Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324g.jpg" align="left" border="0" height="265" width="353">The Japanese Economic and
Social Research Institute of the
Cabinet Office and the Policy Research Institute of the Ministry of
Finance (MOF) have surveyed industry leaders of some 15,000 firms and
analyzed their assessments and forecasts of a number of important
business trends in the current quarter, the next quarter and the
quarter after next. The results are given for large (capital of 1
billion yen and over), medium (capital of 100 million to 1 billion yen)
and small (capital of 10 to 100 million yen) businesses. For each size
group, results for all industry, manufacturing and non manufacturing
industry are given. Complete results of the survey can be found in the
Haver series BUSINESS OUTLOOK SURVEY (M0F) in the BUSINESS CYCLE
INDICATORS AND SURVEY section of the JAPAN data
base. The survey was begun in 2004, and over its short life has tended
to anticipate results of the Bank of Japan's Tankan, Japan's most
closely watched indicator of the business outlook. The next Tankan
results are due on April 1st.
The current Cabinet Office and MOF survey, which was conducted
on February 25, was released today. Among the many results of the
survey, those for the large firms are frequently high lighted. For all
industry in large firms, the pessimists exceeded optimists by 9.3 % in
their appraisal of conditions in the current quarter. In non
manufacturing industry the excess of pessimists was 7.2%, and for
manufacturing, 12.9%. These were the most pessimistic outlooks in the
short history of the measure, as can be seen in the first chart.
Similar results were shown for the assessment of large manufacturing
firms for the next quarter, as shown in the second chart. However, for
the quarter after the next, optimists prevailed. The excess of
optimists for all industry was 6.6%, for non manufacturing, 6.1% and
for manufacturing, 7.3%, as can be seen in the third chart. In general,
the appraisals for conditions in the quarter after next show an excess
of optimists over pessimists. "Hope spring eternal in the human breast,
/ Man never is, but always to be blest."
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324e.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324f.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BUSINESS
OUTLOOK SURVEY,&nbsp; 
CABINET OFFICE &amp; MOF&nbsp;(% Balance)</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol" colspan="9">Large Firms
Current
Quarter</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>-9.3</td>
<td>0.5</td>
<td>6.2</td>
<td>-9.8</td>
<td>-15.5</td>
<td>3.0</td>
<td>6.2</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-12.9</td>
<td>5.2</td>
<td>0.1</td>
<td>-18.1</td>
<td>-13.0</td>
<td>2.7</td>
<td>6.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>-7.2</td>
<td>-2.2</td>
<td>-9.8</td>
<td>-5.0</td>
<td>-17.0</td>
<td>3.2</td>
<td>6.3</td>
<td>7.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms Next
Quarter</td>
<td>Q2 08</td>
<td>Q1 08&nbsp;</td>
<td>Q2 07&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>-2.3</td>
<td>2.4</td>
<td>4.2</td>
<td>-4.70</td>
<td>-6.5</td>
<td>8.3</td>
<td>10.3</td>
<td>7.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-1.6</td>
<td>1.1</td>
<td>4.1</td>
<td>-2.7</td>
<td>-5.7</td>
<td>6.4</td>
<td>10.0</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>-2.8</td>
<td>3.2</td>
<td>4.3</td>
<td>-6.0</td>
<td>-7.1</td>
<td>7.9</td>
<td>10.5</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms&nbsp;
Quarter after Next</td>
<td>Q3 08</td>
<td>Q2 08&nbsp;</td>
<td>Q3 07&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>6.6</td>
<td>2.1</td>
<td>9.9</td>
<td>4.5</td>
<td>-3.3</td>
<td>8.4</td>
<td>10.1</td>
<td>8.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>7.3</td>
<td>1.3</td>
<td>11.8</td>
<td>6.0</td>
<td>-4.5</td>
<td>8.6</td>
<td>9.6</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>6.1</td>
<td>2.5</td>
<td>8.8</td>
<td>3.6</td>
<td>-2.7</td>
<td>8.4</td>
<td>10.5</td>
<td>8.6</td>
</tr>
</tbody>
</table>
</body></html>

The Japanese Economic and Social Research Institute of the Cabinet Office and the Policy Research Institute of the Ministry of Finance (MOF) have surveyed industry leaders of some 15,000 firms and analyzed their assessments and [...]

Large Japanese Business Firms Turn More Pessimistic

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324c.jpg" width="353">
The February National Activity Index (CFNAI) published by the Chicago Federal Reserve fell to its lowest level since April of 2003. At a negative 1.04 following downwardly revised readings in January and December &#39;07 the latest figure lowered the three month moving average to -0.87, its lowest level since 1Q03. That low reading 2003 was then associated with real GDP growth of 0.20% in 4Q02 and of 1.20% in 1Q03.
The Chicago Fed&#39;s release indicated &quot;an increasing likelihood that a recession has begun.&quot; A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_march2008.pdf">here</a> and the historical data are available in Haver&#39;s Surveys database.
During February, each of the four broad categories of indicators &#151; employment, production, consumption and housing &#151; continued to make negative contributions to the CFNAI.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
Economic Outlook Symposium: Summary of 2007 results and forecasts for 2008 from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflfebruary2008_247.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.04</td>
<td>-0.68</td>
<td>-0.28</td>
<td>-0.44</td>
<td>0.01</td>
<td>0.28</td>
</tr>
</tbody>
</table>
</body>
</html>

The February National Activity Index (CFNAI) published by the Chicago Federal Reserve fell to its lowest level since April of 2003. At a negative 1.04 following downwardly revised readings in January and December '07 the latest figure [...]

