Tom Moeller

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      <p><b>The consumer price index declined 0.2% during August (+1.7% y/y)</b>
      following an unrevised 0.1% uptick. The decline was the first since April
      of last year and missed expectations for no change in the Action Economics
      Forecast Survey. <b>Consumer prices excluding food and energy remained
      unchanged (1.7% y/y)</b> following a 0.1% rise. Core consumer prices were
      weaker than expectations for a 0.2% increase.</p>
      
      <p><b>Energy</b> prices led the way lower with a 2.6% decline (0.3% y/y)
      as gasoline prices dropped 4.1% (-2.8% y/y). Natural gas prices fell 2.8%
      (+5.8% y/y), down for the fourth straight month, while fuel oil prices
      were off 1.2% (-0.2% y/y), a sixth consecutive monthly decline.</p>
      
      <p>Weak pricing power also was evident in a 0.1% slip (-0.3% y/y) in
      prices for <b>goods less food and energy.</b> Appliance prices declined
      0.9% (-4.75 y/y) while furniture &amp; bedding prices were off 0.7%
      (-3.6% y/y). Recreation goods prices fell 0.3% (-3.0% y/y), down for the
      fourth straight month, and apparel prices dropped 0.2% (+0.1% y/y).
      Medical care goods prices slipped 0.1% (+2.6% y/y). To the upside, new
      vehicle prices increased 0.2% (0.4% y/y).</p>
      
      <p><b>Core service prices</b> showed no change (+2.4% y/y), the weakest
      monthly reading since January 2010. Transportation services prices
      declined 0.6% (+1.5% y/y), led lower by a 3.3% drop (-1.7% y/y) in public
      transportation costs. Recreation service prices followed with a 0.5%
      decline (+1.7% y/y). Tuition fees also slipped 0.1% (+3.1% y/y) while
      medical care services prices were unchanged (+1.9% y/y). Shelter costs
      (32% of the CPI) advanced 0.2% (2.9% y/y) for the second time in three
      months. Owners equivalent rent of primary residences improved 0.2% (2.7%
      y/y).</p>
      
      <p><b>Food</b> prices strengthened 0.2% (2.7% y/y) as meat prices jumped
      2.5% (11.8% y/y). Dairy prices gained 0.6% (4.4% y/y) while cereal &amp;
      bakery product prices improved 0.2% (0.3% y/y). To the downside were fruit
      &amp; vegetable prices by 0.8% (0.1% y/y) and nonalcoholic beverage costs
      by 0.2% (-0.2% y/y).</p>
      
      <p>The consumer price data is available in Haver's <b>USECON</b> database
      while detailed figures can be found in <b>CPIDATA</b>. The expectations
      figure is from Action Economics and is found in the <b>AS1REPNA</b>
      database.</p>
      
      <p><a href="/comment/140917c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140917c.png"></a>
      <a href="/comment/140917d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140917d.png"></a></p>
      
      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

        <thead>
          <tr>
            <th class="firstcol" scope="col" >Consumer Price Index
              (%)</th>
            <th scope="col" >Aug</th>
            <th scope="col" >Jul</th>
            <th scope="col" >Jun</th>
            <th scope="col" >Aug Y/Y</th>
            <th scope="col" >2013</th>
            <th scope="col" >2012</th>
            <th scope="col" >2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Total</td>
            <td  >-0.2</td>
            <td  >0.1</td>
            <td  >0.3</td>
            <td  >1.7</td>
            <td  >1.5</td>
            <td  >2.1</td>
            <td  >3.2</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Total less Food &amp; Energy</td>
            <td  >0.0</td>
            <td  >0.1</td>
            <td  >0.1</td>
            <td  >1.7</td>
            <td  >1.8</td>
            <td  >2.1</td>
            <td  >1.7</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;Goods less Food &amp;
              Energy</td>
            <td  >-0.1</td>
            <td  >-0.0</td>
            <td  >0.1</td>
            <td  >-0.3</td>
            <td  >-0.0</td>
            <td  >1.3</td>
            <td  >1.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp;Services less Energy</td>
            <td  >0.0</td>
            <td  >0.1</td>
            <td  >0.1</td>
            <td  >2.4</td>
            <td  >2.4</td>
            <td  >2.4</td>
            <td  >1.8</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;Food</td>
            <td  >0.2</td>
            <td  >0.4</td>
            <td  >0.1</td>
            <td  >2.7</td>
            <td  >1.4</td>
            <td  >2.6</td>
            <td  >3.7</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Energy</td>
            <td  >-2.6</td>
            <td  >-0.3</td>
            <td  >1.6</td>
            <td  >0.3</td>
            <td  >-0.7</td>
            <td  >0.9</td>
            <td  >15.2</td>
      </tr>
              </tbody>
            </table>
            </span>
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The consumer price index declined 0.2% during August (+1.7% y/y) following an unrevised 0.1% uptick. The decline was the first since April of last year and missed expectations for no change in the Action Economics Forecast Survey. [...]

