Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204e.jpg" align="left" border="0" height="265" width="353">PPI Trends. 


PPI trends are accelerating for the headline measure as well
as for key country level headlines for inflation. In the Euro area inflation continues to flare for energy and
for MFG goods more generally. Capital goods inflation has remained
subdued at a low of 1.5% Yr/Yr pace. Consumer goods inflation has
backed off its highs but is still strong at 3.9% Yr/Yr. Intermediate
goods inflation has worked its way lower as well. Inflation ex-energy
has come back down to 2.1%, just a small step over the 2% rate that the
ECB has set as its overall inflation ceiling for the Euro area-wide
HICP. In that respect inflation is beginning to behave. Once energy
prices stop boosting headline inflation there is every reason to
believe that the overall rate will revert to the core.
By country&#8230; 



For Germany, Italy and France, while headline inflation is
clearly over the top, ex-energy inflation shows hopeful trends, for
Germany and Italy, ex-energy inflation is at a 1.4% pace over three
months and is below the 2% over the three- and six-month horizons. In
France, the ex-energy inflation rate is at 2.2% above the 2% headline
ceiling pace but in a mode of deceleration. The UK shows that over the top inflation is still
accelerating. At 3.6% ex-energy inflation is over the top as well and
roughly stable at that pace making the BOE&#8217;s task difficult.&nbsp;Summing up 


On balance there is reason for some optimism since the
ex-energy measures are in better shape than the headline inflation
rates, except for the UK. Ex-energy rates are decelerating as well and
in the case of Germany and Italy they already are well below the 2%
top-allowable pace for inflation generally. This progress may be enough
to keep the ECB on hold and waiting for these core trends to take root.
In time it should dominate the now higher headline rates of inflation
across the Euro area nations as oil prices settle lower in the wake of
the global slowing in growth. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> Euro Area and UK PPI Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Ezone-13</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Total excl Constructions</td>
<td>0.1%</td>
<td>0.9%</td>
<td style="color: red;">6.8%</td>
<td style="color: red;">4.9%</td>
<td style="color: red;">4.3%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>2.5%</td>
<td>3.1%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>1.0%</td>
<td>1.5%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.3%</td>
<td>0.3%</td>
<td>4.8%</td>
<td style="color: red;">5.3%</td>
<td style="color: red;">3.9%</td>
<td>1.5%</td>
</tr>
<tr class="even">
<td class="firstcol">Intermediate &amp; Capital
Goods</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.7%</td>
<td>1.0%</td>
<td>2.7%</td>
<td>4.4%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>0.1%</td>
<td>3.4%</td>
<td style="color: red;">23.2%</td>
<td style="color: red;">13.0%</td>
<td style="color: red;">8.3%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.0%</td>
<td>0.8%</td>
<td style="color: red;">5.3%</td>
<td>4.3%</td>
<td style="color: red;">4.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.1%</td>
<td>0.8%</td>
<td style="color: red;">4.8%</td>
<td style="color: red;">2.7%</td>
<td>2.5%</td>
<td>4.4%</td>
</tr>
<tr>
<td class="firstcol">Germany excl Energy</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>1.4%</td>
<td>1.4%</td>
<td>2.2%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>0.2%</td>
<td>0.8%</td>
<td style="color: red;">6.8%</td>
<td style="color: red;">5.6%</td>
<td style="color: red;">4.5%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">France excl Energy</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-0.1%</td>
<td>1.1%</td>
<td style="color: red;">6.4%</td>
<td style="color: red;">5.4%</td>
<td>4.6%</td>
<td>5.2%</td>
</tr>
<tr>
<td class="firstcol">Italy excl Energy</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>1.9%</td>
<td>3.0%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>0.5%</td>
<td>2.9%</td>
<td style="color: red;">23.8%</td>
<td style="color: red;">15.2%</td>
<td style="color: red;">4.0%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">UK excl Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td style="color: red;">3.6%</td>
<td>3.4%</td>
<td style="color: red;">3.5%</td>
<td>3.1%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">E-zone 13 Harmonized PPI excluding
Construction</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany,</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

PPI Trends. PPI trends are accelerating for the headline measure as well as for key country level headlines for inflation.In the Euro area inflation continues to flare for energy and for MFG goods more generally. Capital goods [...]

