Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328e.jpg" align="left" border="0" height="265" width="353">
Japan has been gradually making progress toward ridding itself
of its chronic deflation. Headline inflation now has turned positive
year-over-year and is positive over three months as well as over the
six-month horizon. The 12-month calculations are markedly different
from the year ago calculations which refer to the previous 12-month
period when the economy was more firmly in the grip of deflation.
Still, core inflation (ex-food and energy) has not yet moved up above
the zero mark.&gt;

In the quarter to date, inflation also has a positive tone.
Headline inflation is up at a 1% pace while the core is up at a 0.4%
pace and ex-food prices are rising at a 2.3% rate. Most CPI components
are rising in the first quarter of 2008 as well.

For Japan this mild inflation is a mark of success while other
countries are suffering with true inflation risks. Japan is emerging
from its battle with deflation, but it is still fighting to secure
growth.


<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="odd">
<td class="firstcol">&nbsp;</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>Yr-Ago</td>
<td>Qtr-to-Date</td>
</tr>
<tr>
<td class="firstcol">All items</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.8%</td>
<td>1.2%</td>
<td>1.0%</td>
<td>-0.8%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">All items less food and energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-1.2%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">All items except fresh food</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>2.4%</td>
<td>1.8%</td>
<td>1.0%</td>
<td>-0.4%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">seasonally
adjusted BY Haver</td>
</tr>
<tr>
<td class="firstcol">Food &amp; Beverage</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">Housing</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-1.2%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">Clothing and Personal&nbsp;</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>1.6%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.7%</td>
<td>3.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">Medical care</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-0.8%</td>
<td>0.1%</td>
<td>-1.2%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Miscellaneous</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol">Reading &amp; Recreation</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>-0.9%</td>
<td>-4.4%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">Transport &amp;
Communication</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>4.4%</td>
<td>5.0%</td>
<td>3.1%</td>
<td>-1.6%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
</body></html>

Japan has been gradually making progress toward ridding itself of its chronic deflation. Headline inflation now has turned positive year-over-year and is positive over three months as well as over the six-month horizon. The 12-month [...]

Japan’s Inflation Rate Rises but ‘Core’ Still Below Zero Y/Y

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328c.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index for all of March fell 1.8% m/m to 69.5. That was larger than the 0.4% decline in the preliminary reading and it was just slightly greater than Consensus expectations for a reading of 70.
The index of expected business conditions during the next year still accounted for all of the decline in March sentiment. The 3.7% decline followed an 8.4% February drop and left the index at its lowest since early 1992. Expectations for business conditions during the next year fell 14.8% (-51.6% y/y). hat m/m drop was double the decline in the preliminary report. And expectations for conditions over the next five years fell m/m rather than rose. Expectations for personal finances also were unchanged rather than posting a slight rise.
Opinions about government policy fell slightly m/m (-23.6% y/y) following the sharp 11.5% drop during February. The percentage of those surveyed who indicated that they thought government was doing a good job rose somewhat but 44% had a poor opinion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328d.jpg" width="353">
Expectations for inflation during the next twelve months surged to 4.6%, the highest level in nearly two years though inflation expectations during the next five to ten years fell slightly to 3.3%. That was the same expectation as in the preliminary reading.
The current conditions index fell 0.5% m/m after the 11.2% February plunge. The view of current conditions for buying large household goods improved slightly but the view of current personal finances fell for the fourth month in the last five (-16.2% y/y).
The University of Michigan survey 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&#39;s USECON database, with details in the proprietary UMSCA database.

<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">March</th>
<th scope="col">March (Prelim)</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">March 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">Consumer Sentiment</td>
<td>&nbsp;69.5</td>
<td>70.5</td>
<td>70.8</td>
<td>78.4</td>
<td>-21.4% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>84.2</td>
<td>84.6</td>
<td>83.8</td>
<td>94.4</td>
<td>-18.6%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>60.1</td>
<td>61.4</td>
<td>62.4</td>
<td>68.1</td>
<td>-23.6%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's consumer sentiment index for all of March fell 1.8% m/m to 69.5. That was larger than the 0.4% decline in the preliminary reading and it was just slightly greater than Consensus expectations for a reading [...]

