Tom Moeller

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118b.jpg" width="353"></p>
<p>The 4Q&#39;04 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell to 70 from 75 the prior quarter. Despite moderate declines both last quarter and in 3Q, the average level for 2004 set a series&#39; record indicating sharp improvement in US factory sector output.</p>
<p>Since 1992 there has been a 68% correlation between the Composite Index Level and quarterly growth in factory sector output.</p>
<p>The current orders index fell modestly to 89 but the average of 91 for 2004 by far set a record. The export orders index for 4Q moved to a new record.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118c.jpg" width="353"></p>
<p>The profit margins index likewise moved lower but the annual level in 2004 set a new record.Capital spending intentions for the coming year moved higher and since 1992 there has been a 75% correlation between the capital spending index a y/y growth in business investment in equipment &amp; software.</p>
<p>For the latest press release from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=1064"> here</a>.</p>
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<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveys/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col"><u><b>4Q &#39;04</b></u></th>
<th scope="col"><u><b>3Q &#39;04</b></u></th>
<th scope="col"><b><u>4Q03</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Composite Business Index</td>
<td>70</td>
<td>75</td>
<td>77</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
</table>
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The 4Q'04 Composite Business Index published by the Manufacturers' Alliance/MAPI fell to 70 from 75 the prior quarter. Despite moderate declines both last quarter and in 3Q, the average level for 2004 set a series' record indicating [...]

MAPI Business Outlook Survey Lower in 4Q, 2004 Set Record

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118a.jpg" width="353"></p>
<p>The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries fell seven points to 20.08 during January following revisions that lowered earlier months&#39; levels. The latest level at 20.08 nevertheless indicates continued positive economic growth.</p>
<p>The new orders component eased sharply from the near record level in December and shipments eased sharply as well. The employment measure fell a relatively moderate three points. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.</p>
<p>The prices paid index surged more than twelve points to a record high.</p>
<p>Expectations for business conditions in six months again fell for the fourth consecutive month to the lowest level since March 2003.</p>
<p>The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.</p>
<p>For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.</p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col"><u><b>Jan</b></u></th>
<th scope="col"><u><b>Dec</b></u></th>
<th scope="col"><b><u>Jan &#39;04</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
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<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>20.08</td>
<td>27.07</td>
<td>37.43</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
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The Empire State Index of General Business Conditions in New York's manufacturing industries fell seven points to 20.08 during January following revisions that lowered earlier months' levels. The latest level at 20.08 nevertheless [...]

Empire State Index Eased

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118a.jpg" width="353"></p>
<p>The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries fell seven points to 20.08 during January following revisions that lowered earlier months&#39; levels. The latest level at 20.08 nevertheless indicates continued positive economic growth.</p>
<p>The new orders component eased sharply from the near record level in December and shipments eased sharply as well. The employment measure fell a relatively moderate three points. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.</p>
<p>The prices paid index surged more than twelve points to a record high.</p>
<p>Expectations for business conditions in six months again fell for the fourth consecutive month to the lowest level since March 2003.</p>
<p>The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.</p>
<p>For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.</p>
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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col"><u><b>Jan</b></u></th>
<th scope="col"><u><b>Dec</b></u></th>
<th scope="col"><b><u>Jan &#39;04</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>20.08</td>
<td>27.07</td>
<td>37.43</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
</tr>
</tbody>
</table>
<span id="articletitle">MAPI Business Outlook Survey Lower in 4Q, 2004 Set Record  </span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> January 18, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118b.jpg" width="353"></p>
<p>The 4Q&#39;04 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell to 70 from 75 the prior quarter. Despite moderate declines both last quarter and in 3Q, the average level for 2004 set a series&#39; record indicating sharp improvement in US factory sector output.</p>
<p>Since 1992 there has been a 68% correlation between the Composite Index Level and quarterly growth in factory sector output.</p>
<p>The current orders index fell modestly to 89 but the average of 91 for 2004 by far set a record. The export orders index for 4Q moved to a new record.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118c.jpg" width="353"></p>
<p>The profit margins index likewise moved lower but the annual level in 2004 set a new record.Capital spending intentions for the coming year moved higher and since 1992 there has been a 75% correlation between the capital spending index a y/y growth in business investment in equipment &amp; software.</p>
<p>For the latest press release from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=1064"> here</a>.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveys/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col"><u><b>4Q &#39;04</b></u></th>
<th scope="col"><u><b>3Q &#39;04</b></u></th>
<th scope="col"><b><u>4Q03</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
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</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>70</td>
<td>75</td>
<td>77</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
</table>
<span id="articletitle">NAHB Housing Market Index Off</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> January 18, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118d.jpg" width="353"></p>
<p>The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell slightly in January to 70 versus December&#39;s level of 71. Through 2004 the index drifted higher from 67 in 1Q to 69 in 2Q to 68 in 3Q to 70 in 4Q. The average of 68 rose 7.3% from 2003.</p>
<p>During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.</p>
<p><span style="COLOR: #333333">The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.</span></p>
<p>Each of the components of the composite fell in January with the largest declines logged in home builders&#39; read of prospective activity in six months and in traffic of prospective buyers of new homes.</p>
<p>Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.</p>
<p>Philadelphia Federal Reserve Bank President Anthony M Santomero&#39;s speech today on the economic outlook is available <a href="http://www.philadelphiafed.org/publicaffairs/speeches/2005_santomero1.html"> here</a>.</p>
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<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col"><u><b>Jan</b></u></th>
<th scope="col"><u><b>Dec</b></u></th>
<th scope="col"><u><b>Jan</b></u><b><u> &#39;04</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>7 0</td>
<td>71</td>
<td>68</td>
<td>68</td>
<td>64</td>
<td>61</td>
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Louise Curley

