Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318d.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s export and import rise in January and continue to show
good momentum despite forecasts of slowing in the Euro Area and a
continually rising euro. While MFG readings have showed slowing the
export picture remains surprisingly strong. 
 

After declines in the year ago period Italy&#8217;s exports have
come back to life with strong growth across the export categories.
Capital goods exports remain especially strong. On the import side
growth has also been quite strong. Year over year both export and
imports up by just about 10%. 
 

However the chart provides a different perspective. Despite
all the solid growth rates the time series of Yr/Yr growth rates shows
that apart from a sharp drop and recovery over the past year Italy&#8217;s
export and import Year-over-year growth rates are still locked in a
broad declining trend. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Italy's
Trade Trends </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/mo % monthly rate</td>
<td colspan="4">Period Specified saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</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>
</tr>
<tr>
<td class="firstcol">Current Account Balance</td>
<td>&#8364;&#8364; (3,670)</td>
<td>&#8364;&#8364; (3,589)</td>
<td>&#8364;&#8364; (2,763)</td>
<td>&#8364;&#8364; (3,341)</td>
<td>&#8364;&#8364; (3,311)</td>
<td>&#8364;&#8364; (3,060)</td>
<td>&#8364;&#8364; (3,299)</td>
</tr>
<tr>
<td class="firstcol">Goods Balance</td>
<td>&#8364;&#8364; 288</td>
<td>&#8364;&#8364; (1,255)</td>
<td>&#8364;&#8364; 455</td>
<td>&#8364;&#8364; (171)</td>
<td>&#8364;&#8364; 174</td>
<td>&#8364;&#8364; 171</td>
<td>&#8364;&#8364; (762)</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>16.2%</td>
<td>-9.1%</td>
<td>-3.3%</td>
<td>8.9%</td>
<td>8.7%</td>
<td>9.9%</td>
<td>13.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>10.3%</td>
<td>-3.6%</td>
<td>-2.7%</td>
<td>14.4%</td>
<td>3.3%</td>
<td>9.9%</td>
<td>9.0%</td>
</tr>
<tr>
<td class="firstcol">Services Balance</td>
<td>&#8364;&#8364; 247</td>
<td>&#8364;&#8364; (40)</td>
<td>&#8364;&#8364; (415)</td>
<td>&#8364;&#8364; (69)</td>
<td>&#8364;&#8364; (392)</td>
<td>&#8364;&#8364; (476)</td>
<td>&#8364;&#8364; (180)</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>3.6%</td>
<td>8.0%</td>
<td>-2.6%</td>
<td>40.6%</td>
<td>27.5%</td>
<td>10.0%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>-0.3%</td>
<td>2.4%</td>
<td>-2.9%</td>
<td>-3.3%</td>
<td>5.4%</td>
<td>-1.0%</td>
<td>18.3%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="4">Not
Seasonally Adjusted</td>
<td colspan="4">All Yr/Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>Jan-08</td>
<td>&nbsp;</td>
<td>Jan-07</td>
<td>&nbsp;</td>
<td>Jan-06</td>
<td>&nbsp;</td>
<td>Jan-05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>18.3%</td>
<td>--</td>
<td>-2.0%</td>
<td>--</td>
<td>10.9%</td>
<td>--</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Goods</td>
<td>14.2%</td>
<td>--</td>
<td>5.3%</td>
<td>--</td>
<td>14.4%</td>
<td>--</td>
<td>8.8%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Transport</td>
<td>12.1%</td>
<td>--</td>
<td>-3.1%</td>
<td>--</td>
<td>24.0%</td>
<td>--</td>
<td>8.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>12.3%</td>
<td>--</td>
<td>-2.7%</td>
<td>--</td>
<td>10.8%</td>
<td>--</td>
<td>8.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Other Goods</td>
<td>7.2%</td>
<td>--</td>
<td>18.1%</td>
<td>--</td>
<td>9.2%</td>
<td>--</td>
<td>22.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>Jan-08</td>
<td>&nbsp;</td>
<td>Jan-07</td>
<td>&nbsp;</td>
<td>Jan-06</td>
<td>&nbsp;</td>
<td>Jan-05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>6.4%</td>
<td>--</td>
<td>-5.2%</td>
<td>--</td>
<td>14.7%</td>
<td>--</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Goods</td>
<td>10.6%</td>
<td>--</td>
<td>5.7%</td>
<td>--</td>
<td>7.2%</td>
<td>--</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Transport</td>
<td>11.2%</td>
<td>--</td>
<td>11.2%</td>
<td>--</td>
<td>4.4%</td>
<td>--</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>8.1%</td>
<td>--</td>
<td>-1.2%</td>
<td>--</td>
<td>18.8%</td>
<td>--</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Other Goods</td>
<td>17.8%</td>
<td>--</td>
<td>3.0%</td>
<td>--</td>
<td>37.2%</td>
<td>--</td>
<td>17.2%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Balances in
Mil of Euros</td>
</tr>
</tbody>
</table>
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Italy’s export and import rise in January and continue to show good momentum despite forecasts of slowing in the Euro Area and a continually rising euro. While MFG readings have showed slowing the export picture remains surprisingly [...]