Chicago Fed Index So Low Perhaps Indicates Recession

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324a.jpg" width="353">
According to the National Association of Realtors, existing home sales in February rose 2.9% m/m to 5.030M from an unrevised January level which fell 0.4%. The rise contrasted with Consensus expectations for a slight decline.
There has been, however, a change from past sales patterns. The downward momentum behind last year&#39;s declines in home sales has flattened out. Home sales were essentially unchanged during the last three months following double digit rates of decline during all of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324b.jpg" width="353">
Sales of existing single family homes also rose by 2.8% last month and that followed a 0.7% January uptick.
By region, February home sales in the Northeast rose 11.3% (-26.4% y/y) and recouped all of the declines during the prior two months. In the Midwest February sales rose 2.5% for the second consecutive monthly increase while sales in the South rose a modest 2.1%. That flattening pattern even extends out West. Though sales fell 1.1% in February, the three month rate of decline moderated to -5.2% from -21.4% as of last October.
A flattening of last year&#39;s price decline, however, has not occurred. The median price of an existing home fell 1.9% (-8.2% y/y) last month after a downwardly revised 5.3% January drop. Home prices were off 14.5% in February from their peak last June.
The number of unsold homes on the market continued to fall last month. The 3.0% m/m decline pulled the stock down 11.6% from the peak last July. At the current low sales rate, however, that inventory still amounts to a 9.6 months supply which is barely down from last year&#39;s peak. For single family homes there is a 9.2 months supply at the current sales rate and for condos and co-ops there is a 13.0 months supply.
Walking a tightrope into 2008 from the Federal Reserve Bank of St. Louis can be found <a href="http://stlouisfed.org/publications/re/2008/a/pdf/tightrope.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Single Family Home Sales (Thous)</th>
<th scope="col">February</th>
<th scope="col">y/y %</th>
<th scope="col">January</th>
<th scope="col">February &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,030</td>
<td>-23.8</td>
<td>4,890</td>
<td>6,600</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>890</td>
<td>-26.4</td>
<td>800</td>
<td>1,210</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,240</td>
<td>-19.5</td>
<td>1,210</td>
<td>1,540</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,990</td>
<td>-22.0</td>
<td>1,950</td>
<td>2,550</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>920</td>
<td>-29.2</td>
<td>930</td>
<td>1,300</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>4,470</td>
<td>-22.9</td>
<td>4,350</td>
<td>5,590</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>195,900</td>
<td>-8.2</td>
<td>199,7000</td>
<td>213,500</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the National Association of Realtors, existing home sales in February rose 2.9% m/m to 5.030M from an unrevised January level which fell 0.4%. The rise contrasted with Consensus expectations for a slight decline. There [...]

