Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222a.jpg" align="left" border="0" height="265" width="353">
Rising order trends mask encroaching weakness.
Despite a sharp 3.6% drop in orders in December EMU orders are
still rising strongly over three months and a strong 8.5% in the
quarter. Order trends are even turning higher despite the sharp drop in
orders in December. But MFG sales already are very weak and are
declining in the quarter. Domestic orders are clearly weaker than
foreign orders. In the quarter domestic orders are up at nearly a 7%
pace and foreign orders are up at a nearly 14% pace. The country detail
shows that Germany is a major counterbalance to the overall results.
Germany&#8217;s orders are up by 20% in the quarter. France, Italy and the UK
are showing orders drop in the fourth quarter. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> E-zone
and UK Industrial Orders &amp; Sales Trends
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">%
m/m</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
06</td>
<td>Dec 
05</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area Detail</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG Sales</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>-0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Consumer goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Capital goods</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>2.1%</td>
<td>4.7%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Intermediate goods</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>8.3%</td>
<td>5.6%</td>
<td>6.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-4.6%</td>
<td>1.9%</td>
<td>4.5%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>7.4%</td>
<td>-0.7%</td>
<td>6.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-5.5%</td>
<td>3.6%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>-14.5%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>11.5%</td>
<td>13.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Countries:</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-2.2%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>22.8%</td>
<td>-3.3%</td>
<td>10.5%</td>
<td>8.7%</td>
<td>5.1%</td>
<td>20.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>-2.0%</td>
<td>-0.3%</td>
<td>2.2%</td>
<td>-0.3%</td>
<td>-7.0%</td>
<td>3.8%</td>
<td>2.7%</td>
<td>0.5%</td>
<td>-3.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>2.9%</td>
<td>-1.1%</td>
<td>-14.1%</td>
<td>-8.8%</td>
<td>1.6%</td>
<td>8.1%</td>
<td>3.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>5.2%</td>
<td>-4.2%</td>
<td>2.6%</td>
<td>14.0%</td>
<td>7.2%</td>
<td>13.9%</td>
<td>-2.8%</td>
<td>-2.6%</td>
<td>-20.6%</td>
</tr>
</tbody>
</table>
</body></html>

Rising order trends mask encroaching weakness. Despite a sharp 3.6% drop in orders in December EMU orders are still rising strongly over three months and a strong 8.5% in the quarter. Order trends are even turning higher despite the [...]