PPI Main Sector Trends Still Excessive But Lose Some Momentum

Tom Moeller

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204a.jpg" width="353">
During December, the value of construction put in place fell 1.1% after a downwardly revised 0.4% November dip. The latest decline was the third consecutive monthly drop and it finished a year where activity fell 2.7%, the largest y/y drop since 1991.
Deep recession in the housing industry weighed on residential building and dropped construction activity by 2.8% m/m after a huge 3.0% plunge during November. The annual decline of 18.3% in residential building was a record. Construction activity on new single family units was off 5.4% in December and by 27.3% for the entire year. Building activity on multi-family units also fell by a sharp 1.9% and by 6.5% for the year. Spending on improvements registered the only m/m increase in December with a 1.0% rise that limited the drop in activity to 0.3% for the year.
Housing and the &quot;R&quot; Word from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20080201/cover.pdf"> here</a> .
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204b.jpg" width="353">
Firm gains in nonresidential building activity continued in December to cushion the downside in overall building spending. Nonresidential building activity rose 1.3% in December for the fifth straight strong monthly gain. It raised spending by 18.2% for the year after a another double digit rise in 2006. Building in the lodging area rose a huge 62.9% during all of last year while office construction surged 20.1%. Multi-unit retail (shopping malls) rose 15.3% after gains of 28.0% and of 20.9% during the two prior years and commercial building activity surged 13.5%.
The bright spots last year in the nonresidential area also were a 20.4% gain in education and an 11.6% rise in the health care industry. Spending in the factory sector also rose by 9.2% last year after a 14.4% 2006 gain &amp; a 26.6% 2005 surge. Spending in the transportation area increased 8.3% on the heels of a 12.2% rise during 2006.
Public construction spending also was strong last year and rose 12.5%. Construction on highways &amp; streets rose 7.6% after increases of 11.9% and 8.8% during the two prior years. The value of construction on highways &amp; streets is nearly one third of the value of total public construction spending. Construction spending in education area also surged by 12.8% last year after strong gains during the two prior years while spending on health care facilities jumped 28.5%.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">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>-1.1%</td>
<td>-0.4%</td>
<td>-2.3%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.0%</td>
<td>-1.0%</td>
<td>-6.1%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.8%</td>
<td>-3.0%</td>
<td>-20.4%</td>
<td>-18.3%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.3%</td>
<td>1.8%</td>
<td>20.4%</td>
<td>18.2%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-1.5%</td>
<td>1.3%</td>
<td>10.1%</td>
<td>12.5%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
</body>
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During December, the value of construction put in place fell 1.1% after a downwardly revised 0.4% November dip. The latest decline was the third consecutive monthly drop and it finished a year where activity fell 2.7%, the largest y/y [...]

