Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220f.jpg" align="left" border="0" height="265" width="353">
The German inflation picture remains a bit hotter than the ECB
would have liked. With headline PPI inflation up by 0.7% the core was
up by 0.4%. Over the past 12 months, headline MFG inflation is at 3.2%
the same as it was a year ago. Excluding energy MFG inflation fell to
2.4% Yr/Yr from 3% a year ago.

Sequential growth rates show that ex energy inflation is very
sticky above 2%. Meanwhile, headline inflation has continued to build
pressures in terms of these sequential rates.

Basic goods prices rose by 0.7% in January and by 2.6% Yr/Yr.
Capital goods prices rose by 0.1% and are higher Yr/Yr by 0.7%.
Consumer goods prices rose by 0.5% in January but were up a strong 3.9%
Yr/Yr. Energy prices were by 2.1% in January and by 5.9% Yr/Yr.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Germany
PPI</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="grey2">
<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>12-mo Year Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.7%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>6.9%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.0%</td>
</tr>
</tbody>
</table>
</body></html>

The German inflation picture remains a bit hotter than the ECB would have liked. With headline PPI inflation up by 0.7% the core was up by 0.4%. Over the past 12 months, headline MFG inflation is at 3.2% the same as it was a year ago. [...]

German PPI Inflation Shows Stubbornness

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220e.jpg" align="left" border="0" height="265" width="353">
French and Italian orders have shown some consistency in
recent years in their oscillations. Currently Italy&#8217;s trends are a bit
flatter and the French trends are still a bit stronger but both saw
clear evidence of losing momentum as 2008 approaches.

Over the last three months Italy&#8217;s orders are off at a 13.1%
pace; French orders are off at a 0.3% pace for the same period. Italy&#8217;s
foreign orders are off over 12, 6 and 3 months and are showing
progressively worse results. French foreign orders are up weakly over
12 months and are lower over 6 months but have made a minor rebound in
the recent three months. So while French foreign order trends are
better than Italian trends they are still not solid&#8230;For the fourth
quarter, French orders are dropping at a 3.8% pace Q/Q while Italy&#8217;s
orders are dropping at a 3.3% annual pace. France&#8217;s foreign orders are
holding up better with a mere 4% drop annualized in Q4 compared to
Italy where the annual rate of decline for foreign orders is 15%.

The Euro Area is now showing some signs of growth erosion and
we cannot tell if it is the strong euro at work or the effects of
financial distress and lowered expectations that are having the largest
impact. But France and Italy are showing signs of wear on tear in their
respective industrial sectors.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> Italy Orders</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</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>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-8.1%</td>
<td>3.9%</td>
<td>-5.8%</td>
<td>-34.6%</td>
<td>-23.1%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-4.1%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>-2.7%</td>
<td>0.2%</td>
<td>-0.7%</td>
<td>-12.0%</td>
<td>-4.0%</td>
<td>-2.8%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">French Orders</td>
</tr>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</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>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-1.0%</td>
<td>1.1%</td>
<td>0.5%</td>
<td>2.5%</td>
<td>-9.3%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
</body></html>

French and Italian orders have shown some consistency in recent years in their oscillations. Currently Italy’s trends are a bit flatter and the French trends are still a bit stronger but both saw clear evidence of losing momentum as [...]

