Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319e.jpg" width="353">
The Commerce Department reported that for January total business inventories rose 0.8% after an upwardly revised 0.7% rise in December. The annualized three month growth in inventories rose as a result to 7.7%, its strongest since mid-2006. The quicker rate of accumulation, if sustained, would reverse much of the -1.4 percentage point contribution inventories made to 4Q07 growth in real GDP.
A quicker rate of accumulation of factory inventories accounts for much of the acceleration. In January they surged by 1.3% after a strong 0.9% December increase. Together they raised the three month rate of accumulation to 12.0%, up from 7.2% during 4Q07. Higher oil prices were behind some of that faster rate of gain as petroleum inventories rose 8.1% in January (29.7% y/y). Nevertheless, excluding petroleum factory inventories still increased a firm 0.8% during January, the same as in the prior month, and the three month rate of accumulation rose to 8.8%, up from the 5.9% 4Q rate of gain and from the 1.7% 3Q rise. 
Retail inventories are up, but the rate of gain shows a less pronounced acceleration due to auto cutbacks. During January total retail inventories rose 0.4% after no change in December. The three month rate of increase was a minimal 0.7% after a 0.2% 4Q rise. Inventories of motor vehicle &amp; parts rose just 0.4% in January after four consecutive months of decline. As a result motor vehicle inventories during the last three months fell at a 4.8% rate after an 8.0% 4Q drop. Motor vehicle inventories were reduced as production was cut back. Outside of autos retail inventories were well behaved through January and rose just 0.4%, half the December rise. That lowered the three month growth rate to 3.3% from 4.3% during 4Q. 
The industry detail in the retail sector shows that building materials inventories grew at a 6.4% rate over the last three months versus a 7.6% 4Q gain. Furniture inventories fell at a 5.7% rate after a 2.3% 4Q rise. At clothing &amp; accessory stores the three month rate of accumulation of 0.4% offset a 0.3% rate of decumulation during 4Q. General merchandise stores&#39; inventories rose at a 0.8% rate over the last three months following decumulation at a 1.7% rate during 4Q.
The gains in wholesale inventories have been strong, rising 0.8% in January after a 1.1% December rise. Curiously, the value of inventories of petroleum products fell 3.4% in January and offset half of the prior month&#39;s increase. Less petroleum wholesale inventories rose a strong 1.0% and the three month rate of increase nearly doubled to 10.5% versus 4Q. During the last ten years there has been a 59% correlation between the annual change in wholesale inventories less petroleum and the change in merchandise imports.
Business sales rose 1.5% and three month growth was still a firm 9.4% as of January. Much of that strength was due to wholesale sales which grew at a 17.7% rate over the three months. Petroleum industry sales grew at a 76.2% rate but less petroleum wholesale sales still were strong and grew at a 10.7% rate over the last three months.
As of January, strength in sales offset the gain in inventories and the I/S ratio fell to 1.25%, the lowest since 2005.
Inventories, Lumpy Trade, and Large Devaluations from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/wps/2008/wp08-3.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/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8%</td>
<td>0.7%</td>
<td>4.8%</td>
<td>4.1%</td>
<td>5.8%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.4%</td>
<td>0.0%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>3.2%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Auto</td>
<td>0.4%</td>
<td>0.8%</td>
<td>3.8%</td>
<td>3.3%</td>
<td>4.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>6.1%</td>
<td>8.5%</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>1.3%</td>
<td>0.9%</td>
<td>5.0%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>8.9%</td>
</tr>
</tbody>
</table>
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The Commerce Department reported that for January total business inventories rose 0.8% after an upwardly revised 0.7% rise in December. The annualized three month growth in inventories rose as a result to 7.7%, its strongest since [...]

U.S. Business Inventories Starting to Back Up

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319c.jpg" align="left" border="0" height="265" width="353">Italy&#8217;s orders jumped sharply in January but only after an
even larger fall in December. As a result the Q1 sales growth for
orders in January over the Q4 average is a dismal -1.8%. Foreign orders
in Q1 2008 are still rising however at a 4.4% rate but domestic orders
are a very weak -5.4%.