U.S. Consumer Price Declines Are Broad-based

Robert Brusca

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<p><a href="/comment/140917e_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140917e.png" align="left"></a>
The overall inflation rate in the European Monetary Union settled in at 0.4% year-over-year in August. That's the same pace as the previous month, but it keeps the downtrend for year-over-year inflation in place.
</p><p>
Core inflation is up by 1% year-over-year and has been stuck at or near the 1% mark for many months. But it also has a downtrend. Like the headline, the core was up by 1.3% year-over-year one year ago.
</p><p>
Looking at sequential growth rates, EMU is showing some progress on getting the inflation rate higher. The headline is up by 0.4% over 12 months; that dips to 0.3% over six months but rises back to 0.8% over three months. In the case of the core rate, its 1% pace over 12 months slips to 0.7% over six months but then jumps back to 1.6% over three months.
</p><p>
Sequential trends are indicative but are not decisive. At least their trends are moving in the right direction.
</p><p>
When we look at the large countries in the euro area, we see that only Germany and France have inflation accelerating over three months compared to six months. Inflation in both France and Germany is also slightly higher over three months than it is over 12 months. But that is where signs of inflation progress stop. Spain and Italy have inflation rates deteriorating from six months to three months and they post outright declines in consumer prices over three months. Italy's decline is at a 0.7% annual rate. Spain's decline is at a 0.3% annual rate.
</p><p>
If the European Central Bank is looking for evidence that its policies are working to stabilize inflation, there is little significant contrary evidence. But this report does not offer much solace either.
</p><p>
The CPI report from the U.S. isn't helpful to the ECB either. There, inflation unexpectedly fell with the consumer price index for August making an outright decline. U.S. core inflation was flat in August.
</p><p>
The world environment continues to be somewhat hostile to growth. In Ukraine, troops are being cautioned to stand alert even though there's still a ceasefire in place. Ukraine does not trust Russia. Russia has jailed another one of its billionaires. U.S. airstrikes in the Iraq/Syria area continue with a U.S. general saying that troops on the ground can't be ruled out and the President saying that the U.S. will not send combat troops. China, overnight, infused its five largest banks with funds in an unexpected operation that has some wondering about the health of these institutions.
</p><p>
Clearly, the geopolitical situation is not stabilized. There're continuing weak inflation and growth trends globally that are not reassuring. For those looking for growth pick up, the only good news about such low inflation is that these weak inflation rates will turn what appeared to be small nominal changes in retail sales into stronger real numbers.
</p><p>
With these weak inflation reports for the U.S. today and finalized for the EMU, it's hard to see how either area's central bank could be content the results. In the U.K., the monetary policy committee is already split on the course of interest rates. The U.S. does not have members clamoring for rate hikes yet, but there is a substantial division at the Fed about what policy should be and what its guidance ought to say/not to say. The ECB is still trying to find ways to bring more stimulus without violating its charter. This remains very difficult economic environment.
</p>

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The overall inflation rate in the European Monetary Union settled in at 0.4% year-over-year in August. That's the same pace as the previous month, but it keeps the downtrend for year-over-year inflation in place. Core inflation is up [...]

Euro Area HICP Steadies at 0.4%

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<p>The International Council of Shopping Centers and Goldman Sachs reported that
chain store sales fell 2.6% last week (+3.0% y/y). The decline left sales so far
in September 1.0% below August when sales fell 1.5% from July. During the
last ten years there has been a 70% correlation between the y/y change in chain
store sales and the change in retail sales at general merchandise stores.</p>

<p>The ICSC-Goldman Sachs retail chain-store sales index is constructed using
the same-store sales (stores open for one year) reported by 78 stores of seven
retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and
Wal-Mart. General merchandise store sales account for 15% of total retail sales.
The data can be found in Haver's <b>SURVEYW</b> database.</p>

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

  <thead>
    <tr>
      <th class="firstcol" >ICSC-Goldman Sachs (SA, 1977=100)</th>
      <th>09/13/14</th>
      <th>09/06/14</th>
      <th>08/30/14</th>
      <th>Y/Y</th>
      <th>2013</th>
      <th>2012</th>
      <th>2011</th>
    </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol" >Total Weekly Chain Store Sales</td>
      <td  >561.2</td>
      <td  >576.0</td>
      <td  >571.8</td>
      <td  >3.0%</td>
      <td  >2.3%</td>
      <td  >3.0%</td>
      <td  >3.2%</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp; W/W %</td>
      <td  >-2.6</td>
      <td  >0.7</td>
      <td  >0.0</td>
      <td  >--</td>
      <td  >--</td>
      <td  >--</td>
      <td  >--</td>
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The International Council of Shopping Centers and Goldman Sachs reported that chain store sales fell 2.6% last week (+3.0% y/y). The decline left sales so far in September 1.0% below August when sales fell 1.5% from July. During the [...]

