Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103j.jpg" width="353">
The German labor markets look quite firm, according to labor force and unemployment data reported today for November and December.
Total employment in November was 39.28 million, up 46,000 from October and 411,000 or 1.1% from November 2005. It has risen every month since January (seasonally adjusted). Annual revisions were included in this release, altering some prior employment levels and unemployment rates. The general pattern is not affected, however.
The number of job vacancies remains supportive to further employment growth. At 728,000 in December (seasonally adjusted), these rose 27,000 in the month and are up substantially from 486,000 a year ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103k.jpg" width="353">
The unemployment situation has gained greater clarity in the last couple of months. When we last examined the German labor data two months ago, the ILO-based definition had shown some hesitation and remained above a recent low, even as the so-called &quot;registered unemployment&quot; measure was coming down. Now, the ILO rate has hit a new low, 7.7% of the labor force and the lowest since July 2002. This is off 1.2% from November 2005. The Germans&#39; preferred measure, the &quot;registered&quot; unemployment rate, dipped below 10% to 9.8%, its first move into single digits since September 2002. This latter move is all the more significant for definitional changes in early 2005 that raised the level of reported unemployment. So the rate on this &quot;new&quot; basis is now well below many months calculated on the &quot;old&quot; basis and in fact is just 0.6% above its 2001 cycle low.
These labor market data correspond to results of recent business surveys in Germany, which we have described elsewhere as showing &quot;growing optimism&quot;. They also mirror the improving employment readings in the purchasing manager surveys covering November; the manufacturing sector eased fractionally in its December results (reported yesterday), but remained in the high range of last spring. Taken together, it all seems to be showing improving conditions in Germany.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Germany: Seas Adj, ex as noted</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Oct 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">LFS Employment (mil)</td>
<td>--</td>
<td>39.28</td>
<td>39.24</td>
<td>38.87</td>
<td>38.82</td>
<td>38.88</td>
<td>38.72</td>
</tr>
<tr>
<td class="firstcol">Change (thous)</td>
<td>--</td>
<td>+46</td>
<td>+35</td>
<td>+411</td>
<td>-53</td>
<td>+151</td>
<td>-368</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Chg NSA</td>
<td>--</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>+1.1</td>
<td>-0.1</td>
<td>+0.4</td>
<td>-0.9</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%, ILO Def.)</td>
<td>--</td>
<td>7.7</td>
<td>7.8</td>
<td>8.9</td>
<td>9.1</td>
<td>9.2</td>
<td>8.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Registered Unemployment Rate (%)</td>
<td>9.8</td>
<td>10.1</td>
<td>10.3</td>
<td>11.3</td>
<td>10.8</td>
<td>11.7</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">Job Vacancies (thous)</td>
<td>728</td>
<td>701</td>
<td>671</td>
<td>486</td>
<td>413</td>
<td>284</td>
<td>352</td>
</tr>
</tbody>
</table>
</body>
</html>

The German labor markets look quite firm, according to labor force and unemployment data reported today for November and December. Total employment in November was 39.28 million, up 46,000 from October and 411,000 or 1.1% from [...]

German Labor Markets Maintain Gains; Unemployment at 4-Year Lows

Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103g.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS indicated that chain store sales last week rose 0.3% after three consecutive weeks of double digit increase. The gains lifted December sales 0.5% higher than the November average which advanced 0.3% from October.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103h.jpg" width="353">
The leading indicator of chain store sales from ICSC-UBS, however, repeated its 0.9% decline of the prior week and was down 0.5% from a year ago. The decline may be attributable to the further increase in retail gasoline prices which rose to $2.34 cents per gallon in the latest week, up fourteen cents from the recent low.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">12/30/06</th>
<th scope="col">12/23/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>476.8</td>
<td>475.4</td>
<td>2.8%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS indicated that chain store sales last week rose 0.3% after three consecutive weeks of double digit increase. The gains lifted December sales 0.5% higher than the November [...]