Italy’s Trade Deficit Widens: Complex Picture Emerges

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318e.jpg" width="353">
Finished producer prices in the U.S. rose 0.3% during February following a 1.0% surge in January. The latest increase fell just short of Consensus expectations for a 0.4% rise but the 6.8% increase versus last February was near this cycle&#39;s high. Moreover it was well up from the 3.9% increase during all of last year.
Less food and energy the 0.5% increase in prices was quite a bit stronger than expectations for a 0.2% gain. While the y/y increase held roughly steady at 2.5% the annualized rate of growth during the last three months surged to 4.7%, about the fastest in ten years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318f.jpg" width="353">
Energy prices rose 0.8% (20.7% y/y) and added to the prior month&#39;s 1.5% surge. Gasoline prices rose 2.9% for the second consecutive month (43.2% y/y) though home heating oil prices fell 3.7% (+36.8% y/y). Natural gas prices jumped 5.7% (5.3% y/y).
Why Do Gasoline Prices React to Things That Have Not Happened? from the Federal Reserve Bank of St. Louis is available <a href="http://stlouisfed.org/publications/re/2007/c/pages/gas-prices.html">here</a>.
Finished consumer food prices fell 0.5% (+6.0% y/y) and gave back just a piece of the 1.7% January surge. During the past three months food prices have risen at a 10.8% annual rate.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318g.jpg" width="353">
Prices of core finished consumer goods rose 0.5% (2.5% y/y). That gain was well ahead of expectations for a 0.2% increase and it raised the three month change to 4.7% (AR). Passenger car prices rose 0.8% (1.2% y/y). Capital equipment prices rose a firm 0.5% (1.9% y/y) led by a 0.8% rise in prices of light trucks (0.1% y/y).
Intermediate goods prices rose 0.8% following the 1.4% January surge. Excluding food &amp; energy prices were strong again and posted a 0.6% increase. Industrial chemical prices remained quite firm and rose 17.8% from last year.
The crude materials PPI surged again during February. A 3.7% rise followed the 2.5% jump during January. Crude energy materials prices jumped another 5.6% (30.2% y/y). The core crude materials PPI also was quite firm and posted a 3.3% gain. Prices for iron &amp; steel scrap are up 34.5% y/y and copper base scrap prices are 25.1% higher y/y.

<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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a> (%)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>0.3</td>
<td>1.0&nbsp;</td>
<td>6.8&nbsp;</td>
<td>3.9</td>
<td>3.0</td>
<td>&nbsp;4.9&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5</td>
<td>0.4</td>
<td>2.5</td>
<td>1.9</td>
<td>1.5</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.8</td>
<td>1.4</td>
<td>9.1</td>
<td>4.1</td>
<td>6.4</td>
<td>&nbsp;8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.6</td>
<td>0.8</td>
<td>4.8</td>
<td>2.8</td>
<td>6.0</td>
<td>&nbsp;5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>3.7</td>
<td>&nbsp;2.5&nbsp;</td>
<td>24.6</td>
<td>12.2</td>
<td>1.4</td>
<td>14.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.3</td>
<td>4.0</td>
<td>&nbsp;20.6</td>
<td>15.9</td>
<td>20.8</td>
<td>4.9</td>
</tr>
</tbody>
</table>
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Finished producer prices in the U.S. rose 0.3% during February following a 1.0% surge in January. The latest increase fell just short of Consensus expectations for a 0.4% rise but the 6.8% increase versus last February was near this [...]