U.S. Chain Store Sales Weaken Sharply

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      <p>Prices for energy products remained under pressure
      last week. The price for a gallon of <b>regular
      gasoline</b> declined to $3.41 (-3.9% y/y). It was the lowest level since
      mid-February. To account for seasonal patterns, Haver Analytics constructs
      factors for adjustment of pump prices. The adjusted price declined to $3.28
      per gallon, the lowest level since December 2010. The N.Y. spot market
      price for unleaded regular gasoline was $2.74, down from $3.00 in April.</p>
      
      <p>WTI <b>crude oil</b> prices fell sharply last week to $92.43 per barrel
      (-14.6% y/y), the lowest level since early in January. Yesterday, prices
      ticked up to $92.92. The seasonally adjusted price generated by Haver
      declined to $92.18 per barrel last week. Brent crude oil prices fell to $97.24
      per barrel last week (-14.0% y/y) and were $96.41 yesterday.</p>
      
      <p>Natural gas prices slipped last week and averaged $3.90 per mmbtu (+7.6%
      y/y). Yesterday, prices held at $3.91.</p>
      
      <p>The <b>demand</b> for all petroleum products increased 2.1% y/y in the
      week ended September 5. Gasoline demand was roughly unchanged y/y.
      Residual fuel oil needs, used for heating, fell 60.2% y/y while distillate
      demand improved 1.5% y/y. Inventories of crude oil and petroleum products
      gained 0.2% y/y but gasoline inventories were down 2.4% y/y.</p>
      
      <p>The energy price data are reported by the U.S. Department of Energy and
      can be found in Haver's <b>WEEKLY </b>database. The daily figures are in <b>DAILY</b>
      and the petroleum demand and inventory figures are in <b>OILWKLY.</b></p>
      
      <p><a href="/comment/140916h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140916h.png"></a>
      <a href="/comment/140916i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140916i.png"></a></p>
      
      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

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            <th class="firstcol" scope="col" >Weekly Energy Prices</th>
            <th scope="col" >09/15/14</th>
            <th scope="col" >09/08/14</th>
            <th scope="col" >09/01/14</th>
            <th scope="col" >Y/Y%</th>
            <th scope="col" >2013</th>
            <th scope="col" >2012</th>
            <th scope="col" >2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Retail Gasoline ($ per Gallon,
              Regular)</td>
            <td  >3.41</td>
            <td  >3.46</td>
            <td  >3.46</td>
            <td  >-3.9</td>
            <td  >3.51</td>
            <td  >3.62</td>
            <td  >3.52</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Light Sweet Crude Oil, WTI ($ per
              bbl., WSJ)</td>
            <td  >92.43</td>
            <td  >94.06</td>
            <td  >96.26</td>
            <td  >-14.6</td>
            <td  >97.95</td>
            <td  >94.20</td>
            <td  >95.14</td>
          </tr>
          <tr>
            <td class="firstcol" >Natural Gas ($/mmbtu, LA, WSJ)</td>
            <td  >3.90</td>
            <td  >3.92</td>
            <td  >3.98</td>
            <td  >7.6</td>
            <td  >3.73</td>
            <td  >2.75</td>
            <td  >3.99</td>
    </tr>
              </tbody>
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            </span>
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Prices for energy products remained under pressure last week. The price for a gallon of regular gasoline declined to $3.41 (-3.9% y/y). It was the lowest level since mid-February. To account for seasonal patterns, Haver Analytics [...]

