Tom Moeller

During early February, the University of Michigan's consumer sentiment index fell a hard 11.2% from the January average to a level of 69.6. A reading of 76 had been expected. It was the largest m/m decline since 2005 and it was to the [...]

Michigan Consumer Sentiment Dropped Hard

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214f.jpg" width="353">
The latest figures from the Commerce Department indicate that total business inventory accumulation in December of 0.6% followed a 0.4% November rise. The three month change in inventories of 4.5% (AR) was down from a 4.9% rate of accumulation during 3Q. The deceleration was not, however, quite as drastic as indicated by the 1.2 percentage point subtraction inventories made from economic growth, indicated in the advance read of 4Q GDP. 
Retail inventories fell 0.1% during December following a revised 0.3% November decline. Inventories of motor vehicles fell 1.6% in December and the three month change swung to -8.2% (AR) from an 18.5% rate of accumulation during 3Q. Inventories excluding autos rose 0.7% in December (3.2% y/y) and the rate of accumulation last quarter nearly tripled that in 3Q. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214e.jpg" width="353">
The acceleration was due to building materials which grew 0.3% in December but rose at a 6.8% rate in 4Q versus a 1.4% rate of decline during 3Q. Furniture inventories fell 0.5% (+4.8% y/y) after a 0.9% November drop and the three month change fell to 2.8% (AR) from 10.4% in 3Q. At clothing &amp; accessory stores December inventories rose 0.5% after two months of modest decline. The three month rate held steady last quarter with 3Q at roughly unchanged. Inventories at general merchandise stores rose 0.9% in December and recouped about half of a November decline. For the quarter decumulation held steady with 3Q at a 2.5% rate.
Wholesale inventories jumped 1.1% after a 0.8% November surge. Petroleum inventories skyrocketed 9.2%, more than double the November rise. Less petroleum wholesale inventories rose 0.9% but the three month change fell to 5.3% (AR) from 7.4% during 3Q. During the last ten years there has been a 59% correlation between the annual change in wholesale inventories les petroleum and the change in merchandise imports.
Factory inventories increased 0.8% after a firm 0.7% rise during November. The three month growth in factory inventories accelerated to 6.7% from 2.5% during 3Q. Some of that acceleration owed to petroleum refineries, but excluding petroleum factory inventories still rose 5.8% (AR), nearly triple the 3Q rise.
Business sales fell 0.5% (+6.0% y/y) due to declines in wholesale sales and factory shipments. The decline lifted the ratio of inventories to sales off its lowest level since early 2006.

<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/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">December</th>
<th scope="col">November</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>0.6%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>4.0%</td>
<td>5.8%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>2.9%</td>
<td>2.9%</td>
<td>3.2%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.7%</td>
<td>-0.4%</td>
<td>3.2%</td>
<td>3.2%</td>
<td>4.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.1%</td>
<td>0.8%</td>
<td>6.1%</td>
<td>6.1%</td>
<td>8.5%</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.8%</td>
<td>0.7%</td>
<td>3.6%</td>
<td>3.6%</td>
<td>6.4%</td>
<td>8.9%</td>
</tr>
</tbody>
</table>
</body>
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The latest figures from the Commerce Department indicate that total business inventory accumulation in December of 0.6% followed a 0.4% November rise. The three month change in inventories of 4.5% (AR) was down from a 4.9% rate of [...]