U.S. PPI Total & Total Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318a.jpg" width="353">
Housing starts during February were firmer than expected and fell just 0.6% to 1.065M units. A m/m decline to 0.96M had been the Consensus expectation. In addition, starts in January were revised higher to 1.065M from 1.012M reported last month.
As occurred last month, however, all of the strength relative to expectations (and most of the revision) was due to the multi-family sector. Starts of condos &amp; coops during February rose 14.4% and January starts were revised higher by nearly one half million units.
Single family starts last month fell 6.7% m/m to .707M after a 3.1% January decline. That decline was revised to show less of a decline. Single family starts in February were at their lowest level since January 1991 and since the peak in early 2006, starts of single family homes were down 61.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318b.jpg" width="353">
By region, single family starts in the Northeast gave back all of the January increase with a 42.3% decline (-28.9% y/y). In the Midwest single family starts fell to the lowest level since (this is not a typo) early 1985 and were down 25.0% y/y. In the South, single family starts fell 7.0% (-42.5% y/y) and out West single family starts rose by nearly one-third m/m but still were down by nearly one-half from February 2007.
Building permits continued the slide from a 2005 peak with a 7.8% m/m drop. Single-family permits fell 6.2% (-41.9% y/y).
Understanding the Securitization of Subprime Mortgage Credit from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr318.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/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,065</td>
<td>1,071</td>
<td>-28.4%</td>
<td>1,344</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>707</td>
<td>758</td>
<td>-40.5%</td>
<td>1,039</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>358</td>
<td>313</td>
<td>19.7%</td>
<td>304</td>
<td>338</td>
<td>354</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>978</td>
<td>1,061</td>
<td>-36.5%</td>
<td>1,371</td>
<td>1,842</td>
<td>2,159</td>
</tr>
</tbody>
</table>
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Housing starts during February were firmer than expected and fell just 0.6% to 1.065M units. A m/m decline to 0.96M had been the Consensus expectation. In addition, starts in January were revised higher to 1.065M from 1.012M reported [...]

U.S. Housing Starts Buoyed Again By Multi-Family

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317g.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) reported that the March Composite Housing Market Index remained at the same low level as in February. The readings are more than two-thirds lower than the highs of 2004.
During the last twenty years there has been a 76% correlation between the y/y change in the Composite Index and the change in single family housing starts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317h.jpg" width="353">
The index for single family detached homes also remained near the cycle&#39;s low which was down about three quarters from the 2004 high. Builders saw little improvement in single family home sales during the next six months and their index remained down by two-thirds from 2004.
The Home Builders&#39; index improved slightly in the Southern region of the country but remained at or near the recent lows elsewhere.
Traffic of prospective home buyers was stable m/m following improvement during February.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor.
Fostering Sustainable Homeownership is Friday&#39;s speech by Federal Reserve Board Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20080314a.htm"> here</a>. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</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/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">March</th>
<th scope="col">February &nbsp;</th>
<th scope="col">March &#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">Composite Housing Market Index</td>
<td>20</td>
<td>20</td>
<td>36</td>
<td>27</td>
<td>42</td>
<td>67</td>
</tr>
</tbody>
</table>
</body>
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The National Association of Home Builders' (NAHB) reported that the March Composite Housing Market Index remained at the same low level as in February. The readings are more than two-thirds lower than the highs of 2004. During the [...]