New Industrial Orders in December Sag in Italy and in France

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220d.jpg" width="353">
Housing starts last month did rise slightly as expected to 1.012M units, up 0.8% from December. But the gain did little to dent m/m declines of 14.8% in December and 7.5% during November. As a result housing starts remained near the lows of 1991.
Last month, all of the increase in the total was due to a 22.3% gain in starts of condos &amp; coops.
Single family starts in January fell 5.2% after like declines during each of the prior six months. The decline to .743M was to the lowest level since January 1991. Since the peak in early 2006, starts of single family homes are down 59.6%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220c.jpg" width="353">
By region, single family starts in the Northeast rose by nearly one half m/m to the highest level since last June. That rise was countered by a 20.3% (-49.1% y/y) decline in the West. Single family starts in the Midwest were stable m/m (-31.1% y/y) and in the South, single family starts fell 9.8% (-32.3% y/y).
Building permits fell 3.0% (-35.1% y/y). Single-family permits fell 4.1% (-40.3% y/y).
Liquidity, Monetary Policy, and Financial Cycles from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci14-1.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</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">Total</td>
<td>1,012</td>
<td>1,004</td>
<td>-27.9%</td>
<td>1,344</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>743</td>
<td>784</td>
<td>-33.8%</td>
<td>1,039</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>269</td>
<td>220</td>
<td>-3.9%</td>
<td>304</td>
<td>338</td>
<td>354</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,048</td>
<td>1,080</td>
<td>-33.1%</td>
<td>1,371</td>
<td>1,842</td>
<td>2,159</td>
</tr>
</tbody>
</table>
</body>
</html>

Housing starts last month did rise slightly as expected to 1.012M units, up 0.8% from December. But the gain did little to dent m/m declines of 14.8% in December and 7.5% during November. As a result housing starts remained near the [...]

U.S. Housing Starts Remain Near 1991 Lows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220a.jpg" width="353">
The consumer price index (CPI-U) rose 0.4% last month, the same as during an upwardly revised December increase. (New seasonal factors were introduced for the last three years.) The latest increase was slightly ahead of expectations for a 0.3% rise. It also lifted the y/y comparison to its fastest since October 2005.
Less food &amp; energy, consumer prices rose 0.3% in January. That also was ahead of expectations for a 0.2% gain and it was the quickest since June of 2006. A Comparison of Measures of Core Inflation from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/07v13n3/0712rich.pdf">here</a>.
A faster 0.7% gain in food &amp; beverage prices was the strongest since early last year. Prices for meats poultry &amp; fish surged 0.8% (5.4% y/y) and prices for fruits &amp; vegetables jumped 2.2% (6.2% y/y). Cereal &amp; bakery product prices also have been quite strong and posted a 0.6% gain (5.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220b.jpg" width="353">
Core services prices rose 0.4% (3.4% y/y) and that was the fastest m/m rise since 2006. Shelter prices rose the same 0.3% (3.1% y/y) as during the prior two months. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, also rose 0.3% (2.8% y/y). Medical care services prices, however, were strong. The 0.6% increase doubled the December (5.7% y/y) rise. Tuition costs also posted a strong 0.6% (5.7% y/y) rise but the increase in public transportation prices cooled to 0.4% (5.8% y/y).
Core goods prices rose 0.2% and that was the fastest increase since early 2006. It mainly reflected a 0.4% rise in apparel prices that still left them down 0.2% y/y. Medical care commodity prices also were strong and rose 0.5% (2.5% y/y) but most other goods price increases were tame. Prices for new &amp; used motor vehicles fell 0.1% (0.0% y/y) during January and prices of household furnishings &amp; operation ticked up 0.1% (-0.5% y/y) after two months of having been unchanged.
Energy prices rose just 0.7% last month, well off the double digit rates of increase during the prior four months. The gain in gasoline prices eased to only 1.2% (34.5% y/y) and the weekly data already show a slight m/m decline this month. Prices for fuel oil &amp; other fuels, however, were quite strong and rose 3.7% (34.7% y/y) but natural gas &amp; electricity prices fell 0.5% (+3.% y/y). 
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose 0.5% (+3.9% y/y) and the core measure rose 0.3%, its fastest gain since October. This latter measure is similar to the core PCE price index but its treatment of housing price differs
Publishing Central Bank Interest Rate Forecasts from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-02.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Jan Y/Y&nbsp;</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&nbsp;</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.9%</td>
<td>4.4%&nbsp;</td>
<td>2.9%</td>
<td>3.2%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.5%&nbsp;</td>
<td>2.3%</td>
<td>2.5%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.2%&nbsp;</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Services less Energy</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.4%&nbsp;</td>
<td>3.4%</td>
<td>3.4%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>0.7%</td>
<td>1.7%</td>
<td>6.9%</td>
<td>20.4%&nbsp;</td>
<td>5.6%</td>
<td>11.0%</td>
<td>17.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp; Beverages</td>
<td>0.7%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>4.9%&nbsp;</td>
<td>4.0%</td>
<td>2.3%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>3.9%</td>
<td>2.5%</td>
<td>2.9%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>


</html>

The consumer price index (CPI-U) rose 0.4% last month, the same as during an upwardly revised December increase. (New seasonal factors were introduced for the last three years.) The latest increase was slightly ahead of expectations [...]