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<p><img align="left" border="0" height="276" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050117a.gif" width="366"></p>
<p>Consumer confidence in Japan declined in December to 44.3 from 47.9 in Novemberand was almost 10% below the peak reached in August of this year. It was also below consensus. The outlook for overall livelihood, income growth, employment and willingness to buy durable goods--components that make up the index--are all down almost 10% or more from August as shown in the table below.</p>
<p>A value below 50 indicates that consumers expect conditions to be somewhat worse. Consumers are asked to rate the prospects for their general livelihood, income growth, employment and their willingness to buy durable goods. If the expectation is for better, it is given a !; if slightly better, .75; if no change, .50; if slightly worse, .25; and if worse; 0.</p>
<p>Monthly data are available only since April of last year. In June of 2004, the Economic and Social Research Institute of the Cabinet Office combined the old Quarterly Consumer Confidence Survey, the Monthly Consumer Confidence Survey covering Tokyo and the One-person Household Consumer Survey into one survey called the Monthly Consumer Confidence Survey covering all Japan. Monthly data from April 2004 on are now available for All Households, One-person Households and 2 or More Persons Households. For each type of household, data are available on consumers&#39; appraisals of the outlook for their over all livelihood, income growth, employment, willingness to buy durable goods, and the value of their assets. An appraisal of leisure prospects is also available quarterly. Prior to that time, there are quarterly data based on the discontinued Quarterly Consumer Confidence Survey covering 5040 households, excluding single-person households. These data, available in the Haver Japan data base under the Consumer Confidence Index (Households with 2 or More Persons) are shown in the attached chart, together with the quarterly values of the new monthly data.</p>
<p>In spite of the dip in the fourth quarter, the level of confidence among Japanese consumers is relative high. According to the quarterly data Japanese consumers have rarely scored a level of confidence above the 50 level.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan Consumer Sentiment Diffusion Indexes</th>
<th scope="col"><b>Dec 04</b></th>
<th scope="col"><b>Nov&nbsp;04</b></th>
<th scope="col"><b>Oct 04</b></th>
<th scope="col"><b>Sep 04</b></th>
<th scope="col"><b>Aug 04</b></th>
<th scope="col"><b>% Chg Dec/Aug 04</b></th>
<th scope="col"><b>% Chg&nbsp; Q4/Q3 04</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Households</td>
<td>44.3</td>
<td>47.9</td>
<td>47.7</td>
<td>46.7</td>
<td>49.1</td>
<td>-9.8</td>
<td>-2.9</td>
</tr>
<tr>
<td class="firstcol">2 or more person households</td>
<td>44.0</td>
<td>48.0</td>
<td>47.7</td>
<td>46.1</td>
<td>49.2</td>
<td>-10.6</td>
<td>-3.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Overall livelihood</td>
<td>43.0</td>
<td>46.4</td>
<td>46.6</td>
<td>45.1</td>
<td>47.5</td>
<td>-9.5</td>
<td>-2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Income growth</td>
<td>41.8</td>
<td>46.2</td>
<td>46.1</td>
<td>43.3</td>
<td>46.6</td>
<td>-10.3</td>
<td>-1.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment</td>
<td>44.0</td>
<td>49.1</td>
<td>48.2</td>
<td>46.9</td>
<td>50.7</td>
<td>-13.2</td>
<td>-4.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Willingness to buy durable goods</td>
<td>47.3</td>
<td>50.1</td>
<td>50.0</td>
<td>49.2</td>
<td>51.9</td>
<td>-8.9</td>
<td>-3.5</td>
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Consumer confidence in Japan declined in December to 44.3 from 47.9 in Novemberand was almost 10% below the peak reached in August of this year. It was also below consensus. The outlook for overall livelihood, income growth, [...]