Euro Area Orders Drop Sharply in December

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222c.jpg" align="left" border="0" height="265" width="353">
During 4Q 2007, the Federal Reserve Board Reported that the
delinquency rate on all consumer loan &amp; leases jumped to 2.49%
from 2.13% during the third quarter. The latest reading was the highest
since early 2003, but that performance masks some the real troubles
being had in making payments.
The dollar value of these loans totaled a record $170 trillion
last quarter, more than double the level at the recent low during 2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222d.jpg" align="right" border="0" height="265" width="353">
Driving the rise were delinquent payments on residential real
estate loans. Delinquent payments on residential real estate
loans surged to 3.09% of the loans extended. The current rate
is the highest since 1991. Delinquencies on commercial real
estate loans, which had been relatively current, jumped. The
rate of 2.71% was the highest since late 1996 with a delinquency rate
of 2.71%.
The dollar value of those delinquent residential real estate
loans jumped to $68.4 trillion (+71.2% y/y), more than four times the
level ten years ago and 40% of the dollar value of late payments on
banks' books.
Delinquent payments on consumer loans also
rose sharply to a 3.39% rate versus 3.13% for the full year 2007.
Delinquent payments on credit card debt rose to
4.55%, 4.25% for the whole year. The rise for credit card debt was
larger from the low of 3.52% late in 2005.End of the Credit
Line is a 2006 article from the Federal Reserve Bank of
Minneapolis and it can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/06-07/credit.cfm">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222e.jpg" align="left" border="0" height="265" width="353">
The dollar value of those delinquent credit card payments
amounted to $17.4 trillion, nearly triple the low in 1993.
Delinquencies on C&amp;I loans rose slightly q/q to 1.35%
from 1.23% during 3Q, up slightly from 2006 but down from years
prior.The dollar values of these loans amounted to $18.1 trillion
during 4Q, up by more than one third from one year prior.
These data series are available in Haver's USECON
database.
Another Widow: The Term Auction Facility
from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20080301/cover.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">Loan
Delinquency Rate (%)</th>
<th scope="col">4Q '07</th>
<th scope="col">3Q '07</th>
<th scope="col">4Q '06</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Loan &amp; Leases</td>
<td>2.49</td>
<td>2.13</td>
<td>1.68</td>
<td>2.06</td>
<td>1.57</td>
<td>1.56</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Loans</td>
<td>3.39</td>
<td>3.17</td>
<td>2.93</td>
<td>3.13</td>
<td>2.90</td>
<td>2.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Credit Cards</td>
<td>4.55</td>
<td>4.34</td>
<td>3.92</td>
<td>4.25</td>
<td>4.01</td>
<td>3.70</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Real Estate Loans</td>
<td>2.88</td>
<td>2.40</td>
<td>1.67</td>
<td>2.27</td>
<td>1.48</td>
<td>1.37</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Residential</td>
<td>3.09</td>
<td>2.75</td>
<td>1.91</td>
<td>2.55</td>
<td>1.73</td>
<td>1.55</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Commercial</td>
<td>2.71</td>
<td>1.98</td>
<td>1.32</td>
<td>1.94</td>
<td>1.13</td>
<td>1.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Commercial &amp;
Industrial Loans</td>
<td>1.35</td>
<td>1.23</td>
<td>1.17</td>
<td>1.23</td>
<td>1.27</td>
<td>1.51</td>
</tr>
</tbody>
</table>
Euro Area Orders Drop Sharply
inDecember 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222a.jpg" align="left" border="0" height="265" width="353">
Rising order trends mask encroaching weakness.
Despite a sharp 3.6% drop in orders in December EMU orders are
still rising strongly over three months and a strong 8.5% in the
quarter. Order trends are even turning higher despite the sharp drop in
orders in December. But MFG sales already are very weak and are
declining in the quarter. Domestic orders are clearly weaker than
foreign orders. In the quarter domestic orders are up at nearly a 7%
pace and foreign orders are up at a nearly 14% pace. The country detail
shows that Germany is a major counterbalance to the overall results.
Germany&#8217;s orders are up by 20% in the quarter. France, Italy and the UK
are showing orders drop in the fourth quarter. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> E-zone
and UK Industrial Orders &amp; Sales Trends
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">%
m/m</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
06</td>
<td>Dec 
05</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area Detail</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG Sales</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>-0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Consumer goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Capital goods</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>2.1%</td>
<td>4.7%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Intermediate goods</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>8.3%</td>
<td>5.6%</td>
<td>6.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-4.6%</td>
<td>1.9%</td>
<td>4.5%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>7.4%</td>
<td>-0.7%</td>
<td>6.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-5.5%</td>
<td>3.6%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>-14.5%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>11.5%</td>
<td>13.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Countries:</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-2.2%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>22.8%</td>
<td>-3.3%</td>
<td>10.5%</td>
<td>8.7%</td>
<td>5.1%</td>
<td>20.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>-2.0%</td>
<td>-0.3%</td>
<td>2.2%</td>
<td>-0.3%</td>
<td>-7.0%</td>
<td>3.8%</td>
<td>2.7%</td>
<td>0.5%</td>
<td>-3.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>2.9%</td>
<td>-1.1%</td>
<td>-14.1%</td>
<td>-8.8%</td>
<td>1.6%</td>
<td>8.1%</td>
<td>3.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>5.2%</td>
<td>-4.2%</td>
<td>2.6%</td>
<td>14.0%</td>
<td>7.2%</td>
<td>13.9%</td>
<td>-2.8%</td>
<td>-2.6%</td>
<td>-20.6%</td>
</tr>
</tbody>
</table>
Business Climate Edges Lower in
France&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222b.jpg" align="left" border="0" height="265" width="353">
The INSEE industry climate index fell to 107 from 108. The
index stands in the 68th percentile of its range. The recent trend
rates a -14 and stands below its midpoint in the 43rd percentile of its
range. 
 

In the chart we plot the business indicator as an index and as
a percentage change from a year ago. On a percentage basis the level is
falling. On a level basis the erosion is minor. 
 