Michigan Consumer Sentiment Fell Further

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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/080328a.jpg" width="353">
Nominal personal income grew 0.5% last month and beat Consensus expectations for a 0.3% gain. The rise lifted the three-month growth in income to 4.8%, its best since September.
Wage &amp; salary income moderated a bit and rose 0.3% after January&#39;s 0.5% increase. Factory sector wages rose 0.3% (+0.4% y/y) and wages &amp; salaries in the private service-providing industries rose 0.3% (3.9% y/y). That y/y increase is much reduced from the 6.4% gain last year as well as from the 6.8% 2006 rise. Wages in the government sector rose a strong 0.5% (5.1% y/y) but here the story is one of acceleration after a 4.6% rise last year and a 4.1% 2006 increase.
Lower interest rates caused the fifth straight monthly decline in interest income (+3.6% y/y). That y/y increase was less than one third the rate of gain at the end of 2005. Dividend income rose another firm 0.6% (11.5% y/y), a double digit rate of gain that is down somewhat from its peak 16.3% in 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328b.jpg" width="353">
Disposable personal income growth improved last month to 0.5% which was its best increase since last August. The rise followed 0.4% gains during the prior two months. It raised the thee month growth rate to 5.5% (AR). Adjusted for prices, which moderated, real disposable income rose 0.3% and the three month growth rate picked up to 2.6%.
Personal consumption expenditures rose just the expected 0.1%. Real personal consumption expenditures were flat. That lowered the three-month growth rate to 0.3%, its worst since October 2005.
Real spending on discretionary items continued weak. Motor vehicle &amp; parts purchases did rise 0.3% but three month growth fell to -7.4%. Real spending on household furniture &amp; appliances also rose 0.3%, as it did in January, but three month growth fell to -2.1%. Real spending on apparel rose 1.4% however because of a sharp decline in December, three month growth improved only to -1.5%. These and other detailed spending figures are available in Haver&#39;s USNA database.
The PCE chain price index rose just 0.1% as energy prices fell 1.9%. The core PCE price index matched expectations and rose just 0.1%. The three month growth in prices fell to 2.1%, down from the three month gains of 2.7% registered last year.
The personal savings rate improved somewhat to all of 0.3% from the negative 0.1% during January. 
Yesterday&#39;s speech by Fed GovernorFrederic S. Mishkin on inflation titled Comfort Zones, Shmumfort Zones can be found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080327a.htm">here</a>.</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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</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">Personal Income</td>
<td>0.5</td>
<td>0.3</td>
<td>4.6</td>
<td>6.2</td>
<td>6.6</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>0.5</td>
<td>0.4</td>
<td>4.7</td>
<td>5.7</td>
<td>5.9</td>
<td>4.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.1</td>
<td>0.4</td>
<td>5.1%</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>0.3</td>
<td>-0.1</td>
<td>0.9 (Feb. 07)</td>
<td>0.4</td>
<td>0.4</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.3</td>
<td>3.4</td>
<td>2.5</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.0</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Nominal personal income grew 0.5% last month and beat Consensus expectations for a 0.3% gain. The rise lifted the three-month growth in income to 4.8%, its best since September. Wage & salary income moderated a bit and rose 0.3% after [...]