Weekly Chain Store Sales Finished 2006 Firm

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103i.jpg" width="353">
The total number of mortgage applications ticked up 3.6% last week after two weeks of sharp decline which left the average level of applications in December up 1.1% versus the prior month, according to the Mortgage Bankers Association.
Purchase applications rose 4.3% following two weeks of sharp decline but increased 4.7% during the month from the November average which rose 6.4% from the October level.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance also ticked up 2.2% after two weeks of double digit decline which gave back more than all some earlier increases. In December applications to refinance were unchanged on average from November.
The effective interest rate on a conventional 30-year mortgage increased again w/w to 6.40%, the highest level since early November. Nevertheless rates averaged 6.28% in December, down versus 6.36% during November. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also increased to 6.18% and averaged 6.05% last month versus 6.13% during November. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/29/06</th>
<th scope="col">12/22/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>575.6</td>
<td>555.8</td>
<td>5.4%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>406.9</td>
<td>390.2</td>
<td>-2.7%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,640.4</td>
<td>1,604.6</td>
<td>20.3%</td>
<td>1,634.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications ticked up 3.6% last week after two weeks of sharp decline which left the average level of applications in December up 1.1% versus the prior month, according to the Mortgage Bankers [...]

Mortgage Applications Ticked Up

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103d.jpg" width="353">
The value of construction put in place in November fell 0,2% though the prior month&#39;s sharp drop was revised to more mild 0.3% dip. Nevertheless, it was the sixth decline in the last seven months. Consensus expectations had been for a 0.5% November decline.
Residential building again fell sharply. The 1.6% decline was the eighth consecutive monthly decline and it lowered the level of residential construction activity 11.3% below last December&#39;s peak. New single family building dropped 3.1% after a 3.8% slip during October and it lowered activity 20.8% below the peak this past February. Spending on improvements again made up for some that lost work and rose 0.6% (6.7% y/y).
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103e.jpg" width="353">
Housing: Boom or Bubble? from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/br_q4-2006-2_boom_bubble.pdf"> here</a>.
Nonresidential building rose 1.4% after an upwardly revised 0.5% October uptick. Lodging construction surged 3.9% (71.4% y/y) after a 7.8% October spike and office construction rose a solid 1.0% (30.9% y/y) after an upwardly revised October gain. Multi-retail building eased 0.6% (28.3% y/y) and gave back half of October&#39;s increase.
Public construction spending increased 1.0% after an upwardly revised 1.9% October surge. Spending on highways &amp; streets, nearly one third of the value of public construction spending, ticked up 0.4% (13.7% y/y) but October&#39;s gain was revised up to 2.5%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103f.jpg" width="353">
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>10.7%</td>
<td>11.5%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.6%</td>
<td>-1.0%</td>
<td>-2.7%</td>
<td>12.0%</td>
<td>14.3%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-1.6%</td>
<td>-1.7%</td>
<td>-11.1%</td>
<td>13.9%</td>
<td>18.6%</td>
<td>12.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.4%</td>
<td>0.5%</td>
<td>18.0%</td>
<td>7.4%</td>
<td>5.3%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>1.0%</td>
<td>1.9%</td>
<td>10.6%</td>
<td>6.2%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place in November fell 0,2% though the prior month's sharp drop was revised to more mild 0.3% dip. Nevertheless, it was the sixth decline in the last seven months. Consensus expectations had been for a [...]

U.S. Construction Spending Off Again

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103c.jpg" width="353">
The ADP Nat&#39;l Employment Report, reported by the payroll processor, indicated that private nonfarm payrolls declined 40,000 last month. It was the first decline since April 2003. The U.S. Bureau of Labor Statistics employment figure will be published this Friday.
Last month, ADP&#39;s measure of private nonfarm payrolls for November indicated a 158,000 rise in jobs that was followed by a BLS report that private nonfarm payrolls rose 114,000.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/NER_December_Release_FINAL.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll Employment (Chg.)</td>
<td>-40,000</td>
<td>158,000</td>
<td>1.6%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

The ADP Nat'l Employment Report, reported by the payroll processor, indicated that private nonfarm payrolls declined 40,000 last month. It was the first decline since April 2003. The U.S. Bureau of Labor Statistics employment figure [...]