France has held up longer than most other EMU economies. Its
indicators currently stand at a still strong level but the newest
information is that some of this weakness is beginning to take a toll
in France. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> INSEE
Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="odd">
<td class="firstcol">Climate</td>
<td>107</td>
<td>108</td>
<td>109</td>
<td>110</td>
<td>68.0</td>
<td>64</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Production</td>
</tr>
<tr class="odd">
<td class="firstcol">Recent Trend</td>
<td>-14</td>
<td>-6</td>
<td>4</td>
<td>3</td>
<td>43.1</td>
<td>134</td>
<td>44</td>
<td>-58</td>
<td>102</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely trend</td>
<td>43</td>
<td>47</td>
<td>44</td>
<td>43</td>
<td>79.2</td>
<td>8</td>
<td>63</td>
<td>-33</td>
<td>96</td>
<td>8</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Orders/Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders &amp; Demand</td>
<td>-1</td>
<td>-1</td>
<td>1</td>
<td>4</td>
<td>70.1</td>
<td>46</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-14</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Orders &amp; Demand</td>
<td>1</td>
<td>0</td>
<td>6</td>
<td>4</td>
<td>66.3</td>
<td>67</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-10</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely Sales Prices Trend</td>
<td>17</td>
<td>12</td>
<td>12</td>
<td>10</td>
<td>85.1</td>
<td>12</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>1</td>
</tr>
</tbody>
</table>
EMU Flash PMIs are Weak;
Especially for Services 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222f.jpg" align="left" border="0" height="265" width="353">
EMU PMIs show continued weakness. 
 

The EMU PMIs were weak in February. The MFG index fell further
while the services barometer, already very weak, edged higher. The MFG
index is in the 12th percentile of its range over 24 months. Services
reside in the bottom 2 percent of their range.The MFG indexes have been
slipping since mid-2006. They fell to a lower plateau in early 2007
then fell sharply again as 2007 drew to a close. MFG has steadied above
its lowest pace around a MFG reading of 52.The service sector has
weakened on roughly the same profile except it did not rebound and
steady above its low as 2008 began. Services have made a small rebound
in February but continue to cling near the lower reaches of its 24
month range. Europe is continuing to look weak despite this small
up-tick in February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">NTC
PMIs for the Euro Area</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Feb-08</td>
<td>52.25</td>
<td>52.25</td>
</tr>
<tr>
<td class="firstcol">Jan-08</td>
<td>52.60</td>
<td>52.01</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>52.44</td>
<td>52.50</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>52.43</td>
<td>53.47</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>53.73</td>
<td>55.51</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">24-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>51.46</td>
<td>52.01</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>12.8%</td>
<td>2.6%</td>
</tr>
</tbody>
</table>
</body></html>

During 4Q 2007, the Federal Reserve Board Reported that the delinquency rate on all consumer loan & leases jumped to 2.49% from 2.13% during the third quarter. The latest reading was the highest since early 2003, but that performance [...]

U.S. Loan Delinquencies Up Across the Board

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221d.jpg" width="353">
The Philadelphia Federal Reserve Bank reported that it&#39;s Index of General Business Conditions in the manufacturing sector fell to -24.0 this month from -20.9 in January. The latest level was the lowest since the recession year 2001.
The index is a diffusion index for each component or series. It reflects the increase in activity reported less the decrease.
During the last ten years there has been a 59% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 42% correlation with q/q growth in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221e.jpg" width="353">
The decline in the overall index represented broad based declines in each of the sub indexes except new orders and the number of employees which ticked up. During the last ten years there has been a 75% correlation between the employment index and the three-month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index also fell slightly after strong up moves during the prior five months. During the last ten years there has been a 76% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months fell sharply to the lowest reading since 1990. Expectations for new orders, shipments and for the number of employees fell sharply.
Are Shocks to the Terms of Trade, Shocks to Productivity? from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/research/SR/SR391.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">&nbsp;</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Feb. &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-24.0</td>
<td>-20.9</td>
<td>0.3</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>46.6</td>
<td>&nbsp;49.8</td>
<td>&nbsp;18.8</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank reported that it's Index of General Business Conditions in the manufacturing sector fell to -24.0 this month from -20.9 in January. The latest level was the lowest since the recession year 2001. [...]

Philadelphia Fed Index Lowest Since 2001

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221f.jpg" width="353">
For January, the Conference Board reported that the composite index of leading economic indicators fell 0.1% after a revised 0.1% decline during December. The latest drop matched Consensus expectations. It was the fifth decline in the last six months and since the series&#39; peak last July it has fallen 2.0%.
For all of last year the leaders fell 0.4% and the six month growth rate, calculated as the latest month&#39;s reading divided by the average of the prior twelve months, was -4.0%, the lowest since early 2001.
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators index and the lagged change in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221g.jpg" width="353">
The breadth of one month gain amongst the 10 components of the leading index rose slightly to a break even 50.0%. Over a six month period, the breadth of gain amongst the leaders components cratered to 20%, equal to its lowest level since 2002.
Last month lower stock prices made the largest contribution to the decline in the overall leading index.
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.1% after a 0.1% December uptick. Over the last ten years there has been an 86% correlation between the y/y change in the coincident indicators and real GDP growth. Three of the four coincident series components rose very slightly and employment fell.
The lagging index was unchanged and the ratio of coincident to lagging indicators (a measure of economic excess) ticked up slightly but remained near its lowest since 1991. 
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-1.5%</td>
<td>-0.4%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>


</html>

For January, the Conference Board reported that the composite index of leading economic indicators fell 0.1% after a revised 0.1% decline during December. The latest drop matched Consensus expectations. It was the fifth decline in the [...]