U.S. Real DPI Up 0.3%, Real PCE Flat, Prices Easy

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328a.jpg" align="left" border="0" height="265" width="353">

Nominal personal income grew 0.5% last
month and beat Consensus expectations for a 0.3% gain. The rise lifted
the three-month growth in income to 4.8%, its best since September.
Wage &amp; salary income moderated a bit and rose 0.3%
after January's 0.5% increase. Factory sector wages rose 0.3% (+0.4%
y/y) and wages &amp; salaries in the private service-providing
industries rose 0.3% (3.9% y/y). That y/y increase is much reduced from
the 6.4% gain last year as well as from the 6.8% 2006 rise. Wages in
the government sector rose a strong 0.5% (5.1% y/y) but here the story
is one of acceleration after a 4.6% rise last year and a 4.1% 2006
increase.
Lower interest rates caused the fifth straight monthly decline
in interest income (+3.6% y/y). That y/y increase was less than one
third the rate of gain at the end of 2005. Dividend income rose another
firm 0.6% (11.5% y/y), a double digit rate of gain that is down
somewhat from its peak 16.3% in 2006.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328b.jpg" align="right" border="0" height="265" width="353">
Disposable personal income growth improved
last month to 0.5% which was its best increase since last August. The
rise followed 0.4% gains during the prior two months. It raised the
thee month growth rate to 5.5% (AR). Adjusted for prices, which
moderated, real disposable income rose 0.3% and the three month growth
rate picked up to 2.6%.
Personal consumption expenditures rose just the expected 0.1%.
Real personal consumption expenditures were flat.
That lowered the three-month growth rate to 0.3%, its worst since
October 2005.
Real spending on discretionary items continued weak. Motor
vehicle &amp; parts purchases did rise 0.3% but three month growth
fell to -7.4%. Real spending on household furniture &amp;
appliances also rose 0.3%, as it did in January, but three month growth
fell to -2.1%. Real spending on apparel rose 1.4% however because of a
sharp decline in December, three month growth improved only to -1.5%.
These and other detailed spending figures are available in Haver's
USNA database.
The PCE chain price index rose just 0.1%
as energy prices fell 1.9%. The core PCE price index
matched expectations and rose just 0.1%. The three month growth in
prices fell to 2.1%, down from the three month gains of
2.7% registered last year.
The personal savings rate improved somewhat to all of 0.3%
from the negative 0.1% during January.
Yesterday's speech by Fed GovernorFrederic S. Mishkin on
inflation titled Comfort Zones, Shmumfort Zones can
be found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080327a.htm">here</a>. 

</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/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</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">Personal Income</td>
<td>0.5</td>
<td>0.3</td>
<td>4.6</td>
<td>6.2</td>
<td>6.6</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>0.5</td>
<td>0.4</td>
<td>4.7</td>
<td>5.7</td>
<td>5.9</td>
<td>4.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.1</td>
<td>0.4</td>
<td>5.1%</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>0.3</td>
<td>-0.1</td>
<td>0.9 (Feb. 07)</td>
<td>0.4</td>
<td>0.4</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.3</td>
<td>3.4</td>
<td>2.5</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.0</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Fell
Further 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 28, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328c.jpg" align="left" border="0" height="265" width="353">
The University of Michigan's consumer sentiment index for all
of March fell 1.8% m/m to 69.5. That was larger than the 0.4% decline
in the preliminary reading and it was just slightly greater than
Consensus expectations for a reading of 70.
The index of expected business conditions during the next year
still accounted for all of the decline in March sentiment. The 3.7%
decline followed an 8.4% February drop and left the index at its lowest
since early 1992. Expectations for business conditions during the next
year fell 14.8% (-51.6% y/y). hat m/m drop was double the decline in
the preliminary report. And expectations for conditions over the next
five years fell m/m rather than rose. Expectations for personal
finances also were unchanged rather than posting a slight rise.
Opinions about government policy fell slightly m/m (-23.6%
y/y) following the sharp 11.5% drop during February. The percentage of
those surveyed who indicated that they thought government was doing a
good job rose somewhat but 44% had a poor opinion.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328d.jpg" align="right" border="0" height="265" width="353">
Expectations for inflation during the next twelve months
surged to 4.6%, the highest level in nearly two years though inflation
expectations during the next five to ten years fell slightly to 3.3%.
That was the same expectation as in the preliminary reading.
The current conditions index fell 0.5% m/m after the 11.2%
February plunge. The view of current conditions for buying large
household goods improved slightly but the view of current personal
finances fell for the fourth month in the last five (-16.2% y/y).
The University of Michigan survey 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.