Japanese Consumers' Confidence Declines

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<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050117a.jpg" width="353"></p>
<p>Consumer confidence in Japan declined in December to 44.3 from 47.9 in Novemberand was almost 10% below the peak reached in August of this year. It was also below consensus. The outlook for overall livelihood, income growth, employment and willingness to buy durable goods--components that make up the index--are all down almost 10% or more from August as shown in the table below.</p>
<p>A value below 50 indicates that consumers expect conditions to be somewhat worse. Consumers are asked to rate the prospects for their general livelihood, income growth, employment and their willingness to buy durable goods. If the expectation is for better, it is given a !; if slightly better, .75; if no change, .50; if slightly worse, .25; and if worse; 0.</p>
<p>Monthly data are available only since April of last year. In June of 2004, the Economic and Social Research Institute of the Cabinet Office combined the old Quarterly Consumer Confidence Survey, the Monthly Consumer Confidence Survey covering Tokyo and the One-person Household Consumer Survey into one survey called the Monthly Consumer Confidence Survey covering all Japan. Monthly data from April 2004 on are now available for All Households, One-person Households and 2 or More Persons Households. For each type of household, data are available on consumers&#39; appraisals of the outlook for their over all livelihood, income growth, employment, willingness to buy durable goods, and the value of their assets. An appraisal of leisure prospects is also available quarterly. Prior to that time, there are quarterly data based on the discontinued Quarterly Consumer Confidence Survey covering 5040 households, excluding single-person households. These data, available in the Haver Japan data base under the Consumer Confidence Index (Households with 2 or More Persons) are shown in the attached chart, together with the quarterly values of the new monthly data.</p>
<p>In spite of the dip in the fourth quarter, the level of confidence among Japanese consumers is relative high. According to the quarterly data Japanese consumers have rarely scored a level of confidence above the 50 level.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan Consumer Sentiment Diffusion Indexes</th>
<th scope="col"><b>Dec 04</b></th>
<th scope="col"><b>Nov&nbsp;04</b></th>
<th scope="col"><b>Oct 04</b></th>
<th scope="col"><b>Sep 04</b></th>
<th scope="col"><b>Aug 04</b></th>
<th scope="col"><b>% Chg Dec/Aug 04</b></th>
<th scope="col"><b>% Chg&nbsp; Q4/Q3 04</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Households</td>
<td>44.3</td>
<td>47.9</td>
<td>47.7</td>
<td>46.7</td>
<td>49.1</td>
<td>-9.8</td>
<td>-2.9</td>
</tr>
<tr>
<td class="firstcol">2 or more person households</td>
<td>44.0</td>
<td>48.0</td>
<td>47.7</td>
<td>46.1</td>
<td>49.2</td>
<td>-10.6</td>
<td>-3.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Overall livelihood</td>
<td>43.0</td>
<td>46.4</td>
<td>46.6</td>
<td>45.1</td>
<td>47.5</td>
<td>-9.5</td>
<td>-2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Income growth</td>
<td>41.8</td>
<td>46.2</td>
<td>46.1</td>
<td>43.3</td>
<td>46.6</td>
<td>-10.3</td>
<td>-1.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment</td>
<td>44.0</td>
<td>49.1</td>
<td>48.2</td>
<td>46.9</td>
<td>50.7</td>
<td>-13.2</td>
<td>-4.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Willingness to buy durable goods</td>
<td>47.3</td>
<td>50.1</td>
<td>50.0</td>
<td>49.2</td>
<td>51.9</td>
<td>-8.9</td>
<td>-3.5</td>
</tr>
</tbody>
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Carol Stone, CBE