U.S. Construction Spending Decline Largest Since 1991

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204d.jpg" width="353">
U.S. sales of light vehicles in January fell 6.3% m/m to a 15.24M unit annual selling rate, according to the Autodata Corporation. That rate of sales was the lowest since October of 2005. After two years when sales fell 2.2% in 2007 and 2.5% in 2006, sales started 2008 5.8% below the 2007 average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204c.jpg" width="353">
Sales of domestically made light vehicles fell 3.8% last month after a 0.6% dip in December. Sales of U.S. made cars dropped 3.8% after the 4.8% December decline. Sales of domestically made cars also dropped 3.8% after a 4.8% m/m December decline while sales of domestically made light trucks also fell 3.8%. That gave back all of a 2.9% December gain.
Sales of imported light vehicles plunged 13.6% to 3.57M units, the lowest since early 2006. Sales of imported autos were off 15.4% m/m while sales of imported light trucks dropped 10.6%.
Import&#39;s share of the U.S. light vehicle market fell back to 23.5% from a record 24.6% for of last year.
Economy in Slower Traffic Through 2008 from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2007_241a.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">January</th>
<th scope="col">&nbsp;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>15.24</td>
<td>16.27</td>
<td>-8.5%</td>
<td>16.18</td>
<td>16.55</td>
<td>16.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.22</td>
<td>7.82</td>
<td>-5.7%</td>
<td>7.58</td>
<td>7.77</td>
<td>7.65</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>5.01</td>
<td>5.21</td>
<td>-2.2%</td>
<td>5.07</td>
<td>5.31</td>
<td>5.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>2.21</td>
<td>2.62</td>
<td>-12.9%</td>
<td>2.51</td>
<td>2.45</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>8.02</td>
<td>8.44</td>
<td>-10.8%</td>
<td>8.60</td>
<td>8.78</td>
<td>9.32</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>6.66</td>
<td>6.92</td>
<td>-10.4%</td>
<td>7.12</td>
<td>7.42</td>
<td>8.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.36</td>
<td>1.52</td>
<td>-12.5%</td>
<td>1.48</td>
<td>1.37</td>
<td>1.20</td>
</tr>
</tbody>
</table>
</body>
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U.S. sales of light vehicles in January fell 6.3% m/m to a 15.24M unit annual selling rate, according to the Autodata Corporation. That rate of sales was the lowest since October of 2005. After two years when sales fell 2.2% in 2007 [...]

U.S. Vehicle Sales in January Lowest in Over Two Years

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204a.jpg" align="left" border="0" height="265" width="353">

During December, the value of construction put in place fell
1.1% after a downwardly revised 0.4% November dip. The latest decline
was the third consecutive monthly drop and it finished a year where
activity fell 2.7%, the largest y/y drop since 1991.
Deep recession in the housing industry weighed on residential
building and dropped construction activity by 2.8% m/m after a huge
3.0% plunge during November. The annual decline of 18.3% in residential
building was a record. Construction activity on new single family units
was off 5.4% in December and by 27.3% for the entire year. Building
activity on multi-family units also fell by a sharp 1.9% and by 6.5%
for the year. Spending on improvements registered the only m/m increase
in December with a 1.0% rise that limited the drop in activity to 0.3%
for the year.
Housing and the "R" Word from the Federal
Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20080201/cover.pdf">here</a>
.
During the last twenty years there has been an 84% correlation
between the q/q change in the value of residential building and its
contribution to growth in real GDP.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204b.jpg" align="right" border="0" height="265" width="353">
Firm gains in nonresidential building activity continued in
December to cushion the downside in overall building spending.
Nonresidential building activity rose 1.3% in December for the fifth
straight strong monthly gain. It raised spending by 18.2% for the year
after a another double digit rise in 2006. Building in the lodging area
rose a huge 62.9% during all of last year while office construction
surged 20.1%. Multi-unit retail (shopping malls) rose 15.3% after gains
of 28.0% and of 20.9% during the two prior years and commercial
building activity surged 13.5%.
The bright spots last year in the nonresidential area also
were a 20.4% gain in education and an 11.6% rise in the health care
industry. Spending in the factory sector also rose by 9.2% last year
after a 14.4% 2006 gain &amp; a 26.6% 2005 surge. Spending in the
transportation area increased 8.3% on the heels of a 12.2% rise during
2006.
Public construction spending also was strong last year and
rose 12.5%. Construction on highways &amp; streets rose 7.6% after
increases of 11.9% and 8.8% during the two prior years. The value of
construction on highways &amp; streets is nearly one third of the
value of total public construction spending. Construction spending in
education area also surged by 12.8% last year after strong gains during
the two prior years while spending on health care facilities jumped
28.5%.
These more detailed categories represent the Census Bureau&#8217;s
reclassification of construction activity into end-use groups. Finer
detail is available for many of the categories; for instance,
commercial construction is shown for Automotive sales and parking
facilities, drugstores, building supply stores, and both commercial
warehouses and mini-storage facilities. Note that start dates vary for
some seasonally adjusted line items in 2000 and 2002 and that
constant-dollar data are no longer computed. 



