Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113f.jpg" align="left" border="0" height="265" width="353">
Europe&#8217;s recovery remains on track in November as industrial
production has risen in all the large EMU states. The UK, an EU member,
only saw a very minor set back to MFG IP with output dropping by 0.1%
in November. Of the largest EMU states, the rise in the Italy was
disappointing at just 0.2%. The UK&#8217;s small drop actually out did
expectations.
Year-over-year the IP drops have been trimmed to the range of
-4% to -10% for this group of countries. Despite the set back to UK IP
in November at -5.4% it demonstrates one of the smaller Yr/Yr drops in
IP and exhibits a strong improvement from its result in October (-7.8%,
Yr/Yr). All large countries show an improvement in their Yr/Yr drop in
November compared to October and for most the difference is large.
The chart above shows how strong the recoveries have been.
Despite all that strength over the last 3- and 6-months, 2009 has been
a very bad year for Europe.
German GDP is just reported to have posted an outsized drop of
5% in 2009 as its exports and investment goods sectors were hard hit.
As it was, government programs produced a boost that kept the steep GDP
decline from being even larger. Public consumption rose by 2.7% from
2008 while private consumption edged ahead by just 0.2%.
The recovery in IP is however a good development. Germany&#8217;s
industrial sector depends on exports which fell by 14.7% in 2009.
Exports have begun to get traction again and IP is on the rise as a
result. 2010 promises to be a much better year, but then 2009 put all
of Europe in a very deep hole and the real question is not 'Will 2010
be better?' but, 'How much better will 2010 be?' That is not yet
resolved and is a point of some contention. So far, good strong growth
is in train and seems to have staying power. Perhaps more optimism is
warranted.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">Main
Euro-Area Countries and UK IP in MFG </th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">MFG Only</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q:4 
Date</td>
</tr>
<tr class="grey1">
<td class="firstcol"> Germany:</td>
<td>0.8%</td>
<td>-1.8%</td>
<td>3.6%</td>
<td>10.6%</td>
<td>16.6%</td>
<td>9.1%</td>
<td>18.6%</td>
<td>-9.1%</td>
<td>-13.7%</td>
<td>8.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">France: 
IPxConstruct'n</td>
<td>1.1%</td>
<td>-0.6%</td>
<td>-1.2%</td>
<td>-2.6%</td>
<td>4.2%</td>
<td>6.1%</td>
<td>8.6%</td>
<td>-3.8%</td>
<td>-8.0%</td>
<td>0.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>1.0%</td>
<td>-5.2%</td>
<td>-15.3%</td>
<td>6.4%</td>
<td>7.0%</td>
<td>5.9%</td>
<td>-10.2%</td>
<td>-13.2%</td>
<td>-2.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Spain</td>
<td>1.2%</td>
<td>-3.0%</td>
<td>0.5%</td>
<td>-5.5%</td>
<td>-20.2%</td>
<td>17.9%</td>
<td>-0.2%</td>
<td>-3.9%</td>
<td>-13.0%</td>
<td>-14.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">UK: EU
member</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>6.1%</td>
<td>-1.8%</td>
<td>0.9%</td>
<td>-0.4%</td>
<td>-5.4%</td>
<td>-7.8%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
</body></html>

Europe’s recovery remains on track in November as industrial production has risen in all the large EMU states. The UK, an EU member, only saw a very minor set back to MFG IP with output dropping by 0.1% in November. Of the largest EMU [...]

Industrial Output Is Making Continued Gains In Europe

Tom Moeller

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113c.jpg" style="width: 353px; height: 265px;" align="right">Earlier
improvement in small business' optimism slipped again last month. The
National Federation of Independent Business (NFIB) reported their
December small business optimism index dipped 0.3% to 88.0. This second
consecutive slight decline followed several months of increase after
reaching a March low of 81.0.&nbsp;During the last ten years, there
has been an 85% correlation between the level of the NFIB index and the
two-quarter change in real GDP.
 Credit conditions remained as tight as
they've been since the "credit crunch" recession of 1980. The
percentage of firms reporting that credit was harder to get was stable
m/m at a net 15 but that was roughly triple the percentage from 1994 to
2007. The percent borrowing at least once last quarter was stable at
33% but that was down from the high of 46% during 2006.
The percentage
of small businesses expecting the economy to improve dipped slightly
m/m to 2 after a sharp November decline. The latest was down from the
May high of 12. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113d.jpg" style="width: 353px; height: 265px;" align="right">
The percentage which thought that now was a good time
to expand the business also slipped to 7 though it remained sharply
improved from this winter.
 Hiring intentions have responded negatively
to recent weakness in overall business sentiment. The percentage of
firms planning to raise employment remained in a net-layoff region,
though it has improved from the March low. For now, the percentage of
firms with one or more job openings improved modestly to 10% during
December. During the last ten years there has been a 74% correlation
between the NFIB employment percentage and the six-month change in
nonfarm payrolls. Also stable in the negative region was the percentage
expecting credit conditions to ease.
On the pricing front deflation
continued. The percentage of firms actually raising
prices at -22% (indicating deflation) slipped from the prior several
months and was near the record low. During the last ten years there has
been a 60% correlation between the six-month change in the producer
price index and the level of the NFIB price index<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113e.jpg" style="width: 353px; height: 265px;" align="right">

The
percentage of firms planning to raise prices
slipped again to a net 3 though that remained up from the March low of
zero. Finally, the percentage planning to raise worker compensation
fell to 1.
The largest, single most important problems seen by
business were poor sales (34%), taxes (20%, near its highest level
since 2007), government requirements (13%), insurance cost &amp;
availability (7%), competition from large businesses (6%) and inflation
(2%).
About 24 million small businesses exist in the United
States. Small business creates 80% of all new jobs in America and the
NFIB figures can be found in Haver's SURVEYS
database.&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/SURVEYS/@S7/@S7.HTM">Nat'l
Federation of Independent Business</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Small Business Optimism Index
(SA, 1986=100)</td>
<td>88.0</td>
<td>88.3</td>
<td>89.1</td>
<td>3.3%</td>
<td>86.7</td>
<td>89.8</td>
<td>96.7</td>
</tr>
<tr>
<td class="firstcol">Percent of Firms Expecting
Economy To Improve</td>
<td>2</td>
<td>3</td>
<td>11</td>
<td>-13</td>
<td>-0</td>
<td>-10</td>
<td>-4</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent of Firms With One or
More Job Openings</td>
<td>10</td>
<td>8</td>
<td>8</td>
<td>14</td>
<td>9</td>
<td>18</td>
<td>24</td>
</tr>
<tr>
<td class="firstcol">Percent of Firms Reporting That
Credit Was Harder To Get</td>
<td>15</td>
<td>15</td>
<td>14</td>
<td>12</td>
<td>14</td>
<td>9</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent of Firms Raising Avg.
Selling Pric1es (Net)</td>
<td>-22</td>
<td>-17</td>
<td>-17</td>
<td>-6</td>
<td>-20</td>
<td>17</td>
<td>15</td>
</tr>
</tbody>
</table>

</body></html>

Earlier improvement in small business' optimism slipped again last month. The National Federation of Independent Business (NFIB) reported their December small business optimism index dipped 0.3% to 88.0. This second consecutive slight [...]