U.S. Business Inventory Accumulation Down in 4Q Due To Autos

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214d.jpg" width="353">
Initial claims for jobless insurance slipped another 9,000 to 348,000 last week after the prior week&#39;s 21,000 decline. For February, claims so far are up 26,000, or 8.0%, 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 347,250 (+5.6% y/y), the highest level since late 2005.
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 slipped 9,000 after a downwardly revised jump of 60,000 during the prior week. The figure provides some indication of workers&#39; ability to find employment but here again difficulties of seasonal adjustment this time of year are great.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment held at 2.1% for the second week.
Business Volatility, Job Destruction and Unemployment from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/economics/conferences/0711/haltiwanger.pdf">here</a>.
A Minimum Wager from the Federal Reserve Bank of Minneapolis is available <a href="http://www.minneapolisfed.org/pubs/fedgaz/07-03/wage.cfm">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">02/08/08</th>
<th scope="col">02/01/07</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;348</td>
<td>357</td>
<td>-2.2%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,761</td>
<td>8.3%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
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Initial claims for jobless insurance slipped another 9,000 to 348,000 last week after the prior week's 21,000 decline. For February, claims so far are up 26,000, or 8.0%, from the January average. The latest weekly level remained near [...]

U.S. Weekly Initial Jobless Insurance Claims Slipped, Monthly Rose

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214c.jpg" align="left" border="0" height="265" width="353">
The U.S. foreign trade deficit in December narrowed sharply to
$58.8B from an unrevised $63.1B during November. The figure compared to
Consensus expectations for a deficit of $61.4B and it pulled the annual
deficit for 2007 to $771.6B, its lowest since 2004.
For December U.S. exports jumped 1.5%, the largest monthly
increase since July. Strong economies abroad and the lower value of the
dollar helped exports during all of last year to rise 12.2% after a
12.7% gain in 2006 and a 10.9% rise in 2005.
Exports of goods surged 1.9% in December (14.5% y/y) and for
the full year rose 12.2%. Growth in exports of foods, feeds &amp;
beverages slipped 1.7% in December but for the year this was the
strongest export category with a 27.7% rise. Exports of industrial
supplies &amp; materials also were strong last year and rose 14.3%.
During December exports of capital goods surged 5.2% to finish a year
of 7.8% growth after a 14.2% jump in 2006. Exports of civilian aircraft
rose 20.8% during all of last year while exports of computers jumped
18.3%.Nonauto consumer goods exports also were strong in December. They
rose 4.6% and were firm all year with a 12.6% increase. That was
similar to the gains during the prior three years.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214b.jpg" align="right" border="0" height="265" width="353">
U.S. exports of services slipped 0.3% in December but finished
a year of 11.8% growth. That annual gain was paced by 14.1% growth in
travel exports and a 12.1% rise in passenger fares.
Overall imports fell 1.1% in December and the annual gain of
5.9% was the weakest since 2002. Higher oil prices did raise petroleum
imports by 4.2% in December and by 9.5% for the year, however, that was
the weakest annual rise since 2002. Petroleum imports in constant
dollars fell as the per barrel price of crude petroleum rose 11.1% for
the year. That followed price gains of 23.2% in 2006 and of 36.3% in
2005. Imports of nonauto consumer goods rose 7.3% last year, the
weakest gain since 2001 and capital goods imports increased 6.3% for
the year, the weakest gain since 2003.
The U.S. trade deficit in goods with China during 2007
deepened to $25.6B from $23.3B. Imports rose 11.7% and exports rose
18.2%, the weakest rise since 2002.
The Economy and Financial Markets is
today's testimony by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20080214a.htm">
here</a>.
Today's speech by Treasury Secretary Henry M. Paulson, Jr., Economy
and Financial Markets, can be found <a href="http://www.ustreas.gov/press/releases/hp828.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/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></th>
<th scope="col">December</th>
<th scope="col">November</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">U.S. Trade Deficit</td>
<td>$58.8B</td>
<td>$63.1B</td>
<td>$60.3B 
(12/06)</td>
<td>$711.6</td>
<td>$758.5</td>
<td>$714.4B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp;
Services</td>
<td>1.5%</td>
<td>0.5%</td>
<td>13.6%</td>
<td>12.2%</td>
<td>12.7%</td>
<td>10.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports - Goods &amp;
Services</td>
<td>-1.1%</td>
<td>2.9%</td>
<td>8.4%</td>
<td>5.9%</td>
<td>10.4%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.2%</td>
<td>16.3%</td>
<td>52.4%</td>
<td>9.5%</td>
<td>20.1%</td>
<td>39.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>-2.8%</td>
<td>0.9%</td>
<td>0.5%</td>
<td>4.6%</td>
<td>9.1%</td>
<td>10.3%</td>
</tr>
</tbody>
</table>
</body></html>

The U.S. foreign trade deficit in December narrowed sharply to $58.8B from an unrevised $63.1B during November. The figure compared to Consensus expectations for a deficit of $61.4B and it pulled the annual deficit for 2007 to [...]