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</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>-1.1%</td>
<td>-0.4%</td>
<td>-2.3%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.0%</td>
<td>-1.0%</td>
<td>-6.1%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.8%</td>
<td>-3.0%</td>
<td>-20.4%</td>
<td>-18.3%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.3%</td>
<td>1.8%</td>
<td>20.4%</td>
<td>18.2%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-1.5%</td>
<td>1.3%</td>
<td>10.1%</td>
<td>12.5%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
U.S. Vehicle Sales in January
Lowest in Over Two Years 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 4, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204d.jpg" align="left" border="0" height="265" width="353">
U.S. sales of light vehicles in January fell 6.3% m/m to a
15.24M unit annual selling rate, according to the Autodata Corporation.
That rate of sales was the lowest since October of 2005. After two
years when sales fell 2.2% in 2007 and 2.5% in 2006, sales started 2008
5.8% below the 2007 average.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204c.jpg" align="right" border="0" height="265" width="353">
Sales of domestically made light vehicles fell
3.8% last month after a 0.6% dip in December. Sales of U.S. made cars
dropped 3.8% after the 4.8% December decline. Sales of domestically
made cars also dropped 3.8% after a 4.8% m/m December decline while
sales of domestically made light trucks also fell 3.8%. That gave back
all of a 2.9% December gain.
Sales of imported light vehicles plunged
13.6% to 3.57M units, the lowest since early 2006. Sales of imported
autos were off 15.4% m/m while sales of imported light trucks dropped
10.6%.
Import's share of the U.S. light vehicle
market fell back to 23.5% from a record 24.6% for of last year.
Economy in Slower Traffic Through 2008 from
the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2007_241a.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light
Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">January</th>
<th scope="col">&nbsp;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>15.24</td>
<td>16.27</td>
<td>-8.5%</td>
<td>16.18</td>
<td>16.55</td>
<td>16.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.22</td>
<td>7.82</td>
<td>-5.7%</td>
<td>7.58</td>
<td>7.77</td>
<td>7.65</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>5.01</td>
<td>5.21</td>
<td>-2.2%</td>
<td>5.07</td>
<td>5.31</td>
<td>5.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>2.21</td>
<td>2.62</td>
<td>-12.9%</td>
<td>2.51</td>
<td>2.45</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>8.02</td>
<td>8.44</td>
<td>-10.8%</td>
<td>8.60</td>
<td>8.78</td>
<td>9.32</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>6.66</td>
<td>6.92</td>
<td>-10.4%</td>
<td>7.12</td>
<td>7.42</td>
<td>8.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>1.36</td>
<td>1.52</td>
<td>-12.5%</td>
<td>1.48</td>
<td>1.37</td>
<td>1.20</td>
</tr>
</tbody>
</table>
PPI Main Sector Trends
StillExcessive But Lose Some Momentum 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 4, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204e.jpg" align="left" border="0" height="265" width="353">PPI Trends. 

PPI trends are accelerating for the headline measure as well
as for key country level headlines for inflation. 
In the Euro area inflation continues to flare for energy and
for MFG goods more generally. Capital goods inflation has remained
subdued at a low of 1.5% Yr/Yr pace. Consumer goods inflation has
backed off its highs but is still strong at 3.9% Yr/Yr. Intermediate
goods inflation has worked its way lower as well. Inflation ex-energy
has come back down to 2.1%, just a small step over the 2% rate that the
ECB has set as its overall inflation ceiling for the Euro area-wide
HICP. In that respect inflation is beginning to behave. Once energy
prices stop boosting headline inflation there is every reason to
believe that the overall rate will revert to the core.