<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">March</th>
<th scope="col">March (Prelim)</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">March 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">Consumer Sentiment</td>
<td>&nbsp;69.5</td>
<td>70.5</td>
<td>70.8</td>
<td>78.4</td>
<td>-21.4% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>84.2</td>
<td>84.6</td>
<td>83.8</td>
<td>94.4</td>
<td>-18.6%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>60.1</td>
<td>61.4</td>
<td>62.4</td>
<td>68.1</td>
<td>-23.6%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
Japan&#8217;s Inflation Rate Rises but&#8216;Core&#8217; Still Below Zero Y/Y&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 28, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328e.jpg" align="left" border="0" height="265" width="353">
Japan has been gradually making progress toward ridding itself
of its chronic deflation. Headline inflation now has turned positive
year-over-year and is positive over three months as well as over the
six-month horizon. The 12-month calculations are markedly different
from the year ago calculations which refer to the previous 12-month
period when the economy was more firmly in the grip of deflation.
Still, core inflation (ex-food and energy) has not yet moved up above
the zero mark.&gt;

In the quarter to date, inflation also has a positive tone.
Headline inflation is up at a 1% pace while the core is up at a 0.4%
pace and ex-food prices are rising at a 2.3% rate. Most CPI components
are rising in the first quarter of 2008 as well.

For Japan this mild inflation is a mark of success while other
countries are suffering with true inflation risks. Japan is emerging
from its battle with deflation, but it is still fighting to secure
growth.


<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="odd">
<td class="firstcol">&nbsp;</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>Yr-Ago</td>
<td>Qtr-to-Date</td>
</tr>
<tr>
<td class="firstcol">All items</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.8%</td>
<td>1.2%</td>
<td>1.0%</td>
<td>-0.8%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">All items less food and energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-1.2%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">All items except fresh food</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>2.4%</td>
<td>1.8%</td>
<td>1.0%</td>
<td>-0.4%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">seasonally
adjusted BY Haver</td>
</tr>
<tr>
<td class="firstcol">Food &amp; Beverage</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">Housing</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-1.2%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">Clothing and Personal&nbsp;</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>1.6%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.7%</td>
<td>3.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">Medical care</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-0.8%</td>
<td>0.1%</td>
<td>-1.2%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Miscellaneous</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol">Reading &amp; Recreation</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>-0.9%</td>
<td>-4.4%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">Transport &amp;
Communication</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>4.4%</td>
<td>5.0%</td>
<td>3.1%</td>
<td>-1.6%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080327g.jpg" align="left" border="0" height="265" width="353">
Japanese retail sales strengthened late in 2007 but are giving
those gains back in Q1 2008. Inflation adjusted retail sales fell by 1%
in February 2008, unwinding the 0.8% gain in January. In the
quarter-to-date real retail sales are now shrinking at a 0.6% annual
rate. The inflation adjusted retail trends are somewhat distressed.
The detail for Japan&#8217;s retail sales is not seasonally adjusted
or inflation adjusted. But for those flows we can compare the last
12-month pace with that of 12-month previous to that (Yr-Ago). On that
basis there has been improvement across most of the retail sales
components. Growth is better over the recent 12 months than over the
previous 12 months, except for food and beverages.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> Japan Retail Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</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>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total SA</td>
<td>-1.0%</td>
<td>0.8%</td>
<td>-0.7%</td>
<td>-3.5%</td>
<td>-2.0%</td>
<td>-0.4%</td>
<td>-2.0%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Not
seasonally adjusted</td>
</tr>
<tr class="odd">
<td class="firstcol">Total: Nominal</td>
<td>2.4%</td>
<td>0.6%</td>
<td>-0.8%</td>
<td>8.8%</td>
<td>4.9%</td>
<td>3.2%</td>
<td>-0.6%</td>
<td>7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>-3.0%</td>
<td>2.9%</td>
<td>-0.8%</td>
<td>-4.2%</td>
<td>-3.0%</td>
<td>3.3%</td>
<td>-18.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food&amp; Beverage</td>
<td>1.9%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>7.6%</td>
<td>4.6%</td>
<td>2.1%</td>
<td>6.2%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Fabric apparel&amp; access</td>
<td>5.0%</td>
<td>1.2%</td>
<td>-2.6%</td>
<td>14.7%</td>
<td>4.7%</td>
<td>2.3%</td>
<td>0.9%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rest of Retail</td>
<td>3.5%</td>
<td>0.2%</td>
<td>-0.9%</td>
<td>11.7%</td>
<td>6.9%</td>
<td>3.9%</td>
<td>-0.2%</td>
<td>8.7%</td>
</tr>
</tbody>
</table>
</body></html>