U.S. CPI Total Stable, Core Strongest Since 2006

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220a.jpg" align="left" border="0" height="265" width="353">
The consumer price index (CPI-U) rose 0.4%
last month, the same as during an upwardly revised December increase.
(New seasonal factors were introduced for the last three years.) The
latest increase was slightly ahead of expectations for a 0.3% rise. It
also lifted the y/y comparison to its fastest since October 2005.
Less food &amp; energy, consumer prices
rose 0.3% in January. That also was ahead of expectations for a 0.2%
gain and it was the quickest since June of 2006. A Comparison
of Measures of Core Inflation from the Federal Reserve Bank
of New York can be found <a href="http://www.newyorkfed.org/research/epr/07v13n3/0712rich.pdf">here</a>.
A faster 0.7% gain in food &amp; beverage prices
was the strongest since early last year. Prices for meats poultry
&amp; fish surged 0.8% (5.4% y/y) and prices for fruits &amp;
vegetables jumped 2.2% (6.2% y/y). Cereal &amp; bakery product
prices also have been quite strong and posted a 0.6% gain (5.7% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220b.jpg" align="right" border="0" height="265" width="353">
Core services prices rose 0.4% (3.4% y/y)
and that was the fastest m/m rise since 2006. Shelter prices rose the
same 0.3% (3.1% y/y) as during the prior two months. Owners equivalent
rent of primary residence, a measure not equivalent to other house
price measures, also rose 0.3% (2.8% y/y). Medical care services
prices, however, were strong. The 0.6% increase doubled the December
(5.7% y/y) rise. Tuition costs also posted a strong 0.6% (5.7% y/y)
rise but the increase in public transportation prices cooled to 0.4%
(5.8% y/y).
Core goods prices rose 0.2% and that was
the fastest increase since early 2006. It mainly reflected a 0.4% rise
in apparel prices that still left them down 0.2% y/y. Medical care
commodity prices also were strong and rose 0.5% (2.5% y/y) but most
other goods price increases were tame. Prices for new &amp; used
motor vehicles fell 0.1% (0.0% y/y) during January and prices of
household furnishings &amp; operation ticked up 0.1% (-0.5% y/y)
after two months of having been unchanged.
Energy prices rose just 0.7% last month,
well off the double digit rates of increase during the prior four
months. The gain in gasoline prices eased to only 1.2% (34.5% y/y) and
the weekly data already show a slight m/m decline this month. Prices
for fuel oil &amp; other fuels, however, were quite strong and rose
3.7% (34.7% y/y) but natural gas &amp; electricity prices fell 0.5%
(+3.% y/y). 
The chained CPI, which adjusts for shifts
in the mix of consumer purchases rose 0.5% (+3.9% y/y) and the core
measure rose 0.3%, its fastest gain since October. This latter measure
is similar to the core PCE price index but its treatment of housing
price differs


Publishing Central Bank Interest Rate Forecasts
from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-02.pdf">
here</a>.