Italian sales are however up sharply higher in 2008-Q1: as of
January. Sales are growing at a strong 18% pace in the quarter with
3.6% growth over three months and 5.7% growth over 12 months. So order
weakness has yet to hit the sales bottom line. Still, order and sales
in Italy have tracked closely in the past, so the weakness in orders
should be ignored.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Italy Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<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 class="odd">
<td class="firstcol">Total</td>
<td>2.6%</td>
<td>-5.6%</td>
<td>2.9%</td>
<td>-1.0%</td>
<td>-3.0%</td>
<td>7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Foreign</td>
<td>5.3%</td>
<td>-8.1%</td>
<td>3.9%</td>
<td>2.0%</td>
<td>-8.3%</td>
<td>10.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>1.1%</td>
<td>-4.1%</td>
<td>2.4%</td>
<td>-2.8%</td>
<td>-0.2%</td>
<td>5.7%</td>
</tr>
<tr>
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Sales</td>
<td>4.6%</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>9.0%</td>
<td>3.6%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
</body></html>

Italy’s orders jumped sharply in January but only after an even larger fall in December. As a result the Q1 sales growth for orders in January over the Q4 average is a dismal -1.8%. Foreign orders in Q1 2008 are still rising however [...]

Italy Orders Rise in Month but Still Faltering Trend

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319a.jpg" width="353">
The March index of manufacturing activity in New York State fell to a more negative reading of -22.23 in March after a -11.72 February figure. Expectations were for -6.3. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three month change in U.S. factory sector industrial production.
New orders, shipments and inventories were deeply negative.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319b.jpg" width="353">
The employment index improved to a positive 4.49 from -2.11 in February. In the (perhaps too) short six year history of the NY employment index, there has been an 85% correlation between it and the three month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
Pricing pressure rose to its highest level since June of 2006. Since 2001 there has been an 81% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months improved slightly and remained near its lowest in six years.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">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/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March &#39;07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)&nbsp;&nbsp;</td>
<td>-22.23</td>
<td>-11.72&nbsp;</td>
<td>6.63</td>
<td>17.23</td>
<td>20.24</td>
<td>15.53</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>50.56</td>
<td>47.37</td>
<td>30.23</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>


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The March index of manufacturing activity in New York State fell to a more negative reading of -22.23 in March after a -11.72 February figure. Expectations were for -6.3. The figures are reported by the Federal Reserve Bank of New [...]

U.S. Empire State Index More Negative

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319d.jpg" align="left" border="0" height="265" width="353">
UK order books are high, in the 96th percentile of their range
of values since end-2000 in terms of the net balance readings of the
CBI survey. Total orders are strong and exports are the highest seen in
this seven-plus year period Output volume expected in the next 3-months
is more restrained but still resides in the top 18 percent of its range
(100-82=18). Stocks of product are mid range, neither too high nor too
low. Price expectations will not be good news to the BOE. Prices
expected in the next 3-months are the highest net balance we have sense
in this period at +25, up sharply from +22 in February and average
expectations of +18 over the past year.

In analyzing these trends one thing to consider is the recent
choppiness of recent movements. The export order jump month-to-month
lifted export orders to the top percentile of the seven plus year range
from its top 20th percentile reading last month. Output volume expected
jumped from the 70th percentile of the range last month to the 82nd
percentile (top 18%). So before we celebrate we need to recognize that
the UK industrial sector is doing better, but that the monthly readings
are volatile. The one exception might be for expected prices where the
monthly gains have been large and steady. It is not clear that the UK
industrial sector is as strong as a top of range reading makes it seem.
The chart makes it clear that there has been some recovery but that the
net positive readings are relatively moderate despite their relative
range position that the order readings have posted. For the most part
these readings are moving sideways and are not pointing to an
acceleration that might signal overheating. Still the price component
is a bit unsettling.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Reported:</td>
<td> Mar-08</td>
<td> Feb-08</td>
<td> Jan-08</td>
<td> Dec-07</td>
<td> 12Mo Avg</td>
<td> Pcntle</td>
<td> Max</td>
<td> Min</td>
<td> Range</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>7</td>
<td>3</td>
<td>2</td>
<td>2</td>
<td>3</td>
<td> 96%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>3</td>
<td>-8</td>
<td>-4</td>
<td>2</td>
<td>-4</td>
<td> 100%</td>
<td>3</td>
<td>-50</td>
<td>53</td>
</tr>
<tr class="grey2">
<td class="firstcol">Stocks: Final Goods</td>
<td>12</td>
<td>11</td>
<td>7</td>
<td>14</td>
<td>10</td>
<td> 50%</td>
<td>26</td>
<td>-2</td>
<td>28</td>
</tr>
<tr>
<td class="firstcol">Output Volume: Next 3-months</td>
<td>11</td>
<td>11</td>
<td>9</td>
<td>3</td>
<td>13</td>
<td> 70%</td>
<td>28</td>
<td>-28</td>
<td>56</td>
</tr>
<tr class="grey2">
<td class="firstcol">Avg Prices 4 Next 3-months</td>
<td>25</td>
<td>22</td>
<td>21</td>
<td>15</td>
<td>18</td>
<td> 100%</td>
<td>25</td>
<td>-30</td>
<td>55</td>
</tr>
<tr class="odd">
<td colspan="10" class="firstcol">From end 2000</td>
</tr>
</tbody>
</table>
</body></html>

