Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080313f.jpg" width="353">
The U.S. government ran a budget deficit of $175.6B last month, quite a bit higher than last year&#39;s February deficit of $120B.
For the first five months of FY08 the government ran a budget deficit of $263.3B versus a deficit of 162.2B during the first five months of FY07.
For the fiscal year to date, growth in federal receipts slowed to just 1.3%, down from 9.3% growth during the first five months of FY07. Lower stock prices and the weaker economy with its slower employment growth stalled growth in individual income tax receipts (44% of total receipts) at 0.7% from 12.8% last FYTD. Withheld income taxes grew 5.3%, half the rate of gain last year, but non-withheld taxes grew just 3.6% versus 20.9% growth during the five months of FY07.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080313g.jpg" width="353">
Corporate income taxes (13% of total receipts) fell 4.8% due to lower corporate profits. During FY07 they rose 16.5% during the first five months. Unemployment insurance receipts fell 6.1% due to lower employment growth.
U.S. net outlays grew 10.2% early this fiscal year and that was nearly four times the growth early in FY07. Growth in defense spending (19% of total outlays) surged to 27.8% while Medicare expenditures (12% of outlays) surged 47.3%. Growth in social security spending (21% of outlays) held about steady at 4.8% but interest expense fell 1.5% as interest rates backed down a bit.
The Government&#39;s financial data is available in Haver&#39;s USECON database.

<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/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005 &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>-$175.6B</td>
<td>$17.8B</td>
<td>-$120.0B (2/07)</td>
<td>-$162.0B</td>
<td>-$248.2B</td>
<td>-$318.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$105.7B</td>
<td>$255.2B</td>
<td>-12.1%</td>
<td>6.7%</td>
<td>11.8%</td>
<td>14.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$281.3B</td>
<td>$237.4B</td>
<td>17.1%</td>
<td>2.8%</td>
<td>7.4%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>
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The U.S. government ran a budget deficit of $175.6B last month, quite a bit higher than last year's February deficit of $120B. For the first five months of FY08 the government ran a budget deficit of $263.3B versus a deficit of 162.2B [...]

U.S. Budget Deficit Deeper Due to Revenue Shortfall & Spending Surge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080313d.jpg" width="353">
Overall import prices during February gained only 0.2% after a very firm, little revised 1.6% January increase. Expectations had been for a stronger 0.8% rise last month.
Petroleum prices fell an unexpected 0.5% after a 4.8% surge in January. That decline helped industrial materials prices to rise just 0.2%, but crude petroleum prices look to be up 8.0% this month versus February.
Less petroleum import prices were strong again last month and rose 0.6%. The lower foreign exchange value of the dollar has pushed the y/y increase in these prices to 4.5%, the strongest rate of increase since 1995. 
 During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a reduced 47% against a broader basket of currencies.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080313e.jpg" width="353">
Prices for industrial supplies &amp; materials excluding petroleum surged again, last month by 2.5% (12.5% y/y) led by another surge in chemical prices (23.9% y/y). Finished metal prices also have been strong (12.4% y/y) as have been paper prices (2.3% y/y). They are recovering after deflation last year. The detailed import price series can be found in the Haver USINT database. 
Capital goods import prices rose just 0.1% (0.9% y/y) but that y/y gain follows a 0.4% increase last year and a 0.7% decline in 2006. Prices of computers, peripheral and semiconductors fell 0.5% last month (-5.0% y/y). Less the high tech sector, capital goods prices rose 0.3% (3.4% y/y) and here again the y/y increase is well elevated from a 2.7% rise last year and a 1.4% 2006 gain.
Finally, prices for nonauto consumer goods imports rose 0.3% in February (2.1% y/y) and the y/y rise in prices is now up from a 1.6% 2007 increase and a 0.4% uptick during 2006. Apparel prices are well up (2.0% y/y), double the rise of last year.
Total export prices have been quite strong with the 6.8% y/y gain led by a 30.8% jump in agricultural prices. That is followed by an accelerated 4.6% y/y gain in nonagricultural export prices which rose 3.6% last year. 
Today&#39;s remarks by Treasury Secretary Henry M. Paulson, Jr. can be found <a href="http://www.treas.gov/press/releases/hp872.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"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</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">Import - All Commodities</td>
<td>0.2%</td>
<td>1.6%</td>
<td>13.6%</td>
<td>4.2%</td>
<td>4.9%</td>
<td>7.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-0.5%</td>
<td>4.8%</td>
<td>60.9%</td>
<td>11.6%</td>
<td>20.6%</td>
<td>37.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.6%</td>
<td>0.7%</td>
<td>4.5%</td>
<td>2.7%</td>
<td>1.7%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.9%</td>
<td>1.2%</td>
<td>6.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>