U.S. Leading Economic Indicators Down

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221c.jpg" align="left" border="0" height="265" width="353">
French inflation is showing pressure. In January the Yr/Yr
HICP pace is up to 3.2% from 1.4% in the previous 12-month period. The
CPI excl food and energy rate is up to 2% from 1.4% a year ago. The
3-month CPI excl food and energy pace is a bit lower than it was over
six months, but it is still above the 2% mark. While the main CPI
categories show that 90% of them have inflation higher than it was a
year ago, 72% have higher inflation over six months that over 12-months
but only 54% have higher inflation over three months than over
6-months, Clothing and Communications inflation is cooling the fastest.
Education plus food and energy intensive categories show the most
inflation pressure. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> France HICP and CPI details</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">HICP Total</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>5.9%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Core&nbsp;</td>
<td>--</td>
<td>0.3%</td>
<td>0.3%</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>1.4%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">CPI</td>
</tr>
<tr class="grey2">
<td class="firstcol">All</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.6%</td>
<td style="color: red;">5.4%</td>
<td style="color: red;">4.0%</td>
<td>2.9%</td>
<td>1.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">CPI excl Food and Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.6%</td>
<td style="color: red;">2.8%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food</td>
<td>1.2%</td>
<td>0.6%</td>
<td>0.4%</td>
<td style="color: red;">8.8%</td>
<td style="color: red;">8.1%</td>
<td style="color: red;">4.4%</td>
<td>1.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Alcohol</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.8%</td>
<td style="color: red;">7.0%</td>
<td style="color: red;">4.5%</td>
<td>0.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>0.2%</td>
<td style="color: red;">0.6%</td>
<td>0.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Rent &amp; Utilities</td>
<td>0.5%</td>
<td>0.6%</td>
<td>1.1%</td>
<td style="color: red;">9.0%</td>
<td style="color: red;">6.7%</td>
<td style="color: red;">4.7%</td>
<td>3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Health Care</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td style="color: red;">0.4%</td>
<td style="color: red;">0.3%</td>
<td>0.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Transport</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.9%</td>
<td style="color: red;">13.0%</td>
<td style="color: red;">7.7%</td>
<td style="color: red;">6.1%</td>
<td>0.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Communication</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-2.8%</td>
<td style="color: red;">0.2%</td>
<td style="color: red;">-1.2%</td>
<td>-1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Recreation &amp; Culture</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.2%</td>
<td style="color: red;">-0.6%</td>
<td>-1.6%</td>
<td style="color: red;">-1.3%</td>
<td>-1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Education</td>
<td>0.5%</td>
<td>0.2%</td>
<td>0.6%</td>
<td style="color: red;">5.1%</td>
<td style="color: red;">3.4%</td>
<td style="color: red;">3.0%</td>
<td>2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.2%</td>
<td style="color: red;">3.3%</td>
<td>2.5%</td>
<td style="color: red;">2.8%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Other</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.3%</td>
<td style="color: red;">1.9%</td>
<td>1.9%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Diffusion</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>54.5%</td>
<td>72.7%</td>
<td>90.9%</td>
<td>--</td>
</tr>
<tr class="grey1">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

French inflation is showing pressure. In January the Yr/Yr HICP pace is up to 3.2% from 1.4% in the previous 12-month period. The CPI excl food and energy rate is up to 2% from 1.4% a year ago. The 3-month CPI excl food and energy [...]