U.S. Trade Deficit Narrowed Sharply

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214a.jpg" align="left" border="0" height="265" width="353">
GDP growth is slowing on a broad front. German GDP is slowing
year/year for four straight quarters. For most other countries Q3
growth brought an up tick that quarter and interrupted what would have
been similar long strings of GDP deceleration. GDP growth year/year in
2007-Q4 slowed everywhere except in the Netherlands. Quarter-to-quarter
GDP growth rates slowed everywhere except Japan.

With the European releases on GDP we have no detail on GDP,
except for France. There weaker consumption and inventory reduction
brought GDP growth lower. We have seen the reduction in the growth
rates of the industrial sectors in recent months even though some of
the industrial indicators have displayed some firmer signals. The EU
sentiment indexes have marked this slowdown correctly.

The fact of the matter is that GDP here and now is slowing.
The recent rhetoric of the ECB is sounding much less certain and much
more like it is about to really keep its options open. Remember that
when the credit problems hit in the US at first the Fed did not think
that they would be so bad. Now UBS, a large Swiss bank, has just
reported larger subprime losses than expected and more exposure to
leverage type loans of the variety that have fallen into disregard.

German unions (IG Metall) are using feisty rhetoric to justify
pay hikes even saying that ECB is wrong and that policy should be
accommodative. Professional EMU forecasters (see ECB survey) now look
for weaker growth and more inflation in the Euro Area. Eurogroup
Chairman Jean-Claude Juncker has admitted that the situation is &#8216;not
completely clear any more&#8217;. Guy Quaden, ECB council member, has said
that the economy could decelerate faster than the ECB previously
thought. All of this suggests a situation, outlook and policy in flux.


<table border="0" cellspacing="0" width="100%">
</table>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> Euro Area and Main G-10 Country GDP Results</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Quarter over quarter</td>
<td colspan="4">Year/Year</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>Q4-07</td>
<td>Q3-07</td>
<td>Q2-07</td>
<td>Q4-07</td>
<td>Q3-07</td>
<td>Q2-07</td>
<td>Q1-07</td>
</tr>
<tr>
<td class="firstcol">EMU-13</td>
<td>1.7%</td>
<td>3.1%</td>
<td>1.2%</td>
<td style="color: red;">2.3%</td>
<td>2.7%</td>
<td style="color: red;">2.5%</td>
<td style="color: red;">3.2%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>1.4%</td>
<td>3.2%</td>
<td>1.4%</td>
<td style="color: red;">2.1%</td>
<td>2.2%</td>
<td style="color: red;">1.3%</td>
<td style="color: red;">1.9%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>1.1%</td>
<td>2.7%</td>
<td>0.7%</td>
<td style="color: red;">1.7%</td>
<td style="color: red;">2.5%</td>
<td style="color: red;">2.6%</td>
<td style="color: red;">3.7%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>--</td>
<td>1.7%</td>
<td>0.2%</td>
<td>--</td>
<td>1.9%</td>
<td style="color: red;">1.8%</td>
<td style="color: red;">2.4%</td>
</tr>
<tr>
<td class="firstcol">The Netherlands</td>
<td>4.7%</td>
<td>7.7%</td>
<td>1.1%</td>
<td>4.3%</td>
<td>3.9%</td>
<td style="color: red;">2.4%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>2.5%</td>
<td>2.5%</td>
<td>3.3%</td>
<td style="color: red;">2.9%</td>
<td style="color: red;">3.2%</td>
<td>3.2%</td>
<td style="color: red;">3.2%</td>
</tr>
<tr>
<td class="firstcol">US</td>
<td>0.6%</td>
<td>4.9%</td>
<td>3.8%</td>
<td style="color: red;">2.5%</td>
<td>2.8%</td>
<td>1.9%</td>
<td style="color: red;">1.5%</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>3.7%</td>
<td>1.3%</td>
<td>-1.4%</td>
<td style="color: red;">1.8%</td>
<td>1.9%</td>
<td style="color: red;">1.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
</body></html>