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Overall import prices during February gained only 0.2% after a very firm, little revised 1.6% January increase. Expectations had been for a stronger 0.8% rise last month. Petroleum prices fell an unexpected 0.5% after a 4.8% surge in [...]

U.S. Total Import Prices Eased, Nonoil Strongest Since 1995

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080313c.jpg" width="353">
Initial claims for unemployment insurance were unchanged last week at 353,000 from the prior week&#39;s level which was revised up slightly. The figure about matched Consensus expectations and it left the early March level of claims slightly below the February average.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four week moving average of initial was about unchanged w/w at 358,500 (9.4% y/y).
Continuing claims for unemployment insurance moved higher again. A 7,000 increase during the latest week followed a 26,000 gain during the prior period which was unrevised. Insured unemployment stood at its highest level since Summer 2005. The figure provides some indication of workers&#39; ability to find employment.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment remained at 2.1% for the sixth consecutive week.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">03/07/08</th>
<th scope="col">02/29/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;353</td>
<td>353</td>
<td>12.4%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,835</td>
<td>9.8%</td>
<td>2,551</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
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Initial claims for unemployment insurance were unchanged last week at 353,000 from the prior week's level which was revised up slightly. The figure about matched Consensus expectations and it left the early March level of claims [...]

U.S. Weekly Initial Claims for Unemployment Insurance Unchanged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080313a.jpg" width="353">
During February, U.S. retail sales fell an unexpected 0.6%, below the Consensus forecast for a 0.2% gain. Weak retail sales were generally expected during the last two months. The weakness didn&#39;t come in the initial January report but it was clearly evident in February. The sales decline reversed January&#39;s 0.4% gain which was little revised.
Sales of motor vehicles &amp; parts provided much of the surprise to the reports for last month and for January. They fell 1.9% in February, reversing an unexpected 0.2% January gain. Expectations for both months were based on unit sales reports of a 0.3% m/m increase in February and a 5.4% January decline.
Retail sales excluding autos last month fell 0.2% after a 0.5% January increase that was revised up slightly. A 0.5% December drop also was revised deeper. The February decline was short of Consensus expectations for a 0.2% rise.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080313b.jpg" width="353">
A 1.0% decline in sales at gasoline service stations was in line with a 0.5% drop in retail gasoline prices last month. So far in March gasoline prices are up roughly 5.5% m/m. Less gasoline &amp; autos, February retail sales fell 0.1% and the January result was revised up.
Sales of discretionary items were mixed last month. Apparel store sales rose 0.2% (2.3% y/y) after an upwardly revised 2.2% January increase. Furniture, home furnishings &amp; appliance store sales, however, fell 0.4% (-2.1% y/y) and they are down 2.8% during the last three months. Sales of electronics &amp; appliances fell 0.4% (+0.5% y/y). Sales at general merchandise stores rose 0.4% (3.6% y/y) after little change during January.
Sales of nonstore retailers (internet &amp; catalogue) fell 0.1% (+1.8% y/y) during February, for the third consecutive monthly decline, and earlier months&#39; figures were revised lower.
Sales of building materials &amp; garden equipment continued their recent decline and fell 0.7% (-4.2% y/y). Since their peak early in 2006 these sales are down 8.3%.
Food &amp; beverage store sales fell 0.2% (+4.3% y/y) last month. Restaurant &amp; drinking place sales fell 0.4% (+4.6% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>-0.6%</td>
<td>0.4%</td>
<td>2.6%</td>
<td>4.0%</td>
<td>6.2%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>4.4%</td>
<td>4.5%</td>
<td>7.4%</td>
<td>7.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Less Gasoline</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>4.3%</td>
<td>7.2%</td>
<td>6.6%</td>
</tr>
</tbody>
</table>
</body>
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During February, U.S. retail sales fell an unexpected 0.6%, below the Consensus forecast for a 0.2% gain. Weak retail sales were generally expected during the last two months. The weakness didn't come in the initial January report but [...]