U.S. Small Business Optimism Slips Again As Credit Remains Tight

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113a.jpg" style="width: 353px; height: 265px;" align="right">The
Bureau
of Labor Statistics continued to indicate little improvement in hiring,
but layoffs have diminished. In its Job Openings &amp; Labor
Turnover Survey (JOLTS) job availability during November fell 6.1% from
October and is off 27.1% year-to-year. The series dates back to
December 2000.&nbsp;As a result of the decline the job
openings rate fell to 1.8% and remained off sharply from the
3.1% rate before the current recession began. The job
openings rate is the number of job openings on the last business day of
the month as a percent of total employment plus job openings.
The service sector weakened last month. The number of retail
job
openings fell 15.8% (-49.3% y/y) and the number of professional
&amp; business service jobs fell 9.2% (-13.7% y/y). Leisure
&amp; hospitality jobs also were off, by 7.8% (-21.2% y/y), but
educational &amp; health service jobs rose 4.2% (-21.7% y/y). Even
the number of government sector job openings fell 9.8% (-10.3% y/y).
Countering weakness in service sector hiring was the factory sector
where job openings rose for the fourth consecutive month but they remained off 28.6% y/y. 
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113b.jpg" style="width: 353px; height: 265px;" align="right">
Construction
sector job openings were firm for the third of the last four months and
posted an 11.6% (+1.3% y/y) increase.
 The hires rate
picked up slightly m/m to 3.2% and was improved from the series' low of
3.0% last spring.&nbsp;The hires rate is the number of
hires during the month divided by employment.&nbsp;The
actual number of hires also rose 3.2% m/m but was down 1.2%
year-to-year. Professional &amp; business service sector hires rose
14.1% (7.2% y/y) while leisure &amp; hospitality hires rose 8.4%
(4.0% y/y). Factory sector hiring slipped 0.8% and was off a diminished
5.4% y/y while construction sector hiring also dipped m/m (-10.0%
y/y).
 The job separations rate increased
modestly
from the series' low to 3.3% with the actual number of separations off
10.8% year-to-year. Separations include quits, layoffs,
discharges, and other separations as well as retirements. The
layoff rate alone held steady at 1.6% for the third consecutive month.
That was down sharply from the rate's high of 1.9% last winter.
 The
JOLTS survey dates only to December 2000 but has followed the movement
in nonfarm payrolls, though the actual correlation between the two
series is low.
 A description of the Jolts survey and the latest
release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/pdf/jolts.pdf">here</a>
and the figures are available in Haver's USECON
database.&nbsp;&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/@EB/@EB14/@EB14.HTM" style="color: white;">JOLTS (Job Openings &amp; Labor
&nbsp;Turnover Survey)</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Nov. '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="8" class="firstcol">Job Openings, Total</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>1.8</td>
<td>1.9</td>
<td>1.9</td>
<td>2.4</td>
<td>2.3</td>
<td>3.1</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>2,415</td>
<td>2,571</td>
<td>2,586</td>
<td>3,311</td>
<td>3,224</td>
<td>4,382</td>
<td>4,606</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Hires, Total</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.2</td>
<td>3.1</td>
<td>3.1</td>
<td>3.1</td>
<td>41.1</td>
<td>46.1</td>
<td>47.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>4,176</td>
<td>4,045</td>
<td>4,061</td>
<td>4,226</td>
<td>56,486</td>
<td>63,666</td>
<td>64,879</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Layoffs &amp;
Discharges, Total</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>1.6</td>
<td>1.6</td>
<td>1.6</td>
<td>1.7</td>
<td>1.5</td>
<td>1.4</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>2,054</td>
<td>2,128</td>
<td>2,128</td>
<td>2,253</td>
<td>24,362</td>
<td>22,613</td>
<td>21,546</td>
</tr>
</tbody>
</table>

</body></html>

The Bureau of Labor Statistics continued to indicate little improvement in hiring, but layoffs have diminished. In its Job Openings & Labor Turnover Survey (JOLTS) job availability during November fell 6.1% from October and is off [...]