GDP growth is slowing on a broad front. German GDP is slowing year/year for four straight quarters. For most other countries Q3 growth brought an up tick that quarter and interrupted what would have been similar long strings of GDP [...]

GDP Slows on a Very Broad Front

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214c.jpg" align="left" border="0" height="265" width="353">
The U.S. foreign trade deficit in December narrowed sharply to
$58.8B from an unrevised $63.1B during November. The figure compared to
Consensus expectations for a deficit of $61.4B and it pulled the annual
deficit for 2007 to $771.6B, its lowest since 2004.
For December U.S. exports jumped 1.5%, the largest monthly
increase since July. Strong economies abroad and the lower value of the
dollar helped exports during all of last year to rise 12.2% after a
12.7% gain in 2006 and a 10.9% rise in 2005.
Exports of goods surged 1.9% in December (14.5% y/y) and for
the full year rose 12.2%. Growth in exports of foods, feeds &amp;
beverages slipped 1.7% in December but for the year this was the
strongest export category with a 27.7% rise. Exports of industrial
supplies &amp; materials also were strong last year and rose 14.3%.
During December exports of capital goods surged 5.2% to finish a year
of 7.8% growth after a 14.2% jump in 2006. Exports of civilian aircraft
rose 20.8% during all of last year while exports of computers jumped
18.3%.Nonauto consumer goods exports also were strong in December. They
rose 4.6% and were firm all year with a 12.6% increase. That was
similar to the gains during the prior three years.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214b.jpg" align="right" border="0" height="265" width="353">
U.S. exports of services slipped 0.3% in December but finished
a year of 11.8% growth. That annual gain was paced by 14.1% growth in
travel exports and a 12.1% rise in passenger fares.
Overall imports fell 1.1% in December and the annual gain of
5.9% was the weakest since 2002. Higher oil prices did raise petroleum
imports by 4.2% in December and by 9.5% for the year, however, that was
the weakest annual rise since 2002. Petroleum imports in constant
dollars fell as the per barrel price of crude petroleum rose 11.1% for
the year. That followed price gains of 23.2% in 2006 and of 36.3% in
2005. Imports of nonauto consumer goods rose 7.3% last year, the
weakest gain since 2001 and capital goods imports increased 6.3% for
the year, the weakest gain since 2003.
The U.S. trade deficit in goods with China during 2007
deepened to $25.6B from $23.3B. Imports rose 11.7% and exports rose
18.2%, the weakest rise since 2002.
The Economy and Financial Markets is
today's testimony by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20080214a.htm">
here</a>.
Today's speech by Treasury Secretary Henry M. Paulson, Jr., Economy
and Financial Markets, can be found <a href="http://www.ustreas.gov/press/releases/hp828.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/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></th>
<th scope="col">December</th>
<th scope="col">November</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">U.S. Trade Deficit</td>
<td>$58.8B</td>
<td>$63.1B</td>
<td>$60.3B 
(12/06)</td>
<td>$711.6</td>
<td>$758.5</td>
<td>$714.4B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp;
Services</td>
<td>1.5%</td>
<td>0.5%</td>
<td>13.6%</td>
<td>12.2%</td>
<td>12.7%</td>
<td>10.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports - Goods &amp;
Services</td>
<td>-1.1%</td>
<td>2.9%</td>
<td>8.4%</td>
<td>5.9%</td>
<td>10.4%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.2%</td>
<td>16.3%</td>
<td>52.4%</td>
<td>9.5%</td>
<td>20.1%</td>
<td>39.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>-2.8%</td>
<td>0.9%</td>
<td>0.5%</td>
<td>4.6%</td>
<td>9.1%</td>
<td>10.3%</td>
</tr>
</tbody>
</table>
U.S. Weekly Initial Jobless
Insurance Claims Slipped, Monthly Rose 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 14, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214d.jpg" align="left" border="0" height="265" width="353">
Initial claims for jobless insurance slipped another 9,000 to
348,000 last week after the prior week's 21,000 decline. For February,
claims so far are up 26,000, or 8.0%, 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
347,250 (+5.6% y/y), the highest level since late 2005.
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 slipped 9,000
after a downwardly revised jump of 60,000 during the prior week. The
figure provides some indication of workers' ability to find employment
but here again difficulties of seasonal adjustment this time of year
are great.
The continuing claims numbers lag the initial claims figures
by one week.
The insured rate of unemployment held at 2.1% for the second
week.
Business Volatility, Job Destruction and Unemployment
from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/economics/conferences/0711/haltiwanger.pdf">here</a>.
A Minimum Wager from the Federal Reserve
Bank of Minneapolis is available <a href="http://www.minneapolisfed.org/pubs/fedgaz/07-03/wage.cfm">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">02/08/08</th>
<th scope="col">02/01/07</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;348</td>
<td>357</td>
<td>-2.2%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,761</td>
<td>8.3%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
U.S. Business Inventory
Accumulation Down in 4Q Due To Autos 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 14, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214f.jpg" align="left" border="0" height="265" width="353">
The latest figures from the Commerce Department indicate that
total business inventory accumulation in December of 0.6% followed a
0.4% November rise. The three month change in inventories of 4.5% (AR)
was down from a 4.9% rate of accumulation during 3Q. The deceleration
was not, however, quite as drastic as indicated by the 1.2 percentage
point subtraction inventories made from economic growth, indicated in
the advance read of 4Q GDP. 
 