U.S. Retail Sales Fell Unexpectedly, Discretionary Sales Mixed

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080312g.jpg" align="left" border="0" height="265" width="353">
French headline inflation began to level off in February of
2008. The 12-month rate that rose to 3.2% in January from 2.8% in
December held steady at that 3.2% pace in February. The ECB has a
ceiling objective only for the inflation&#8217;s headline. At 3.2% France&#8217;s
own pace is well above that 2% ceiling. Still it is something that
year/year acceleration has stopped, for now. The core inflation reading
is not available but the HICP core rate edged above the 2% mark last
month.
As to the various inflation categories we can turn to France&#8217;s
domestic inflation measure that has slightly different ingredients form
the HICP. France&#8217;s overall inflation on that measure is up by 2.9%
year/year the same as it was last month. The French domestic core
inflation rate is at 2.1% in February up from 2% in January. Inflation
overall, at 2.9%, is higher than it was 12 months ago (1.1%). Not
surprisingly the diffusion condition based that result is high at 72.7%.
This diffusion reading is a US ISM type measure that counts
all inflation accelerating categories in the CPI as a value of &#8216;one.&#8217;
If inflation is steady period to period it counts as 0.5. The category
results are totaled and taken as a percentage of the total number of
categories. Roughly this means that above 50% inflation is accelerating
and below 50% inflation is decelerating. For the year ago comparison we
find that inflation accelerated year/year in 72% of the categories. And
that seems bad. But over six months, although the inflation rate was
higher-still at a 3.6% pace, inflation diffusion was only 36%. Over
three months inflation is at 3% and diffusion is at 27%. So inflation
is not accelerating on a broader patch, but rather on a narrower one,
if at all.
The overall inflation rate, while still high, has come down.
You can see it in the core domestic French rate that is 2.1% year/year,
2.3% over 6 months and 1.9% over 3 months. Inflation is not getting out
of hand in France despite the ugly headlines. Food costs are a problem,
surging and steadily accelerating over the past year until those costs
are up at an 8% pace over the most recent three months. In addition,
energy prices have been rising and spot oil is still higher than it was
in January and February on average.
Inflation is still a &#8216;threat&#8217; but the detailed trends from
France suggest that the ECB and the strong euro are helping to keep
inflation from spreading. France has the fourth best record in EMU on
keeping core inflation in check from 2000 to date. Finland has the best
record, Germany the second best for that period. Greece has the worst
record followed by Ireland and Spain.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> France
HICP and CPI details</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">HICP Total</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.0%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.3%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.4%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">All</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>3.6%</td>
<td>2.9%</td>
<td>1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI ex Food &amp; Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>2.3%</td>
<td>2.1%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>0.2%</td>
<td>1.2%</td>
<td>0.6%</td>
<td>8.0%</td>
<td>7.2%</td>
<td>5.1%</td>
<td>0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Alcohol</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.5%</td>
<td>4.7%</td>
<td>0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>-0.2%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-2.8%</td>
<td>-0.8%</td>
<td>0.6%</td>
<td>0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rent&nbsp;
&amp;Utilities</td>
<td>0.2%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>6.7%</td>
<td>4.6%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Health Care</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.0%</td>
<td>5.1%</td>
<td>8.2%</td>
<td>5.8%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Communication</td>
<td>-1.4%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-8.0%</td>
<td>-3.1%</td>
<td>-2.1%</td>
<td>-1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Recreation &amp; Culture</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-2.1%</td>
<td>-1.7%</td>
<td>-1.3%</td>
<td>-2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Education</td>
<td>0.2%</td>
<td>0.5%</td>
<td>0.2%</td>
<td>3.6%</td>
<td>3.6%</td>
<td>3.0%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.3%</td>
<td>0.8%</td>
<td>2.8%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.7%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Diffusion Type</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>27.3%</td>
<td>36.4%</td>
<td>72.7%</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="4">Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