UK order books are high, in the 96th percentile of their range of values since end-2000 in terms of the net balance readings of the CBI survey. Total orders are strong and exports are the highest seen in this seven-plus year period [...]

UK Order Books are "Full".…but for How Long?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319e.jpg" align="left" border="0" height="265" width="353">
The Commerce Department reported that for January total
business inventories rose 0.8% after an upwardly revised 0.7% rise in
December. The annualized three month growth in inventories rose as a
result to 7.7%, its strongest since mid-2006. The quicker rate of
accumulation, if sustained, would reverse much of the -1.4 percentage
point contribution inventories made to 4Q07 growth in real GDP.
A quicker rate of accumulation of factory inventories accounts
for much of the acceleration. In January they surged by 1.3% after a
strong 0.9% December increase. Together they raised the three month
rate of accumulation to 12.0%, up from 7.2% during 4Q07. Higher oil
prices were behind some of that faster rate of gain as petroleum
inventories rose 8.1% in January (29.7% y/y). Nevertheless, excluding
petroleum factory inventories still increased a firm 0.8% during
January, the same as in the prior month, and the three month rate of
accumulation rose to 8.8%, up from the 5.9% 4Q rate of gain and from
the 1.7% 3Q rise. 
 

Retail inventories are up, but the rate of gain shows a less
pronounced acceleration due to auto cutbacks. During January total
retail inventories rose 0.4% after no change in December. The three
month rate of increase was a minimal 0.7% after a 0.2% 4Q rise.
Inventories of motor vehicle &amp; parts rose just 0.4% in January
after four consecutive months of decline. As a result motor vehicle
inventories during the last three months fell at a 4.8% rate after an
8.0% 4Q drop. Motor vehicle inventories were reduced as production was
cut back. Outside of autos retail inventories were well behaved through
January and rose just 0.4%, half the December rise. That lowered the
three month growth rate to 3.3% from 4.3% during 4Q. 
 