U.S. Existing Home Sales Rose Slightly. Momentum Changing?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324a.jpg" align="left" border="0" height="265" width="353">
According to the National Association of Realtors, existing
home sales in February rose 2.9% m/m to 5.030M from an unrevised
January level which fell 0.4%. The rise contrasted with Consensus
expectations for a slight decline.
There has been, however, a change from past sales patterns.
The downward momentum behind last year's declines in home sales has
flattened out. Home sales were essentially unchanged during the last
three months following double digit rates of decline during all of last
year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324b.jpg" align="right" border="0" height="265" width="353">
Sales of existing single family homes also rose by 2.8% last
month and that followed a 0.7% January uptick.
By region, February home sales in the Northeast rose 11.3%
(-26.4% y/y) and recouped all of the declines during the prior two
months. In the Midwest February sales rose 2.5% for the second
consecutive monthly increase while sales in the South rose a modest
2.1%. That flattening pattern even extends out West. Though sales fell
1.1% in February, the three month rate of decline moderated to -5.2%
from -21.4% as of last October.
A flattening of last year's price decline, however, has not
occurred. The median price of an existing home fell 1.9% (-8.2% y/y)
last month after a downwardly revised 5.3% January drop. Home prices
were off 14.5% in February from their peak last June.
The number of unsold homes on the market continued to fall
last month. The 3.0% m/m decline pulled the stock down 11.6% from the
peak last July. At the current low sales rate, however, that inventory
still amounts to a 9.6 months supply which is barely down from last
year's peak. For single family homes there is a 9.2 months supply at
the current sales rate and for condos and co-ops there is a 13.0 months
supply.
Walking a tightrope into 2008 from the
Federal Reserve Bank of St. Louis can be found <a href="http://stlouisfed.org/publications/re/2008/a/pdf/tightrope.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Single Family 
Home Sales (Thous)</th>
<th scope="col">February</th>
<th scope="col">y/y %</th>
<th scope="col">January</th>
<th scope="col">February '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,030</td>
<td>-23.8</td>
<td>4,890</td>
<td>6,600</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>890</td>
<td>-26.4</td>
<td>800</td>
<td>1,210</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,240</td>
<td>-19.5</td>
<td>1,210</td>
<td>1,540</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,990</td>
<td>-22.0</td>
<td>1,950</td>
<td>2,550</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>920</td>
<td>-29.2</td>
<td>930</td>
<td>1,300</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>4,470</td>
<td>-22.9</td>
<td>4,350</td>
<td>5,590</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>195,900</td>
<td>-8.2</td>
<td>199,7000</td>
<td>213,500</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
Chicago Fed Index So Low Perhaps
Indicates Recession 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324c.jpg" align="left" border="0" height="265" width="353">
The February National Activity Index (CFNAI) published by the
Chicago Federal Reserve fell to its lowest level since April of 2003.
At a negative 1.04 following downwardly revised readings in January and
December '07 the latest figure lowered the three month moving average
to -0.87, its lowest level since 1Q03. That low reading 2003 was then
associated with real GDP growth of 0.20% in 4Q02 and of 1.20% in 1Q03.
The Chicago Fed's release indicated "an increasing
likelihood that a recession has begun." A zero value of the
CFNAI indicates that the economy is expanding at its historical trend
rate of growth of roughly 3%. During the last twenty years there has
been a 68% correlation between the level of the CFNAI and q/q growth in
real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_march2008.pdf">here</a>
and the historical data are available in Haver's Surveys
database.
During February, each of the four broad categories of
indicators &#8212; employment, production, consumption and housing &#8212;
continued to make negative contributions to the CFNAI.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
Economic Outlook Symposium: Summary of 2007 results
and forecasts for 2008 from the Federal Reserve Bank of
Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflfebruary2008_247.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.04</td>
<td>-0.68</td>
<td>-0.28</td>
<td>-0.44</td>
<td>0.01</td>
<td>0.28</td>
</tr>
</tbody>
</table>
Large Japanese Business
Firms Turn More Pessimistic 
by <a href="/comment/Curley.html">Louise
Curley</a> March 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324g.jpg" align="left" border="0" height="265" width="353">
The Japanese Economic and Social Research Institute of the
Cabinet Office and the Policy Research Institute of the Ministry of
Finance (MOF) have surveyed industry leaders of some 15,000 firms and
analyzed their assessments and forecasts of a number of important
business trends in the current quarter, the next quarter and the
quarter after next. The results are given for large (capital of 1
billion yen and over), medium (capital of 100 million to 1 billion yen)
and small (capital of 10 to 100 million yen) businesses. For each size
group, results for all industry, manufacturing and non manufacturing
industry are given. Complete results of the survey can be found in the
Haver series BUSINESS OUTLOOK SURVEY (M0F) in the BUSINESS CYCLE
INDICATORS AND SURVEY section of the JAPAN data
base. The survey was begun in 2004, and over its short life has tended
to anticipate results of the Bank of Japan's Tankan, Japan's most
closely watched indicator of the business outlook. The next Tankan
results are due on April 1st.
The current Cabinet Office and MOF survey, which was conducted
on February 25, was released today. Among the many results of the
survey, those for the large firms are frequently high lighted. For all
industry in large firms, the pessimists exceeded optimists by 9.3 % in
their appraisal of conditions in the current quarter. In non
manufacturing industry the excess of pessimists was 7.2%, and for
manufacturing, 12.9%. These were the most pessimistic outlooks in the
short history of the measure, as can be seen in the first chart.
Similar results were shown for the assessment of large manufacturing
firms for the next quarter, as shown in the second chart. However, for
the quarter after the next, optimists prevailed. The excess of
optimists for all industry was 6.6%, for non manufacturing, 6.1% and
for manufacturing, 7.3%, as can be seen in the third chart. In general,
the appraisals for conditions in the quarter after next show an excess
of optimists over pessimists. "Hope spring eternal in the human breast,
/ Man never is, but always to be blest."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324e.jpg" align="left" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324f.jpg" align="right" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BUSINESS
OUTLOOK SURVEY,
CABINET OFFICE &amp; MOF&nbsp;(% Balance)</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol" colspan="9">Large
Firms Current
Quarter</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>-9.3</td>
<td>0.5</td>
<td>6.2</td>
<td>-9.8</td>
<td>-15.5</td>
<td>3.0</td>
<td>6.2</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-12.9</td>
<td>5.2</td>
<td>0.1</td>
<td>-18.1</td>
<td>-13.0</td>
<td>2.7</td>
<td>6.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>-7.2</td>
<td>-2.2</td>
<td>-9.8</td>
<td>-5.0</td>
<td>-17.0</td>
<td>3.2</td>
<td>6.3</td>
<td>7.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms Next
Quarter</td>
<td>Q2 08</td>
<td>Q1 08&nbsp;</td>
<td>Q2 07&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>-2.3</td>
<td>2.4</td>
<td>4.2</td>
<td>-4.70</td>
<td>-6.5</td>
<td>8.3</td>
<td>10.3</td>
<td>7.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-1.6</td>
<td>1.1</td>
<td>4.1</td>
<td>-2.7</td>
<td>-5.7</td>
<td>6.4</td>
<td>10.0</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>-2.8</td>
<td>3.2</td>
<td>4.3</td>
<td>-6.0</td>
<td>-7.1</td>
<td>7.9</td>
<td>10.5</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms&nbsp;
Quarter after Next</td>
<td>Q3 08</td>
<td>Q2 08&nbsp;</td>
<td>Q3 07&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>6.6</td>
<td>2.1</td>
<td>9.9</td>
<td>4.5</td>
<td>-3.3</td>
<td>8.4</td>
<td>10.1</td>
<td>8.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>7.3</td>
<td>1.3</td>
<td>11.8</td>
<td>6.0</td>
<td>-4.5</td>
<td>8.6</td>
<td>9.6</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>6.1</td>
<td>2.5</td>
<td>8.8</td>
<td>3.6</td>
<td>-2.7</td>
<td>8.4</td>
<td>10.5</td>
<td>8.6</td>
</tr>
</tbody>
</table>
Italy Retail Sales and Consumer
Confidence
Sag
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324d.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s retail sales edged up in January, rising by 0.2% in
nominal terms, likely a decline in volume terms given the recent pace
of inflation. Over the past three months, sales values fell at a 0.4%
annual rate. And, overall value growth has been eroding ever so
slightly over this period. In the first quarter of 2008 value growth is
up at a 0.5% annual pace and at a stronger 0.7% pace for food,
beverages and tobacco &#8211; both likely representing volume declines.