JOLTS: U.S. Job Openings Remain At Series' Low

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113a.jpg" style="width: 353px; height: 265px;" align="right">The
Bureau
of Labor Statistics continued to indicate little improvement in hiring,
but layoffs have diminished. In its Job Openings &amp; Labor
Turnover Survey (JOLTS) job availability during November fell 6.1% from
October and is off 27.1% year-to-year. The series dates back to
December 2000.&nbsp;As a result of the decline the job
openings rate fell to 1.8% and remained off sharply from the
3.1% rate before the current recession began. The job
openings rate is the number of job openings on the last business day of
the month as a percent of total employment plus job openings.
The service sector weakened last month. The number of retail
job
openings fell 15.8% (-49.3% y/y) and the number of professional
&amp; business service jobs fell 9.2% (-13.7% y/y). Leisure
&amp; hospitality jobs also were off, by 7.8% (-21.2% y/y), but
educational &amp; health service jobs rose 4.2% (-21.7% y/y). Even
the number of government sector job openings fell 9.8% (-10.3% y/y).
Countering weakness in service sector hiring was the factory sector
where job openings rose for the fourth consecutive month but they remained off 28.6% y/y. 
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113b.jpg" style="width: 353px; height: 265px;" align="right">Construction
sector job openings were firm for the third of the last four months and
posted an 11.6% (+1.3% y/y) increase.
 The hires rate
picked up slightly m/m to 3.2% and was improved from the series' low of
3.0% last spring.&nbsp;The hires rate is the number of
hires during the month divided by employment.&nbsp;The
actual number of hires also rose 3.2% m/m but was down 1.2%
year-to-year. Professional &amp; business service sector hires rose
14.1% (7.2% y/y) while leisure &amp; hospitality hires rose 8.4%
(4.0% y/y). Factory sector hiring slipped 0.8% and was off a diminished
5.4% y/y while construction sector hiring also dipped m/m (-10.0%
y/y).
 The job separations rate increased
modestly
from the series' low to 3.3% with the actual number of separations off
10.8% year-to-year. Separations include quits, layoffs,
discharges, and other separations as well as retirements. The
layoff rate alone held steady at 1.6% for the third consecutive month.
That was down sharply from the rate's high of 1.9% last winter.
 The
JOLTS survey dates only to December 2000 but has followed the movement
in nonfarm payrolls, though the actual correlation between the two
series is low.
 A description of the Jolts survey and the latest
release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/pdf/jolts.pdf">here</a>
and the figures are available in Haver's USECON
database.&nbsp;&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/@EB/@EB14/@EB14.HTM" style="color: white;">JOLTS (Job Openings &amp; Labor
&nbsp;Turnover Survey)</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Nov. '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="8" class="firstcol">Job
Openings, Total</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>1.8</td>
<td>1.9</td>
<td>1.9</td>
<td>2.4</td>
<td>2.3</td>
<td>3.1</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>2,415</td>
<td>2,571</td>
<td>2,586</td>
<td>3,311</td>
<td>3,224</td>
<td>4,382</td>
<td>4,606</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Hires,
Total</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.2</td>
<td>3.1</td>
<td>3.1</td>
<td>3.1</td>
<td>41.1</td>
<td>46.1</td>
<td>47.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>4,176</td>
<td>4,045</td>
<td>4,061</td>
<td>4,226</td>
<td>56,486</td>
<td>63,666</td>
<td>64,879</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Layoffs
&amp;
Discharges, Total</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>1.6</td>
<td>1.6</td>
<td>1.6</td>
<td>1.7</td>
<td>1.5</td>
<td>1.4</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>2,054</td>
<td>2,128</td>
<td>2,128</td>
<td>2,253</td>
<td>24,362</td>
<td>22,613</td>
<td>21,546</td>
</tr>
</tbody>
</table>

U.S. Small Business Optimism Slips
Again As Credit Remains Tight 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 13, 2010



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113c.jpg" style="width: 353px; height: 265px;" align="right">Earlier
improvement in small business' optimism slipped again last month. The
National Federation of Independent Business (NFIB) reported their
December small business optimism index dipped 0.3% to 88.0. This second
consecutive slight decline followed several months of increase after
reaching a March low of 81.0.&nbsp;During the last ten years, there
has been an 85% correlation between the level of the NFIB index and the
two-quarter change in real GDP.
 Credit conditions remained as tight as
they've been since the "credit crunch" recession of 1980. The
percentage of firms reporting that credit was harder to get was stable
m/m at a net 15 but that was roughly triple the percentage from 1994 to
2007. The percent borrowing at least once last quarter was stable at
33% but that was down from the high of 46% during 2006.
The percentage
of small businesses expecting the economy to improve dipped slightly
m/m to 2 after a sharp November decline. The latest was down from the
May high of 12. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113d.jpg" style="width: 353px; height: 265px;" align="right">
The percentage which thought that now was a good time
to expand the business also slipped to 7 though it remained sharply
improved from this winter.
 Hiring intentions have responded negatively
to recent weakness in overall business sentiment. The percentage of
firms planning to raise employment remained in a net-layoff region,
though it has improved from the March low. For now, the percentage of
firms with one or more job openings improved modestly to 10% during
December. During the last ten years there has been a 74% correlation
between the NFIB employment percentage and the six-month change in
nonfarm payrolls. Also stable in the negative region was the percentage
expecting credit conditions to ease.
On the pricing front deflation
continued. The percentage of firms actually raising
prices at -22% (indicating deflation) slipped from the prior several
months and was near the record low. During the last ten years there has
been a 60% correlation between the six-month change in the producer
price index and the level of the NFIB price index<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113e.jpg" style="width: 353px; height: 265px;" align="right">

The
percentage of firms planning to raise prices
slipped again to a net 3 though that remained up from the March low of
zero. Finally, the percentage planning to raise worker compensation
fell to 1.
The largest, single most important problems seen by
business were poor sales (34%), taxes (20%, near its highest level
since 2007), government requirements (13%), insurance cost &amp;
availability (7%), competition from large businesses (6%) and inflation
(2%).
About 24 million small businesses exist in the United
States. Small business creates 80% of all new jobs in America and the
NFIB figures can be found in Haver's SURVEYS
database.&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/SURVEYS/@S7/@S7.HTM">Nat'l
Federation of Independent Business</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Small Business Optimism Index
(SA, 1986=100)</td>
<td>88.0</td>
<td>88.3</td>
<td>89.1</td>
<td>3.3%</td>
<td>86.7</td>
<td>89.8</td>
<td>96.7</td>
</tr>
<tr>
<td class="firstcol">Percent of Firms Expecting
Economy To Improve</td>
<td>2</td>
<td>3</td>
<td>11</td>
<td>-13</td>
<td>-0</td>
<td>-10</td>
<td>-4</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent of Firms With One or
More Job Openings</td>
<td>10</td>
<td>8</td>
<td>8</td>
<td>14</td>
<td>9</td>
<td>18</td>
<td>24</td>
</tr>
<tr>
<td class="firstcol">Percent of Firms Reporting That
Credit Was Harder To Get</td>
<td>15</td>
<td>15</td>
<td>14</td>
<td>12</td>
<td>14</td>
<td>9</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent of Firms Raising Avg.
Selling Pric1es (Net)</td>
<td>-22</td>
<td>-17</td>
<td>-17</td>
<td>-6</td>
<td>-20</td>
<td>17</td>
<td>15</td>
</tr>
</tbody>
</table>

