durable goods also
fell sharply (-0.7% y/y) as they did during the prior
quarter.&nbsp; Real spending on clothing fell at a somewhat easier
rate (-2.7%) than during 3Q.&nbsp; Business fixed investment fell
at the same rate as estimated last month (-5.0% y/y) and the 22.2%
decline in residential investment (-19.2% y/y) was in fact slightly
less than initially indicated.&nbsp; Combined, business plus
residential investment declined for the tenth quarter out of the last
eleven (-8.8% y/y).The
government sector contributed marginally to GDP growth last quarter.
Activity rose at a 1.6% annual rate (3.3% y/y) led by a 6.7% (8.2% y/y)
rise in Federal spending.Finally, the foreign
trade sector subtracted 0.5 percentage points from GDP growth
instead of adding minimally.&nbsp; It was the first negative
contribution from trade to U.S. growth since 1Q 2007.&nbsp; Exports
fell at a deepened 23.6% rate (-1.8% y/y) as recessions intensified in
economies abroad.&nbsp; U.S. imports fell at a 16.0% rate (-7.1%
y/y) with the developing domestic recession, which was about the same
rate of decline estimated last month.Adding to the overall downward
estimate of GDP growth was an upward revision to price
inflation.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227c.jpg" align="right" border="0" height="265" width="353">
The GDP chain price index
increased at a 0.5% rate instead of falling minimally.&nbsp; The
source of the upward revision to the price index appears to have come
from inventories.&nbsp; The PCE price index fell at a 5.0% annual
rate versus a drop of 5.5% in the initial report. prices. The
residential investment chain price index fell at a 9.6% annual rate
while the business fixed investment price index rose 4.6%, about as
presented last month.The U.S. National Income &amp;
Product Account data is available in Haver's USECON
and the USNA databases.Sources of the
Great Moderation: shocks, friction, or monetary policy? from
the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-01bk.pdf">here</a>.·
Ties that bind: bilateral trade's role in synchronizing
business cycles from the Federal Reserve Bank of Dallas can
be found <a href="http://dallasfed.org/research/eclett/2009/el0901.html">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">4Q '08 (Preliminary)</th>
<th scope="col">4Q '08 (Advance)</th>
<th scope="col">3Q '08</th>
<th scope="col">4Q 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">GDP</td>
<td>-6.2</td>
<td>-3.8</td>
<td>-0.5</td>
<td>-0.8</td>
<td>1.3</td>
<td>2.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>0.2</td>
<td>1.3</td>
<td>0.8</td>
<td>0.1</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-6.4</td>
<td>-5.1</td>
<td>-1.3</td>
<td>-0.7</td>
<td>1.4</td>
<td>2.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>-0.5</td>
<td>0.1</td>
<td>1.1</td>
<td>1.4</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-5.7</td>
<td>-4.9</td>
<td>-2.2</td>
<td>-1.7</td>
<td>0.0</td>
<td>1.8</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.5</td>
<td>-0.1</td>
<td>3.9</td>
<td>2.0</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
</tr>
</tbody>
</table>
</body></html>

The U.S. Bureau of Economic Analysis today reported that real GDP contracted at a 6.2% annual rate last quarter. It was the largest decline since the "credit crunch" recession of 1980 and it exceeded Consensus expectations for a 5.4% [...]