The industry detail in the retail sector shows that building
materials inventories grew at a 6.4% rate over the last three months
versus a 7.6% 4Q gain. Furniture inventories fell at a 5.7% rate after
a 2.3% 4Q rise. At clothing &amp; accessory stores the three month
rate of accumulation of 0.4% offset a 0.3% rate of decumulation during
4Q. General merchandise stores' inventories rose at a 0.8% rate over
the last three months following decumulation at a 1.7% rate during 4Q.
The gains in wholesale inventories have been strong, rising
0.8% in January after a 1.1% December rise. Curiously, the value of
inventories of petroleum products fell 3.4% in January and offset half
of the prior month's increase. Less petroleum wholesale inventories
rose a strong 1.0% and the three month rate of increase nearly doubled
to 10.5% versus 4Q. During the last ten years there has been a 59%
correlation between the annual change in wholesale inventories less
petroleum and the change in merchandise imports.
Business sales rose 1.5% and three month growth was still a
firm 9.4% as of January. Much of that strength was due to wholesale
sales which grew at a 17.7% rate over the three months. Petroleum
industry sales grew at a 76.2% rate but less petroleum wholesale sales
still were strong and grew at a 10.7% rate over the last three months.
As of January, strength in sales offset the gain in
inventories and the I/S ratio fell to 1.25%, the lowest since 2005.
Inventories, Lumpy Trade, and Large Devaluations from
the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/wps/2008/wp08-3.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/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business
Inventories</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8%</td>
<td>0.7%</td>
<td>4.8%</td>
<td>4.1%</td>
<td>5.8%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.4%</td>
<td>0.0%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>3.2%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Auto</td>
<td>0.4%</td>
<td>0.8%</td>
<td>3.8%</td>
<td>3.3%</td>
<td>4.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>6.1%</td>
<td>8.5%</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>1.3%</td>
<td>0.9%</td>
<td>5.0%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>8.9%</td>
</tr>
</tbody>
</table>
U.S. Empire State Index More
Negative 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319a.jpg" align="left" border="0" height="265" width="353">
The March index of manufacturing activity in New York State
fell to a more negative reading of -22.23 in March after a -11.72
February figure. Expectations were for -6.3. The figures are reported
by the Federal Reserve Bank of New York.
Since the series' inception in 2001 there has been a 55%
correlation between the index level and the three month change in U.S.
factory sector industrial production.
New orders, shipments and inventories were deeply negative.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319b.jpg" align="right" border="0" height="265" width="353">
The employment index improved to a positive 4.49 from -2.11 in
February. In the (perhaps too) short six year history of the NY
employment index, there has been an 85% correlation between it and the
three month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business
Conditions, the Empire State Business Conditions Index reflects answers
to an independent survey question; it is not a weighted combination of
the components.
Pricing pressure rose to its highest level since June of 2006.
Since 2001 there has been an 81% correlation between the index of
prices paid and the three month change in the core intermediate
materials PPI.
The Empire State index of expected business
conditions in six months improved slightly and remained near
its lowest in six years.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State conducted by the Federal Reserve Bank
of New York. Participants from across the state in a variety of
industries respond to a questionnaire and report the change in a
variety of indicators from the previous month. Respondents also state
the likely direction of these same indicators six months ahead. April
2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including
methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">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/@S511/@S511.HTM">Empire
State Manufacturing Survey</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March '07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions
(diffusion index)&nbsp;&nbsp;</td>
<td>-22.23</td>
<td>-11.72&nbsp;</td>
<td>6.63</td>
<td>17.23</td>
<td>20.24</td>
<td>15.53</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>50.56</td>
<td>47.37</td>
<td>30.23</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>
UK Order Books are "Full".&#8230;but
forHow Long? 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319d.jpg" align="left" border="0" height="265" width="353">
UK order books are high, in the 96th percentile of their range
of values since end-2000 in terms of the net balance readings of the
CBI survey. Total orders are strong and exports are the highest seen in
this seven-plus year period Output volume expected in the next 3-months
is more restrained but still resides in the top 18 percent of its range
(100-82=18). Stocks of product are mid range, neither too high nor too
low. Price expectations will not be good news to the BOE. Prices
expected in the next 3-months are the highest net balance we have sense
in this period at +25, up sharply from +22 in February and average
expectations of +18 over the past year.