U.S. NAHB Housing Market Index Low & Stable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317f.jpg" width="353">
The US current account deficit fell last quarter to $172.9 billion from $177.4 billion in Q3. The Q4 deficit was shallower than Consensus expectations for a deficit of $184 billion.
The latest deficit totaled 4.9% of GDP and it peaked as a percentage of GDP nearly two years ago at 6.8% in Q4 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317e.jpg" width="353">
That shrinkage occurred even though the deficit on merchandise trade deepened. Higher oil prices lifted imports and the goods deficit grew to $208.1B from Q3&#39;s revised deficit of $200.5B. It was the deepest deficit in just over a year. During the last year only, however, exports grew 14.2% and outpaced import growth of 9.8%.
The effects of the lower U.S. dollar and the strength of foreign economies versus the U.S. is apparent greatest in the surplus in services trade which grew to a record surplus of $30.2B from $28.0B in 3Q. Exports of services during the last year grew 15.2%. Travel exports grew 21.4% y/y and passenger fares were up 19.2%. Imports grew a slower 11.5% due to moderate 7.3% growth in travel and 9.3% growth in passenger fares.
The trade surplus on earned income grew to $33.0B as the unilateral transfers deficit deepened to 28.1B.
 Friedman and Taylor on Monetary Policy Rules: A Comparison from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/08/03/Nelson.pdf"> here</a>. 

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Balance of Payments</a>,&nbsp;Bil.$, SA</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">Q3 &#39;07</th>
<th scope="col">Year Ago</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Balance ($ Bil.)</td>
<td>-172.9</td>
<td>-177.4</td>
<td>-187.9</td>
<td>-738.6</td>
<td>-811.5</td>
<td>-754.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Deficit % of GDP</td>
<td>-4.9</td>
<td>-5.1</td>
<td>-5.6</td>
<td>-5.3</td>
<td>-6.2</td>
<td>-6.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Goods ($ Bil.)</td>
<td>-208.1</td>
<td>-200.5</td>
<td>-200.3</td>
<td>-815.4</td>
<td>-838.3</td>
<td>-787.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports&nbsp;</td>
<td>2.4%</td>
<td>6.7%</td>
<td>14.2%</td>
<td>12.3%</td>
<td>14.4%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports&nbsp;</td>
<td>2.9%</td>
<td>2.9%</td>
<td>9.8%</td>
<td>5.5%</td>
<td>10.7%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance on Private Services ($ Bil.)</td>
<td>30.2</td>
<td>28.0</td>
<td>23.4</td>
<td>106.9</td>
<td>79.8</td>
<td>72.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>4.4%</td>
<td>4.9%</td>
<td>15.2%</td>
<td>13.4%</td>
<td>8.8%</td>
<td>11.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>3.4%</td>
<td>3.7%</td>
<td>11.5%</td>
<td>8.6%</td>
<td>9.3%</td>
<td>8.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Income ($ Bil.)</td>
<td>33.0</td>
<td>21.3</td>
<td>9.7</td>
<td>74.3</td>
<td>36.6</td>
<td>48.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers ($ Bil.)</td>
<td>-28.1</td>
<td>-26.2</td>
<td>-20.7</td>
<td>-104.4</td>
<td>-89.6</td>
<td>-88.5</td>
</tr>
</tbody>
</table>
</body>
</html>

The US current account deficit fell last quarter to $172.9 billion from $177.4 billion in Q3. The Q4 deficit was shallower than Consensus expectations for a deficit of $184 billion. The latest deficit totaled 4.9% of GDP and it peaked [...]

U.S. Current Account Deficit Shrank in 2007

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317d.jpg" align="left" border="0" height="265" width="353">
Stock markets around the world have taken another plunge as a
result of the latest turmoil in the financial markets. Peaks and
troughs in the stock markets have been successively lower ever since
the sub prime crisis erupted last August. The attached chart plots
daily stock price indexes for the United States (the Dow Jones), the
United Kingdom (the Financial Times All Share) and Japan (the Nikkei
225). As of last Friday, the Dow Jones was down 15% from its July 19,
2007 peak of 14,000. The Financial Times All Share was down 17% and the
Nikkei 225, 33% from their peaks of respectively 3,468 and 18,239 on
July 13, 2007. Early indicators suggests further falls today.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317c.jpg" align="right" border="0" height="265" width="353">
While stock markets been falling, commodity prices have been
soaring. In attempts to seek safety, investors have turned to
commodities, gold and oil in particular. The second chart shows the run
ups in the prices of these commodities. Over the same period that the
Dow Jones fell 15%, gold rose 47% and oil 43%.
These daily prices can be found in the Haver Data Base, INTDAILY.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">STOCK
PRICE INDEXES&nbsp;</th>
<th scope="col">Mar 14,08&nbsp;</th>
<th scope="col">Peak, Jul 07</th>
<th scope="col">% Chg&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U. S. Dow Jones</td>
<td>11951.09</td>
<td>14000.41</td>
<td>-14.64</td>
</tr>
<tr class="odd">
<td class="firstcol">U.K. Financial Times All Shares</td>
<td>2886.17</td>
<td>3467.92</td>
<td>-16.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan Nikkei
225&nbsp;Foreign</td>
<td>12240.60</td>
<td>18238.95</td>
<td>-32.88</td>
</tr>
<tr class="grey2">
<td class="firstcol"> &nbsp;COMMODITY
PRICES</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Gold
(Engelhard Indus Bullion $ per troy oz.)</td>
<td>997.34</td>
<td>676.26</td>
<td>47.78</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Oil (Brent Crude $
per bbl.)</td>
<td>110.75</td>
<td>78.33</td>
<td>41.39</td>
</tr>
</tbody>
</table>
</body></html>