U.S. Energy Prices Move Lower

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<p><a href="/comment/140916e_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140916e.png" align="left"></a>
The ZEW index in September fell to a level of 25.4 from the August level of 44.3. This drop means that current conditions have been stronger than this 29% of the time, instead of 15% of the time as was the case last month. The assessment of current conditions has taken a big hit this month.
</p><p>
The expectations reading in September fell to 6.9 from a level of 8.6 in August. This index had been expected to fall further. However, we have to evaluate these two indices - current and expectations - together. Expectations are formed from a base of current perceptions of current conditions. Since current conditions fell sharply between September and August, it's not surprising that expectations, while lower, didn't fall as much as had previously been expected. The relatively small drop in expectations, a drop of 1.7 points month-to-month, suggests that expectations may be coming into line with the level of current conditions. Even so, expectations continue to be quite weak as they are higher 71% of the time.
</p><p>
This month the ZEW experts' assessment of the stock market fell to a reading of 3.0 from 4.1 in August. The assessment for bonds improved slightly to -0.4 from -6.7 the month before. Neither of these assessments is particular strong.
</p><p>
The sector assessments are split this month with the ZEW financial experts giving higher readings to seven out of 13 stock market sectors. However, there is a substantial cut to the consumption and trade expectation which has fallen to the 72nd percentile of its range from the 81st percentile - and was last lower in June 2013. The construction sector assessment also dropped sharply to a 70.8 percentile of range standing from its 80.5 percentile standing in August; it was last lower in October 2013. On the upside, there were no dramatic moves, for the most part, just small increases. The stock market, judging from the standing of its individual sectors, had is weakest reading since June 2013.
</p><p>
The ZEW data are another black eye for European growth prospects. The German current conditions index fell sharply and it's too soon to say that expectation deterioration is really out of the woods. Uncertainties continue to overhang the outlook for Europe and Germany, as the cease-fire in Ukraine is still in force but continues to produce significant violations. Ukraine is offering some independent decision-making to its rebel provinces. Meanwhile, Europe is still at risk to the Scottish secession referendum. Reports from Russia continue to show a withering economy as the latest news is that General Motors is reducing staff at its Opel plant in Russia. The weaker the Russian economy gets, the more dangerous Russia becomes. Meanwhile, general world conditions continue to produce a great deal of uncertainty about political and economic outcomes.
</p>

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The ZEW index in September fell to a level of 25.4 from the August level of 44.3. This drop means that current conditions have been stronger than this 29% of the time, instead of 15% of the time as was the case last month. The [...]

ZEW Expectations Drop By Less Than Expected

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      <p>The overall Final Demand Producer Price Index held steady during August
      (1.8% y/y) following an unrevised 0.1% uptick in July. A 0.1% rise was
      expected in the Action Economics Forecast Survey. Prices excluding food
      &amp; energy gained 0.1% (1.8% y/y) and matched expectations.</p>
      
      <p>Goods prices (34% of the total index) declined 0.3% (+1.7% y/y). A 1.5%
      fall (+0.2% y/y) in energy prices held back the overall index increase.
      Home heating oil prices fell 5.7% (-7.1% y/y) while natural gas prices
      were off 4.5% (+6.6% y/y). Gasoline prices were off 1.4% (-3.1% y/y) and
      electric power costs slipped 0.2% (+3.9% y/y). Finished food prices
      declined 0.5% (+3.8% y/y), the third drop in four months. Egg prices
      plummeted 21.5% (+2.0% y/y). Beef &amp; veal prices edged 0.3% higher
      (28.6% y/y) after having surged 9.2% in July. That followed the 9.2% July 
      upward surge. Dairy product prices gained 0.3% (12.5% y/y). Final demand prices 
      for goods excluding food &amp; energy remained unchanged (1.6% y/y) after a 0.2% 
      gain during July. Passenger car prices declined 0.2% (+1.0% y/y). Private capital
      equipment prices held steady (1.5% y/y).</p>
      
      <p>Services prices (64% of the total index) gained 0.3% (1.9% y/y) after a
      0.1% uptick. Prices for transportation of passengers jumped 1.6% (4.3%
      y/y). Prices for transportation and warehousing of goods for final demand
      ticked 0.1% lower (+2.5% y/y).</p>
      
      <p>Construction prices for final demand (2% of the total index) remained
      unchanged (3.2% y/y) following a 0.5% jump.</p>
      
      <p>Intermediate demand prices of processed goods fell 0.3% (+1.3% y/y)
      after a 0.1% uptick.</p>
      
      <p>Measured using the old formula, which is being phased out as the
      headline series, producer prices declined 0.4% (+2.3% y/y) after a 0.1% July
      uptick. Food costs retreated 0.4% (+5.0% y/y) while energy prices declined
      1.4% (+0.8% y/y). Prices excluding food &amp; energy nudged 0.1% higher
      (1.9% y/y) for a second straight month.</p>
      
      <p>The PPI data are contained in Haver's <b>USECON</b> database with
      further detail in <b>PPI</b> and <b>PPIR</b>. The expectations figure is
      available in the <b>AS1REPNA </b>database.</p>
      
      <p><a href="/comment/140916c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140916c.png"></a>
      <a href="/comment/140916d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140916d.png"></a></p>
      