French Inflation: Core and Headline Rates Move Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221a.jpg" width="353">
Initial claims for unemployment insurance fell 9,000 to 349,000 last week, but the prior week&#39;s level was revised up sharply. For February, claims so far are up 28,000, or 8.6%, from the January average. The latest weekly level remained near the highest since October of 2005.
The four-week moving average of initial claims, a measure which smoothes out most of the series&#39; w/w volatility, rose again to 360,500 (+9.2% y/y), the highest level since Summer of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221b.jpg" width="353">
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance rose 48,000 and reversed a 48,000 decline during the prior week. That decline was much deeper than reported initially. Insured unemployment stood at its highest level since Summer 2005. The figure provides some indication of workers&#39; ability to find employment.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment remained at 2.1% for the third consecutive week.
Minutes to the January meeting of the Federal Open Market Committee can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080220a.htm"> here</a>.
Recent Trends in Economic Volatility: Conference Summary from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-06.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">02/16/08</th>
<th scope="col">02/09/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;349</td>
<td>358</td>
<td>4.8%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,784</td>
<td>11.5%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance fell 9,000 to 349,000 last week, but the prior week's level was revised up sharply. For February, claims so far are up 28,000, or 8.6%, from the January average. The latest weekly level [...]

U.S. Weekly Initial Claims for Jobless Insurance Down, Revisions Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221f.jpg" align="left" border="0" height="265" width="353">
For January, the Conference Board reported that the composite
index of leading economic indicators fell 0.1% after a revised 0.1%
decline during December. The latest drop matched Consensus
expectations. It was the fifth decline in the last six months and since
the series' peak last July it has fallen 2.0%.
For all of last year the leaders fell 0.4% and the
six month growth rate, calculated as the latest month's reading divided
by the average of the prior twelve months, was -4.0%, the lowest since
early 2001.
During the last ten years there has been a 59% correlation
between the y/y change in the leading indicators index and the lagged
change in real GDP.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221g.jpg" align="right" border="0" height="265" width="353">
The breadth of one month gain amongst the 10 components of the
leading index rose slightly to a break even 50.0%. Over a six month
period, the breadth of gain amongst the leaders components cratered to
20%, equal to its lowest level since 2002.
Last month lower stock prices made the largest contribution to
the decline in the overall leading index.
The method of calculating the contribution to the leading
index from the spread between 10 year Treasury securities and the Fed
funds rate has been revised. A negative contribution will now occur
only when the spread inverts rather than when declining as in the past.
More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported
economic data series. Two series, orders for consumer goods and orders
for capital goods, are estimated.
The coincident indicators rose 0.1% after a 0.1% December
uptick. Over the last ten years there has been an 86% correlation
between the y/y change in the coincident indicators and real GDP
growth. Three of the four coincident series components rose very
slightly and employment fell.
The lagging index was unchanged and the ratio of coincident to
lagging indicators (a measure of economic excess) ticked up slightly
but remained near its lowest since 1991. 
Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