Japanese retail sales strengthened late in 2007 but are giving those gains back in Q1 2008. Inflation adjusted retail sales fell by 1% in February 2008, unwinding the 0.8% gain in January. In the quarter-to-date real retail sales are [...]

Japan Retail Sales Show Some Life in January and Give it Back in February

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080327f.jpg" align="left" border="0" height="265" width="353">
The climate indicator for France&#8217;s Service sector noted lower
by one point in March continuing a slip that began in mid-2007. The
index now stands in the 77th percentile of its
range of values since 2000. The climate outlook is weaker in the 67th
percentile of its range.
The past observed sales rating is the best of the period at
the top of its range since 2000 but the 3-month ahead expected result
is only in the 48th percentile of its range, a
sharp reversal in expectations form current conditions. Sales prices
are expected are moderately high in the 70th
percentile of their range. Employment while in the 92nd
percentile as observed over the past three months is rated in the 70th
percentile of its range for the next 3 months. Expectations are
shifting lower in France&#8217;s services sector.
<div align="left"> </div>


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">France
INSEE Services Survey Jan 2000-date </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar 08</td>
<td>Feb 08</td>
<td>Jan 08</td>
<td>Dec 07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate Indicator</td>
<td>104</td>
<td>105</td>
<td>108</td>
<td>108</td>
<td>70.0</td>
<td>44</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 3Mo MAV</td>
<td>106</td>
<td>107</td>
<td>109</td>
<td>111</td>
<td>74.7</td>
<td>31</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 12Mo MAV</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>96.6</td>
<td>7</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>-1</td>
<td>-1</td>
<td>2</td>
<td>3</td>
<td>67.7</td>
<td>41</td>
<td>9</td>
<td>-22</td>
<td>31</td>
<td>-1</td>
</tr>
<tr class="grey2">
<td class="firstcol">Sales</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Observed over past 3 Months</td>
<td>18</td>
<td>13</td>
<td>13</td>
<td>15</td>
<td>100.0</td>
<td>1</td>
<td>18</td>
<td>-11</td>
<td>29</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Expected over next 3 Months</td>
<td>3</td>
<td>10</td>
<td>14</td>
<td>8</td>
<td>48.1</td>
<td>62</td>
<td>17</td>
<td>-10</td>
<td>27</td>
<td>7</td>
</tr>
<tr class="grey2">
<td class="firstcol">Sales Price</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Observed over past 3 Months</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>41.7</td>
<td>21</td>
<td>8</td>
<td>-4</td>
<td>12</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Expected over next 3 Months</td>
<td>2</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>70.0</td>
<td>11</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>0</td>
</tr>
<tr class="grey2">
<td class="firstcol">Employment</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Observed over past 3 Months</td>
<td>15</td>
<td>17</td>
<td>7</td>
<td>15</td>
<td>92.9</td>
<td>2</td>
<td>17</td>
<td>-11</td>
<td>28</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">Expected over next 3 Months</td>
<td>12</td>
<td>19</td>
<td>14</td>
<td>11</td>
<td>70.8</td>
<td>7</td>
<td>19</td>
<td>-5</td>
<td>24</td>
<td>5</td>
</tr>
</tbody>
</table>
</body></html>