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> </th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Jan Y/Y&nbsp;</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&nbsp;</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.9%</td>
<td>4.4%&nbsp;</td>
<td>2.9%</td>
<td>3.2%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.5%&nbsp;</td>
<td>2.3%</td>
<td>2.5%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.2%&nbsp;</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.4%&nbsp;</td>
<td>3.4%</td>
<td>3.4%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>0.7%</td>
<td>1.7%</td>
<td>6.9%</td>
<td>20.4%&nbsp;</td>
<td>5.6%</td>
<td>11.0%</td>
<td>17.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.7%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>4.9%&nbsp;</td>
<td>4.0%</td>
<td>2.3%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>3.9%</td>
<td>2.5%</td>
<td>2.9%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
U.S. Housing Starts Remain Near
1991 Lows 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 20, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220d.jpg" align="left" border="0" height="265" width="353">
Housing starts last month did rise slightly as expected to
1.012M units, up 0.8% from December. But the gain did little to dent
m/m declines of 14.8% in December and 7.5% during November. As a result
housing starts remained near the lows of 1991.
Last month, all of the increase in the total was due to a
22.3% gain in starts of condos &amp; coops.
Single family starts in January fell 5.2% after like declines
during each of the prior six months. The decline to .743M was to the
lowest level since January 1991. Since the peak in early
2006, starts of single family homes are down 59.6%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220c.jpg" align="right" border="0" height="265" width="353">
By region, single family starts in the Northeast rose by
nearly one half m/m to the highest level since last June. That rise was
countered by a 20.3% (-49.1% y/y) decline in the West. Single family
starts in the Midwest were stable m/m (-31.1% y/y) and in the South,
single family starts fell 9.8% (-32.3% y/y).
Building permits fell 3.0% (-35.1% y/y). Single-family permits
fell 4.1% (-40.3% y/y).
Liquidity, Monetary Policy, and Financial Cycles
from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci14-1.html">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing
Starts (000s, AR)</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">Total</td>
<td>1,012</td>
<td>1,004</td>
<td>-27.9%</td>
<td>1,344</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>743</td>
<td>784</td>
<td>-33.8%</td>
<td>1,039</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>269</td>
<td>220</td>
<td>-3.9%</td>
<td>304</td>
<td>338</td>
<td>354</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,048</td>
<td>1,080</td>
<td>-33.1%</td>
<td>1,371</td>
<td>1,842</td>
<td>2,159</td>
</tr>
</tbody>
</table>
New Industrial Orders in
DecemberSag in Italy and in France 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 20, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220e.jpg" align="left" border="0" height="265" width="353">
French and Italian orders have shown some consistency in
recent years in their oscillations. Currently Italy&#8217;s trends are a bit
flatter and the French trends are still a bit stronger but both saw
clear evidence of losing momentum as 2008 approaches.

Over the last three months Italy&#8217;s orders are off at a 13.1%
pace; French orders are off at a 0.3% pace for the same period. Italy&#8217;s
foreign orders are off over 12, 6 and 3 months and are showing
progressively worse results. French foreign orders are up weakly over
12 months and are lower over 6 months but have made a minor rebound in
the recent three months. So while French foreign order trends are
better than Italian trends they are still not solid&#8230;For the fourth
quarter, French orders are dropping at a 3.8% pace Q/Q while Italy&#8217;s
orders are dropping at a 3.3% annual pace. France&#8217;s foreign orders are
holding up better with a mere 4% drop annualized in Q4 compared to
Italy where the annual rate of decline for foreign orders is 15%.

The Euro Area is now showing some signs of growth erosion and
we cannot tell if it is the strong euro at work or the effects of
financial distress and lowered expectations that are having the largest
impact. But France and Italy are showing signs of wear on tear in their
respective industrial sectors.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Italy
Orders</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</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>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-8.1%</td>
<td>3.9%</td>
<td>-5.8%</td>
<td>-34.6%</td>
<td>-23.1%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-4.1%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>-2.7%</td>
<td>0.2%</td>
<td>-0.7%</td>
<td>-12.0%</td>
<td>-4.0%</td>
<td>-2.8%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">French
Orders</td>
</tr>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</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>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-1.0%</td>
<td>1.1%</td>
<td>0.5%</td>
<td>2.5%</td>
<td>-9.3%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
German PPI Inflation Shows
Stubbornness 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 20, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080220f.jpg" align="left" border="0" height="265" width="353">
The German inflation picture remains a bit hotter than the ECB
would have liked. With headline PPI inflation up by 0.7% the core was
up by 0.4%. Over the past 12 months, headline MFG inflation is at 3.2%
the same as it was a year ago. Excluding energy MFG inflation fell to
2.4% Yr/Yr from 3% a year ago.