French headline inflation began to level off in February of 2008. The 12-month rate that rose to 3.2% in January from 2.8% in December held steady at that 3.2% pace in February. The ECB has a ceiling objective only for the inflation’s [...]

French Inflation Begins to Level Off in February

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080312e.jpg" width="353">
The Bureau of Labor Statistics reported in the Job Openings &amp; Labor Turnover Survey (JOLTS) that the January &#39;08 job openings rate was unchanged from the prior month at 2.8%. That level was, however, down from early 2007. Past year&#39;s figures were revised. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings. In private industries the rate fell in January to 2.9% from 3.0% in December and from 3.2% in 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080312f.jpg" width="353">
The actual number of total job openings fell 1.2% m/m to 3.925 million and the number of job openings was down 8.9% from one year earlier. Job openings in retail trade fell 16.7% y/y. They were down 34.6% in construction and down 14.0% in manufacturing. Education &amp; health services jobs fell 3.1% y/y and leisure &amp; hospitality job openings fell 7.1%. Only openings in the professional &amp; business services industry rose, by 3.4% y/y.
The hires rate also fell m/m to 3.3% to its lowest level since 2004. The hires rate is the number of hires during the month divided by employment.The decline was across most industries. The actual number of January hires fell 3.6% (-9.0% y/y) to 4.545 million.
The job separations rate in January fell to 3.1% from 3.2% at yearend 2007 and from 3.3% at yearend 2006. Separations include quits, layoffs, discharges, and other separations as well as retirements. The level of job separations fell 4.1% since yearend 2006.
The JOLTS survey dates only to December 2000 but has since followed the movement in nonfarm payrolls, though the actual correlation between the two series is low.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.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"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor &nbsp;Turnover Survey)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Job Openings, Total&nbsp;&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>2.8</td>
<td>2.8</td>
<td>3.0</td>
<td>2.8</td>
<td>3.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>3,925</td>
<td>3,974</td>
<td>4,307</td>
<td>3,974</td>
<td>4,272</td>
<td>3,863</td>
</tr>
<tr class="odd">
<td class="firstcol">Hires, Total </td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.3</td>
<td>3.4</td>
<td>3.6</td>
<td>41.9</td>
<td>43.4</td>
<td>43.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>4,545</td>
<td>4,717</td>
<td>4,992</td>
<td>57,771</td>
<td>59,153</td>
<td>57,501</td>
</tr>
</tbody>
</table>
</body>
</html>

The Bureau of Labor Statistics reported in the Job Openings & Labor Turnover Survey (JOLTS) that the January '08 job openings rate was unchanged from the prior month at 2.8%. That level was, however, down from early 2007. Past year's [...]