In analyzing these trends one thing to consider is the recent
choppiness of recent movements. The export order jump month-to-month
lifted export orders to the top percentile of the seven plus year range
from its top 20th percentile reading last month. Output volume expected
jumped from the 70th percentile of the range last month to the 82nd
percentile (top 18%). So before we celebrate we need to recognize that
the UK industrial sector is doing better, but that the monthly readings
are volatile. The one exception might be for expected prices where the
monthly gains have been large and steady. It is not clear that the UK
industrial sector is as strong as a top of range reading makes it seem.
The chart makes it clear that there has been some recovery but that the
net positive readings are relatively moderate despite their relative
range position that the order readings have posted. For the most part
these readings are moving sideways and are not pointing to an
acceleration that might signal overheating. Still the price component
is a bit unsettling.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Reported:</td>
<td> Mar-08</td>
<td> Feb-08</td>
<td> Jan-08</td>
<td> Dec-07</td>
<td> 12Mo Avg</td>
<td> Pcntle</td>
<td> Max</td>
<td> Min</td>
<td> Range</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>7</td>
<td>3</td>
<td>2</td>
<td>2</td>
<td>3</td>
<td> 96%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>3</td>
<td>-8</td>
<td>-4</td>
<td>2</td>
<td>-4</td>
<td> 100%</td>
<td>3</td>
<td>-50</td>
<td>53</td>
</tr>
<tr class="grey2">
<td class="firstcol">Stocks: Final Goods</td>
<td>12</td>
<td>11</td>
<td>7</td>
<td>14</td>
<td>10</td>
<td> 50%</td>
<td>26</td>
<td>-2</td>
<td>28</td>
</tr>
<tr>
<td class="firstcol">Output Volume: Next 3-months</td>
<td>11</td>
<td>11</td>
<td>9</td>
<td>3</td>
<td>13</td>
<td> 70%</td>
<td>28</td>
<td>-28</td>
<td>56</td>
</tr>
<tr class="grey2">
<td class="firstcol">Avg Prices 4 Next 3-months</td>
<td>25</td>
<td>22</td>
<td>21</td>
<td>15</td>
<td>18</td>
<td> 100%</td>
<td>25</td>
<td>-30</td>
<td>55</td>
</tr>
<tr class="odd">
<td colspan="10" class="firstcol">From end
2000</td>
</tr>
</tbody>
</table>
Italy Orders Rise in Month but
Still Faltering Trend 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319c.jpg" align="left" border="0" height="265" width="353">Italy&#8217;s orders jumped
sharply in January but only after an
even larger fall in December. As a result the Q1 sales growth for
orders in January over the Q4 average is a dismal -1.8%. Foreign orders
in Q1 2008 are still rising however at a 4.4% rate but domestic orders
are a very weak -5.4%.

Italian sales are however up sharply higher in 2008-Q1: as of
January. Sales are growing at a strong 18% pace in the quarter with
3.6% growth over three months and 5.7% growth over 12 months. So order
weakness has yet to hit the sales bottom line. Still, order and sales
in Italy have tracked closely in the past, so the weakness in orders
should be ignored.
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Italy
Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<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 class="odd">
<td class="firstcol">Total</td>
<td>2.6%</td>
<td>-5.6%</td>
<td>2.9%</td>
<td>-1.0%</td>
<td>-3.0%</td>
<td>7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Foreign</td>
<td>5.3%</td>
<td>-8.1%</td>
<td>3.9%</td>
<td>2.0%</td>
<td>-8.3%</td>
<td>10.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>1.1%</td>
<td>-4.1%</td>
<td>2.4%</td>
<td>-2.8%</td>
<td>-0.2%</td>
<td>5.7%</td>
</tr>
<tr>
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Sales</td>
<td>4.6%</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>9.0%</td>
<td>3.6%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>