<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/BCI/BCI.HTM">Business
Cycle Indicators</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-1.5%</td>
<td>-0.4%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Lowest
Since 2001 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 21, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221d.jpg" align="left" border="0" height="265" width="353">
The Philadelphia Federal Reserve Bank reported that it's Index
of General Business Conditions in the manufacturing sector fell to
-24.0 this month from -20.9 in January. The latest level was the lowest
since the recession year 2001.
The index is a diffusion index for each component or series.
It reflects the increase in activity reported less the decrease.
During the last ten years there has been a 59% correlation
between the level of the Philadelphia Fed Business Conditions Index and
the three-month growth in factory sector industrial production. There
has been a 42% correlation with q/q growth in real GDP.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221e.jpg" align="right" border="0" height="265" width="353">
The decline in the overall index represented broad based
declines in each of the sub indexes except new orders and the number of
employees which ticked up. During the last ten years there has been a
75% correlation between the employment index and the three-month growth
in factory payrolls.
The business conditions index reflects a separate survey
question, not the sub indexes.
The prices paid index also fell slightly after strong up moves
during the prior five months. During the last ten years there has been
a 76% correlation between the prices paid index and the three-month
growth in the intermediate goods PPI. There has been an 85% correlation
with the change in core intermediate goods prices.
The separate index of expected business conditions in six
months fell sharply to the lowest reading since 1990. Expectations for
new orders, shipments and for the number of employees fell sharply.
Are Shocks to the Terms of Trade, Shocks to
Productivity? from the Federal Reserve Bank of Minneapolis
can be found <a href="http://www.minneapolisfed.org/research/SR/SR391.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">&nbsp;</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Feb. '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-24.0</td>
<td>-20.9</td>
<td>0.3</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>46.6</td>
<td>&nbsp;49.8</td>
<td>&nbsp;18.8</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
U.S. Weekly Initial Claims for
Jobless Insurance Down, Revisions Up 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 21, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221a.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance fell 9,000 to
349,000 last week, but the prior week's level was revised up sharply.
For February, claims so far are up 28,000, or 8.6%, from the January
average. The latest weekly level remained near the highest since
October of 2005.
The four-week moving average of initial claims, a measure
which smoothes out most of the series' w/w volatility, rose again to
360,500 (+9.2% y/y), the highest level since Summer of 2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221b.jpg" align="right" border="0" height="265" width="353">
A claims level below 400,000 typically has been associated
with growth in nonfarm payrolls. During the last ten years there has
been a (negative) 76% correlation between the level of initial claims
and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance rose 48,000 and
reversed a 48,000 decline during the prior week. That decline was much
deeper than reported initially. Insured unemployment stood at its
highest level since Summer 2005. The figure provides some indication of
workers' ability to find employment.
The continuing claims numbers lag the initial claims figures
by one week.
The insured rate of unemployment remained at 2.1% for the
third consecutive week.
Minutes to the January meeting of the Federal Open
Market Committee can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080220a.htm">
here</a>.
Recent Trends in Economic Volatility: Conference
Summary from the Federal Reserve Bank of San Francisco is
available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-06.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">02/16/08</th>
<th scope="col">02/09/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;349</td>
<td>358</td>
<td>4.8%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,784</td>
<td>11.5%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
French Inflation: Core andHeadline Rates Move Higher 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 21, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221c.jpg" align="left" border="0" height="265" width="353">
French inflation is showing pressure. In January the Yr/Yr
HICP pace is up to 3.2% from 1.4% in the previous 12-month period. The
CPI excl food and energy rate is up to 2% from 1.4% a year ago. The
3-month CPI excl food and energy pace is a bit lower than it was over
six months, but it is still above the 2% mark. While the main CPI
categories show that 90% of them have inflation higher than it was a
year ago, 72% have higher inflation over six months that over 12-months
but only 54% have higher inflation over three months than over
6-months, Clothing and Communications inflation is cooling the fastest.
Education plus food and energy intensive categories show the most
inflation pressure. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> France
HICP and CPI details</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">HICP Total</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>5.9%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Core&nbsp;</td>
<td>--</td>
<td>0.3%</td>
<td>0.3%</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>1.4%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">CPI</td>
</tr>
<tr class="grey2">
<td class="firstcol">All</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.6%</td>
<td style="color: red;">5.4%</td>
<td style="color: red;">4.0%</td>
<td>2.9%</td>
<td>1.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">CPI excl Food and Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.6%</td>
<td style="color: red;">2.8%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food</td>
<td>1.2%</td>
<td>0.6%</td>
<td>0.4%</td>
<td style="color: red;">8.8%</td>
<td style="color: red;">8.1%</td>
<td style="color: red;">4.4%</td>
<td>1.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Alcohol</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.8%</td>
<td style="color: red;">7.0%</td>
<td style="color: red;">4.5%</td>
<td>0.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>0.2%</td>
<td style="color: red;">0.6%</td>
<td>0.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Rent &amp; Utilities</td>
<td>0.5%</td>
<td>0.6%</td>
<td>1.1%</td>
<td style="color: red;">9.0%</td>
<td style="color: red;">6.7%</td>
<td style="color: red;">4.7%</td>
<td>3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Health Care</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td style="color: red;">0.4%</td>
<td style="color: red;">0.3%</td>
<td>0.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Transport</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.9%</td>
<td style="color: red;">13.0%</td>
<td style="color: red;">7.7%</td>
<td style="color: red;">6.1%</td>
<td>0.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Communication</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-2.8%</td>
<td style="color: red;">0.2%</td>
<td style="color: red;">-1.2%</td>
<td>-1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Recreation &amp; Culture</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.2%</td>
<td style="color: red;">-0.6%</td>
<td>-1.6%</td>
<td style="color: red;">-1.3%</td>
<td>-1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Education</td>
<td>0.5%</td>
<td>0.2%</td>
<td>0.6%</td>
<td style="color: red;">5.1%</td>
<td style="color: red;">3.4%</td>
<td style="color: red;">3.0%</td>
<td>2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.2%</td>
<td style="color: red;">3.3%</td>
<td>2.5%</td>
<td style="color: red;">2.8%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Other</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.3%</td>
<td style="color: red;">1.9%</td>
<td>1.9%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Diffusion</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>54.5%</td>
<td>72.7%</td>
<td>90.9%</td>
<td>--</td>
</tr>
<tr class="grey1">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
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background-color:#e2e2e2;
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</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220g.jpg" align="left" border="0" height="265" width="353">
The UK&#8217;s CBI report is a survey which reports purchaser type
survey data as net measures (net better Vs worse responses). The report
shows that output trends, while still showing expansion, have moved
substantially lower. Order trends have been hovering; they show small
net positive readings. This month the order series even ticked higher
to a net +3 from +2 in January. Output volume expected in the next
three months has improved a bit too. At +11 in February it is up from
+9 in January and +3 in December. Still, it is a reading that is still
below its 12-month average of 14. But prices are the real headline of
this report. Price pressures continue to rise. At +22 they are
accelerating and are above their 12-month average of 18. Prices for the
next 3 months stand in the 95th percentile of their range. This is
stronger than for orders or export orders where the rankings show them
in the top 79th to 88th percentile of their ranges. Output is only in
the top 30% of its range. While the BOE is cutting rates the output and
orders barometers in this report are still firm but price expectations
are pushing their limits. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">UK
Industrial Volume Data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>12-mo Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>2</td>
<td>2</td>
<td>8</td>
<td>-6</td>
<td>4</td>
<td>86%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-4</td>
<td>2</td>
<td>-4</td>
<td>-9</td>
<td>-3</td>
<td>87%</td>
<td>3</td>
<td>-50</td>
<td>53</td>
</tr>
<tr>
<td class="firstcol">Stocks: Final Goods</td>
<td>7</td>
<td>14</td>
<td>14</td>
<td>14</td>
<td>9</td>
<td>32%</td>
<td>26</td>
<td>-2</td>
<td>28</td>
</tr>
<tr>
<td class="firstcol">Output Volume: Next 3M</td>
<td>9</td>
<td>3</td>
<td>9</td>
<td>10</td>
<td>15</td>
<td>66%</td>
<td>28</td>
<td>-28</td>
<td>56</td>
</tr>
<tr>
<td class="firstcol">Averages Prices for Next 3M</td>
<td>21</td>
<td>15</td>
<td>21</td>
<td>14</td>
<td>18</td>
<td>93%</td>
<td>25</td>
<td>-30</td>
<td>55</td>
</tr>
<tr class="grey2">
<td colspan="10" class="firstcol">From end
2000</td>
</tr>
</tbody>
</table>
</body></html>