ADP Report: Private Payrolls Declined

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103b.jpg" width="353">
The composite index of manufacturing activity from the Institute for Supply Management recovered in December to 51.4 from 49.5 the prior month. Consensus expectations had been for less of an improvement to 50.0.
During the last ten years there has been a 67% correlation between the level of the ISM index and three month growth in factory sector industrial production.
All of the component series improved m/m with the exception of inventories. The new orders component rose to 52.1 with a 3.4 point increase that just recouped the November decline. Production also recovered its November drop and rose to 51.8 but the new export orders index fell 54.3, its lowest level since July. The series peak was in early 2004 near 60. During the last ten years there has been a 69% correlation between the level of the export order index and the q/q growth in goods exports from the GDP accounts. The imports index also fell moderately.
What Will the Next Export Boom Look Like? Some Lessons from the Late 1980s from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/br/br_q4-2006-3_export_boom.pdf"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103a.jpg" width="353">
Employment also improved modestly to 49.7, the third month in the last four below the break even level of 50. During the last ten years there has been a 77% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.
The price index, which is not included in the composite, gave back about all of its November rise and fell to the second lowest level since 2002.
During the last ten years there has been an 89% correlation between the level of the price index and the three month change in the PPI for intermediate goods less food &amp; energy.

<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/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Dec. &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>51.4</td>
<td>49.5</td>
<td>55.6</td>
<td>53.9</td>
<td>55.5</td>
<td>60.5</td>
</tr>
<tr>
<td class="firstcol">Prices Index (NSA)</td>
<td>47.5</td>
<td>53.5</td>
<td>63.0</td>
<td>65.0</td>
<td>66.4</td>
<td>79.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The composite index of manufacturing activity from the Institute for Supply Management recovered in December to 51.4 from 49.5 the prior month. Consensus expectations had been for less of an improvement to 50.0. During the last ten [...]

ISM Composite Index Recovered A Bit

Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070102a.jpg" width="353">
In Europe and the Pacific Rim, increases in consumer spending have lagged behind increases in investment spending and net exports. The news, today, from Hong Kong in the Far East and Denmark in Europe is encouraging. In volume terms retail sales in November in Hong Kong were slightly, 0.19%, below October but were 7.72% above November, 2005. In Denmark retail sales rose 0.72% in October and were 4.03% above November, 2005. For the eleven months of this year retail sales in Hong Kong are up 6.8% in value terms and 5.2% in volume. Comparable figures for Denmark are 3.9% and 3.4%. The first chart compares the trend in the volume of retail sales in Hong Kong and Denmark, while the second chart compares the trends in the value of retail sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070102b.jpg" width="353">
The greater difference between the value indexes and the volume indexes is the largely the result of the different price trends in Hong Kong and Denmark. From late 1998 until mid 2004, Hong Kong experienced deflation, while Denmark experienced annual prices increases of about 2.5%. (See the third chart.)<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070102c.jpg" width="353">
The city state of Hong Kong and the country of Denmark are too small to be used as projectors of trends in broader areas--the Pacific Rim and European Union, but the news today is at least affirmative. Hong Kong has a population of 7.0 million and Denmark one of 5.4 million. In Euro terms Gross Domestic Product in Denmark is currently 56 billion euros while that of Hong Kong is 37 billion Euros.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">RETAIL SALES&nbsp;</th>
<th scope="col">Nov&nbsp; 06</th>
<th scope="col">Oct 06</th>
<th scope="col">Nov 05</th>
<th scope="col">M/M&nbsp;&nbsp; %</th>
<th scope="col">Y/Y&nbsp;&nbsp; %</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">Jan-Nov06/ Jan-Nov05</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Hong Kong Value (2000=100)</td>
<td>110.2</td>
<td>109.3</td>
<td>102.3</td>
<td>0.82</td>
<td>7.72</td>
<td>101.3</td>
<td>94.9</td>
<td>85.6</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">Denmark Value&nbsp; (2000=100)</td>
<td>129.2</td>
<td>128.0</td>
<td>124.2</td>
<td>0.94</td>
<td>4.03</td>
<td>122.9</td>
<td>116.4</td>
<td>112.3</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Hong Kong Volume (2000=100)</td>
<td>107.2</td>
<td>107.4</td>
<td>102.2</td>
<td>-0.19</td>
<td>4.89</td>
<td>101.5</td>
<td>95.4</td>
<td>87.5</td>
<td>5.2</td>
</tr>
<tr>
<td class="firstcol">Denmark Volume (2000=100)</td>
<td>125.5</td>
<td>124.6</td>
<td>122.2</td>
<td>0.72</td>
<td>2.70</td>
<td>120.5</td>
<td>113.6</td>
<td>107.9</td>
<td>3.4</td>
</tr>
</tbody>
</table>
</body>
</html>