Industrial Output Is Making
Continued Gains In Europe 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 13, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113f.jpg" align="left" border="0" height="265" width="353">
Europe&#8217;s recovery remains on track in November as industrial
production has risen in all the large EMU states. The UK, an EU member,
only saw a very minor set back to MFG IP with output dropping by 0.1%
in November. Of the largest EMU states, the rise in the Italy was
disappointing at just 0.2%. The UK&#8217;s small drop actually out did
expectations.
Year-over-year the IP drops have been trimmed to the range of
-4% to -10% for this group of countries. Despite the set back to UK IP
in November at -5.4% it demonstrates one of the smaller Yr/Yr drops in
IP and exhibits a strong improvement from its result in October (-7.8%,
Yr/Yr). All large countries show an improvement in their Yr/Yr drop in
November compared to October and for most the difference is large.
The chart above shows how strong the recoveries have been.
Despite all that strength over the last 3- and 6-months, 2009 has been
a very bad year for Europe.
German GDP is just reported to have posted an outsized drop of
5% in 2009 as its exports and investment goods sectors were hard hit.
As it was, government programs produced a boost that kept the steep GDP
decline from being even larger. Public consumption rose by 2.7% from
2008 while private consumption edged ahead by just 0.2%.
The recovery in IP is however a good development. Germany&#8217;s
industrial sector depends on exports which fell by 14.7% in 2009.
Exports have begun to get traction again and IP is on the rise as a
result. 2010 promises to be a much better year, but then 2009 put all
of Europe in a very deep hole and the real question is not 'Will 2010
be better?' but, 'How much better will 2010 be?' That is not yet
resolved and is a point of some contention. So far, good strong growth
is in train and seems to have staying power. Perhaps more optimism is
warranted.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">Main
Euro-Area Countries and UK IP in MFG </th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">MFG Only</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q:4 
Date</td>
</tr>
<tr class="grey1">
<td class="firstcol"> Germany:</td>
<td>0.8%</td>
<td>-1.8%</td>
<td>3.6%</td>
<td>10.6%</td>
<td>16.6%</td>
<td>9.1%</td>
<td>18.6%</td>
<td>-9.1%</td>
<td>-13.7%</td>
<td>8.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">France: 
IPxConstruct'n</td>
<td>1.1%</td>
<td>-0.6%</td>
<td>-1.2%</td>
<td>-2.6%</td>
<td>4.2%</td>
<td>6.1%</td>
<td>8.6%</td>
<td>-3.8%</td>
<td>-8.0%</td>
<td>0.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>1.0%</td>
<td>-5.2%</td>
<td>-15.3%</td>
<td>6.4%</td>
<td>7.0%</td>
<td>5.9%</td>
<td>-10.2%</td>
<td>-13.2%</td>
<td>-2.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Spain</td>
<td>1.2%</td>
<td>-3.0%</td>
<td>0.5%</td>
<td>-5.5%</td>
<td>-20.2%</td>
<td>17.9%</td>
<td>-0.2%</td>
<td>-3.9%</td>
<td>-13.0%</td>
<td>-14.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">UK: EU
member</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>6.1%</td>
<td>-1.8%</td>
<td>0.9%</td>
<td>-0.4%</td>
<td>-5.4%</td>
<td>-7.8%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
</body></html>

JOLTS: U.S. Job Openings Remain AtSeries' Low

Louise Curley

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112i.jpg" style="width: 353px; height: 265px;" align="right">Industrial
production in India increased 3.0% from 298.8 (FY 1993=100) in October
to 307.8 in November and was 11.7% greater than November
2008.&nbsp; This follows October's year over year increase of
10.4%.&nbsp; The production of electricity was down 1.7% for the
month but was 3.3% above the year ago level.&nbsp; Mining
production increased less than a third of a percent in November but was
almost 10 above the year ago level.&nbsp; Production in the
manufacturing sector was strong, increasing 4.2% in the month and 12.7%
over a year ago.&nbsp; The trends in total production and its major
components over the past six years are shown in the first
chart.&nbsp; The rising trend in production halted in 2008 and
early 2009, but never actually reversed into a decline.
Industrial
production for India is also reported for Market Groups, some of which
are shown in the second chart.&nbsp; (Recent levels and percentage
changes for those market groups not shown in the chart are shown in the
table below.) Production of consumer durables was a standout in
November with production up 14.0%.&nbsp; A steadily increasing rate
of production has brought the production of consumer durable goods
37.4% above that of November 2008&nbsp;&nbsp; Although capital
goods production increased only 0.39% in the month of November it was
11.6% greater than in November 2008.&nbsp; There was a similar
pattern in the production of Intermediate Goods, which increased 1.5%
in November but was 19.4% above the year ago
level.
 Rising industrial production in the first
two months of the fourth quarter bodes well for growth in the total
economy in the fourth quarter.&nbsp; Industrial production has
accounted for between 18% and 20% of GDP over the past six years as
shown in the third chart.&nbsp;&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112j.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112k.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Industrial
Production (FY1993=100)</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Nov 08</th>
<th scope="col">M/M % Chg</th>
<th scope="col">Y/Y % Chg</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total</td>
<td>307.8</td>
<td>298.8</td>
<td>275.5</td>
<td>3.01</td>
<td>11.72</td>
<td>275.0</td>
<td>263.3</td>
<td>239.6</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>194.0</td>
<td>193.4</td>
<td>176.6</td>
<td>0.31</td>
<td>9.85</td>
<td>175.5</td>
<td>169.2</td>
<td>159.9</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>333.0</td>
<td>319.7</td>
<td>295.5</td>
<td>4.16</td>
<td>12.69</td>
<td>294.9</td>
<td>282.0</td>
<td>255.0</td>
</tr>
<tr>
<td class="firstcol">Electricity</td>
<td>232.2</td>
<td>236.7</td>
<td>224.7</td>
<td>-1.69</td>
<td>3.34</td>
<td>222.1</td>
<td>214.1</td>
<td>201.5</td>
</tr>
<tr>
<td class="firstcol">Basic Goods</td>
<td>243.3</td>
<td>241.7</td>
<td>229.5</td>
<td>0.66</td>
<td>6.01</td>
<td>229.5</td>
<td>221.2</td>
<td>203.5</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>440.1</td>
<td>438.4</td>
<td>394.5</td>
<td>0.39</td>
<td>11.56</td>
<td>392.7</td>
<td>359.6</td>
<td>300.5</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>305.7</td>
<td>291.7</td>
<td>256.0</td>
<td>1.46</td>
<td>19.41</td>
<td>260.8</td>
<td>259.7</td>
<td>234.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>335.4</td>
<td>329.2</td>
<td>302.2</td>
<td>1.88</td>
<td>10.99</td>
<td>306.4</td>
<td>288.3</td>
<td>269.6</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;
Durable&nbsp;</td>
<td>516.9</td>
<td>453.3</td>
<td>376.1</td>
<td>14.03</td>
<td>37.44</td>
<td>389.7</td>
<td>377.9</td>
<td>378.5</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;
Nondurable</td>
<td>294.4</td>
<td>298.0</td>
<td>286.0</td>
<td>-1.21</td>
<td>2.94</td>
<td>287.3</td>
<td>267.7</td>
<td>244.4</td>
</tr>
</tbody>
</table>

</body></html>

Industrial production in India increased 3.0% from 298.8 (FY 1993=100) in October to 307.8 in November and was 11.7% greater than November 2008. This follows October's year over year increase of 10.4%. The production of electricity [...]