The climate indicator for France’s Service sector noted lower by one point in March continuing a slip that began in mid-2007. The index now stands in the 77th percentile of its range of values since 2000. The climate outlook is weaker [...]

French Service Sector Continues to Lose Momentum

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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/080327e.jpg" width="353">
The index of help-wanted advertising reported by the Conference Board dipped last month to a reading of 21 from an upwardly revised 22 in January. The latest level was equal to the record low hit last November.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ads fell even further to 31% after the January decline to 43% from 59% in December. Each figure still is an improvement from 12% in August which was the lowest monthly reading since October 2001.</div>
Each region of the country showed a m/m decline in its help wanted index except the West South Central region.
The Conference Board also surveys help-wanted print advertising volume in 51 major newspapers across the country every month. The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.In 2006, the Conference Board introduced its Help Wanted Online Data Series and the latest release can be found in this <a href="http://www.conference-board.org/pdf_free/HWOnLinePR_080130.pdf">link</a>.
FedViews is from the Federal Reserve Bank of San Francisco an it can be found <a href="http://www.frbsf.org/publications/economics/fedviews/index.html"> here</a>.<div align="left"> </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/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February 2007</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>21</td>
<td>22</td>
<td>30</td>
<td>26</td>
<td>33</td>
<td>39</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of help-wanted advertising reported by the Conference Board dipped last month to a reading of 21 from an upwardly revised 22 in January. The latest level was equal to the record low hit last November. During the last ten [...]

U.S. Help-Wanted Advertising Back to Record Low in January

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080327c.jpg" width="353">
Initial unemployment insurance claims fell back last week by 9,000 to 366,000 after an upwardly revised 28,000 increase during the prior week. The latest was near the highest level since September 2005. Consensus expectations had been for 370,000 initial claims last week. So far in March claims have averaged 363,000, up 1.1% from the February average. (Prior years&#39; figures were revised.)
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080327d.jpg" width="353">
The four week moving average of initial claims fell slightly to 360,250 (13.6% y/y).
Continuing claims for unemployment insurance fell slightly by 5,000 after the upwardly revised 57,000 increase during the prior week. Insured unemployment is at its highest level since mid 2005. The figure provides some indication of workers&#39; ability to find employment.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment held at 2.1%.
No Volatility, No Forecasting Power for the Term Spread from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20080401/cover.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">03/21/08</th>
<th scope="col">03/14/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;366</td>
<td>375</td>
<td>18.1%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,845</td>
<td>13.8%</td>
<td>2,551</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial unemployment insurance claims fell back last week by 9,000 to 366,000 after an upwardly revised 28,000 increase during the prior week. The latest was near the highest level since September 2005. Consensus expectations had been [...]

U.S. Weekly Initial Jobless Insurance Claims Dipped

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief: 2008

Jump to:

Japan’s Inflation Rate Rises but ‘Core’ Still Below Zero Y/Y

Michigan Consumer Sentiment Fell Further

U.S. Real DPI Up 0.3%, Real PCE Flat, Prices Easy

U.S. Real DPI Up 0.3%, Real PCE Flat, Prices Easy

Japan Retail Sales Show Some Life in January and Give it Back in February

French Service Sector Continues to Lose Momentum

U.S. Help-Wanted Advertising Back to Record Low in January

U.S. Weekly Initial Jobless Insurance Claims Dipped