In Europe and the Pacific Rim, increases in consumer spending have lagged behind increases in investment spending and net exports. The news, today, from Hong Kong in the Far East and Denmark in Europe is encouraging. In volume terms [...]

Encouraging Trends in Retail Sales in Hong Kong and Denmark

Resilient US economy pushing up Blue Chip 2026 outlook

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Michael J. Moran

260210F.jpg

260210G.jpg

The Employment Cost Index rose at an annual rate of 3.0% in the final three months of 2025 (0.7% not annualized). The latest observation reinforced the deceleration that began in the latter part of 2022 and returned the change to the range in place before the pandemic - albeit the upper portion of that range.

Most of the deceleration occurred in the goods-producing sector, where the latest increase of 2.5% (annual rate) trailed the average of 3.9% in the prior three quarters. The service sector saw compensation growth of 3.1%, down from an average of 3.5% in the prior three quarters. The difference between the performances of goods and service is not surprising, as compensation growth in the goods-producing sector tends to be more volatile, and it has typically been softer in the past few years.

Fed Chair Jerome Powell has argued recently that labor costs are not a driving force behind above-target inflation, and recent results on the employment cost index support this view. While the increase in compensation of 3.0% in Q4 is a percentage point above the Fed’s target, businesses can maintain profits without passing along the full extent of the increase. Productivity growth, which has been strong recently (average growth of 2.3% in the past eight quarters), can effectively offset compensation growth and dampen the inflation impulse.

The chart on the upper right shows quarterly growth in total compensation less the 8-quarter increase in productivity (the 8-quarter average smooths the high degree of volatility in productivity growth). This metric, which gives insight into the likely path of inflation, has been below 2.0% for the past 6 quarters, with the latest increase totaling less than 1.0%. (the chart ends in 2025-Q3 because productivity statistics for Q4 are not available).

260210H.jpg

Total compensation in the ECI includes both wages and benefits. In the third quarter, both components rose by the same amount (0.7% quarter-to-quarter, or 3.0% at an annual rate). This balance is a shift from the pattern of recent years, when wages typically posted firmer growth. The advantage to wages in the past few years, in turn, represents a break from the more common tendency for benefits to grow at a faster pace.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

- Vigorous growth during the pandemic-related recovery gives way to moderate advances recently.
- Labor costs seem in line with the Fed’s inflation target.

Employment Cost Index: Continued Deceleration

Winnie Tapasanun

260210N39.jpg

260210O39.jpg

Total retail sales were essentially flat m/m in December, falling short of expectations, following a 0.6% increase in November (unrevised) and a 0.2% decline in October (-0.1% previously), data from the U.S. Census Bureau showed. A 0.5% m/m December increase had been expected in the Action Economics Forecast Survey. The year-on-year growth rate decelerated to 2.4% in December, the lowest since September 2024, from 3.3% in November; this compared with 4.6% in December 2024 and remained far below a high of 17.1% in February 2022 and a record-high 51.8% in April 2021. For all of 2025, retail sales increased 4.0% after gains of 2.6% in 2024 and 3.5% in 2023.