The chart at the top shows the ISAE consumer sentiment index
plotted against retail sales Yr/Yr. Notice that the ISAE index plotted
in its raw levels format tends to lead the Yr/Yr decline in retail
sales: Sentiment peaks first and rebounds first. It gives reasonably
good signals about what retail sales are about to do. In the recent
period the weak consumer sentiment readings are pointed to further
weakness in Italy&#8217;s already weak retail sales.

Italy&#8217;s HICP is rising at a 2.9% pace in Q1 (also through
January) and its core is up at a 1.5% pace. But in terms of Italy&#8217;s own
domestic inflation indicator (NIC) inflation is at a 5% pace in the
first quarter or 4.6% excluding tobacco (NIC ex-tobacco). Food prices
alone in Italy are up at a 5.8% pace in Q1.

As in the table above these inflation statistics for the first
quarter growth rates take the January level over the Q4 average
(centered in November) and compound that pace. Italy&#8217;s Q1 inflation
calculated on that same basis produces some dismal implicit estimates
of &#8216;retail sales growth (-2.5% to -4.5% depending on the deflator
used). Inflation is clearly outstripping the nominal growth rates for
sales in these comparisons by a wide margin. Italy is the most severely
impacted economy of the EMU Big Three or EU Big Four (i.e. Germany,
France &amp; Italy for EMU, adding the UK for EU).