Sequential growth rates show that ex energy inflation is very
sticky above 2%. Meanwhile, headline inflation has continued to build
pressures in terms of these sequential rates.

Basic goods prices rose by 0.7% in January and by 2.6% Yr/Yr.
Capital goods prices rose by 0.1% and are higher Yr/Yr by 0.7%.
Consumer goods prices rose by 0.5% in January but were up a strong 3.9%
Yr/Yr. Energy prices were by 2.1% in January and by 5.9% Yr/Yr.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Germany
PPI</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="grey2">
<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>12-mo Year Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.7%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>6.9%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.0%</td>
</tr>
</tbody>
</table>
UK Output Trends Decline as Orders
Hover Showing Small Persisting Gains 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 20, 2008


<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>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080219f.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s own leading index composite is demonstrating ongoing
weakness. The OECD&#8217;s take is that there is an improvement afoot.
Japan&#8217;s own index peaked in the first half of 2006 and has since then
been in a steady and rapid deteriorating phase. Not so for the OECD
measure. It went flat from early 2006 to early 2007 then fell sharply
but has since regained about half of its drop. These are two different
views of Japan&#8217;s future to be sure &#8211; as well as different views of its
present.
While the two indexes broadly tell the same story
historically,
currently their divergence has never been so great. The OECD index is a
bit smoother back through time. There have been disagreements in the
message of these two indexes before, but never one so stark with one
index rising while the other is falling. In the past they were not
directionally different as much as one simply lagged the other. 
Recently it seems that the OECD index has performed a bit
better. In
2000 it turned over to show weakness first. From 2001 to 2005 it
expanded steadily while Japan&#8217;s own index moved up to dwell at two
separate plateaus before expanding again. It is hard to argue with the
OECD&#8217;s recent plateauing then dropping as being a superior signal to
the Japan&#8217;s domestic LEI that has simply fallen so sharply that it
would be reasonable to look for even more disruption in the economy. But then maybe that bad news is
still in the pipeline?
On the other hand what rings false about the OECD index is
that,
apart from the recent episode of plateauing then dropping, it has the
index at its highest point in 15 years. The Japan&#8217;s domestic LEI has
the index level back below four past peaks going back to 1994. Those
are real differences, not just different assessments on the timing of
the economic rebound. 
 