Retail inventories fell 0.1% during December following a
revised 0.3% November decline. Inventories of motor vehicles
fell 1.6% in December and the three month change swung to -8.2% (AR)
from an 18.5% rate of accumulation during 3Q. Inventories excluding
autos rose 0.7% in December (3.2% y/y) and the rate of accumulation
last quarter nearly tripled that in 3Q. 
 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214e.jpg" align="right" border="0" height="265" width="353">
The acceleration was due to building materials which grew 0.3%
in December but rose at a 6.8% rate in 4Q versus a 1.4% rate of decline
during 3Q. Furniture inventories fell 0.5% (+4.8% y/y) after a 0.9%
November drop and the three month change fell to 2.8% (AR) from 10.4%
in 3Q. At clothing &amp; accessory stores December inventories rose
0.5% after two months of modest decline. The three month rate held
steady last quarter with 3Q at roughly unchanged. Inventories at
general merchandise stores rose 0.9% in December and recouped about
half of a November decline. For the quarter decumulation held steady
with 3Q at a 2.5% rate.
Wholesale inventories jumped 1.1% after a 0.8% November surge.
Petroleum inventories skyrocketed 9.2%, more than double the November
rise. Less petroleum wholesale inventories rose 0.9% but the three
month change fell to 5.3% (AR) from 7.4% during 3Q. During the last ten
years there has been a 59% correlation between the annual change in
wholesale inventories les petroleum and the change in merchandise
imports.
Factory inventories increased 0.8% after a firm 0.7% rise
during November. The three month growth in factory inventories
accelerated to 6.7% from 2.5% during 3Q. Some of that acceleration owed
to petroleum refineries, but excluding petroleum factory inventories
still rose 5.8% (AR), nearly triple the 3Q rise.
Business sales fell 0.5% (+6.0% y/y) due to declines in
wholesale sales and factory shipments. The decline lifted the ratio of
inventories to sales off its lowest level since early 2006.