      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

        <thead>
          <tr>
            <th class="firstcol" scope="col" >Producer Price Index
              (%)</th>
            <th scope="col" >Aug</th>
            <th scope="col" >Jul</th>
            <th scope="col" >Jun</th>
            <th scope="col" >Aug Y/Y</th>
            <th scope="col" >2013</th>
            <th scope="col" >2012</th>
            <th scope="col" >2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Final Demand</td>
            <td  >0.0</td>
            <td  >0.1</td>
            <td  >0.4</td>
            <td  >1.8</td>
            <td  >1.3</td>
            <td  >1.9</td>
            <td  >3.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp; Excluding Food &amp; Energy</td>
            <td  >0.1</td>
            <td  >0.2</td>
            <td  >0.2</td>
            <td  >1.8</td>
            <td  >1.5</td>
            <td  >1.9</td>
            <td  >--</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp; Goods</td>
            <td  >-0.3</td>
            <td  >0.0</td>
            <td  >0.5</td>
            <td  >1.7</td>
            <td  >0.8</td>
            <td  >1.7</td>
            <td  >6.8</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
              Foods</td>
            <td  >-0.5</td>
            <td  >0.4</td>
            <td  >-0.2</td>
            <td  >3.8</td>
            <td  >1.7</td>
            <td  >3.0</td>
            <td  >8.5</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
              Energy</td>
            <td  >-1.5</td>
            <td  >-0.6</td>
            <td  >2.1</td>
            <td  >0.2</td>
            <td  >-0.8</td>
            <td  >0.2</td>
            <td  >17.5</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp; Goods
              Excluding Food &amp; Energy</td>
            <td  >0.0</td>
            <td  >0.2</td>
            <td  >0.1</td>
            <td  >1.6</td>
            <td  >1.1</td>
            <td  >1.8</td>
            <td  >3.4</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp; Services</td>
            <td  >0.3</td>
            <td  >0.1</td>
            <td  >0.3</td>
            <td  >1.9</td>
            <td  >1.6</td>
            <td  >1.9</td>
            <td  >2.1</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp; Construction</td>
            <td  >0.0</td>
            <td  >0.5</td>
            <td  >0.1</td>
            <td  >3.2</td>
            <td  >1.8</td>
            <td  >2.9</td>
            <td  >2.2</td>
          </tr>
          <tr>
            <td class="firstcol" >Intermediate Demand - Processed
              Goods</td>
            <td  >-0.3</td>
            <td  >0.1</td>
            <td  >0.4</td>
            <td  >1.3</td>
            <td  >0.0</td>
            <td  >0.5</td>
            <td  >8.9</td>
           </tr>
              </tbody>
            </table>
            </span>
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The overall Final Demand Producer Price Index held steady during August (1.8% y/y) following an unrevised 0.1% uptick in July. A 0.1% rise was expected in the Action Economics Forecast Survey. Prices excluding food & energy gained [...]