JOLTS: Job Openings Broadly Down Early in 2008

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080312c.jpg" width="353">
The Mortgage Bankers&#39; Association reported that during the 4th quarter of 2007, foreclosures were started on .83% of all mortgages outstanding. That was by far the highest foreclosure rate on record. Moreover, it raised the total for the full year to 2.84% of the number outstanding.Foreclosure rates on both prime and subprime mortgages rose sharply last year.
Foreclosures on all prime mortgage loans rose to 0.41% by yearend and totaled 1.30% of those outstanding for the full year. That was nearly double the rate during the prior nine years. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080312d.jpg" width="353">
Though rates for prime fixed rate mortgages held steady at yearend at 0.22% of loans outstanding, the foreclosure rate for the year of 0.79% was a record and it was up from 0.56% during 2006. There were 25.8 million of these loans outstanding last year. Of the 6.5 million prime adjustable rate mortgages during 4Q, the foreclosure rate rose to 1.06%. That pulled the full year rate of foreclosures up to 3.23% which was nearly triple the rate during 2006.
As bad as the above data on prime debt was, the figures on subprime mortgage debt were far worse. Though short-term interest rates fell slightly during the year the average level of rates was double that a few years earlier. In total, the rate of foreclosure on subprime mortgages rose to 3.44% of outstanding loans during 4Q &#39;07. The rise pulled foreclosures for the full year to 11.71% of loans outstanding.
The foreclosure rate on subprime fixed rate debt rose to 1.52% of loans outstanding. That was up by half from the quarterly running rate in early 2006 and the rate for the year jumped to 5.55%.There were 2.5 million of these loans outstanding last year. On variable rate subprime debt, however, foreclosures soared to 5.29% of loans outstanding from 4.72% during 3Q. Seventeen percent of these loans were foreclosed on last year and there were 2.9 million of these loans on the books.
By the country&#39;s regions the Northeast saw an increase in the overall rate of foreclosure to 2.29% last year from 1.59% during 2006. In the Midwest that rate rose to 3.44% from 2.71%. The West saw an increase to 2.68% of loans outstanding from 1.18% in 2006 and in the South foreclosures were started last year on 2.69% of loans versus 1.73% in 2006.
The Rise and Fall of Subprime Mortgages from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2007/el0711.pd">here</a>.
These data series are available in Haver&#39;s MBAMTG database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Mortgages in Foreclosure (%)</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q &#39;07</th>
<th scope="col">4Q &#39;06</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">All Mortgages</td>
<td>0.83</td>
<td>0.78</td>
<td>0.54</td>
<td>2.84</td>
<td>1.84</td>
<td>1.64</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Conventional Prime</td>
<td>0.41</td>
<td>0.37</td>
<td>0.24</td>
<td>1.30</td>
<td>0.77</td>
<td>0.72</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Fixed Rate</td>
<td>0.22</td>
<td>0.22</td>
<td>0.16</td>
<td>0.79</td>
<td>0.56</td>
<td>0.61</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; ARM</td>
<td>1.06</td>
<td>1.02</td>
<td>0.41</td>
<td>3.23</td>
<td>1.19</td>
<td>0.75</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Subprime</td>
<td>3.44</td>
<td>3.12</td>
<td>2.00</td>
<td>11.71</td>
<td>7.23</td>
<td>5.66</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Fixed Rate</td>
<td>1.52</td>
<td>1.38</td>
<td>1.09</td>
<td>5.55</td>
<td>4.24</td>
<td>4.33</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; ARM</td>
<td>5.29</td>
<td>4.72</td>
<td>2.70</td>
<td>17.08</td>
<td>8.80</td>
<td>6.07</td>
</tr>
</tbody>
</table>
</body>
</html>

The Mortgage Bankers' Association reported that during the 4th quarter of 2007, foreclosures were started on .83% of all mortgages outstanding. That was by far the highest foreclosure rate on record. Moreover, it raised the total for [...]

U.S. Mortgage Foreclosures Continued To Surge

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ZEW Expectations Weaken Mildly

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Europe

Production in a Gradual Recovery in Europe Despite Recent Setbacks

Tian Yong Woon

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

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

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

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

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

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

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

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

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

Economy in Brief: 2008

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U.S. Budget Deficit Deeper Due to Revenue Shortfall & Spending Surge

U.S. Total Import Prices Eased, Nonoil Strongest Since 1995

U.S. Weekly Initial Claims for Unemployment Insurance Unchanged

U.S. Retail Sales Fell Unexpectedly, Discretionary Sales Mixed

U.S. Retail Sales Fell Unexpectedly, Discretionary Sales Mixed

French Inflation Begins to Level Off in February

JOLTS: Job Openings Broadly Down Early in 2008

U.S. Mortgage Foreclosures Continued To Surge