<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/@ED/@ED06/@ED0601/@ED0601.HTM">Business
Inventories</a></th>
<th scope="col">December</th>
<th scope="col">November</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>0.6%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>4.0%</td>
<td>5.8%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>2.9%</td>
<td>2.9%</td>
<td>3.2%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Autos</td>
<td>0.7%</td>
<td>-0.4%</td>
<td>3.2%</td>
<td>3.2%</td>
<td>4.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.1%</td>
<td>0.8%</td>
<td>6.1%</td>
<td>6.1%</td>
<td>8.5%</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.8%</td>
<td>0.7%</td>
<td>3.6%</td>
<td>3.6%</td>
<td>6.4%</td>
<td>8.9%</td>
</tr>
</tbody>
</table>
GDP Slows on a Very Broad Front by <a href="/comment/Brusca.html">Robert
Brusca</a> February 14, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080214a.jpg" align="left" border="0" height="265" width="353">
GDP growth is slowing on a broad front. German GDP is slowing
year/year for four straight quarters. For most other countries Q3
growth brought an up tick that quarter and interrupted what would have
been similar long strings of GDP deceleration. GDP growth year/year in
2007-Q4 slowed everywhere except in the Netherlands. Quarter-to-quarter
GDP growth rates slowed everywhere except Japan.

With the European releases on GDP we have no detail on GDP,
except for France. There weaker consumption and inventory reduction
brought GDP growth lower. We have seen the reduction in the growth
rates of the industrial sectors in recent months even though some of
the industrial indicators have displayed some firmer signals. The EU
sentiment indexes have marked this slowdown correctly.

The fact of the matter is that GDP here and now is slowing.
The recent rhetoric of the ECB is sounding much less certain and much
more like it is about to really keep its options open. Remember that
when the credit problems hit in the US at first the Fed did not think
that they would be so bad. Now UBS, a large Swiss bank, has just
reported larger subprime losses than expected and more exposure to
leverage type loans of the variety that have fallen into disregard.

German unions (IG Metall) are using feisty rhetoric to justify
pay hikes even saying that ECB is wrong and that policy should be
accommodative. Professional EMU forecasters (see ECB survey) now look
for weaker growth and more inflation in the Euro Area. Eurogroup
Chairman Jean-Claude Juncker has admitted that the situation is &#8216;not
completely clear any more&#8217;. Guy Quaden, ECB council member, has said
that the economy could decelerate faster than the ECB previously
thought. All of this suggests a situation, outlook and policy in flux.