U.S. Producer Prices Remain Unchanged; Core Index Up 0.1%

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      <p>The overall Final Demand Producer Price Index held steady during August
      (1.8% y/y) following an unrevised 0.1% uptick in July. A 0.1% rise was
      expected in the Action Economics Forecast Survey. Prices excluding food
      &amp; energy gained 0.1% (1.8% y/y) and matched expectations.</p>
      <p>Goods prices (34% of the total index) declined 0.3% (+1.7% y/y). A 1.5%
      fall (+0.2% y/y) in energy prices held back the overall index increase.
      Home heating oil prices fell 5.7% (-7.1% y/y) while natural gas prices
      were off 4.5% (+6.6% y/y). Gasoline prices were off 1.4% (-3.1% y/y) and
      electric power costs slipped 0.2% (+3.9% y/y). Finished food prices
      declined 0.5% (+3.8% y/y), the third drop in four months. Egg prices
      plummeted 21.5% (+2.0% y/y) while beef &amp; veal prices edged 0.3% higher
      (28.6% y/y). That followed the 9.2% July upward surge. Dairy product
      prices gained 0.3% (12.5% y/y). Final demand prices for goods excluding
      food &amp; energy remained unchanged (1.6% y/y) after a 0.2% gain during
      July. Passenger car prices declined 0.2% (+1.0% y/y). Private capital
      equipment prices held steady (1.5% y/y).</p>
      <p>Services prices (64% of the total index) gained 0.3% (1.9% y/y) after a
      0.1% uptick. Prices for transportation of passengers jumped 1.6% (4.3%
      y/y). Prices for transportation and warehousing of goods for final demand
      ticked 0.1% lower (+2.5% y/y).</p>
      <p>Construction prices for final demand (2% of the total index) remained
      unchanged (3.2% y/y) following following a 0.5% jump.</p>
      <p>Intermediate demand prices of processed goods fell 0.3% (+1.3% y/y)
      after a 0.1% uptick.</p>
      <p>Measured using the old formula, which is being phased out as the
      headline series, producer prices declined 0.4% (+2.3% y/y) after a 0.1% July
      uptick. Food costs retreated 0.4% (+5.0% y/y) while energy prices declined
      1.4% (+0.8% y/y). Prices excluding food &amp; energy nudged 0.1% higher
      (1.9% y/y) for a second straight month.</p>
      <p>The PPI data are contained in Haver's <b>USECON</b> database with
      further detail in <b>PPI</b> and <b>PPIR</b>. The expectations figure is
      available in the <b>AS1REPNA </b>database.</p>
      <table class="centered" border="0" cellSpacing="0" width="1871">
        <thead>
          <tr>
            <th class="firstcol" scope="col" width="947">Producer Price Index
              (%)</th>
            <th scope="col" width="131">Aug</th>
            <th scope="col" width="131">Jul</th>
            <th scope="col" width="131">Jun</th>
            <th scope="col" width="131">Aug Y/Y</th>
            <th scope="col" width="132">2013</th>
            <th scope="col" width="132">2012</th>
            <th scope="col" width="132">2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" width="947">Final Demand</td>
            <td align="center" width="131">0.0</td>
            <td align="center" width="131">0.1</td>
            <td align="center" width="131">0.4</td>
            <td align="center" width="131">1.8</td>
            <td align="center" width="132">1.3</td>
            <td align="center" width="132">1.9</td>
            <td align="center" width="132">3.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="947">&nbsp; Excluding Food &amp; Energy</td>
            <td align="center" width="131">0.1</td>
            <td align="center" width="131">0.2</td>
            <td align="center" width="131">0.2</td>
            <td align="center" width="131">1.8</td>
            <td align="center" width="132">1.5</td>
            <td align="center" width="132">1.9</td>
            <td align="center" width="132">--</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="947">&nbsp;&nbsp;&nbsp;&nbsp; Goods</td>
            <td align="center" width="131">-0.3</td>
            <td align="center" width="131">0.0</td>
            <td align="center" width="131">0.5</td>
            <td align="center" width="131">1.7</td>
            <td align="center" width="132">0.8</td>
            <td align="center" width="132">1.7</td>
            <td align="center" width="132">6.8</td>
          </tr>
          <tr>
            <td class="firstcol" width="947">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
              Foods</td>
            <td align="center" width="131">-0.5</td>
            <td align="center" width="131">0.4</td>
            <td align="center" width="131">-0.2</td>
            <td align="center" width="131">3.8</td>
            <td align="center" width="132">1.7</td>
            <td align="center" width="132">3.0</td>
            <td align="center" width="132">8.5</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="947">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
              Energy</td>
            <td align="center" width="131">-1.5</td>
            <td align="center" width="131">-0.6</td>
            <td align="center" width="131">2.1</td>
            <td align="center" width="131">0.2</td>
            <td align="center" width="132">-0.8</td>
            <td align="center" width="132">0.2</td>
            <td align="center" width="132">17.5</td>
          </tr>
          <tr>
            <td class="firstcol" width="947">&nbsp;&nbsp;&nbsp;&nbsp; Goods
              Excluding Food &amp; Energy</td>
            <td align="center" width="131">0.0</td>
            <td align="center" width="131">0.2</td>
            <td align="center" width="131">0.1</td>
            <td align="center" width="131">1.6</td>
            <td align="center" width="132">1.1</td>
            <td align="center" width="132">1.8</td>
            <td align="center" width="132">3.4</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="947">&nbsp;&nbsp; Services</td>
            <td align="center" width="131">0.3</td>
            <td align="center" width="131">0.1</td>
            <td align="center" width="131">0.3</td>
            <td align="center" width="131">1.9</td>
            <td align="center" width="132">1.6</td>
            <td align="center" width="132">1.9</td>
            <td align="center" width="132">2.1</td>
          </tr>
          <tr>
            <td class="firstcol" width="947">&nbsp;&nbsp; Construction</td>
            <td align="center" width="131">0.0</td>
            <td align="center" width="131">&nbsp;0.5</td>
            <td align="center" width="131">0.1</td>
            <td align="center" width="131">3.2</td>
            <td align="center" width="132">1.8</td>
            <td align="center" width="132">2.9</td>
            <td align="center" width="132">2.2</td>
          </tr>
          <tr>
            <td class="firstcol" width="947">Intermediate Demand - Processed
              Goods</td>
            <td align="center" width="131">-0.3</td>
            <td align="center" width="131">0.1</td>
            <td align="center" width="131">0.4</td>
            <td align="center" width="131">1.3</td>
            <td align="center" width="132">0.0</td>
            <td align="center" width="132">0.5</td>
            <td align="center" width="132">8.9</td>
          </tr>
        </tbody>
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      <span id="articletitle">U.S. Gasoline Prices Remain Stable; Crude Oil
      Prices Decline</span><br>
      <span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
      Moeller</a>&nbsp;&nbsp;September 16, 2014</span><span id="articletext">
      <p>The price for a gallon of <b>regular gasoline</b> held steady last week
      at $3.46. It's been near that level for four weeks but was off 3.6% y/y.
      To account for seasonal patterns, Haver Analytics constructs factors for
      adjustment of pump prices. The adjusted price slipped to $3.33 per gallon,
      the lowest level since May 2013.</p>
      <p>WTI <b>crude oil</b> prices reversed the prior week's increase and fell
      to $94.05 per barrel (-13.5% y/y), the lowest level since late November.
      The seasonally adjusted price generated by Haver declined to $94.85 per
      barrel. Yesterday, prices fell to $92.66. Brent crude oil prices edged up
      to $100.72 per barrel last week (-12.8% y/y) and were $99.13 yesterday.</p>
      <p>Natural gas prices slipped last week and averaged $3.92 per mmbtu
      (+7.5% y/y), the highest level since mid-July. Yesterday, prices slipped
      to $3.85.</p>
      <p>The <b>demand</b> for all petroleum products increased 2.7% in the week
      ended August 29 versus a year earlier. Gasoline demand slipped 0.7% y/y.
      Residual fuel oil needs, used for heating, fell 32.1% y/y while distillate
      demand improved 5.1% y/y. Inventories of crude oil and petroleum products
      eased 0.1% y/y and gasoline inventories were down 2.8% y/y.</p>
      <p>The energy price data are reported by the U.S. Department of Energy and
      can be found in Haver's <b>WEEKLY </b>database. The daily figures are in <b>DAILY</b>
      and the petroleum demand and inventory figures are in <b>OILWKLY.</b></p>
      <table class="centered" border="0" cellSpacing="0" width="1871">
        <thead>
          <tr>
            <th class="firstcol" scope="col" width="864">Weekly Energy Prices</th>
            <th scope="col" width="143">09/15/14</th>
            <th scope="col" width="143">09/08/14</th>
            <th scope="col" width="143">09/01/14</th>
            <th scope="col" width="143">Y/Y%</th>
            <th scope="col" width="143">2013</th>
            <th scope="col" width="144">2012</th>
            <th scope="col" width="144">2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" width="864">Retail Gasoline ($ per Gallon,
              Regular)</td>
            <td align="center" width="143"></td>
            <td align="center" width="143">3.46</td>
            <td align="center" width="143">3.46</td>
            <td align="center" width="143">-3.6</td>
            <td align="center" width="143">3.51</td>
            <td align="center" width="144">3.62</td>
            <td align="center" width="144">3.52</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="864">Light Sweet Crude Oil, WTI ($ per
              bbl., WSJ)</td>
            <td align="center" width="143"></td>
            <td align="center" width="143">94.05</td>
            <td align="center" width="143">96.26</td>
            <td align="center" width="143">-13.5</td>
            <td align="center" width="143">97.95</td>
            <td align="center" width="144">94.20</td>
            <td align="center" width="144">95.14</td>
          </tr>
          <tr>
            <td class="firstcol" width="864">Natural Gas ($/mmbtu, LA, WSJ)</td>
            <td align="center" width="143"></td>
            <td align="center" width="143">3.92</td>
            <td align="center" width="143">3.98</td>
            <td align="center" width="143">7.5</td>
            <td align="center" width="143">3.73</td>
            <td align="center" width="144">2.75</td>
            <td align="center" width="144">3.99</td>
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	  <br>
      