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114g.jpg" width="353"></p>
<p>Back in the 1970s, when the first energy crisis occurred, the striking phenomenon for many economists was that inflation responded around the world. Many countries saw price indexes accelerate dramatically. Moreover, labor contracts in many places included automatic accelerator clauses tied to inflation. The CPI in some countries -- including the US -- included mortgage rates as part of the measure of housing costs, so that, ironically, as central banks raised interest rates to combat inflation, the reported inflation figures rose. These factors, plus the widespread pricing-power of producers to pass energy costs on to their customers rather than absorb them, made the energy cost-price inflation process self-reinforcing.</p>
<p>Today, these conditions are vastly different, and it may be just as remarkable that resistance of generalized consumer price inflation to rising energy costs is as widespread now as the vulnerability to them was 30 years ago. December CPI reports for five quite different countries give examples. There&#39;s evidence of some pick-up in 2004 compared with 2003 performance, but these seem restrained. In Spain, the December 2004 CPI is up 3.2% from a year ago, 0.6 percentage point faster than 2003&#39;s rise. But inflation is less than in 2002 and not much more than in 2001. Excluding unprocessed food and energy products, Spain&#39;s core CPI is notably slower than either 2002 or 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114h.jpg" width="353"></p>
<p>Finland has seen a progressive slowing of its CPI throughout this period, as has Brazil. Inflation conditions are vastly different in these two countries, of course. And the Brazilian central bank came under fire in markets and the press this morning for missing its annual inflation target once again. Even so, inflation in both of these countries is being kept at bay. In Slovakia, the CPI trend is uneven, but after it surged in 2003, it moderated in 2004, indicating that self-reinforcement mechanisms are not in play there either. In Israel, the 2004 CPI rise contrasts with 2003&#39;s outright decline, but shifts in regulated prices, not in energy, were the main ingredient in that seesaw pattern.</p>
<p>In fact, the only country in our table which is showing a persistent pick-up in inflation rates is the United States, which we included here for reference and perspective. Lower energy costs for December may help restrain the 2004 outcome (due to be published Wednesday, January 19) but the year still looks to show just about the highest inflation in four years.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b>Consumer Price Indexes, NSA, Yr/Yr % Chg</b></th>
<th scope="col"><b>Dec 2004</b></th>
<th scope="col"><b>Nov 2004</b></th>
<th scope="col"><b>Oct 2004</b></th>
<th scope="col"><b>Dec 2003</b></th>
<th scope="col"><b>Dec 2002</b></th>
<th scope="col"><b>Dec 2001</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Spain</b></td>
<td>3.2</td>
<td>3.5</td>
<td>3.5</td>
<td>2.6</td>
<td>4.5</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol"><b>ex Food &amp; Energy</b></td>
<td>3.0</td>
<td>2.9</td>
<td>2.9</td>
<td>2.5</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>Finland</b></td>
<td>0.4</td>
<td>0.5</td>
<td>0.9</td>
<td>0.6</td>
<td>1.7</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol"><b>Slovakia</b></td>
<td>6.0</td>
<td>6.3</td>
<td>6.6</td>
<td>9.2</td>
<td>3.4</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>Israel</b></td>
<td>1.2</td>
<td>0.9</td>
<td>0.8</td>
<td>-1.9</td>
<td>6.5</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol"><b>Brazil</b></td>
<td>7.6</td>
<td>7.2</td>
<td>6.9</td>
<td>9.3</td>
<td>12.5</td>
<td>7.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: US</td>
<td>NA</td>
<td>3.5</td>
<td>3.2</td>
<td>1.9</td>
<td>2.4</td>
<td>1.6</td>
</tr>
</tbody>
</table>
</body>
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Back in the 1970s, when the first energy crisis occurred, the striking phenomenon for many economists was that inflation responded around the world. Many countries saw price indexes accelerate dramatically. Moreover, labor contracts [...]