Japan Slips and its Assessment is
Cut&#8230; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080319f.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s all-industry index was flat in January. The tertiary
index that it tracks so closely was up to 110.3 from 109.5 in December.
In terms of year-to-year changes the tertiary and all-industries
indices are about the same showing a small bounce in the recent month
but holding in a shallow downtrend overall. Mining and MFG are well off
peak and the sector moved lower in January to 109.5 from 112.0 in
December. This left the year/year change in the index near zero. Over
the past several months Japan&#8217;s sector indices have more or less held
steady in terms of their year/year changes. Even the very weak
construction index that fell again in January is steady to a bit higher
over 12 months.
Amid these signals the Japanese government has downgraded its
assessment of the economy for the second consecutive month in March.The Cabinet Office that issues the
assessment cited stalled corporate capital spending and weak industrial
production. Private
consumption has lagged for time and was also on the laundry list of
reason to downgrade the economy. The
government said in its March report that "the economic recovery appears
to be pausing recently." This pronouncement is a bold contrast to its
overview in the February report that held: "the economy is recovering
at a moderate pace recently." Things change.
This is the &#8216;first second&#8217; for a downgrade: It is the first
time in this cycle that the government has downgraded its overall
assessment of the economy for the second month in a row. Last time it
did such a thing was in November and December 2004.
The first downgrade in this cycle came in February a
period that is not yet covered in the data table below.
In February the government lowered its assessment of the
economy due to slower growth of exports and industrial production in
addition to continuing weakness in private consumption and housing
construction. This month&#8217;s downgrade features some of the same sectors:
capital investment, industrial output and private consumer spending.
Japan once again has issues. With the yen now rising, Japan faces
challenges and still needs a head at its central bank. &#8230;and it&#8217;s not a
good time to be without monetary leadership. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> Up to
date Japan Industry Surveys</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes; Range</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan 
2008</td>
<td>Dec 
2007</td>
<td>Nov 
2007</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>107.0</td>
<td>107.0</td>
<td>107.4</td>
<td>107.1</td>
<td>107.4</td>
<td>107.3</td>
<td>108.4</td>
<td>93.6</td>
<td>90.5%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>71.5</td>
<td>72.0</td>
<td>72.1</td>
<td>71.9</td>
<td>72.3</td>
<td>76.3</td>
<td>124.6</td>
<td>71.1</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Mining and MFG</td>
<td>109.5</td>
<td>112.0</td>
<td>110.4</td>
<td>110.6</td>
<td>111.1</td>
<td>109.4</td>
<td>112.2</td>
<td>87.7</td>
<td>89.0%</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>110.3</td>
<td>109.5</td>
<td>110.5</td>
<td>110.1</td>
<td>110.2</td>
<td>110.1</td>
<td>111.2</td>
<td>91.0</td>
<td>95.5%</td>
</tr>
<tr>
<td class="firstcol" colspan="10">Ranges,
Max, Min since
1993</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318n.jpg" width="353">
Today, the Federal Open Market Committee lowered the Federal funds rate by 75 basis points to 2.25% in a move that was somewhat more aggressive than generally expected. The funds rate was last this low early in 2005 and it was the largest cut since this past January.
The discount rate was lowered another 75 basis points to 2.5% after this weekend&#39;s cut from 3.5%.
The Fed indicated that &quot;the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.&quot;
The Fed further indicated that &quot;Today&#146;s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain.&quot;
Voting against taking the action was Richard W. Fisher, President of the Federal Reserve Bank of Dallas and Charles I. Plosser, President of the Philadelphia Fed, who preferred less aggressive action at this meeting.
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080318a.htm">link</a>.
Market Bailouts and the &quot;Fed Put&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/08/03/Poole.pdf">here</a>.
Booms and Busts: The Case of Subprime Mortgages from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/4q07Gramlich.pdf">here</a>.

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Today, the Federal Open Market Committee lowered the Federal funds rate by 75 basis points to 2.25% in a move that was somewhat more aggressive than generally expected. The funds rate was last this low early in 2005 and it was the [...]

FOMC Lowers Fed Funds Rate by 75 Basis Points

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318k.jpg" width="353">
For last week, the International Council of Shopping Centers ICSC-UBS Chain Store survey indicated that chain store sales rose 0.4% and added to the prior week&#39;s 0.3% rise. The increases raised the average level of sales so far this month 0.2% from February after that month&#39;s 0.4% increase.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318l.jpg" width="353">
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
During the latest week the leading indicator of chain store sales from ICSC-UBS remained quit week and was unchanged w/w.The index has trended steadily lower since early January.
Retail gasoline prices were again strong last week and repeated the prior period&#39;s six cent rise. The level of $3.28 per gallon, according to the U.S. Department of Energy survey, was a new high.In real terms (calculated as the CPI for gasoline divided by the total CPI less energy) gasoline prices remained in February just above the old high reached early in 1981.
Real gasoline prices likely will reach a new high this month as the wholesale price of gasoline is up more than ten cents from the February average.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318m.jpg" width="353"> 
Crude oil prices have been quite strong with the average for WTI crude at $109.43 per bbl., up roughly ten dollars from the February average. Crude prices backed off slightly yesterday.
These energy price series are available in Haver&#39;s Daily and Weekly databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/14/08</th>
<th scope="col">03/08/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>490.1</td>
<td>488.3</td>
<td>1.6%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">03/17/08</th>
<th scope="col">03/10/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Gasoline ($ per Gallon)</td>
<td>3.28</td>
<td>3.23</td>
<td>27.4%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>109.43</td>
<td>103.43</td>
<td>88.9%</td>
<td>94.00</td>
<td>61.11</td>
<td>58.16</td>
</tr>
</tbody>
</table>


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For last week, the International Council of Shopping Centers ICSC-UBS Chain Store survey indicated that chain store sales rose 0.4% and added to the prior week's 0.3% rise. The increases raised the average level of sales so far this [...]