All of the EMU nations are having a hard time getting retail
sales to grow. (The EU&#8217;s UK retail sales are an exception to most of
the rest of Europe). Germany continues to look for the consumer to fill
in some gaps. But flagging confidence is an issue and the EMU
industrial sector is slowing. Fear seems to have gripped the EMU
nations as the euro has climbed in value despite policymakers extolling
European strength and flexibility, and growth has continued to be
registered. Someone is either worried about nothing or someone else is
whistling past the graveyard. Who is out of touch? Is it the consumer
whose pull back is reminiscent of the consumer in the fetal position,
or is it the policymaker who is trying to put a brave face on an ugly
situation? I report, you decide&#8230; For the moment we are in opinion-land
on this or deeply into shrink-o-nomics as we try and assess the state
of mind of the government official vs the consumer.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Italy
Retail Sales Growth</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">mo/mo %</td>
<td colspan="4">At annual rates</td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-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">Retail Trade</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>0.9%</td>
<td>0.8%</td>
<td>0.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>-0.3%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Clothing&amp;Furniture</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-1.5%</td>
<td>-2.6%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>0.5%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321e.jpg" align="left" border="0" height="265" width="353">
The chart on the left shows that consumer confidence has been
weaker briefly in 2004 and then again back in 1994. But at the pace
that confidence is falling it may be there soon. Italy&#8217;s Sentiment
indicator is in the bottom 6% of its range since 1999 but it is not far
from its recession low in 1994 and it is still plunging. A number of
components are on lows for this period. In 1998 a number of the
components cease to be available even though the headline and other
component measures do go back further in time. Still, it is clear from
the longer-horizon chart as well as from the shorter-horizon table that
looks only at a recovery period that the current responses by survey
participants are not much like those in expansion periods and are
getting to look more like they do in downturns. Other Euro area
countries may be more resilient but Italy is fighting to maintain its
growth. Unemployment expectations are in the top 8% of where they have
been since the start of 1999. The household past, current and future
financial situations all are rated as the worst in this period since
1999. The overall situation is in the bottom 6%; only 17 percent of
respondents think it&#8217;s a good time to make a major purchase. See the
table, the percentile rankings are telling.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> Italy
ISAE Consumer Confidence</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="6">Since January 1999</td>
</tr>
<tr class="even">
<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 class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>99</td>
<td>102.8</td>
<td>102.2</td>
<td>106.7</td>
<td>6.1</td>
<td>108</td>
<td>127</td>
<td>97</td>
<td>30</td>
<td>111</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Last
12 months</td>
</tr>
<tr class="odd">
<td class="firstcol">OVERALL SITUATION</td>
<td>-84</td>
<td>-76</td>
<td>-79</td>
<td>-69</td>
<td>0.0</td>
<td>111</td>
<td>-22</td>
<td>-84</td>
<td>62</td>
<td>-55</td>
</tr>
<tr class="odd">
<td class="firstcol">PRICE TRENDS</td>
<td>-17.5</td>
<td>-18</td>
<td>-23</td>
<td>-21.5</td>
<td>40.8</td>
<td>61</td>
<td>4</td>
<td>-32</td>
<td>36</td>
<td>-15</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Next
12months</td>
</tr>
<tr class="odd">
<td class="firstcol">OVERALL SITUATION</td>
<td>-35</td>
<td>-31</td>
<td>-39</td>
<td>-35</td>
<td>6.3</td>
<td>108</td>
<td>24</td>
<td>-39</td>
<td>63</td>
<td>-13</td>
</tr>
<tr class="odd">
<td class="firstcol">PRICE TRENDS</td>
<td>23</td>
<td>22</td>
<td>24.5</td>
<td>28</td>
<td>38.1</td>
<td>55</td>
<td>49</td>
<td>7</td>
<td>42</td>
<td>24</td>
</tr>
<tr class="odd">
<td class="firstcol">UNEMPLOYMENT</td>
<td>6</td>
<td>5</td>
<td>-2</td>
<td>4</td>
<td>92.3</td>
<td>6</td>
<td>9</td>
<td>-30</td>
<td>39</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>-2</td>
<td>-3</td>
<td>1</td>
<td>9</td>
<td>2.8</td>
<td>110</td>
<td>33</td>
<td>-3</td>
<td>36</td>
<td>14</td>
</tr>
<tr>
<td class="firstcol" colspan="11">HOUSEHOLD
FIN SITUATION</td>
</tr>
<tr class="odd">
<td class="firstcol">Last 12 months</td>
<td>-55</td>
<td>-53</td>
<td>-46</td>
<td>-44</td>
<td>0.0</td>
<td>111</td>
<td>-7</td>
<td>-55</td>
<td>48</td>
<td>-29</td>
</tr>
<tr class="odd">
<td class="firstcol">Next12 months</td>
<td>-16</td>
<td>-12</td>
<td>-14</td>
<td>-14</td>
<td>0.0</td>
<td>111</td>
<td>14</td>
<td>-16</td>
<td>30</td>
<td>-1</td>
</tr>
<tr>
<td class="firstcol" colspan="11">HOUSEHOLD
SAVINGS</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>54</td>
<td>61</td>
<td>53</td>
<td>60</td>
<td>79.1</td>
<td>11</td>
<td>63</td>
<td>20</td>
<td>43</td>
<td>39</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>-45</td>
<td>-42</td>
<td>-35</td>
<td>-37</td>
<td>0.0</td>
<td>111</td>
<td>-9</td>
<td>-45</td>
<td>36</td>
<td>-23</td>
</tr>
<tr>
<td class="firstcol" colspan="11">MAJOR
Purchases</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>-50</td>
<td>-44</td>
<td>-42</td>
<td>-47</td>
<td>16.7</td>
<td>89</td>
<td>-15</td>
<td>-57</td>
<td>42</td>
<td>-40</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>-65</td>
<td>-61</td>
<td>-53</td>
<td>-61</td>
<td>25.8</td>
<td>65</td>
<td>-42</td>
<td>-73</td>
<td>31</td>
<td>-62</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Total
number of months:111</td>
</tr>
</tbody>
</table>
</body></html>

The chart on the left shows that consumer confidence has been weaker briefly in 2004 and then again back in 1994. But at the pace that confidence is falling it may be there soon. Italy’s Sentiment indicator is in the bottom 6% of its [...]

Italy’s Consumer Confidence Erodes

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321a.jpg" align="left" border="0" height="265" width="353">
French industrial orders are hanging tough in an environment
where Euro Area growth is fading and the euro is getting stronger.
Total new orders and foreign orders are however losing some momentum
after spurting strongly in mid-2007 as the chart above shows. While off
peak and while showing some so-far short-lived downtrend, French
domestic and foreign orders are still at firm levels and slipping only
very gradually. 
 

Despite Euro Area weakening, France has one of the higher NTC
MFG indices in the Zone, at 53.8 in February just short of Germany&#8217;s at
54.3. And, like Germany, France has seen its rate of unemployment over
the past year drop by more than one percentage point, faster than for
the Euro Area as a whole. On the face of it, France&#8217;s economy is still
doing well but household confidence is off sharply, MFG surveys show
weakening trends, business climate is off peak and has flattened out,
and the services sector climate index has been sliding. With France we
must be aware that some of the recent trends that can be viewed a still
firm exist in an environment where other survey responses seem to show
relatively more concern and more slippage. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> French
Orders</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>3.1%</td>
<td>-2.1%</td>
<td>-0.2%</td>
<td>3.0%</td>
<td>-2.7%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>3.3%</td>
<td>-0.9%</td>
<td>1.8%</td>
<td>18.0%</td>
<td>5.1%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
</body></html>

French industrial orders are hanging tough in an environment where Euro Area growth is fading and the euro is getting stronger. Total new orders and foreign orders are however losing some momentum after spurting strongly in mid-2007 [...]