Moderate 2004 Inflation in Several Countries, Despite Stronger Energy Costs

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114e.jpg" width="353"></p>
<p>Total business inventories jumped 1.0% in November. The increase lifted the y/y gain to 7.9%, the strongest since 1995, in marked contrast to the decumulation of just a few years ago.</p>
<p>Wholesale inventories again jumped by 1.1%. During the last ten years there has been a 64% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.</p>
<p>Retail inventories surged 1.1% due to across the board accumulation. Motor vehicle inventories rose 1.6% (7.8% y/y) and non-auto retail inventories nearly doubled the October increase with a 0.9% rise. Strong m/m gains were logged for furniture (+3.9% y/y), a general merchandise (5.5% y/y) and building materials (15.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114f.jpg" width="353"></p>
<p>Overall business sales added 0.4% (+10.6% y/y) to the 11.4% pop in October.</p>
<p>The ratio of inventories-to-sales ticked up slightly to 1.31.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></b></th>
<th scope="col"><u><b>Nov</b></u></th>
<th scope="col"><u><b>Oct</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
<th scope="col"><u><b>2001</b></u></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1.0%</td>
<td>0.4%</td>
<td>7.9%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>1.1%</td>
<td>-0.4%</td>
<td>6.2%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.9%</td>
<td>0.5%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.1%</td>
<td>1.1%</td>
<td>11.5%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.7%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
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Total business inventories jumped 1.0% in November. The increase lifted the y/y gain to 7.9%, the strongest since 1995, in marked contrast to the decumulation of just a few years ago. Wholesale inventories again jumped by 1.1%. During [...]

U.S. Inventories Gain Strongest Since 1995

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114c.jpg" width="353"></p>
<p>Industrial production finished 2004 on a strong note and surged 0.8%. The gain followed a downwardly revised 0.2% November increase but it doubled Consensus expectations had been for a 0.4% increase. The 4.1% gain in production for all of last year was the strongest since a 4.3% rise in 2000.</p>
<p>A 2.7% rise in electric &amp; gas utilities last month boosted the production gain, but the factory sector nevertheless performed well. The 0.6% (5.1% y/y) rise in December factory sector output raised production 4.8% for the full year, the strongest since 1999.</p>
<p>The high tech sector contributed to the 2004 output gain with a 19.1% rise for the full year. Output of semiconductors &amp; related equipment rose by nearly one third for the year though that rate of gain is half the growth logged during the late 1990s. Outside the technology sector, the 3.9% full year gain in factory output excluding high tech was the largest since 1997.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114d.jpg" width="353"></p>
<p>Output of appliances, furniture &amp; carpeting added 0.6% (2.8% y/y) to a downwardly revised 0.9% November gain and for the year grew 4.8%. Clothing output turned in the best showing since April with a 0.8% (-4.2% y/y) rise but output still fell 6.2% for the year, the tenth down year in a row.</p>
<p>Total capacity utilization rose to 79.2% from an upwardly revised November. Capacity grew 1.2% y/y.</p>
</span>
<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"><b>Production &amp; Capacity</b></a></th>
<th scope="col"><b>Dec</b></th>
<th scope="col"><b>Nov</b></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.8%</td>
<td>0.2%</td>
<td>4.3%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.2%</td>
<td>78.6%</td>
<td>76.8% (12/03)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
</table>
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Industrial production finished 2004 on a strong note and surged 0.8%. The gain followed a downwardly revised 0.2% November increase but it doubled Consensus expectations had been for a 0.4% increase. The 4.1% gain in production for [...]

Industrial Production Surged

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 16,000 to 199,000 in the week ending December 27, from 215,000 in the week of December 20, revised from 214,000. The latest claims represent the third consecutive weekly decline. The four-week moving average of initial claims was 218,750 in the December 27 week, an increase of 1,750 from 217,000 in the prior week, revised from 216,750.

Federal government employees initially filed 812 (NSA) jobless insurance claims in the week ended December 20, after filing 805 claims in the week ended December 13.

Continuing claims for unemployment insurance declined 47,000 to 1.866 million in the week of December 20, from 1.913 million in the week ending December 13, revised from 1.923 million. The four-week moving average was 1.873 million in the December 20 week, a decrease of 17,750 from 1.891 million in the week ending December 13, revised from 1.894 million. The insured unemployment rate stood at 1.2% in the week of December 20, unchanged from previous week of December 13.

Federal government employees’ continuing benefits claims were 13,390 (NSA) in the week ended December 13, up from 12,887 (NSA) in the week ending December 6. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 13, the highest unemployment rates were in Washington (2.50%), New Jersey (2.40%), Massachusetts and Minnesota (both 2.20%), and California, Illinois and Rhode Island (all 2.10%). The lowest rates were in Florida (0.30%), and Alabama and North Carolina (both 0.40%). Rates in other notable states include New York (1.80%), Pennsylvania (1.70%), and Texas (1.20%). 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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- Initial claims declined from the prior week.
- Continuing claims declined from the prior week.
- The insured unemployment rate was unchanged.