The UK’s CBI report is a survey which reports purchaser type survey data as net measures (net better Vs worse responses). The report shows that output trends, while still showing expansion, have moved substantially lower. Order trends [...]

UK Output Trends Decline as Orders Hover Showing Small Persisting Gains

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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Retail gasoline prices for all grades rose to an average $3.19 per gallon (0.3% y/y) in the week ended November 10 after easing to $3.15 in the previous week. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. Haver Analytics seasonally adjusts the retail price of regular grade gasoline. That price rose to $3.10 last week from $3.05 in the previous week. Diesel fuel prices rose to $3.84 per gallon last week (9.0% y/y) after increasing to $3.75 per gallon in the prior week.

The price of West Texas Intermediate crude oil fell to an average $60.08 per barrel (-16.1% y/y) in the week ended November 7 after improving to $60.70 per barrel in the prior week. Prices remained below a recent high of $74.17 during the third week of June. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $61.04 per barrel. The price of European Brent crude declined to $64.30 per barrel (-15.0% y/y) in the week of November 7 after rising to $65.02 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. Yesterday, the price was $63.86 per barrel.

Natural gas prices strengthened to an average $3.54/mmbtu (137.6% y/y) in the week ended November 7 after rising to $3.43/mmbtu in the prior week. The rise left prices at the highest level since the second week of April and well above the low of $1.40/mmbtu in the week of March 15, 2024. Yesterday, the price was $3.80 per mmbtu.

Gasoline demand declined 2.1% y/y in the four weeks ending October 31, following a 4.2% y/y decline in the prior four weeks. Demand for all petroleum products weakened 1.2% y/y in the four weeks ending October 31, after falling 0.9% y/y in the previous four-week period. Crude oil input to refineries declined 4.5% y/y in the four weeks ending October 31, after falling 1.7% y/y in the prior four weeks.

Gasoline inventories fell 2.5% y/y in the week ending October 31 following a 0.1% y/y slip in the prior week. Residual fuel oil inventories fell 7.1% y/y in the October 31 week after falling 10.0% y/y in the prior week. Working higher, crude oil inventories rose 1.9% y/y in the week of October 31 after increasing 1.7% y/y in the previous week.

Measured in days’ supply, gasoline inventories fell to 23.7 days in the week of October 31 from 24.3 days in the prior week. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil rose to 27.5 days in the week of October 31 from 26.7 days in the prior week. The supply remained below a recent high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices rise to four-week high.
- Crude oil prices decline.
- Natural gas prices move to highest level since April.
- Demand for gasoline & all petroleum products falls.