U.S. 4Q GDP Revised Down To Show Sharpest Drop Since 1980

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227a.jpg" align="right" border="0" height="265" width="353">The U.S.
Bureau of Economic Analysis today reported that real GDP contracted
at a 6.2% annual rate last quarter.&nbsp; It was the largest
decline since the "credit crunch" recession of 1980 and it exceeded
Consensus expectations for a 5.4% drop.&nbsp; One month ago, the
initial report showed that GDP had declined at a 3.8% rate with
expectations for a 6.0% decline. In the interim, estimates of virtually
all the economy's components were weaker than suggested by certain "top
down" estimates from the labor market, on which the early GDP estimates
are partially based.&nbsp; So, today's figure about matches
month-ago Consensus forecasts.
The largest source
of the downward revision to GDP growth came from inventory changes
which added just 0.2 percentage points to growth instead of the
originally estimate of 1.3 points. To some extent this news is somewhat
positive for the GDP&nbsp; outlook because it suggests that the
"involuntary" accumulation was smaller. Therefore fewer inventories may
need to be shed if demand remains under pressure.&nbsp; The 4Q
inventory addition to GDP growth followed three consecutive quarters of
decumulation or modest accumulation as tight control methods kept
inventories under wraps.
The next two sources of downward
revision to 4Q GDP are a bit more problematic for the economic growth
outlook.&nbsp;&nbsp;
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227b.jpg" align="right" border="0" height="265" width="353">Real
U.S. final sales to domestic purchasers contracted at a 5.7%
annual rate which was greater than the 4.9% estimated last
month.&nbsp; Again, that was the worst decline since the notably
sharp, "credit crunch" recession of 1980 when consumers pocketed their
credit cards.&nbsp; Personal consumption expenditures fell a
downwardly revised 4.3% (AR) which was somewhat greater than the
decline during 3Q.&nbsp; Spending on motor vehicles declined at a
huge 38.0% annual rate, which was quite a bit faster than the 26.6%
decline logged in 3Q.&nbsp; Spending on other durable goods also
fell sharply (-0.7% y/y) as they did during the prior
quarter.&nbsp; Real spending on clothing fell at a somewhat easier
rate (-2.7%) than during 3Q.&nbsp; Business fixed investment fell
at the same rate as estimated last month (-5.0% y/y) and the 22.2%
decline in residential investment (-19.2% y/y) was in fact slightly
less than initially indicated.&nbsp; Combined, business plus
residential investment declined for the tenth quarter out of the last
eleven (-8.8% y/y).
The
government sector contributed marginally to GDP growth last quarter.
Activity rose at a 1.6% annual rate (3.3% y/y) led by a 6.7% (8.2% y/y)
rise in Federal spending.
Finally, the foreign
trade sector subtracted 0.5 percentage points from GDP growth
instead of adding minimally.&nbsp; It was the first negative
contribution from trade to U.S. growth since 1Q 2007.&nbsp; Exports
fell at a deepened 23.6% rate (-1.8% y/y) as recessions intensified in
economies abroad.&nbsp; U.S. imports fell at a 16.0% rate (-7.1%
y/y) with the developing domestic recession, which was about the same
rate of decline estimated last month.
Adding to the overall downward
estimate of GDP growth was an upward revision to price
inflation.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227c.jpg" align="right" border="0" height="265" width="353">
The GDP chain price index
increased at a 0.5% rate instead of falling minimally.&nbsp; The
source of the upward revision to the price index appears to have come
from inventories.&nbsp; The PCE price index fell at a 5.0% annual
rate versus a drop of 5.5% in the initial report. prices. The
residential investment chain price index fell at a 9.6% annual rate
while the business fixed investment price index rose 4.6%, about as
presented last month.
The U.S. National Income &amp;
Product Account data is available in Haver's USECON
and the USNA databases.
Sources of the
Great Moderation: shocks, friction, or monetary policy? from
the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-01bk.pdf">here</a>.·
Ties that bind: bilateral trade's role in synchronizing
business cycles from the Federal Reserve Bank of Dallas can
be found <a href="http://dallasfed.org/research/eclett/2009/el0901.html">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">4Q '08 (Preliminary)</th>
<th scope="col">4Q '08 (Advance)</th>
<th scope="col">3Q '08</th>
<th scope="col">4Q 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">GDP</td>
<td>-6.2</td>
<td>-3.8</td>
<td>-0.5</td>
<td>-0.8</td>
<td>1.3</td>
<td>2.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>0.2</td>
<td>1.3</td>
<td>0.8</td>
<td>0.1</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-6.4</td>
<td>-5.1</td>
<td>-1.3</td>
<td>-0.7</td>
<td>1.4</td>
<td>2.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>-0.5</td>
<td>0.1</td>
<td>1.1</td>
<td>1.4</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-5.7</td>
<td>-4.9</td>
<td>-2.2</td>
<td>-1.7</td>
<td>0.0</td>
<td>1.8</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.5</td>
<td>-0.1</td>
<td>3.9</td>
<td>2.0</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
</tr>
</tbody>
</table>