U.S. Initial Claims for Unemployment Insurance Dropped Again in Latest Week

Winnie Tapasanun

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U.S. house prices rose 0.4% m/m in October following a 0.1% dip in September (0.0% initially) and a 0.4% rise in August (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. October marked the second m/m increase in three months after no change in July. The HPI reached a record high of 436.75 in October, up 13.4% from its August 2022 low of 384.98. The year-on-year rate of increase eased to 1.7% in October from 1.8% in September—the slowest pace since March 2012—down from 4.7% in October 2024 and well below a high of 18.6% in February 2022.

House prices increased m/m in October (vs. September) across seven of the nine census divisions. Gains were led by West South Central (+1.0% vs. -1.6%), followed by New England (+0.9% vs. -0.3%), East North Central (+0.6% vs. +0.7%), Mountain (+0.6% vs. -0.8%), West North Central (+0.6% vs. +0.6%), Middle Atlantic (+0.4% vs. +0.2%), and Pacific (+0.2% vs. +0.3%). In contrast, house prices fell m/m in two census divisions in October (vs. September): East South Central (-0.4% vs. +0.7%) and South Atlantic (-0.2% vs. -0.2%).

Year-on-year house prices continued to rise in October across most regions, except West South Central and South Atlantic. The y/y pace accelerated in October (vs. September) in four of the nine census divisions: West North Central (+3.8% vs. +3.2%), New England (+3.7% vs. +3.2%), Mountain (+0.3% vs. -0.8%), and Pacific (+0.2% vs. -0.6%). Meanwhile, house price growth decelerated y/y in October (vs. September) in East South Central (+1.5% vs. +2.7%), East North Central (+5.1% vs. +5.4%), and Middle Atlantic (+5.3% vs. +5.4%). To the downside, West South Central (-0.7% vs. -1.0%) and South Atlantic (-0.5% vs. +0.4%) were the only regions posting y/y declines in October (vs. September).

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

The minutes to the December 9–10 **FOMC** meeting can be found [here](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20251210.pdf).

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- FHFA HPI +0.4% m/m (+1.7% y/y) in Oct.; second m/m gain in three months.
- House prices up m/m in seven of nine census divisions but down in East South Central (-0.4%) and South Atlantic (-0.2%).
- House prices up y/y in seven of nine regions, led by Middle Atlantic (+5.3%), but down in West South Central (-0.7%) and South Atlantic (-0.5%).

U.S. FHFA House Prices Rebound in October Following September’s Easing

Robert Brusca

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When inflation numbers come hot off the griddle, some part of them might stick to the pan. That's the case this month with Spain’s release of inflation in December. It provides us with the headline for the HICP measure, a headline to the domestic measure, and the domestic measure excluding energy. But it does not release the sector detail for the rest of the report.

However, based upon what's been released, it’s clear that inflation in Spain has picked up. The part of the core that we have in-hand, which is just the portion excluding energy, still appears to be fairly well behaved; however, its gain is still slightly excessive.

**HICP trend**
Spain’s HICP measure in December rose 0.4% after rising by 0.5% in both October and November; those are hot numbers. That translates into a 5.7% annual rate over three months which is hotter than its pace of 4.5% over six months which in turn is hotter than the 12-month increase of 3%. The HCP headline for Spain has clearly been accelerating, the year-over-year rise is too-hot, and the shorter-term metrics are hotter still. This is not good news, and this is not a welcome progression.

**Domestic inflation**
Looking at Spain’s domestic CPI conditions, we find that they are still on the hot side with December showing a headline gain of 0.3% but gains in October and November of 0.5% each, producing a three-month annual rate of 5.4%, which is hotter than its 4.2% over six months, which, in turn, is hotter than the year-over-year gain at 2.9%. And these patterns/results are very similar to the pattern and the readings for the HICP. The domestic inflation picture is too hot over 12 months and accelerating over the shorter periods.

**Domestic inflation ex-energy:** The CPI excluding energy is not as bloated as the HICP or the domestic headline, but it is still a reading on rough terrain. Over 12 months, inflation excluding energy rises at a 2.6% annual rate; that's above the 2% pace sought by the ECB for the community as a whole. Over six months, the reading ramps up to a 3.1% annual rate, again moving the wrong direction and a reading at 3.1% is simply too hot. Over three months, there's a slight deceleration compared to six months but still a rate that is too hot, at 2.9%, and stronger than the 12-month pace. Core inflation is better behaved than headline inflation and both the domestic and the HICP frameworks, but inflation is unruly overall and, for the most part, showing either acceleration or at least a 3-month pace stronger than its 12-month pace. None of this is what the ECB is looking for or trying to achieve.