We are left in a quandary by these discrepancies. Still it is
clear
that both reports are saying that Japan has taken some hit and the
uncertainty is about how soon or vigorous the recovery will be. But
they are also saying that there is some difference of opinion on how
hard Japan has been hit and that is an important element in assessing
the depth of the expected drop as well as the timing of recovery. As a
result we must be prepared to continue to watch Japan closely.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan's
LEI and its Trends </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Levels</td>
<td colspan="4">Growth (saar)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Dec-07</td>
<td> Nov-07</td>
<td> Oct-07</td>
<td> 3M0</td>
<td> 6M0</td>
<td> 12Mo</td>
<td> 24MO</td>
</tr>
<tr>
<td class="firstcol">LEI</td>
<td>97.3</td>
<td>97.8</td>
<td>100.3</td>
<td>-7.1%</td>
<td>-10.1%</td>
<td>-5.8%</td>
<td>-7.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">LEI: OECD</td>
<td>105.7</td>
<td>104.6</td>
<td>103.5</td>
<td>11.0%</td>
<td>-1.9%</td>
<td>-2.0%</td>
<td>-0.7%</td>
</tr>
<tr style="font-weight: bold;" class="even">
<td class="firstcol" colspan="8">OECD LEI
Details</td>
</tr>
<tr class="grey1">
<td class="firstcol">Share P</td>
<td>1.2</td>
<td>1.2</td>
<td>1.3</td>
<td>-12.7%</td>
<td>-27.0%</td>
<td>-8.2%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">Int Spread (chngs)</td>
<td>-0.5</td>
<td>-0.5</td>
<td>-0.4</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-0.4</td>
<td>-0.7</td>
</tr>
<tr class="grey1">
<td class="firstcol">Loan/Deposit</td>
<td>#N/A</td>
<td>1.1</td>
<td>1.1</td>
<td>-1.1%</td>
<td>1.5%</td>
<td>1.2%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">Dwellings Started</td>
<td>0.9</td>
<td>0.9</td>
<td>0.8</td>
<td>319.1%</td>
<td>-39.9%</td>
<td>-18.4%</td>
<td>-8.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">OT-MFG</td>
<td>#N/A</td>
<td>1.0</td>
<td>1.0</td>
<td>8.5%</td>
<td>6.3%</td>
<td>0.0%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Stocks/Deliv (M&amp;M)</td>
<td>#N/A</td>
<td>1.0</td>
<td>1.0</td>
<td>10.6%</td>
<td>6.6%</td>
<td>1.3%</td>
<td>2.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Exp&gt;Imp</td>
<td>-0.1</td>
<td>-0.1</td>
<td>-0.1</td>
<td>-40.9%</td>
<td>93.6%</td>
<td>-214.3%</td>
<td>-900.0%</td>
</tr>
<tr>
<td class="firstcol"> SmallBiz</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>7.1%</td>
<td>-6.4%</td>
<td>-8.1%</td>
<td>-5.2%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Grey shaded
rows are one month
behind current; Small Biz lags by SIX months</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s own leading index composite is demonstrating ongoing weakness. The OECD’s take is that there is an improvement afoot. Japan’s own index peaked in the first half of 2006 and has since then been in a steady and rapid [...]

Japan Offers Up some Mixed Signals From Two LEI Concepts

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080219c.jpg" align="left" border="0" height="265" width="353">
Japan reported a record current account surplus of 250,012 100
million yen or about $215 billion for the year 2007 about a week ago.
The current account balance for the past 12 years is shown in the first
chart.
Today Japan reported the breakdown of the current account
surplus by region for the third quarter of the year. Japan continues to
run its largest surplus on current account with the United States,
however, it's surplus with Western Europe appears to be growing faster
than that of the U.S. as can be seen in the second chart. This chart
also shows Japan's current account surplus with Central/South America,
which shows a small upward trend.
Japan has traditionally run a deficit with China, Indonesia
and the Middle East. The deficits with the Indonesia and the Middle
East are largely the as a result of Japan's dependence on imported oil.
These deficits have increased sharply with the rise in the price of
oil. The deficit with China, however, has decreased significantly this
year as can be seen in the third chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080219d.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080219e.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN
CURRENT ACCOUNT BY REGION (100 billion yen)&nbsp;</th>
<th scope="col">Q4 07</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">2007&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>57.6</td>
<td>68.6</td>
<td>56.0</td>
<td>68.3</td>
<td>250.0</td>
<td>198.5</td>
<td>182.6</td>
<td>186.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;United
States&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>n.a.</td>
<td>33.</td>
<td>26.9</td>
<td>37.4</td>
<td>n.a.</td>
<td>130.8</td>
<td>111.2</td>
<td>96.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Western
Europe</td>
<td>n.a.</td>
<td>21.6</td>
<td>19.4</td>
<td>24.3</td>
<td>n.a.</td>
<td>66.9</td>
<td>51.6</td>
<td>46.0</td>
</tr>
<tr>
<td class="firstcol">
&nbsp;&nbsp;Central/South America</td>
<td>n.a.</td>
<td>6.1</td>
<td>4.5</td>
<td>8.0</td>
<td>n.a.</td>
<td>21.8</td>
<td>19.1</td>
<td>11.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;China</td>
<td>n.a.</td>
<td>-2.0</td>
<td>-3.5</td>
<td>-4.2</td>
<td>n.a.</td>
<td>-22.0</td>
<td>-25.6</td>
<td>-14.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Indonesia</td>
<td>n.a.</td>
<td>-4.3</td>
<td>-4.0</td>
<td>-4.1</td>
<td>n.a.</td>
<td>-15.2</td>
<td>-9.1</td>
<td>-6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Middle
East&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>n.a.</td>
<td>-25.5</td>
<td>-23.8</td>
<td>-22.1</td>
<td>n.a.</td>
<td>-101.5</td>
<td>-74.1</td>
<td>-48.1</td>
</tr>
</tbody>
</table>
</body></html>