 Michigan Consumer Sentiment
Estimate Little Changed At Lowest Since 1980 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 27, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227e.jpg" align="left" border="0" height="265" width="353">
The University of Michigan reported that its February reading
of consumer sentiment fell a sharp 8.0% month-to-month, about equal to
the mid-month read. That nearly reversed all of the gains of the prior
two months and returned the index to its lowest level since 1980. The
latest figure was down 20.5% from last February and the reading about
matched Consensus expectations. During the last ten years there has
been a 62% correlation between the level of sentiment and the
three-month change in real personal consumption expenditures.
The expectations component of consumer sentiment led the
decline in the overall February index. The 12.6% month-to-month drop
reversed all of the increases during the prior several months and the
series landed at its lowest level since 1980.
Expectations for business conditions during the next
year plunged 34.0% m/m to the lowest level since 1980. Expectations
for conditions during the next five years also fell. The expected
change in personal finances also fell back to the lowest level since
last June with a sharp 9.6% decline.
The current economic conditions index fell 1.5% after the
sharp 4.3% January decline. Buying conditions for large household goods
were viewed as having improved very slightly but the index remained
down 16.3% from a year earlier. The view of current personal finances
fell sharply and the index remained down by nearly one-half from early
2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227f.jpg" align="right" border="0" height="265" width="353">
The opinion of government policy, which apparently influences
economic expectations, improved to the highest level since last
January. Fourteen percent of respondents thought that a good job was
being done by government while a reduced forty-three percent thought
that a poor job was being done.
Inflation expectations for the next year fell back to 2.3%. It
was as high as 7.0% in May. The range of expectations is from slight
price deflation to a 5.2% increase in prices, though that latter figure
is half the year-ago expectation. The expected inflation rate during
the next five years worked the other way and ticked up to 3.5%.
The University of Michigan survey data is not seasonally
adjusted. The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database
with details in the proprietary UMSCA database.
Budget of the United States Government Fiscal
Year 2010 The Budget Documents
from the Office of Management and Budget can be found <a href="http://www.whitehouse.gov/omb/budget/">here</a>.
The Shimer Puzzle and the Identification of
Productivity Shocks from the Federal Reserve Board is
available <a href="http://www.federalreserve.gov/pubs/feds/2009/200904/200904pap.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">February</th>
<th scope="col">Mid 
February</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">February 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">Consumer Sentiment</td>
<td>56.3</td>
<td>56.2</td>
<td>61.2</td>
<td>60.1</td>
<td>-20.5%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>65.5</td>
<td>67.1</td>
<td>66.5</td>
<td>69.5</td>
<td>-21.8</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>50.5</td>
<td>49.1</td>
<td>57.8</td>
<td>54.0</td>
<td>-19.1</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
 Deflation Is Back! by <a href="/comment/Brusca.html">Robert