**Beyond the missing details**
The details of the Spanish report are missing for December because the data are too preliminary for the authorities to post. However, if we look at the sequential pace of inflation over 12 months, six months, and three months on a lagged basis, it is looking at data that are up-to-date through November rather than through December what's the numbers that are generally excessive and they show too much acceleration moving from 12-months to 6-months to 3-months. Over 12 months compared to a year ago, five of nine categories show inflation accelerating. Over 6 months compared to 12 months, four categories are accelerating. Over 3 months compared to 6 months, six of the nine categories are accelerating. These acceleration tendencies are worrisome.

In addition, over 12 months, six of nine categories have a pace above 2%. Over 6 months, six of nine categories have annualized gains above 2%, and over 3 months, the lagged data show six of nine categories with gains above 2%. Only apparel shows inflation tempered on all horizons (at or below 2%). Food, housing, transport, education and other all show above 2% inflation on all horizons.

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**Summing up-challenging times ahead?**
Is Spain past its best inflation performance? Is the inflation worm going to begin to turn more broadly? These are trends we will need to watch. Inflation broadly has slowed or stopped its declines and largely done that in Europe as well as in the United States. Inflation is now hovering at a pace that is too strong- maybe tolerable or maybe not. Central banks need to decide and tell us what a 2% target means. Then, the question of what’s next hangs in the air. U.K. inflation remains excessive but has stepped down as the economy has begun to experience some significantly weaker economic data. Is that the future? Is it stagflation? Is it recovering from a slowdown and higher rates of interest and inflation? Or will there be continued inflation progress? Open the door on 2026…the envelope… please.

Spain

Spanish Inflation Flares at Year-End

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General business activity in Texas declined further in December, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure, the general business activity index, fell to -10.9 in December, the lowest level since June, from -10.4 in November and -5.0 in October. The index, while above a low of -35.8 in April, was well below a high of +14.1 in January and +4.5 in December 2024. The index had been in negative territory from February through December 2025, except for a one-month positive reading of +0.9 in July. In December, 12.7% of respondents reported improved business activity, down from 18.9% in November, while 23.6% of respondents reported worsened business conditions, down from November's 29.3%. The company outlook index dropped to -11.9 in December, the fourth consecutive negative reading and the lowest since April, from -6.3 in November. Just 10.8% of respondents expected improved company outlook this month while 22.7% expected deterioration. Data were collected between December 15 and 23 from 74 Texas manufacturers.

The production index, a key measure of state manufacturing conditions, plunged to -3.2 in December after a 15.3-point jump to 20.5 in November, indicating production contracted for the first time since February. A lessened 17.2% of respondents reported higher production this month while an increased 20.4% reported a decline. The capacity utilization index plummeted to -4.5 in December, the lowest reading since February, following a four-year-high 19.4 in November; it was up from a low of -15.0 in January 2024 but well below a record-high 46.3 in March 2021.

The growth rate of orders index declined steeply to -16.0 in December from -1.3 in November, marking the weakest of four successive negative readings and the lowest level since June. The index was above a low of -22.0 in April and a low of -24.3 in November 2023 but significantly below a peak of 29.6 in April 2021. The new orders index fell to -6.4 this month after rising to 4.8 in November, indicating a decline in demand for the third time in four months and the lowest level since June. The index was above a low of -20.0 in April and a low of -21.8 in November 2022 but well below a high of 22.6 in February 2022 and a record-high 38.6 in April 2021. The shipments index plunged to -10.6 this month after jumping to 15.1 in November, marking its first negative reading since June and the lowest since July 2024. The unfilled orders index dropped to -13.5 in December from -6.6 in November, registering the 16th straight negative reading and the lowest since November 2024. The index was below a high of 1.4 in August 2024 but above a low of -26.3 in July 2024. Meanwhile, the delivery time index increased to 3.3 this month, the highest reading since March, from -8.4 in November.