Japan reported a record current account surplus of 250,012 100 million yen or about $215 billion for the year 2007 about a week ago. The current account balance for the past 12 years is shown in the first chart. Today Japan reported [...]

Japan's Current Account Balances by Region

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080219a.jpg" width="353">
The U.S. government ran a budget surplus last month of $17.8B. The news did not, however, represent real improvement in the government&#39;s budget condition. The surplus shrank and was roughly half that during January of 2007 when a surplus of $38.2B. Typically a surplus is run during the month of January.
The shrinkage of the January surplus highlights a worsening of the budget condition. For the first four months of FY08 the government&#39;s budget deficit of $87.7B was roughly double the $42.2B during the first four months of FY07. The deterioration in the dollar value of the deficit highlights the projected deterioration as a percentage of the nominal value of GDP.
For the fiscal year to date, growth in federal receipts slowed to 3.3% which was one third the growth during the first four months of FY07. The weaker economy with its slower employment growth brought slower growth in individual income tax receipts (44% of total receipts); to 4.2% from 12.6%. Withheld income taxes grew 4.4%, a sharp slowdown from 11.2% last fiscal year, but the weaker stock market brought a more dramatic drop in the growth in non-withheld taxes; to 4.8% from 21.9% during the four months of FY07.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080219b.jpg" width="353">
Corporate income taxes (13% of total receipts) fell 2.5% as a result of the weakness in corporate profits. During FY07 they rose 16.4% during the first four months. Growth in employment &amp; general retirement contributions actually rose slightly to 5.8% from 4.0% but unemployment insurance receipts fell 6.0%, nearly twice the rate of decline in early FY07.
U.S. net outlays grew 8.3%, well up from FY07 but steady with prior years. Growth in defense spending (19% of total outlays) of 9.6% was roughly steady and Medicare expenditures (12% of outlays) fell 3.0%. Growth in social security spending (21% of outlays) held about steady at 5.7% but interest expense grew 20.3% with the rise in interest rates.
The Government&#39;s financial data is available in Haver&#39;s USECON database.
The Federal Reserve&#39;s Tools for Responding to Financial Disruptions is Friday&#39;s speech made by Federal Reserve Board Governor Frederic S. Mishkin and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080215a.htm"> here</a> .

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005 &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$17.839B</td>
<td>$48.261B</td>
<td>$38.236B (1/07)</td>
<td>-$162.8B</td>
<td>-$248.2B</td>
<td>-$318.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$255.2B</td>
<td>$277.0B</td>
<td>-2.1%</td>
<td>6.7%</td>
<td>11.8%</td>
<td>14.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$237.4B</td>
<td>$228.7B</td>
<td>6.7%</td>
<td>2.8%</td>
<td>7.4%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. government ran a budget surplus last month of $17.8B. The news did not, however, represent real improvement in the government's budget condition. The surplus shrank and was roughly half that during January of 2007 when a [...]

U.S. Budget Deficit Deeper: A Weaker Economy

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

Jump to:

German PPI Inflation Shows Stubbornness

New Industrial Orders in December Sag in Italy and in France

U.S. Housing Starts Remain Near 1991 Lows

U.S. CPI Total Stable, Core Strongest Since 2006

U.S. CPI Total Stable, Core Strongest Since 2006

Japan Offers Up some Mixed Signals From Two LEI Concepts

Japan's Current Account Balances by Region

U.S. Budget Deficit Deeper: A Weaker Economy