Industrial Production In India Continues To Advance

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112g.jpg" style="width: 353px; height: 265px;" align="right">The holiday
spirit faded last week. That was reflected in a 3.0% w/w decline in
chain store sales which left purchases at the lowest level since March
of last year. Nevertheless, sales rose 1.7% y/y. Most likely the latest
weakness as much reflects post-holiday price discounts as a decline in
sales' volume.The
ICSC-Goldman Sachs retail chain-store sales index is constructed using
the same-store sales (stores open for one year) reported by 78 stores
of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.During the last ten years
there has been a 69% correlation between the year-to-year growth in
chain store sales and the growth in general merchandise retail sales.<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112h.jpg" style="width: 353px; height: 265px;" align="right">

The weekly figures are available in Haver's SURVEYW database.
Also suffering from post-Holiday blues was the leading indicator of
chain store sales. It slipped marginally early in January but its level
was near the highest since January of last year. This composite leading
economic indicator is compiled from four series: (1) the MBA's volume
index of mortgage applications for home purchase (2) the ABC News/Money
magazine's survey of consumer buying conditions (3) new filings for
jobless benefits and (4) the 30-year government bond yield
<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/surveyw/@S2/@S2.HTM" style="color: rgb(0, 0, 0);">ICSC-UBS (SA,
1977=100)</a></th>
<th scope="col">01/09/10</th>
<th scope="col">01/02/10</th>
<th scope="col">12/26/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>482.6</td>
<td>497.6</td>
<td>490.1</td>
<td>1.7%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body></html>

The holiday spirit faded last week. That was reflected in a 3.0% w/w decline in chain store sales which left purchases at the lowest level since March of last year. Nevertheless, sales rose 1.7% y/y. Most likely the latest weakness as [...]

Weekly Chain Store Sales Likely Suffered From Price Discounting

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112d.jpg" style="width: 353px; height: 265px;" align="right">Energy
prices are responding to evidence of economic recovery. Last week the pump
price for regular gasoline rose to $2.75 per gallon, the
highest level since October 2008 and up 71% from the December 2008 low
of $1.61. Yesterday, strength in gasoline prices eased somewhat. The
spot market price for a gallon of regular gasoline held at $2.12 per
gallon, the same as last week's level. The figures are reported by the
U.S. Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
Earlier gains in the price for a
barrel of light sweet crude (WTI) oil also stabilized. Yesterday, the
spot price of $82.52 was roughly unchanged from the prior week.
Nevertheless, prices have risen from $71.53 averaged in early-December.
Moreover, prices were up sharply from the December 2008 low of $32.37.

Demand for gasoline last week posted a 0.9% decline versus one
year
ago. That decline compared to a 3.9% increase at the beginning of
October. Breaking away from earlier y/y strength, the demand for
residual fuel oil fell a sharp 50.4% y/y while distillate demand fell
10.9% y/y, a decline more moderate than the 21.6% y/y shortfall at the
beginning of last July. Inventories of crude oil and petroleum products
fell in early-January by 6.2% from the July high and were up a
diminished 3.1% from one year ago. 
 Reflecting the cold temperatures
throughout the U.S. natural gas prices also strengthened significantly.
Last week prices averaged $6.50 per mmbtu (11.1% y/y), up from $3.35 in
November and triple the September low. Nevertheless, prices remained
down by half from the high reached in early-July of 2008 of
$13.19/mmbtu.
The energy price data can be found in Haver's WEEKLY
database while the daily figures are in DAILY.
The gasoline demand figures are in OILWKLY.
 The
Case for "Inflation First" Monetary Policy from the Federal
Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/es/09/ES0947.pdf">here</a>&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112e.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">01/11/10</th>
<th scope="col">01/04/10</th>
<th scope="col">12/28/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.75</td>
<td>2.67</td>
<td>2.61</td>
<td>54.2%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>82.59</td>
<td>79.14</td>
<td>75.09</td>
<td>85.6%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>

</body></html>

Energy prices are responding to evidence of economic recovery. Last week the pump price for regular gasoline rose to $2.75 per gallon, the highest level since October 2008 and up 71% from the December 2008 low of $1.61. Yesterday, [...]

Weekly Chain Store Sales LikelySuffered From Price Discounting

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112a.jpg" align="right" border="0" height="265" width="353">
Economic
recovery hit the U.S. trade accounts with a double-whammy during
November. It generated a 2.6% m/m rise in imports and it increased the
international trade deficit to $36.4B which was the highest since
January. The rise followed October's deficit of $33.2B which&nbsp;
was revised up slightly from the initial estimate. Export growth lagged
with a 0.9% increase that followed two months of stronger increase. The
latest figure was quite a bit higher than Consensus expectations for a
deficit of $34.5B.Imports rose 2.6% in part due to a rise in crude
oil prices to $72.54 per barrel which was the highest level since
October of 2008. Overall, however, the gain in petroleum imports was
held back by a 4.6% m/m decline (-8.2% y/y) in the quantity of
energy-related products. U.S. economic recovery continued to be
apparent in a 1.5% increase (-6.3% y/y) in real nonoil imports which
was the fifth increase in six months. Real non-auto capital goods
imports jumped 3.5% (-13.0% y/y) after a 2.8% September rise. Real
nonauto consumer goods imports surged 3.7% and by 12.5% since June.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112b.jpg" align="right" border="0" height="265" width="353">
These are turnarounds from earlier sharp declines. Real automotive
vehicles &amp; parts imports, however, slipped 0.4% (-0.1% y/y) but
they were up by one-half since the spring. Real capital goods imports
also have been strong and rose 3.6% for the fourth increase in five
months. They have risen 14.5% since June. Finally, services imports
rose a modest 0.3% (-4.0% y/y) for the fifth increase in six months.
U.S. travels abroad were discouraged by the lower dollar. Travel
imports slipped 0.9% (-7.1% y/y and passenger fares rose 1.5% (-25.6%
y/y). Reflecting the competitive value of the dollar, nominal exports
rose 0.9% m/m and by 13.6% from the April low. Adjusted for price
inflation, however, the gain is more impressive. Though real
merchandise exports slipped 0.6% during November (-4.4% y/y), they have
risen 13.9% since April. Offsetting a 5.4% decline (-2.3% y/y) decline
in real non-auto consumer goods exports was a 9.0% rise in auto exports
(-6.1% y/y) and a 0.4% uptick (-7.6% y/y) uptick in real capital goods
exports. Exports of services ticked up 0.2% (-0.8% y/y) following
earlier strong monthly gains.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112c.jpg" align="right" border="0" height="265" width="353">
By country, the trade deficit
with mainland China lessened to $20.2B, its least since June, as
exports rose 41.4% y/y and imports fell 2.5%. With Japan, the trade
deficit deteriorated to $5.4B from 5.1B one year earlier as exports
fell 16.3% while imports fell just 4.4%. With the European Union, the
trade deficit deteriorated to $6.4B as exports declined 9.4% y/y and
imports fell a lesser 5.3%. The international
trade data can be found in Haver's USECON database.
Detailed figures are available in the USINT
database.The Determinants of International Flows of U.S.
Currency from the Federal Reserve Bank of New York can be
found <a href="http://www.newyorkfed.org/research/staff_reports/sr400.pdf">
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/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</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">U.S. Trade Deficit</td>
<td>$36.4</td>
<td>$33.2</td>
<td>$35.7B</td>
<td>$43.2B (11/08)</td>
<td>$695.9</td>
<td>$701.4</td>
<td>$760.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Exports - Goods
&amp; Services</td>
<td>0.9%</td>
<td>2.7%</td>
<td>2.8%</td>
<td>-2.3%</td>
<td>11.2%</td>
<td>13.2%</td>
<td>13.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports - Goods
&amp; Services</td>
<td>2.6%</td>
<td>0.7%</td>
<td>5.6%</td>
<td>-5.5%</td>
<td>7.6</td>
<td>6.0%</td>
<td>10.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>7.3%</td>
<td>-10.6%</td>
<td>20.7%</td>
<td>1.0%</td>
<td>37.0%</td>
<td>9.4%</td>
<td>20.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>2.4%</td>
<td>3.2%</td>
<td>4.2%</td>
<td>-6.9%</td>
<td>1.5%</td>
<td>4.8%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>
</body></html>