Excluding motor vehicles & parts, retail sales were virtually unchanged (3.3% y/y) in December after a 0.4% rise in November (+0.5% initially), which marked the sixth consecutive m/m gain. A 0.4% m/m December increase had been expected. Sales of motor vehicles & parts fell 0.2% (-1.1% y/y) following a 1.2% November rebound; this compared to a 2.8% rise (-4.2% y/y) in unit light vehicle sales after a 2.7% November increase.

Sales in the retail control group, which excludes autos, building materials, gasoline stations, and food services, eased 0.1% (+3.4% y/y) in December, the first m/m decline since September, after a 0.2% increase in November. These sales are used in the construction of personal consumption expenditures in NIPA accounts. Nonauto sales excluding gasoline & building materials dipped 0.1% (+3.6% y/y), also down for the first time since September, following a 0.3% November rise.

Sales by category showed mixed performance in December. To the downside, furniture & home furnishing store sales slid 0.9% (-5.6% y/y) in December, the fourth m/m slide in five months, after a 0.1% easing in November. Miscellaneous store sales fell 0.9% (+9.4% y/y), the first m/m fall since August, after a 1.3% November rise. Clothing & accessory store sales declined 0.7% (+5.1% y/y), the first m/m decrease in three months, reversing a 0.5% November increase. Electronics & appliance store sales fell 0.4% (+2.1% y/y) after rising 0.2% in November and October. General merchandise store sales slipped 0.1% (+1.2% y/y) for the second consecutive month in December; within this grouping, department store sales fell 0.7% (-0.3% y/y), the third m/m fall in four months, following a 3.1% November drop.

To the upside, building materials & garden equipment store sales climbed 1.2% (0.5% y/y) for the second successive month in December, the first m/m gain since August. Sporting goods, hobby, book & music store sales rose 0.4% (6.0% y/y), the fifth m/m rise in six months, after a 0.9% November increase. Gasoline station sales grew 0.3% (1.6% y/y), the sixth m/m gain in seven months, on top of a 1.7% November rebound. Nonstore retail sales were up 0.1% (5.3% y/y) in December after virtually unchanged in November.

In the nondiscretionary sales categories, health & personal care store sales fell 0.2% (+6.4% y/y) in December, down for the second time in three months, following a 0.3% increase in November. Food & beverage store sales rose 0.2% (1.1% y/y) after a 0.1% November dip.

Consumers appeared to dine out less frequently in December amid still-high inflation (December CPI +0.3% m/m, +2.7% y/y; core CPI +0.2% m/m, +2.6% y/y). Restaurant & drinking place sales eased 0.1% (+4.7% y/y) in December, the second m/m decline in three months, following an upwardly revised 0.7% rise in November (+0.6% initially).

Retail Sales data can be found in Haver's **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

260210P39.jpg

260210Q39.jpg

- December total retail sales -0.02%, below expectations; +2.4% y/y, lowest since Sept. ’24.
- Ex-auto sales +0.02% (+3.3% y/y) after six straight m/m rises; auto sales -0.2% (-1.1% y/y).
- Declines m/m: furniture stores (-0.9%), misc. stores (-0.9%), clothing stores (-0.7%).
- Gains m/m: bldg. materials (+1.2%), sporting goods (+0.4%), gasoline stations (+0.3%).

U.S. Retail Sales Hold Steady in December Following November’s Rebound

Sandy Batten

260210J2.jpg

260210K2.jpg

The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October. Therefore, the charts here have a gap for October between the September and the November and December values.

Import prices rose 0.1% m/m (unchanged y/y) in December from November, in line with the expectations of the Action Economics Forecast Survey. Since there was no value for October value, a monthly change for November could not be calculated. Import prices fell 0.1% y/y in November. Export prices rose 0.3% m/m in December. Again, a monthly change for November could not be calculated. The Action Economics Forecast Survey expected a 0.1% monthly increase in December. The y/y reading fell to 3.1% in December from 3.2% in November.

Note that these indexes are not directly affected by tariffs because they measure the price of goods before taxes. Tariffs are considered taxes and thus are excluded from these calculations.