      <span id="articletext">
      <p></p>
      
      <p><a href="/comment/140915f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140915f.png"></a>
      <a href="/comment/140915g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140915g.png"></a></p>
      
      <p>Industrial production slipped 0.1% last month (+4.1% y/y) following a
      0.2% July increase, revised from 0.4%. The decline was driven by a 0.4%
      shortfall (+1.3% y/y) in factory output during August after increasing 0.7%,
      last month reported as 1.0%. A 0.3% gain in total production was expected
      in the Action Economics Forecast Survey. Utility output improved 1.0%
      (0.0% y/y) after a 2.7% decline.</p>
      
      <p>A 7.0% decline last month in automotive products production (+7.4% y/y)
      reversed a 7.6% July increase. Appliances, furniture &amp; carpeting
      production fell 2.5% (+7.0% y/y) following strong increases in the prior five
      months. Working the other way was computers &amp; electronics output. It
      gained 2.4% (+5.6% y/y) and reversed a 2.3% July decline. Business
      equipment production was unchanged (5.8% y/y) last month. A 1.0% increase
      (1.7% y/y) in information processing equipment was offset by a 2.3% decline
      (+7.2% y/y) in transit equipment (+7.2% y/y). Amongst consumer soft-goods
      industries, output improved 0.3% (2.0% y/y) after a 0.4% decline. Chemical
      production gained 0.7% (4.1% y/y) after having been unchanged and food
      &amp; tobacco production gained 0.5% (1.8% y/y) following a 0.6% July
      decline. To the downside, clothing output fell 2.3% (+0.3% y/y), the
      largest of four declines in the last five months.</p>
      