Stock markets around the world have taken another plunge as a result of the latest turmoil in the financial markets. Peaks and troughs in the stock markets have been successively lower ever since the sub prime crisis erupted last [...]

Stock Markets Plunge: Commodity Prices Soar

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317a.jpg" width="353">
Industrial production fell 0.5% last month after an unrevised 0.1% rise during January. The decline was greater than the 0.1% slip that was generally expected. The cause of the surprise, however, primarily was due to a 3.7% drop in utility output, caused by warm Winter temperatures during February.
Factory output fell 0.3% during February. A reading of no change in January production was revised down from a 0.1% uptick reported initially. The m/m decline was the first since October and three month growth in output fell to -0.7% (AR). Production in the high tech sector rose 1.1% last month after a 0.3% January increase. Outside the high tech sector, factory output fell 0.4% during February after having been unchanged during January. Three month output growth fell to -1.1% (AR).
Production of computers &amp; electronics again surged last month by 1.2% and three month growth totaled a strong 12.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317b.jpg" width="353">
Severe weakness has taken over output elsewhere in the durable goods area. Output of furniture &amp; appliances fell 3.1% last month after a 2.5% January decline. Three month output growth here fell to -25.4% at an annual rate. Output of automotive products dropped 1.2% and on a three month basis fell 6.2%. In the nondurables sector apparel product output fell 0.4%, the second consecutive decline, though that followed a strong 2.4% December jump. On a three month basis output growth was a still firm 3.2%.
Output of business equipment ticked up 0.1% for the second month and three month growth totaled 4.2%. Output of industrial equipment less high tech slipped 0.1% with three month growth still positive at 3.9%.
Output of construction supplies fell 0.7% during February for the second consecutive month and three month growth remained negative at -3.7%.
Capacity utilization fell to 80.9%, its lowest level since late 2005. Utilization in the factory sector slipped to 79.3%, its lowest also since late 2005. Annual growth in capacity is estimated at 1.7% y/y for 2.1% in the factory sector.
Yesterday the Federal Reserve announced two initiatives to promote financial market liquidity and orderly market functioning. The text of the announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080316a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.5</td>
<td>0.1</td>
<td>1.1</td>
<td>1.9</td>
<td>4.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.3</td>
<td>0.0</td>
<td>1.7</td>
<td>1.9</td>
<td>4.7</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Utilities</td>
<td>-3.7</td>
<td>2.2</td>
<td>-5.4</td>
<td>3.1</td>
<td>0.2</td>
<td>2.0</td>
</tr>
</tbody>
</table>


</html>

Industrial production fell 0.5% last month after an unrevised 0.1% rise during January. The decline was greater than the 0.1% slip that was generally expected. The cause of the surprise, however, primarily was due to a 3.7% drop in [...]

U.S. Industrial Output Down

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

251111E.jpg

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

251110E.jpg

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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Italy’s Trade Deficit Widens: Complex Picture Emerges

U.S. PPI Total & Total Firm

U.S. Housing Starts Buoyed Again By Multi-Family

U.S. PPI Total & Total Firm

U.S. NAHB Housing Market Index Low & Stable

U.S. Current Account Deficit Shrank in 2007

Stock Markets Plunge: Commodity Prices Soar

U.S. Industrial Output Down