Brusca</a> February 27, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090227d.jpg" align="left" border="0" height="265" width="353">
Deflation strikes back -- Uh, oh&#8230; Japan&#8217;s prices are falling
again. The chart of Japan&#8217;s Core CPI looks like the path of the ground
hog on ground hog&#8217;s day. In this case it is not four more weeks of
winter but another bout with deflation that is in prospect. Japan&#8217;s
quantitative easing seemed to have been successful in dispatching
Japan&#8217;s deflation as inflation began to rise in 2008. Then as oil
prices plunged, as the yen soared and as financial crisis gripped the
global economy, Japan&#8217;s recession took hold and now deflation is back.
Just today Japan issued a report of a 10% Yr/yr drop in industrial
production and with dwindling consumer spending. The downturn fuels the
deflation and deflation fuels the downturn. Japan&#8217;s economy has been
performing badly enough that the yen has reversed its course and is now
depreciating. The near 50% drop in Japan&#8217;s exports yr/yr is a clear
demonstration of how much the global economic downturn is battering
Japan. But the re-emergence of Japan&#8217;s deflation is a bad sign and an
event that will make Japan&#8217;s recovery that much more difficult. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Japan CPI
Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">All Items</td>
<td>-0.4%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td> -5.0%</td>
<td> -3.1%</td>
<td> 0.0%</td>
<td>2.8%</td>
<td> -5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">All items less food and
energy-0.2%</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td> -1.2%</td>
<td> -0.4%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>-1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Allitems except fresh food</td>
<td>-0.2%</td>
<td>-0.5%</td>
<td>-0.6%</td>
<td> -5.0%</td>
<td> -3.1%</td>
<td> 0.0%</td>
<td>3.2%</td>
<td> -4.3%</td>
</tr>
<tr>
<td colspan="9" class="firstcol">
Seasonally
Adjusted By Haver</td>
</tr>
<tr class="odd">
<td class="firstcol">Food&amp; Beverage</td>
<td>-0.5%</td>
<td>0.1%</td>
<td>0.4%</td>
<td> 0.0%</td>
<td> 0.8%</td>
<td>3.4%</td>
<td>2.0%</td>
<td> -1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">housing</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td> -0.4%</td>
<td> -0.2%</td>
<td>0.0%</td>
<td>0.0%</td>
<td> -0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing $ Persoanl</td>
<td>-1.2%</td>
<td>0.0%</td>
<td>0.1%</td>
<td> -4.2%</td>
<td> -1.8%</td>
<td> -0.9%</td>
<td>3.6%</td>
<td> -6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.8%</td>
<td> 0.6%</td>
<td> 0.7%</td>
<td>2.8%</td>
<td> 0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Medical are</td>
<td>0.6%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>1.2%</td>
<td>0.4%</td>
<td> 0.1%</td>
<td> 0.8%</td>
<td> 3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Misc</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td> -0.8%</td>
<td> -0.4%</td>
<td> -0.1%</td>
<td>2.4%</td>
<td> -0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Reading &amp; Rec</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td> -4.9%</td>
<td> -1.9%</td>
<td>-1.3%</td>
<td> -2.0%</td>
<td> -6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport&amp;Comm</td>
<td>-1.2%</td>
<td>-2.1%</td>
<td>-2.7%</td>
<td> -21.8%</td>
<td> -16.7%</td>
<td> -6.3%</td>
<td>10.8%</td>
<td> -19.5%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. 4Q GDP Revised Down To ShowSharpest Drop Since 1980