      <p>Within the special aggregate series, high technology industries posted
      a 1.5% production gain (7.4% y/y). That included a 1.6% rise (9.9% y/y) in
      semiconductors after having been unchanged over the prior two months.
      Factory production excluding the high-tech sector fell 0.5% (3.4% y/y).
      Manufacturing production excluding both high-tech and autos remained
      unchanged (3.1% y/y) following four straight months of gains between 0.2%
      and 0.3%.</p>
      
      <p>The capacity utilization rate fell to 78.8%, its lowest level in six
      months. That remained below the 80.5% high averaged in 2007. In the
      factory sector, the capacity utilization rate declined to 77.2% and
      reversed the July increase. Total industry capacity rose an improving 2.8%
      y/y while factory sector capacity increased 2.1%.</p>
      
      <p>Industrial production and capacity data are included in Haver's <b>USECON</b>
      database, with additional detail in the <b>IP</b> database. The
      expectations figure is in the <b>AS1REPNA</b> database.</p>
      
      <p><a href="/comment/140915h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140915h.png"></a>
      <a href="/comment/140915i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140915i.png"></a></p>
      
      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

        <thead>
          <tr>
            <th class="firstcol" scope="col" >Industrial Production
              (SA, % Change)</th>
            <th scope="col" >Aug</th>
            <th scope="col" >Jul</th>
            <th scope="col" >Jun</th>
            <th scope="col" >Aug Y/Y</th>
            <th scope="col" >2013</th>
            <th scope="col" >2012</th>
            <th scope="col" >2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Total Output</td>
            <td  >-0.1</td>
            <td  >0.2</td>
            <td  >0.3</td>
            <td  >4.1</td>
            <td  >2.9</td>
            <td  >3.8</td>
            <td  >3.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Manufacturing</td>
            <td  >-0.4</td>
            <td  >0.7</td>
            <td  >0.3</td>
            <td  >3.6</td>
            <td  >2.7</td>
            <td  >4.1</td>
            <td  >3.3</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;Consumer Goods</td>
            <td  >-0.8</td>
            <td  >0.7</td>
            <td  >-0.2</td>
            <td  >2.8</td>
            <td  >2.4</td>
            <td  >1.7</td>
            <td  >1.5</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp;Business Equipment</td>
            <td  >0.0</td>
            <td  >1.2</td>
            <td  >-0.3</td>
            <td  >5.8</td>
            <td  >3.6</td>
            <td  >7.5</td>
            <td  >5.6</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;Construction Supplies</td>
            <td  >0.1</td>
            <td  >1.3</td>
            <td  >0.6</td>
            <td  >5.4</td>
            <td  >4.2</td>
            <td  >4.6</td>
            <td  >3.0</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Materials</td>
            <td  >0.1</td>
            <td  >-0.3</td>
            <td  >0.9</td>
            <td  >4.9</td>
            <td  >3.2</td>
            <td  >4.5</td>
            <td  >4.7</td>
          </tr>
          <tr>
            <td class="firstcol" >Utilities</td>
            <td  >1.0</td>
            <td  >-2.7</td>
            <td  >-2.0</td>
            <td  >0.0</td>
            <td  >2.1</td>
            <td  >-2.1</td>
            <td  >-0.2</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Capacity Utilization (%)</td>
            <td  >78.8</td>
            <td  >79.1</td>
            <td  >79.1</td>
            <td  >77.8</td>
            <td  >78.0</td>
            <td  >77.3</td>
            <td  >76.3</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;Manufacturing</td>
            <td  >77.2</td>
            <td  >77.6</td>
            <td  >77.2</td>
            <td  >76.1</td>
            <td  >76.1</td>
            <td  >75.5</td>
            <td  >73.9</td>
  </tr>
              </tbody>
            </table>
            </span>
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Industrial production slipped 0.1% last month (+4.1% y/y) following a 0.2% July increase, revised from 0.4%. The decline was driven by a 0.4% shortfall (+1.3% y/y) in factory output during August after increasing 0.7%, last month [...]

U.S. Industrial Production is Led Lower by Durable Goods

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

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**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

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**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

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**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

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**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

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**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

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**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

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.

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief

Jump to:

U.S. Consumer Price Declines Are Broad-based

Euro Area HICP Steadies at 0.4%

U.S. Chain Store Sales Weaken Sharply

U.S. Energy Prices Move Lower

ZEW Expectations Drop By Less Than Expected

U.S. Producer Prices Remain Unchanged; Core Index Up 0.1%

U.S. Producer Prices Remain Unchanged; Core Index Up 0.1%

U.S. Industrial Production is Led Lower by Durable Goods