French Orders in Holding Pattern With Strong Foreign Orders

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321c.jpg" width="353">
You can&#39;t say the Fed isn&#39;t trying. And if the current credit crisis situation turns into something far worse, it&#39;s unlikely that historians a generation from now will be able to blame the Fed&#39;s present efforts, as they can with the Great Depression. When various institutions have encountered troubles in recent months, the Fed has conjured a way to try to help them.
So it is that this week&#39;s H.4.1 release, the presentation by the Fed of its own provision of credit to the economy, has new line items. The indicator that years ago was known simply as &quot;member bank borrowing&quot; is now a five-part section of the statement, with the latest two added this week, &quot;primary dealer credit facility&quot; and the vaguely titled &quot;other credit extensions&quot;. The central bank&#39;s attempt last summer to encourage borrowing largely fell on deaf ears; despite the Fed&#39;s encouragement, few &quot;depository institutions&quot; wanted to be known as accessing the old discount window. Some that did borrowed for 28 days, the period the Fed indicated it would favor, and then let the loans run off. At the peak in early September, these loans averaged $3.2 billion for the statement week ended Wednesday, September 12. Year-end pressures brought some back in again from mid-December through early January. Otherwise these loans were only frictional amounts. In the week ended March 12, they averaged $103 million daily and there was a total of just $27 million outstanding at the close of business that Wednesday (that&#39;s million, with an &quot;m&quot;).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321b.jpg" width="353">
These loans covered just &quot;depository institutions&quot;, that is, banks and thrifts, which fund their activities from a base of customer deposits. But as securitization has grown to cover more and more of the US credit markets (see the graph from the Flow-of-Funds data), the bank-oriented discount window safety value on the economy&#39;s finances has become less and less relevant. The Fed, &quot;the lender of last resort&quot;, needed to be able to reach non-depository credit providers. This week, it found one big way. The &quot;primary dealer credit facility&quot; surged from $0 on Monday morning to $28.8 billion by Wednesday (that&#39;s billion, with a &quot;b&quot;). No token borrowing here, clearly.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321d.jpg" width="353">
The mechanical workings of this facility appear to be very similar to the repo transactions the Fed does. Dealers offer various securities as collateral for an overnight loan of cash. The differences are that the loan comes at the dealers&#39; initiative, not the Fed&#39;s, and the collateral is of the dealers&#39; choosing, not the Fed&#39;s prescription. And there is a fixed rate, the &quot;discount rate&quot;, rather than the competitive auction-type proceeding the Fed conducts in its repos. So indeed, the Fed found it could essentially open the discount window to nonbanks. This got cash where it is needed in yet another example of the Bernanke approach of targeted responses to specific circumstances.
The Fed&#39;s H.4.1 release, &quot;Factors Affecting Reserve Balances&quot;, is in Haver&#39;s WEEKLY database under the &quot;Money and Banking&quot; heading. Flow-of-funds data are in FFUNDS.

</body>
</html>

You can't say the Fed isn't trying. And if the current credit crisis situation turns into something far worse, it's unlikely that historians a generation from now will be able to blame the Fed's present efforts, as they can with the [...]

Nonbank Dealers Borrow $29 Billion from the Fed

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321c.jpg" align="left" border="0" height="265" width="353">
You can't say the Fed isn't trying. And if the current credit
crisis situation turns into something far worse, it's unlikely that
historians a generation from now will be able to blame the Fed's
present efforts, as they can with the Great Depression. When various
institutions have encountered troubles in recent months, the Fed has
conjured a way to try to help them.
So it is that this week's H.4.1 release, the presentation by
the Fed of its own provision of credit to the economy, has new line
items. The indicator that years ago was known simply as "member bank
borrowing" is now a five-part section of the statement, with the latest
two added this week, "primary dealer credit facility" and the vaguely
titled "other credit extensions". The central bank's attempt last
summer to encourage borrowing largely fell on deaf ears; despite the
Fed's encouragement, few "depository institutions" wanted to be known
as accessing the old discount window. Some that did borrowed for 28
days, the period the Fed indicated it would favor, and then let the
loans run off. At the peak in early September, these loans averaged
$3.2 billion for the statement week ended Wednesday, September 12.
Year-end pressures brought some back in again from mid-December through
early January. Otherwise these loans were only frictional amounts. In
the week ended March 12, they averaged $103 million daily and there was
a total of just $27 million outstanding at the close of business that
Wednesday (that's million, with an "m").<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321b.jpg" align="right" border="0" height="265" width="353">
These loans covered just "depository institutions", that is,
banks and thrifts, which fund their activities from a base of customer
deposits. But as securitization has grown to cover more and more of the
US credit markets (see the graph from the Flow-of-Funds data), the
bank-oriented discount window safety value on the economy's finances
has become less and less relevant. The Fed, "the lender of last
resort", needed to be able to reach non-depository credit providers.
This week, it found one big way. The "primary dealer credit facility"
surged from $0 on Monday morning to $28.8 billion by Wednesday (that's
billion, with a "b"). No token borrowing here, clearly.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321d.jpg" align="left" border="0" height="265" width="353">
The mechanical workings of this facility appear to be very
similar to the repo transactions the Fed does. Dealers offer various
securities as collateral for an overnight loan of cash. The differences
are that the loan comes at the dealers' initiative, not the Fed's, and
the collateral is of the dealers' choosing, not the Fed's prescription.
And there is a fixed rate, the "discount rate", rather than the
competitive auction-type proceeding the Fed conducts in its repos. So
indeed, the Fed found it could essentially open the discount window to
nonbanks. This got cash where it is needed in yet another example of
the Bernanke approach of targeted responses to specific circumstances.
The Fed's H.4.1 release, "Factors Affecting Reserve Balances",
is in Haver's WEEKLY database under the "Money and
Banking" heading. Flow-of-funds data are in FFUNDS.