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Euro
Area and Main G-10 Country GDP Results</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Quarter over quarter</td>
<td colspan="4">Year/Year</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>Q4-07</td>
<td>Q3-07</td>
<td>Q2-07</td>
<td>Q4-07</td>
<td>Q3-07</td>
<td>Q2-07</td>
<td>Q1-07</td>
</tr>
<tr>
<td class="firstcol">EMU-13</td>
<td>1.7%</td>
<td>3.1%</td>
<td>1.2%</td>
<td style="color: red;">2.3%</td>
<td>2.7%</td>
<td style="color: red;">2.5%</td>
<td style="color: red;">3.2%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>1.4%</td>
<td>3.2%</td>
<td>1.4%</td>
<td style="color: red;">2.1%</td>
<td>2.2%</td>
<td style="color: red;">1.3%</td>
<td style="color: red;">1.9%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>1.1%</td>
<td>2.7%</td>
<td>0.7%</td>
<td style="color: red;">1.7%</td>
<td style="color: red;">2.5%</td>
<td style="color: red;">2.6%</td>
<td style="color: red;">3.7%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>--</td>
<td>1.7%</td>
<td>0.2%</td>
<td>--</td>
<td>1.9%</td>
<td style="color: red;">1.8%</td>
<td style="color: red;">2.4%</td>
</tr>
<tr>
<td class="firstcol">The Netherlands</td>
<td>4.7%</td>
<td>7.7%</td>
<td>1.1%</td>
<td>4.3%</td>
<td>3.9%</td>
<td style="color: red;">2.4%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>2.5%</td>
<td>2.5%</td>
<td>3.3%</td>
<td style="color: red;">2.9%</td>
<td style="color: red;">3.2%</td>
<td>3.2%</td>
<td style="color: red;">3.2%</td>
</tr>
<tr>
<td class="firstcol">US</td>
<td>0.6%</td>
<td>4.9%</td>
<td>3.8%</td>
<td style="color: red;">2.5%</td>
<td>2.8%</td>
<td>1.9%</td>
<td style="color: red;">1.5%</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>3.7%</td>
<td>1.3%</td>
<td>-1.4%</td>
<td style="color: red;">1.8%</td>
<td>1.9%</td>
<td style="color: red;">1.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080213e.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s consumer confidence survey did not used to be monthly.
That is why the chart shows its past as a quarterly report represented
by unconnected dots co-joined with its new form in which the dots are
connected month-to-month. Based on a full sample of observations back
to 1988 the current Consumer confidence readings are very weak. Based
on the data from 2004 onward when monthly reporting kicked in these are
the worst levels for all of the components that this report has seen.
But in its broader historic context, while overall livelihood is nearly
at an all-time low, employment is still above mid range in its 54th
percentile. Willingness to buy durable goods is weak in the bottom 25
percentile of its range. The same relative position is true of expected
income growth. People assess the value of their assets as in about the
bottom third of its historic range. 
 

Clearly Japan is undergoing some difficulties. The consumer is
still very concerned about the future. While the OECD leading
indicators show Japan in an upswing of sorts, Japan&#8217;s own indicators
continue to show the economy bogged down with some conditions still
worsening. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Japan
Consumer Confidence </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Monthly</td>
<td colspan="3">Change over</td>
<td colspan="2">Percentile of range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3-mos</td>
<td>6-mos</td>
<td>12-Mos</td>
<td>Since 2004</td>
<td>Since 1988</td>
</tr>
<tr>
<td class="firstcol">Overall Livelihood</td>
<td>34.9</td>
<td>37.0</td>
<td>41.0</td>
<td>-7.3</td>
<td>-7.5</td>
<td>-8.6</td>
<td>0.0</td>
<td>0.0</td>
</tr>
<tr>
<td class="firstcol">Income growth</td>
<td>39.6</td>
<td>40.7</td>
<td>42.2</td>
<td>-2.8</td>
<td>-2.6</td>
<td>-2.5</td>
<td>0.0</td>
<td>26.1</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>40.6</td>
<td>43.1</td>
<td>45.3</td>
<td>-5.8</td>
<td>-8.4</td>
<td>-8.4</td>
<td>0.0</td>
<td>59.7</td>
</tr>
<tr>
<td class="firstcol">Willing to buy Durable Goods</td>
<td>37.0</td>
<td>38.4</td>
<td>42.8</td>
<td>-8.5</td>
<td>-9.4</td>
<td>-11.9</td>
<td>0.0</td>
<td>27.3</td>
</tr>
<tr>
<td class="firstcol">Value of Assets</td>
<td>40.8</td>
<td>42.4</td>
<td>44.6</td>
<td>-3.4</td>
<td>-5.9</td>
<td>-4.7</td>
<td>0.0</td>
<td>40.1</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">For
two-person households; *
Percentiles since Mar 2004 when series became monthly or full period</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s consumer confidence survey did not used to be monthly. That is why the chart shows its past as a quarterly report represented by unconnected dots co-joined with its new form in which the dots are connected month-to-month. [...]