Economic recovery hit the U.S. trade accounts with a double-whammy during November. It generated a 2.6% m/m rise in imports and it increased the international trade deficit to $36.4B which was the highest since January. The rise [...]

U.S. Trade Deficit Increases With Economic Recovery

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

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

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Michael J. Moran

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The Conference Board’s index of Consumer Confidence inched higher in April from an upwardly revised reading in March. The combined changes left the measure 1.1% higher than the preliminary tally in March. Despite the improvement, the index remained in the low end of the range for the current expansion. The index in April totaled 92.8, down from an average of 96.1 in 2025 and an annual cyclical high of 105.4 in 2023.

The Improvement in April reflected a pickup in the expectations component, which rose 1.7%. The current conditions component inched 0.2% lower. Overall views on current conditions slipped despite more favorable assessments of the labor market. The so-called measure of the jobs gap (share of respondents indicating that jobs are plentiful less the share saying that jobs are hard to get) rose 1.4 percentage points higher to 7.5%. The pickup reflected a drop in the share indicating that jobs are hard to get (down 1.5 percentage points to 19.8%). The share indicating that jobs are plentiful eased 0.1 percentage point to 27.3%.

Although expectations improved in April, from a long-term perspective they could be viewed as the more important factor restraining the headline measure of confidence. As shown in the left chart below, the expectations component of confidence shows considerably less volatility than the current conditions component does. The contrasting patterns suggest that individuals realize that the economy will undergo possibly sharp cyclical swings, but they expect conditions at some point to return to an underlying norm.

The current conditions index in the current cycle has indeed dropped noticeably, but it is still above the long run average (123.8 in April versus the average of approximately 108 from 1990 to 2025). The expectations component, as usual, has eased less than the current conditions component, but its shift has pushed the measure to the low end of its long-run range (72.2 in April versus an average of approximately 88).

Interestingly, concern about the labor market seems to be a factor affecting expectations. While current views on the labor market are favorable (plentiful less hard to get jobs gap of 7.5%), Individual are concerned about the future. The survey asks respondents if they expect more jobs or fewer jobs six months hence. The share indicating fewer jobs has moved well into the upper end of the historical range. Such observations in the past were typically seen only during recession (chart, below right). An unfavorable view on interest rates also seems to be playing a role in depressing the expectations component. More than 60% of respondents to the current survey expect higher interest rates 12 months from now.

The results from the Conference Board survey of consumers differ markedly from those of the University of Michigan Survey Research Center. The Michigan results show consumer sentiment at a record low, while the Conference Board index is only slightly below its long-run average. The difference most likely reflects the nature of the questions in the surveys. The Conference Board focuses on business and employment conditions, while Michigan emphasizes personal finances. The focus on finances, along with questions on inflation, probably picks up concerns about affordability.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

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- Expectations improved slightly in April, but are still subdued relative to norms.
- Moderately favorable view of current conditions.

Consumer Confidence: Modest Change in April

Winnie Tapasanun

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U.S. house prices were essentially unchanged m/m in February after rises of 0.2% in January (+0.1% initially) and 0.3% in December (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. February marked the first flat reading since September following four consecutive m/m increases. The HPI was at 441.43 in February, up 14.8% from its August 2022 low of 384.59. The year-on-year growth rate eased to 1.7% in February—the lowest since March 2012—from 1.8% in January (+4.1% in February 2025), down from a high of 6.9% in February 2024 and well below a peak of 18.5% in February 2022.

By region, February FHFA house prices showed a mixed performance. House prices fell m/m in February (vs. January) in four of the nine census divisions. Declines were led by Mountain (-1.1% vs. +0.4%), followed by Pacific (-0.5% vs. +0.6%), West North Central (-0.4% vs. +0.3%), and Middle Atlantic (-0.1% vs. +0.3%). To the upside, house prices rose m/m in four census divisions in February (vs. January): South Atlantic (+0.6% vs. -0.2%), East South Central (+0.2% vs. +1.2%), New England (+0.2% vs. +0.6%), and West South Central (+0.2% vs. -0.3%). Meanwhile, house prices in East North Central were virtually unchanged m/m for the second successive month in February following seven straight m/m gains.

Year-on-year house prices continued to rise in February in most regions, except Mountain, Pacific, and West South Central. The y/y growth rate accelerated in February (vs. January) in only two of the nine census divisions: East South Central (+4.0% vs. +3.2%) and South Atlantic (+0.9% vs. +0.4%). Meanwhile, house price growth decelerated y/y in February (vs. January) in four regions: New England (+3.1% vs. +3.9%), West North Central (+3.1% vs. +3.6%), East North Central (+3.8% vs. +4.5%), and Middle Atlantic (+4.2% vs. +4.5%). To the downside, Mountain (-0.7% vs. 0.0%), Pacific (-0.4% vs. -0.3%), and West South Central (-0.1% vs. -0.4%) posted y/y declines in February.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

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- February FHFA HPI 0.0% m/m; +1.7% y/y, lowest since Mar. ’12.
- House prices down m/m in four of nine census divisions, led by Mountain (-1.1%); up in four, driven by South Atlantic (+0.6%); flat in East North Central.
- House prices up y/y in six of nine regions, led by Middle Atlantic (+4.2%), but down in Mountain (-0.7%), Pacific (-0.4%), and West South Central (-0.1%).