U.S. Energy Prices Remain Mixed in Latest Week

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The number of weekly mortgage loan edged 0.6% higher (73.7% y/y) during the week ended November 7 after falling 1.9% during the prior week and rising 7.1% one week earlier.

The effective interest rate on a 30-year fixed-rate mortgage rose to 6.52% after rough stability at 6.48% during the prior week. These rates stand below their January average of 7.20%. Rates on a 15-year fixed rate loan were 5.86% while interest rates on a 30-year JUMBO loan averaged 6.57%. Rates on a 5-year ARM eased to 5.82%.

Purchase loan applications last week increased 5.8% (29.6% y/y) after falling 0.6% in the prior week and rising 4.5% one week earlier. Applications to refinance an existing loan declined 3.4% (+146.5% y/y) following a 2.8% decline in the prior week and rising 9.3% one week earlier.

Loans to refinance an existing mortgage fell to 55.6% of total applications from 57.0% in the prior week. The percentage of total loans that were ARMs declined to 7.8% from 8.7% one week earlier.

The average loan size declined to $396,500 last week from $414,900. The size of conventional purchase loans declined to $431,400 from $435,100 while the size of refinanced loans declined to $368,700 from $399,700 one week earlier.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Mortgage interest rates rise to three-week high.
- Purchase loans surge but refinancing declines.

U.S. Weekly Mortgage Applications & Interest Rates Edge Higher

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Global money supply growth boomed during COVID. Then growth ‘busted,’ decelerating sharply with the United States, the United Kingdom, and the European Monetary Union all showing monetary contraction to some degree throughout 2023. The only country to buck this trend was Japan which had a more modest boost in money supply during COVID and then more modest growth rates that decelerated and continued to gravitate toward near zero growth, until recently, when Japanese money supply started to accelerate very slightly.

**Euro Area**
Recent trends show nominal money growth in the euro area decelerating slightly from a 2.5% growth rate over 12 months to growth rates around 2% or a bit lower over three months and six months. Monetary union private credit has also decelerated from a growth rate of 2.4% over 12 months to 1.7% over six months and to a 1.3% annual rate over three-months.

**United States, United Kingdom, and Japan**
Nominal money supply growth in the U.S. remains fairly steady, growing 4.5% over 12 months and an annual rate of 5 to 5.4% over three months and six months. The U.K. nominal money supply growth is 3.5% over 12 months, 2.8% at an annual rate over six months and 3.6% at an annual rate over three months. Japan's M2 plus CDs has been stepping up its growth from 1.6% over 12 months to a 2% pace over six months to 4% at an annual rate over three months. Nominal money supply growth is mostly fluctuating between steady and stronger across these monetary center countries.

**Real balances in EMU**
Real money balances, however, are looking significantly weaker. In the European monetary Union, real M2 grows 0.3% over 12 months and then its growth rate slips to -0.6% at an annual rate over both three months and six months. Private credit in the euro area rises by 0.1% over 12 months, declines by 0.5% at an annual rate over six months, and declines at a 1.3% annual rate over three months. Real credit is weakening.

**More real balances**
In the U.S., real money supply growth is fluctuating, growing at 1.4% over 12 months, stepping up to 2.3% over six months and back to a 1.4% annual rate over three months. U.K. real money balances are simply shrinking at a -0.6% annual rate over 12 months and a -0.7% annual rate over three months. In Japan, real money balances are actually accelerating; real money growth is -1.3% over 12 months, which rises to plus 0.4% over six months with an annual rate of 2.9% at an annual rate over three months.


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**Global monetary growth conditions**
Global monetary conditions simply don't show a great deal of change over the last year. The perception is that nominal money growth has been relatively stable; however, we can see that real money growth and real credit growth are declining in the euro area and in the U.K. Real balances are growing at a relatively modest rate but also accelerating in Japan. On the whole, money supply doesn't seem to be playing a significant role in charting a new path for monetary policy- except perhaps in Japan.

Global Money Supplies Deliver Growth-Rate Plateau

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: 2008

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Euro Area Orders Drop Sharply in December

U.S. Loan Delinquencies Up Across the Board

Philadelphia Fed Index Lowest Since 2001

U.S. Leading Economic Indicators Down

French Inflation: Core and Headline Rates Move Higher

U.S. Weekly Initial Claims for Jobless Insurance Down, Revisions Up

U.S. Leading Economic Indicators Down

UK Output Trends Decline as Orders Hover Showing Small Persisting Gains