 


French Orders in Holding
PatternWith Strong Foreign
Orders
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 21, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321a.jpg" align="left" border="0" height="265" width="353">
French industrial orders are hanging tough in an environment
where Euro Area growth is fading and the euro is getting stronger.
Total new orders and foreign orders are however losing some momentum
after spurting strongly in mid-2007 as the chart above shows. While off
peak and while showing some so-far short-lived downtrend, French
domestic and foreign orders are still at firm levels and slipping only
very gradually. 
 

Despite Euro Area weakening, France has one of the higher NTC
MFG indices in the Zone, at 53.8 in February just short of Germany&#8217;s at
54.3. And, like Germany, France has seen its rate of unemployment over
the past year drop by more than one percentage point, faster than for
the Euro Area as a whole. On the face of it, France&#8217;s economy is still
doing well but household confidence is off sharply, MFG surveys show
weakening trends, business climate is off peak and has flattened out,
and the services sector climate index has been sliding. With France we
must be aware that some of the recent trends that can be viewed a still
firm exist in an environment where other survey responses seem to show
relatively more concern and more slippage. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> French
Orders</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>3.1%</td>
<td>-2.1%</td>
<td>-0.2%</td>
<td>3.0%</td>
<td>-2.7%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>3.3%</td>
<td>-0.9%</td>
<td>1.8%</td>
<td>18.0%</td>
<td>5.1%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
 Italy&#8217;s Consumer Confidence Erodes 
by <a href="/comment/Brusca.html">Robert
Brusca</a>March 21, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080321e.jpg" align="left" border="0" height="265" width="353">
The chart on the left shows that consumer confidence has been
weaker briefly in 2004 and then again back in 1994. But at the pace
that confidence is falling it may be there soon. Italy&#8217;s Sentiment
indicator is in the bottom 6% of its range since 1999 but it is not far
from its recession low in 1994 and it is still plunging. A number of
components are on lows for this period. In 1998 a number of the
components cease to be available even though the headline and other
component measures do go back further in time. Still, it is clear from
the longer-horizon chart as well as from the shorter-horizon table that
looks only at a recovery period that the current responses by survey
participants are not much like those in expansion periods and are
getting to look more like they do in downturns. Other Euro area
countries may be more resilient but Italy is fighting to maintain its
growth. Unemployment expectations are in the top 8% of where they have
been since the start of 1999. The household past, current and future
financial situations all are rated as the worst in this period since
1999. The overall situation is in the bottom 6%; only 17 percent of
respondents think it&#8217;s a good time to make a major purchase. See the
table, the percentile rankings are telling.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> Italy
ISAE Consumer Confidence</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="6">Since January 1999</td>
</tr>
<tr class="even">
<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 class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>99</td>
<td>102.8</td>
<td>102.2</td>
<td>106.7</td>
<td>6.1</td>
<td>108</td>
<td>127</td>
<td>97</td>
<td>30</td>
<td>111</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Last
12 months</td>
</tr>
<tr class="odd">
<td class="firstcol">OVERALL SITUATION</td>
<td>-84</td>
<td>-76</td>
<td>-79</td>
<td>-69</td>
<td>0.0</td>
<td>111</td>
<td>-22</td>
<td>-84</td>
<td>62</td>
<td>-55</td>
</tr>
<tr class="odd">
<td class="firstcol">PRICE TRENDS</td>
<td>-17.5</td>
<td>-18</td>
<td>-23</td>
<td>-21.5</td>
<td>40.8</td>
<td>61</td>
<td>4</td>
<td>-32</td>
<td>36</td>
<td>-15</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Next
12months</td>
</tr>
<tr class="odd">
<td class="firstcol">OVERALL SITUATION</td>
<td>-35</td>
<td>-31</td>
<td>-39</td>
<td>-35</td>
<td>6.3</td>
<td>108</td>
<td>24</td>
<td>-39</td>
<td>63</td>
<td>-13</td>
</tr>
<tr class="odd">
<td class="firstcol">PRICE TRENDS</td>
<td>23</td>
<td>22</td>
<td>24.5</td>
<td>28</td>
<td>38.1</td>
<td>55</td>
<td>49</td>
<td>7</td>
<td>42</td>
<td>24</td>
</tr>
<tr class="odd">
<td class="firstcol">UNEMPLOYMENT</td>
<td>6</td>
<td>5</td>
<td>-2</td>
<td>4</td>
<td>92.3</td>
<td>6</td>
<td>9</td>
<td>-30</td>
<td>39</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>-2</td>
<td>-3</td>
<td>1</td>
<td>9</td>
<td>2.8</td>
<td>110</td>
<td>33</td>
<td>-3</td>
<td>36</td>
<td>14</td>
</tr>
<tr>
<td class="firstcol" colspan="11">HOUSEHOLD
FIN SITUATION</td>
</tr>
<tr class="odd">
<td class="firstcol">Last 12 months</td>
<td>-55</td>
<td>-53</td>
<td>-46</td>
<td>-44</td>
<td>0.0</td>
<td>111</td>
<td>-7</td>
<td>-55</td>
<td>48</td>
<td>-29</td>
</tr>
<tr class="odd">
<td class="firstcol">Next12 months</td>
<td>-16</td>
<td>-12</td>
<td>-14</td>
<td>-14</td>
<td>0.0</td>
<td>111</td>
<td>14</td>
<td>-16</td>
<td>30</td>
<td>-1</td>
</tr>
<tr>
<td class="firstcol" colspan="11">HOUSEHOLD
SAVINGS</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>54</td>
<td>61</td>
<td>53</td>
<td>60</td>
<td>79.1</td>
<td>11</td>
<td>63</td>
<td>20</td>
<td>43</td>
<td>39</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>-45</td>
<td>-42</td>
<td>-35</td>
<td>-37</td>
<td>0.0</td>
<td>111</td>
<td>-9</td>
<td>-45</td>
<td>36</td>
<td>-23</td>
</tr>
<tr>
<td class="firstcol" colspan="11">MAJOR
Purchases</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>-50</td>
<td>-44</td>
<td>-42</td>
<td>-47</td>
<td>16.7</td>
<td>89</td>
<td>-15</td>
<td>-57</td>
<td>42</td>
<td>-40</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>-65</td>
<td>-61</td>
<td>-53</td>
<td>-61</td>
<td>25.8</td>
<td>65</td>
<td>-42</td>
<td>-73</td>
<td>31</td>
<td>-62</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Total
number of months:111</td>
</tr>
</tbody>
</table>
</body></html>