U.S. Chain Store Sales Up Slightly and Gasoline Prices Up Sharply

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318h.jpg" align="left" border="0" height="265" width="353">
With turmoil in world financial markets and slowing economies,
monetary authorities in some of the countries that have been targeting
inflation may find the "target" too restrictive.
The release of inflation data in the United Kingdom and Canada
today illustrates two different cases. In the United Kingdom where
inflation is increasing and economic conditions deteriorating,
inflation targeting may be relaxed. In Canada where inflation is
falling, weakening demand can be addressed by easier monetary policies
without fear of setting off an inflationary spiral.
In the UK, where the base interest rate is 5.25%, a reduction
in the rate would ordinarily be likely in view of the slowing economy.
However, inflation has been creeping up since a low of 1.75% was
reached last August. It was 2.51% in February, the highest since June
of last year and well above the Bank of England's target rate of 2%. On
the other hand, Core inflation, defined as total excluding energy,
food, alcoholic beverages and tobacco, has been declining over the same
period and is now 1.17%. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318i.jpg" align="right" border="0" height="265" width="353">Overall
inflation and core inflation in the UK are shown in the first chart.
The better performance of the core relative to total inflation may
influence the Monetary Policy Committee against raising interest rates
and may even pave the way for a cut. The next meeting of the Monetary
Policy Commission of the Bank of England will be on April 10th.
The Bank of Canada reduced its base rate by 50 basis points to
3.5% on March 4, 2008. At that time the Bank suggested that further
monetary stimulus might be required. It is unlikely that monetary
policy in Canada in the coming months will be restrained by inflation
considerations. Inflation has been declining since November and was
1.8% in February. below the Bank of Canada's target rate of 2%.
Although core inflation, defined as total inflation less 8 volatile
items and indirect taxes, increased from 1.38% in January to 1.47% in
February it was the first increase in core inflation since June, 2006
and the level is still relatively subdued. Overall inflation and core
inflation in Canada are shown in the second chart. The next interest
rate announcement by the Bank of Canada will be on April 22, 2008.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CONSUMER
PRICE INDEXES AND INFLATION&nbsp;</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan&nbsp; 08&nbsp;</th>
<th scope="col">Feb 07&nbsp;</th>
<th scope="col">M/M %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">UNITED
KINGDOM</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total
CPI&nbsp;&nbsp; (2005
=100)</td>
<td>106.3</td>
<td>105.5</td>
<td>103.7</td>
<td>0.76</td>
<td>2.51</td>
<td>104.7</td>
<td>102.33</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core
CPI&nbsp; (2005 =100)&nbsp;</td>
<td>103.4</td>
<td>103.1</td>
<td>102.2</td>
<td>0.29</td>
<td>1.17</td>
<td>103.0</td>
<td>101.3</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">CANADA</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total
CPI&nbsp;&nbsp;(2005=100)*
</td>
<td>104.9</td>
<td>104.5</td>
<td>103.0</td>
<td>0.36</td>
<td>1.81</td>
<td>104.2</td>
<td>102.0</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core
CPI&nbsp;&nbsp; (2005=100)*</td>
<td>105.0</td>
<td>104.4</td>
<td>103.4</td>
<td>0.54</td>
<td>1.47</td>
<td>104.1</td>
<td>101.9</td>
<td>100.0</td>
</tr>
<tr>
<td colspan="9">* Rebased
from&nbsp;&nbsp;(2002=100)</td>
</tr>
</tbody>
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With turmoil in world financial markets and slowing economies, monetary authorities in some of the countries that have been targeting inflation may find the "target" too restrictive. The release of inflation data in the United Kingdom [...]

Inflation Targeting in UK and CANADA

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

Jump to:

U.S. Business Inventories Starting to Back Up

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U.S. Business Inventories Starting to Back Up

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Inflation Targeting in UK and CANADA