For imports, a 3.3% monthly decline in prices of imported petroleum and petroleum products restrained the rise in overall prices. Prices of nonpetroleum imports rose 0.4% m/m (1.0% y/y). Prices of imported food increased 0.5% m/m while prices of imported industrial supplies rose 0.4% m/m even with a 0.8% monthly decline in prices of fuels and lubricants. Prices of the remaining end-use categories were little changed in December. Given the recent weakness of the foreign exchange value of the dollar, there could be further upward pressure on nonpetroleum import prices in coming months.

For exports, prices of agricultural products 0.2% m/m (2.1% y/y) in December following a 0.9% m/m jump in November. Prices of nonagricultural exports increased 0.3% m/m in December. A monthly change could not be calculated for November. The y/y rate slowed to 3.1% in December from 3.3%. Exported food prices rose 0.4% m/m, down from a 1.1% monthly jump in November. Prices of exported industrial supplies also increased 0.4% m/m in December. Prices of exported consumer goods excluding autos jumped 0.8% m/m in December, their largest monthly increase since January 2023.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

260210L2.jpg

260210M2.jpg

- Import prices rose 0.1% m/m in December, in line with expectations.
- The December increase reflected a 0.2% monthly gain in non-fuel import prices and a 0.8% m/m decline in fuel prices.
- Export prices rose 0.3% m/m against expectations of a 0.1% m/m increase. Both agricultural and nonagricultural prices rose in December.


U.S. Import and Export Prices Rise in December

Tian Yong Woon

In our Letter this week, we explore Asia in two parts. The first reviews key developments from the past week, focusing on snap election outcomes in Japan (chart 1) and Thailand (chart 2), both of which delivered victories for incumbent parties and helped reduce near-term political uncertainty.

The second, and larger, section builds on last week’s discussion of Asia and AI, shifting the focus to AI’s potential impact on the region from an end-user perspective. On the upside, Asia stands to benefit meaningfully from the eventual large-scale adoption of AI-powered robotics, reflecting the region’s relatively high share of manufacturing value added (chart 3). That said, important considerations remain, including the cost viability of transitioning towards humanoid robotics given the sizeable upfront capital expenditure involved. Beyond manufacturing, AI adoption could also deliver gains in healthcare, particularly as many Asian economies grapple with ageing populations—implying a growing care burden alongside a shrinking domestic caregiver base (chart 4). However, regulatory, ethical, and implementation challenges persist. 

At the same time, the AI transition will likely displace certain jobs, making this a race not only of adoption but of adaptability, where education—while an imperfect proxy—offers some insight into which economies may be better positioned to adjust (chart 5). Finally, bureaucratic frictions also matter (chart 6), although even traditionally more bureaucratic economies have begun introducing fast-track frameworks to avoid falling behind in what could prove to be a pivotal transition reshaping the regional, and potentially global, economic landscape.

**Japan’s snap election**
Following a snap election held on Sunday, Japanese Prime Minister Takaichi’s Liberal Democratic Party (LDP) secured a historic landslide victory, winning a more than two-thirds majority in Japan’s 456-seat Lower House. The LDP’s coalition partner, the Japan Innovation Party, also expanded its presence to 36 seats. The outcome suggests that Takaichi’s political gamble to capitalise on strong opinion polling has paid off. While the election result has removed a key source of near-term political uncertainty for Japan, attention now turns to the policy agenda enabled by the government’s newly strengthened mandate. Among the first expected moves, Takaichi appears set to proceed with a temporary food tax pause, reducing the 8% consumption tax on food to 0% for two years. This proposal reinforces the perception that her policy stance is fiscally accommodative, even as critics raise concerns around fiscal discipline and long-term sustainability. As for the market reaction, Japanese equities rallied on stimulus expectations, bond yields rose on prospects of increased issuance to fund higher spending, while the yen recorded only muted net moves (chart 1)—prompting some speculation that some intervention may have taken place.