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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

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

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

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

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

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

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

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

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

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Macroeconomic expectations in the ZEW survey backtracked slightly in Germany while improving slightly in the United States in November. The economic situation improved slightly in the euro area and Germany while backtracking in the United States. That's the assessments of the current economic situation and expectations for Germany or the EMU that are moving in different directions in the U.S. and in Germany or in the U.S. vs. the European Monetary Union in November.

Inflation expectations backed off across the board easing slightly in the euro area, Germany, and also in the United States. While that happened, expectations for short-term interest rates became less focused on rate cuts in the euro area and slightly less tilted toward the expectation for rate cuts in the U.S. as well. Long-term rate expectations receded somewhat in both Germany and in the U.S. in November by small amounts. Stock market expectations picked up in the euro area, Germany, and the U.S., and in most cases, somewhat significantly.

**The queue standings**
The queue standings are ranked standings of these various metrics, and they tell a clear story of how the ZEW experts see current conditions and policy tradeoffs. The euro area has an economic situation where the queue standing is at its 51st percentile, slightly above its historic median (on data since the early 1990s). However, Germany and the U.S. have very weak percentile standings with Germany in its 14.5 percentile and the U.S. in its 35th percentile. Macroeconomic expectations, however, find Germany at a solid 63.6 percentile while the U.S. is at a 23.3 percentile. ZEW experts are far more upbeat on prospects for German recovery right now than in the United States – and that seems odd to me with a lot of fiscal stimulus in train in the U.S. and tons of ‘AI’ investment.

Inflation expectations are high in the U.S. at an 85.5 percentile standing, well above the historic median, and clearly showing threatening conditions. This compares to a 30% queue standing for the euro area and Germany.

Short-term rate expectations are significantly below the median for both the euro area and the U.S. with the euro area at a 26.8 percentile and the U.S. at a 9.3 percentile standing. Long-term rate expectations have Germany at a 43-percentile and the U.S. at a more similar 35-percentile. Stock market expectations are fairly similar across the lot with the euro area at a 38-percentile standing, Germany at a 35-percentile standing and the U.S. at a 38-percentile standing.

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**Summing up**
These metrics remind us that ZEW experts see different inflation circumstances in the U.S. compared to Europe as well as very different current economic situations, especially between the U.S. and the euro area and very different macroeconomic expectations between the U.S. and Germany. The U.S. is seen more as a place that's percolating inflation despite the fact that the Federal Reserve continues to say inflation is under control and inflation expectations are well anchored. Apparently, they are not well-anchored among the ZEW financial experts. We might add, nor are they well-anchored among participants in the University of Michigan survey, or for respondents to the NFIB survey that was just released. Maybe it's the Fed that is not very well anchored to reality when it comes to inflation expectations assessments?

ZEW Expectations Weaken Mildly

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Europe

Production in a Gradual Recovery in Europe Despite Recent Setbacks

Tian Yong Woon

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

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

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

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

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

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

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

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

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

Economy in Brief: 2008

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