Japan's Consumer Confidence Very Weak

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080213d.jpg" align="left" border="0" height="265" width="353">
All EMU industrial sectors are seeing a considerable decline
in their rates of growth for industrial output. Capital goods has been
a strong sector in Europe and we have seen orders for capital goods
holding up especially in Germany. But on an EMU-wide basis capital
goods output is now declining over three months and its growth rate
year over year is declining as well. Consumer goods output has never
really been strong in this recovery and now it is showing signs of
decay from a low growth level. For the quarter industrial output is off
by about one percentage point. 
 

Among countries Germany is the strongest but even its growth
rates show a deceleration in IP. France (excluding construction) is
holding up a bit better than Germany, but with a weaker Yr/Yr rate of
growth. Italy&#8217;s output shows a deep year/year decline for output. Spain
shows a shallow Yr/Yr decline. The UK has been pretty flat for most of
the past year. 
 

For Q4 2007 Germany has the strongest contribution from IP at
3.4% Spain is next at 2.9% France is third at 1.1%. Italy has a
strongly negative -10.4% IP contraction in Q4. The UK has a small 0.5%
subtraction as IP sides in the fourth quarter. 
 

Despite some stirring the Zew Survey for Germany we also saw
that the Zew current conditions assessment is sliding. A pick up in
sentiment for the future hangs on some rate cuts by the Fed, the
potential for more and a US stimulus package that has just been passed
into law. But the future remains cloudy and current conditions are
still very weak, and in some cases, getting weaker. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Euro Area
and UK IP and MFG </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Dec-07</td>
<td>Dec-07</td>
<td>Dec-07</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area Detail</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>
<td>Q-2-Date</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>0.6%</td>
<td>0.2%</td>
<td>1.3%</td>
<td>1.1%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.1%</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>-2.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>0.0%</td>
<td>-1.9%</td>
<td>-0.1%</td>
<td>-7.8%</td>
<td>-4.9%</td>
<td>-4.0%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-0.4%</td>
<td>0.8%</td>
<td>0.2%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>0.6%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.2%</td>
<td>-1.5%</td>
</tr>
<tr>
<td>Capital</td>
<td>-1.0%</td>
<td>-0.2%</td>
<td>1.0%</td>
<td>-0.7%</td>
<td>2.4%</td>
<td>2.5%</td>
<td>0.5%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Main
Euro Area Countries
and UK IP in MFG</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>105.2</td>
<td>105.2</td>
<td>105.2</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: MFG</td>
<td>1-Mo%</td>
<td>1-Mo%</td>
<td>1-Mo%</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Q-2-Date</td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>0.9%</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>3.0%</td>
<td>6.1%</td>
<td>5.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">France: IP excl Construction</td>
<td>0.7%</td>
<td>-1.7%</td>
<td>2.0%</td>
<td>3.9%</td>
<td>3.3%</td>
<td>1.2%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.5%</td>
<td>-1.7%</td>
<td>-0.8%</td>
<td>-11.5%</td>
<td>-6.7%</td>
<td>-6.4%</td>
<td>-10.8%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-1.5%</td>
<td>-6.7%</td>
<td>10.2%</td>
<td>5.5%</td>
<td>-3.3%</td>
<td>-0.3%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>-0.8%</td>
<td>0.0%</td>
<td>-0.5%</td>
</tr>
</tbody>
</table>
</body></html>

All EMU industrial sectors are seeing a considerable decline in their rates of growth for industrial output. Capital goods has been a strong sector in Europe and we have seen orders for capital goods holding up especially in Germany. [...]

IP Sinking in All Sectors

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:

Michigan Consumer Sentiment Dropped Hard

U.S. Business Inventory Accumulation Down in 4Q Due To Autos

U.S. Weekly Initial Jobless Insurance Claims Slipped, Monthly Rose

U.S. Trade Deficit Narrowed Sharply

GDP Slows on a Very Broad Front

U.S. Trade Deficit Narrowed Sharply

Japan's Consumer Confidence Very Weak

IP Sinking in All Sectors