260210T1.jpg

**Thailand’s snap election**
Thailand also held snap elections last Sunday, which saw the incumbent deliver a strong showing at the polls. Unlike Japan’s election outcome, however, the scale of the increase in the incumbent Bhumjaithai (BJT) Party’s parliamentary footprint came as a surprise to many observers. That said, despite these sizable gains, the BJT Party fell short of an outright majority, securing 193 of the 500 seats in parliament, implying that a coalition government will likely still be required to pass legislation smoothly. Thai equities and the baht nevertheless rallied on the election results (chart 2). Attention now turns to whether—and how—Prime Minister Anutin will follow through on key campaign promises, including the revival of a popular shopping subsidy programme. While such measures would provide a near-term boost to consumption, they would also raise concerns around fiscal sustainability. Beyond the parliamentary vote, Thai voters also approved a proposal to replace the constitution. If pursued, this could pave the way for deeper structural reforms to Thailand’s economy.

260210T2.jpg

**AI’s (potential) impact on Asia**
We now turn to the longer, second part of this week’s letter, where we examine AI’s potential impact on Asia. In contrast to last week’s discussion, the focus here is on Asia’s role as an end-user of AI, rather than its position within the global AI supply chain. While AI broadly promises substantial productivity gains if deeply embedded across economies, one sector where Asia may benefit disproportionately is manufacturing. This reflects the relatively high share of manufacturing value added in GDP across many Asian economies compared with the global average (chart 3). In particular, Asia stands to reap significant productivity gains through the widespread adoption of AI-powered robotics. Cost, however, remains a key consideration: relative to the overall cost of human labour, AI-enabled robots have yet to become unequivocally competitive once high upfront capital outlays are taken into account. That said, recent advances in humanoid, AI-enabled robots have demonstrated increasingly broad and sophisticated capabilities in replicating human tasks, including delicate and precision operations. Over time, this could meaningfully alleviate a persistent structural challenge facing many advanced Asian economies—ageing populations and the associated labour constraints.

260210T3.jpg

Digging deeper into the ageing population challenge faced by many Asian economies, another area where AI and robotics could play a meaningful role is healthcare. Ageing societies face a twin burden: a rising number of elderly individuals requiring care alongside a shrinking pool of working-age caregivers, absent offsetting labour inflows. One proxy for this imbalance is the old-age dependency, which, as shown in chart 4, is already relatively high in several Asian economies, including China, Japan, and South Korea. That said, adoption remains at a very early stage. Significant barriers to widespread deployment persist, including regulatory and ethical considerations, high implementation costs, and questions around the consistency, reliability, and safety of AI-enabled systems in delivering healthcare-related tasks.

260210T4.jpg

**Asia’s challenges in AI adoption**
That said, the outlook is not entirely positive for Asia in the context of widespread AI adoption. As with previous waves of transformative technology, AI will inevitably render some jobs—at least in their current form—obsolete, even as it creates new roles and reshapes others. This implies that many Asian economies will need to navigate a significant structural adjustment in their labour markets, as certain types of work are displaced while demand for new skill sets emerges. How effectively Asia manages this transition will be critical in determining whether its economies move ahead of—or fall behind—the global shift towards AI. At present, and using education quality as a rough proxy, some Asian economies appear better positioned to manage this adjustment than others. As illustrated in chart 5, economies such as China, Singapore, Japan, and South Korea seem relatively well placed to absorb and adapt to the coming changes. That said, education quality is only an imperfect indicator. Other factors will also matter, including the capacity to rapidly retool and reskill the workforce, as well as the inclusiveness of the transition. Ensuring that lower-skilled and more vulnerable segments of society are not left behind will be an important determinant of the long-term economic and social outcomes of AI adoption across the region.