Labor market indexes showed flat employment conditions and shorter workweeks in December. The employment index slipped to -1.1 this month from 1.2 in November, marking its first negative reading since September, with the near-zero level indicating little change in employment. The latest reading, while up from a low of -9.7 in January 2024, was far below a high of 17.9 in January 2023 and a record-high 31.8 in April 2021. A lessened 12.3% of respondents reported net hiring in December while 13.4% reported net layoffs. The hours worked index fell sharply to -7.5 this month, the lowest reading since June, after rising to 9.9 in November. Meanwhile, the wages & benefits index climbed to 21.8 in December, the highest level since October 2024 and near its series average of 21.0, up from 15.4 in November; nevertheless, having been trending downward since a peak of 55.0 in March 2022.

Inflationary pressures were little changed this month. The index for prices received for finished goods declined to 8.2 in December following a 3.1-point rise to 10.8 in November; it was up from a low of -7.0 in November 2023 but meaningfully below a high of 47.4 in March 2022 and a peak of 51.4 in October 2021. In December, 13.1% of respondents reported raising prices while only 4.9% reported lowering prices. The index of prices paid for raw materials rose to 36.0 this month, the highest reading since September, after a 1.9-point increase to 35.3 in November. The index was well above a low of 1.0 in June 2023 but significantly below 73.2 in March 2022 and a record-high 83.8 in November 2021.

Expectations on future manufacturing activity remained positive this month. The future general business activity index dipped to 10.8 in December after rising to 11.0 in November, registering the eighth straight positive reading. The future production index rose to a four-month-high 34.2 from November’s 33.7. Other indexes of future manufacturing activity also rose in December (vs. November), signaling increased activity six months ahead: company outlook (16.5 vs. 16.2), shipments (33.9 vs. 27.0), wages & benefits (42.5 vs. 39.1), and capital expenditures (17.7 vs. 12.9). Meanwhile, future indexes for capacity utilization (28.9 vs. 34.0), new orders (30.5 vs. 39.2), growth rate of new orders (24.9 vs. 27.8), and employment (20.9 vs. 22.3) declined in December (vs. November), but they remained in positive territory.

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's **SURVEYS** database.

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- General Business Activity down in Dec. to -10.9, lowest level since June.
- Company Outlook (-11.9) negative for the fourth straight mth. and at an eight-month low; Production (-3.2) negative for the first time since Feb.
- New Orders Growth (-16.0) and New Orders (-6.4) at a six-month low.
- Employment (-1.1) negative for the first time since Sept.
- Prices Received down 2.6 pts. to 8.2; Prices Paid up 0.7 pts. to a three-month-high 36.0.
- Future General Business Activity down to 10.8, still positive for the eighth consecutive mth.

Texas General Business Activity Still Negative in December, But Expectations Remain Positive

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, rose 3.3% m/m to 79.2 in November after increases of 2.4% in October (+1.9% initially) and 0.1% in September (unrevised), according to the National Association of Realtors (NAR). The November reading registered the fourth consecutive m/m gain after declining in July and June. The year-on-year growth rate accelerated to 2.6% in November, the highest since August, from 0.1% in October, though still below +6.0% y/y in November 2024. Despite recent gains, the PHSI had fallen 36.7% since its October 2021 high of 125.1.

The m/m rise in November pending home sales coincided with a decline in the average 30-year mortgage rate to 6.24% in November, the lowest since September 2024, down from 6.25% in October and 6.35% in September. These rates, while below a peak of 7.62% in October 2023, had remained higher than a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales rose m/m in November across all four major regions. Sales in the West recovered 9.2% (2.4% y/y) in November, the first m/m increase since August, following a 1.4% decline in October. Sales in the South rose 2.4% (3.3% y/y), the fourth straight m/m rise, on top of a 2.7% October advance. Sales in the Northeast grew 1.8% (1.8% y/y), the third successive m/m increase, after a 2.3% October gain. Sales in the Midwest rose 1.3% (2.2% y/y), up for the third time in four months, after a 5.3% November rebound.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- PHSI +3.3% (+2.6% y/y) in Nov., driven by lower mortgage rates.
- Home sales m/m up in all four major regions, w/ the highest rate in the West (+9.2%).
- Home sales y/y up across all regions, w/ the highest rate in the South (+3.3%).

Economy in Brief: 2005

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MAPI Business Outlook Survey Lower in 4Q, 2004 Set Record

Empire State Index Eased

Empire State Index Eased

Japanese Consumers' Confidence Declines

Japanese Consumers' Confidence Declines

Moderate 2004 Inflation in Several Countries, Despite Stronger Energy Costs

U.S. Inventories Gain Strongest Since 1995

Industrial Production Surged