U.S. FHFA House Prices Flat in February After Four Straight M/M Gains

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Early PPI reports in the monetary union show collective pressures building over the past year, with newly emergent pressures popping up strongly in March.

The sequence of monthly inflation observations for these five early reporters in March shows that inflation pressure has not been clearly building but did jump up suddenly in March. In February, before the Iran war, the median monthly PPI gain was -0.5%. In March, that jumped to +3.9% (median month-to-month gain). Monthly pressure does not show steady gains anywhere except moderately in Germany. Finland shows deceleration in progress (!) even through—especially through—March, as its PPI in March fell by 5.3%. But the whole Finish pattern is somewhat upside down, with prices up month-to-month by 6.2% in January and 2.9% in February. It is not a trend that is easy to understand.

However, the March monthly gains are strong enough to drive sequential inflation higher from 12-months, to 6-months, to 3-months across all early-reporting countries. Even the German ex-energy index shows acceleration on that profile.

On a year-on-year basis, two of the early reporters have PPI inflation below 2%. Finland has 12-month PPI inflation at 2.1%, but Italy and Spain have inflation much higher, up by 3.4% over 12 months in Spain and by 5.6% in Italy.

The PPI has been very well-behaved in the last few years. Looking at 12-month changes for the year ended in March, the median change for this group in 2025 was -0.1%, compared to -4.6% in 2024.

The chart shows the PPI flared sharply in 2021 and 2022, then fell quickly into line in 2023. Clearly, the inflation tune now is being called by oil prices, the same as for that spike prices in 2022 and 2023.

The hope is that the oil price bump up will not be as long-lived, that the war will end soon, with the Strait of Hormuz reopened, and that oil prices—and other inflation pressures—will sink back to prerevision norms relatively quickly. That could happen, but so could other outcomes so markets remain wary. One problem this time is the destruction of oil facilities and the shutting of oil fields that could cause high prices to linger longer.

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**A new dynamic**
However, there is now a new dynamic with the UAE leaving OPEC. OPEC has been a vehicle to harness common behavior to control oil prices mostly to keep them higher. While undermining OPEC (UAE pumps about 13% of OPEC capacity) at a time the U.S. oil prowess has risen, this defection will make it much harder for OPEC to control prices. When countries are not bound together, the incentive is for countries to cheat on their production quota. In a cartel arrangement, when many cheat, the output reduction does not hold, and oil prices fall. A cartel arrangement allows for supply control and reduction which raises prices. But once prices are up, each member has an individual incentive to cheat—to sell more than his quota share of oil at the higher price. But that undermines the cartel. So, this move, this exit of UAE from the cartel, will create instability in the OPEC by moving more production outside the OPEC framework, beyond its control. Unless the Saudis are willing to be the ‘swing man’ and cut back their output to keep prices on target—something the Saudis have been increasingly unwilling to do—OPEC will be in less control.

EMU PPIs Show Instant Pressure

Tian Yong Woon

In this week’s Letter, we cover the latest developments and implications of the Middle East conflict for Asia, while also making space for other important themes, including artificial intelligence (AI). The Middle East conflict remains in a no deal state coming out of the weekend, though some early Monday optimism emerged in Asian markets following Iran’s reported offer to reopen the Strait of Hormuz (chart 1). Nonetheless, as the Strait closure drags on, so too do the fiscal costs of domestic fossil fuel subsidies across Asia, which have been shown to move closely with crude oil prices (chart 2). While such measures offer direct relief by cushioning household energy costs, they remain difficult to sustain over the long haul.

Over the week, we also saw a further fraying in regional monetary policy trends, with the Philippines hiking its policy rate for the first time in about two years amid inflation concerns, while Indonesia stood pat on rates (chart 3). Investor attention is likely to remain fixed on monetary policy this week, with the Bank of Japan due to decide on policy. Expectations for an April hike have faded amid the persistent Middle East conflict, though yen weakness continues to present a source of concern (chart 4). The week also brings China’s latest PMI readings (chart 5), adding to the recent run of hard data accompanying the Q1 GDP release.

Beyond the Middle East conflict, the evolution of AI continues to demand close attention. Before geopolitical tensions took centre stage, AI was the dominant market narrative — and that enthusiasm has hardly faded. If anything, recent developments suggest the story is broadening: use cases are expanding, scalability is improving, and access is widening beyond large corporates to the mass market — increasingly spilling into the realm of physical AI. It may well be this persistent wave of optimism that is helping to underpin equity valuations, even as the geopolitical backdrop darkens (chart 6).

**The Middle East conflict**
About two months in, we remain stuck in the limbo of the US-Iran conflict, which has left the Strait of Hormuz largely closed and much of the world starved of the critical oil flows needed to power the global economy. The back and forth between the US and Iran has persisted in recent weeks, with both sides again failing to reach a peace deal over the weekend, though Monday’s news of Iran offering to reopen the Strait has revived some hope in markets. In truth, commodity and market valuations do not hinge so much on a peace deal itself, but rather on the resumption of oil flows through the Strait, something that could materialise even in the absence of a formal deal, though any agreement that includes and credibly delivers such a reopening would likely be warmly received by markets. Until then, market gyrations are likely to persist, with prices fluctuating in response to each new snippet of news. And until then, the world will continue both to be starved of, while gradually adapting to, the drip feed of oil flows emerging from the Strait.

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**The fiscal costs of the Middle East conflict**
As the Middle East conflict drags on, so too does the strain on fiscal resources across parts of Asia, as the costs of energy-related subsidy programmes continue to mount. While such programmes have an immediate, direct, and tangible impact in shielding households from surging energy costs, they are far from sustainable, particularly if oil prices remain well above targeted levels or stay elevated for an extended period. As chart 2 illustrates, the costs of these explicit subsidy programmes tend to rise closely with crude oil prices, as seen in India and Indonesia. Other measures adopted elsewhere, such as drawing down oil reserves, may be less fiscally costly, but are similarly difficult to sustain indefinitely. In both respects, the clock is ticking, and the world continues to hold its breath as the conflict drags on.