260210T5.jpg

Another potential hurdle relates to bureaucratic costs, which—when elevated—can act as a meaningful source of friction in the adoption of new AI-driven technologies. On this front, some Asian economies stand out for having comparatively low bureaucratic burdens, notably Singapore, Taiwan, and South Korea, while others, such as Vietnam, the Philippines, and China, tend to lag (chart 6). That said, as with many broad-based indicators, this picture masks important nuances. Several of these economies have introduced industry-specific—particularly AI-focused—fast-tracking initiatives aimed at accelerating development within targeted domestic sectors. Even so, in an increasingly competitive and intensifying global race to adopt AI and capture its economic upside, we may see a growing tendency toward an “adopt first, regulate later” approach in the years ahead. This is likely to persist unless and until major incidents or heightened concerns emerge that materially slow the pace of AI adoption.

260210T6.jpg

Asia

Economic Letter from Asia: Of Ballots and Bots

Robert Brusca

260209E.jpg

Japan's economy watchers index has flattened out and backed off slightly for the current and future outlooks depending on the time horizon that you seek. However, what's clear is that the index reached the low point around the middle of last year, has been rebounding and now the rebound has either run out of gas or slowed after the index has rebuilt itself considerably.  

It is certainly too early to get pessimistic on Japan's economy, with Prime Minister Sanae Takaichi having just won a significant - essentially a landslide - snap election that she called after recently having been elected. The LDP would appear to be back in the driver's seat, and she has her sights set on more fiscal stimulus and expanded military spending. She is apparently much more on the same wavelength as Donald Trump in the United States. Mr. Trump was an Abe supporter, and Ms. Takaichi is a disciple of Mr. Abe.

At the moment, Japan would seem to have a groundswell of support behind the government and that government is set to try to rekindle some growth which could potentially put the Bank of Japan in a more decisively defensive track as far as setting rates and potentially raising rates.

**Economy watchers index is trending**
In January, the economy watchers index backed off for the second month in a row. However, it still has a percentile standing in its 51-percentile, slightly above its median standing since early-2005. The headline and all the components have standings above their respective 50th percentiles on this timeline, with the exception of housing, services, and employment; three readings that are extremely important to consumers. Housing has a 26.1 percentile standing, services (the employment sector) have a 45.8 percentile standing, while employment has a 22.9 percentile standing. Despite the otherwise solid and strong set of readings, there are these three significant flies in the ointment. Corporate Japan is doing extremely well with corporations having a 66.8 percentile standing; manufacturers and nonmanufacturers, separately, each come in with readings in their mid-to-upper 60th percentiles.

**The future index**
The future readings from the economy watchers index show continued but slight increases over the last few months. Only two future readings weaken month-to-month: housing and employment—once again two key readings as far as consumers are concerned. However, in terms of current monthly diffusion readings, the assessment of households, retailing, housing, and employment all have current diffusion values below 50, indicating net declines rather than increases. The percentile standing is for the future index are, like those for the current index, generally upbeat - and generally stronger than for the current indexes - with the future headline posting a 66.4 percentile standing in January. However, like the current index, the standing for housing is at its 21.3 percentile and the standing for employment is at its 30th percentile, both well below the neutral level that would place the ranking at the 50th percentile. Corporations show high readings, higher for the future indexes than for the current index standings. There also are high readings and standings for eating and drinking places as well as services. It's good to see services come up with a strong rating since it creates hope for the future for employment because services are the core employment sector. It will be interesting to see how this value changes in the coming months as Takaichi’s new policies are implemented and take hold.

**Summing up**
On balance, the economy watchers index has been firm to strong. There is some slight give-back in the current index in terms of trend. But beyond the index, there's more immediate reason to be more positive because Japan has just executed a very decisive and pro-growth snap election that is going to put the new Prime Minister Takaichi and strong control of the economy at a time where she seeks to cement economic strength. These elections were just completed over the weekend, and we will see the results reflected in data in the weeks and months to come.

Economy in Brief: 2007

Jump to:

German Labor Markets Maintain Gains; Unemployment at 4-Year Lows

Weekly Chain Store Sales Finished 2006 Firm

Mortgage Applications Ticked Up

U.S. Construction Spending Off Again

ADP Report: Private Payrolls Declined

ISM Composite Index Recovered A Bit

ISM Composite Index Recovered A Bit

Encouraging Trends in Retail Sales in Hong Kong and Denmark