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090226a.jpg" align="right" border="0" height="265" width="353">&nbsp;The
recession in the U.S. factory sector entered an even more dire phase
during the last several months.&nbsp; New orders for durable goods
fell 5.2% last month after downwardly revised declines of between 4.0%
and 8.0% during four of the prior five months.&nbsp; Since July new
orders have plummeted 24.9%, a record six-month drop.&nbsp; The
latest decline doubled Consensus expectations for a 2.4% drop.
&nbsp; That
shortfall in new orders has been aptly followed by lower shipments of
durable goods.&nbsp; Off 3.7% in January, the decline followed
shortfalls of between 3.0% and 4.0% during four of the prior five
months.&nbsp; Year-to-year shipments fell 15.2% and they are down
15.9% during just the last six months.&nbsp; This extreme weakness
has brought with it a 17.5% twelve-month decline in industrial
production of durable goods.&nbsp; During the last ten years there
has been an 83% correlation between the twelve-month change in
shipments of durable goods and the change in durables industrial
production.&nbsp;
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090226b.jpg" align="right" border="0" height="265" width="353">
&nbsp;Last month, the production cuts may finally have
succeeded in curbing inventory accumulation.&nbsp; Inventories of
manufactured durables fell 0.8%, the first monthly decline since
2003.&nbsp; But more efforts to curb the inventory buildup are to
come.&nbsp; Six-month growth still amounted to 1.3%.&nbsp; And
while that's down from the peak, it compares to outright inventory
decumulation at an 8.0% rate during the last recession. Orders for
transportation equipment led last month's decline in orders for durable
goods with a 13.5% drop which left them off 38.7%
year-to-year.&nbsp; The aircraft sector led that shortfall with a
nearly three-quarters drop in nondefense bookings.&nbsp; Orders for
motor vehicles &amp; parts fell by a lesser one-third during the
last year. Lower new orders for computers &amp; electronic
products followed closely for the top weakest spot in last month's
decline with a 5.0% drop (-13.6% y/y) which followed the 7.1% December
shortfall.&nbsp; Orders for just computers &amp; related
products were the weakest and posted a 16.0% drop and they're off by
more than one quarter during the last twelve months.&nbsp; Working
the other way were new orders for communications equipment which rose
1.2%.&nbsp; That recovered a piece of the 5.2% decline during
December and limited the year-to-year shortfall to just
2.6%.
Most other industries have been notably hard hit by
weakening demand.&nbsp; Orders for primary metals fell 4.6% last
month and they're down by more than one-third during the last
twelve.&nbsp; Machinery orders fell 2.0% last month and they're off
23.0% during the last year.&nbsp; Electrical equipment bookings
reversed all of a downwardly revised December gain with a 6.1%
flop.&nbsp; They're down by 22.1% during the last twelve
months.&nbsp;
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090226c.jpg" align="right" border="0" height="265" width="353">&nbsp;Capital
equipment orders are very much
suffering from all this weakness in the front-end of the
economy.&nbsp; They fell 8.8% last month and are down 26.2% during
the last twelve. Orders for nondefense capital goods have been
particularly hard hit and they posted a 28.3% fall just in
January.&nbsp; Alone, aircraft orders have fallen by three-quarters
year-to-year.&nbsp; And without aircraft, nondefense capital goods
orders fell 5.4% during January and by 18.5% during the last twelve
months to their lowest level since 2004.&nbsp; During the last ten
years there has been an 80% correlation between the y/y change in
nondefense capital goods orders and the change in equipment &amp;
software spending in the GDP accounts.&nbsp; The correlation of the
GDP figure with capital goods shipments is, as one would expect, a
larger 92%.&nbsp;The durable goods figures are available in
Haver's USECON database. The U.S. Auto
Industry from the Federal Reserve Bank of Cleveland can be
found <a href="http://www.clevelandfed.org/research/trends/2009/0309/02ecoact.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/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</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">Durable Goods Orders</td>
<td>-5.2</td>
<td>-4.6</td>
<td>-23.3</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>-2.5</td>
<td>-5.5</td>
<td>-17.4</td>
<td>-1.3</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-2.7</td>
<td>-10.2</td>
<td>-28.3</td>
<td>-6.7</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-5.4</td>
<td>-5.8</td>
<td>-18.5</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>

</body></html>

The recession in the U.S. factory sector entered an even more dire phase during the last several months. New orders for durable goods fell 5.2% last month after downwardly revised declines of between 4.0% and 8.0% during four of the [...]

U.S. Durable Goods Orders Lowest in Six Years; Latest Six-Month Decline a Record

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.

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**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.

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**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.

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**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.

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**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.

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**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.

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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

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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.

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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**.

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- 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

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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.

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

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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.

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**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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ISM Index Flat Month-To-Month, Still Near Low

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U.S. January Personal Savings Rate Highest Since 1995

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Michigan Consumer Sentiment Estimate Little Changed At Lowest Since 1980

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U.S. 4Q GDP Revised Down To ShowSharpest Drop Since 1980

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