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**The latest central bank responses to the conflict**
Over the past week, Asia saw two central bank decisions. The Philippines’ (BSP) opted to deliver its first rate hike in about two years, while Indonesia’s (BI) chose to stand pat on policy rates and instead committed to stepped up FX intervention (chart 3). This latest round of decisions points to a further fraying of what had been a broad regional monetary policy consensus, namely that central banks would delay additional easing while maintaining a high bar for outright tightening. Domestic considerations, however, remain paramount. In the Philippines’ case, the central bank has moved to rein in inflation, which is already showing notable signs of price pass through stemming from disruptions linked to the Strait of Hormuz. That said, BSP is not the first in the region to buck the reluctance to tighten. Singapore’s central bank had already tightened policy in mid-April, albeit through its own distinct framework, given its use of the exchange rate rather than policy rates as the primary channel for monetary policy.

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**The week ahead**
Looking to the week ahead, a major central bank decision looms in Japan. Market expectations for the Bank of Japan to deliver a rate hike at its April meeting have ebbed amid the persistence of the Middle East conflict, to which Japan remains particularly vulnerable given its reliance on oil imports flowing through the Strait of Hormuz. At the same time, inflation in Japan has yet to become a major concern, with recent readings having picked up but not yet entering troubling territory. One potential source of concern, however, lies with the Japanese yen, which has remained on a weakening trend since early last year (chart 4). That depreciation has been one of the key arguments underpinning calls for further rate hikes.

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The week also brings China’s latest PMIs into focus. March saw a divergence between China’s official PMI readings, which improved, and the unofficial readings from RatingDog, which instead pulled back. Nonetheless, both official and unofficial gauges remained in expansionary territory (chart 5), with investors now watching closely to see whether that resilience can be sustained amid ongoing stresses from the Middle East, or whether offsetting drivers can continue to keep Chinese business sentiment and prospects buoyant.

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**Beyond the strait**
Moving beyond the Middle East conflict, a whole host of developments continue to unfold globally, many of which have in fact helped offset some of the pessimism wrought by the Strait’s chokehold. One such development is artificial intelligence (AI), which had dominated headlines before the outbreak of the conflict and continues to advance at breakneck pace. AI capabilities are still rapidly evolving, while practical applications, such as physical AI embodied in humanoid robots, are beginning to show broader and stronger use cases. Production of such robots is also becoming increasingly scalable and within reach not just for industrial complexes and healthcare, but for the mass market as well. It is perhaps growing optimism around these prospects that has helped keep equity valuations buoyant, even in the face of the festering conflict in the Middle East. Moreover, while concerns over AI-driven job displacement persist, new opportunities are emerging as well, particularly for AI adopters, with a growing share of job postings in Western economies increasingly referencing AI-related skills, as shown in chart 6.

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Asia

Economic Letter from Asia: Not Just About the Strait

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**The Distributive Trades Survey**

The U.K. Distributive Trades Survey for April 2026 and the look-ahead expectation readings for May paint an extremely soured outlook for the U.K. economy.

**Retail ranking**: Surveys for retail sales compared to a year ago, orders compared to a year ago, and sales evaluated for the time of year all have rankings near zero, which is the worst result on this timeline. This zero distinction applies to retail sales compared to a year ago. The best ranking is 11.6%; that is for sales evaluated for the time of year. Orders compared to a year ago have a 4.2 percentile standing. The stock-to-sales ratio—which is a completely different concept—shows that the inventory-to-sales ratio has a 29.9 percentile standing.

**Retail diffusion**: The raw April diffusion readings (up minus down diffusion) show that sales compared to a year ago slipped to a reading of -68 in April from -52 in March. Orders fell to -46 in April from -26 in March. Sales evaluated for the time of year fell to -32 April from -23 in March. All three measures weakened, and all three weakened decisively, resulting in extremely weak rankings. All of the rankings are executed on data back to 2002.

**Expectations for retailing**: The expectations readings for May show slippage again across all three metrics: expected sales compared to a year ago, expected orders compared to a year ago, and expected sales for the time of year. Expected sales compared to a year ago fell to -60 in May from -49 in April. Orders compared to a year ago declined to -45 in May from -30 in April, and sales for the time of year slipped to -43 from -19. In May, these readings have rankings in a 0.4 percentile standing for sales compared to a year ago, a 1.8 percentile standing for sales evaluated relative to the time of year, and a 4.6 percentile standing for orders compared to a year ago. These two panels on current and expected retail sales volumes are just simply terrible: weak monthly, weak in ranking terms, and showing slipping momentum.

The distributor trade series also provides data on the wholesale sector. While the wholesale sector is not quite as beat up as the retail sector, it's still extremely weak. There is no cause for any kind of hope that things are getting better based on wholesaling trends.

**Wholesaling**: The wholesale survey for sales compared to a year ago edged lower to -32 in April from -31 in March. Orders compared to a year ago remained at a reading of -41 in April. Sales evaluated for the time of year improved to a reading of -20 in April from -39 in March—a significant step up, but still very weak. The percentile standings for these three categories show sales compared to a year ago at the 8.8 percentile, orders compared to a year ago at the 5.6 percentile, and sales evaluated for the time of year at the 14.8 percentile.

**Wholesale Expectations**: The look-ahead observations, which provide expectations for wholesaling in May, show a similar constellation of readings, with sales compared to a year ago falling to -37 in May from -27 in April and orders compared to a year ago falling to -42 from -38, while sales evaluated for the time of year improved to  16 from  37. That category for wholesale sales improved both in April in real time and in May for expectations; however, it continues to have a very weak percentile standing, at the 17.9 percentile in May, while sales for a year ago have a 6.7 percentile standing and orders for a year ago have a 6.0 percentile standing.

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While some of the global PMI data have improved, these survey data for the U.K. are particularly dour. The war in Ukraine drags on, and there's a new conflict in Iran that has shut the Strait of Hormuz, creating energy problems for much of Europe. More broadly, supply chains have been harmed. In addition, the U.K. is undergoing a bout of political instability, as its Prime Minister is under pressure and a good deal of political uncertainty is being worsened by deteriorating economic performance.

Both the U.K. and the European Monetary Union had been showing some progress on inflation until the Iran war hit. Now, as the oil prices are up so sharply, headline inflation is going to be worse everywhere and there will probably be a bit more attention directed to the core inflation rate. However, the U.K. has had inflation too hot for a while, and it has failed to settle down. At its last meeting, the Bank of England’s Monetary Policy Committee warned that if the war was still ongoing at the next meeting, there would be a risk of a rate hike. So, it would seem that a rate hike is going to be in play unless the economy falls off a cliff first, which, based on the distributive trades data, is also something that could happen. The U.K. economy appears to be on very unsound footing, and what happens next is just about anybody's guess.

Economy in Brief: 2010

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