By country&#8230; 


For Germany, Italy and France, while headline inflation is
clearly over the top, ex-energy inflation shows hopeful trends, for
Germany and Italy, ex-energy inflation is at a 1.4% pace over three
months and is below the 2% over the three- and six-month horizons. In
France, the ex-energy inflation rate is at 2.2% above the 2% headline
ceiling pace but in a mode of deceleration. 
The UK shows that over the top inflation is still
accelerating. At 3.6% ex-energy inflation is over the top as well and
roughly stable at that pace making the BOE&#8217;s task difficult.&nbsp;
Summing up 


On balance there is reason for some optimism since the
ex-energy measures are in better shape than the headline inflation
rates, except for the UK. Ex-energy rates are decelerating as well and
in the case of Germany and Italy they already are well below the 2%
top-allowable pace for inflation generally. This progress may be enough
to keep the ECB on hold and waiting for these core trends to take root.
In time it should dominate the now higher headline rates of inflation
across the Euro area nations as oil prices settle lower in the wake of
the global slowing in growth. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Euro
Area and UK PPI Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Ezone-13</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Total excl Constructions</td>
<td>0.1%</td>
<td>0.9%</td>
<td style="color: red;">6.8%</td>
<td style="color: red;">4.9%</td>
<td style="color: red;">4.3%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>2.5%</td>
<td>3.1%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>1.0%</td>
<td>1.5%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.3%</td>
<td>0.3%</td>
<td>4.8%</td>
<td style="color: red;">5.3%</td>
<td style="color: red;">3.9%</td>
<td>1.5%</td>
</tr>
<tr class="even">
<td class="firstcol">Intermediate &amp; Capital
Goods</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.7%</td>
<td>1.0%</td>
<td>2.7%</td>
<td>4.4%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>0.1%</td>
<td>3.4%</td>
<td style="color: red;">23.2%</td>
<td style="color: red;">13.0%</td>
<td style="color: red;">8.3%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.0%</td>
<td>0.8%</td>
<td style="color: red;">5.3%</td>
<td>4.3%</td>
<td style="color: red;">4.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.1%</td>
<td>0.8%</td>
<td style="color: red;">4.8%</td>
<td style="color: red;">2.7%</td>
<td>2.5%</td>
<td>4.4%</td>
</tr>
<tr>
<td class="firstcol">Germany excl Energy</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>1.4%</td>
<td>1.4%</td>
<td>2.2%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>0.2%</td>
<td>0.8%</td>
<td style="color: red;">6.8%</td>
<td style="color: red;">5.6%</td>
<td style="color: red;">4.5%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">France excl Energy</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-0.1%</td>
<td>1.1%</td>
<td style="color: red;">6.4%</td>
<td style="color: red;">5.4%</td>
<td>4.6%</td>
<td>5.2%</td>
</tr>
<tr>
<td class="firstcol">Italy excl Energy</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>1.9%</td>
<td>3.0%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>0.5%</td>
<td>2.9%</td>
<td style="color: red;">23.8%</td>
<td style="color: red;">15.2%</td>
<td style="color: red;">4.0%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">UK excl Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td style="color: red;">3.6%</td>
<td>3.4%</td>
<td style="color: red;">3.5%</td>
<td>3.1%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">E-zone 13
Harmonized PPI excluding
Construction</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">The EA 13
countries are Austria,
Belgium, Finland, France, Germany,</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Greece,
Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
Currencies in Australia and New
Zealand Continue to Strengthen 
by <a href="/comment/Curley.html">Louise
Curley</a> February 4, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204h.jpg" align="left" border="0" height="265" width="353">
Both the Australian and New Zealand dollars have rebounded, if
somewhat irregularly, since the U. S. Federal Reserve Board started to
lower interest rates in September, as can be seen in the first chart,
showing the daily values of the two currencies for the past year or so.
A longer term perspective is shown in the second chart where the broad
J. P. Morgan effective nominal trade weighted indexes are shown. This
chart shows not only that the appreciations of these currencies have
been underway since the beginning of this decade, but it also shows
that the appreciations have been widespread and not simply with the U.
S. dollar.
While interest rate differentials are not the only factor in
the relative value of one country vis-à-vis another, they are among the
more important. The third chart shows the yield on a 2-year government
security in the three countries. Interest rates in Australia and New
Zealand have been substantially above those in the U. S and steady
while those in the U. S. have dropped sharply since the Fed began to
cut rates. As of January of this year the differential between the
2-year security in Australia and the U. S. was 4.25 points and in New
Zealand and the U. S. security, 4.73 points.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204g.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080204f.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">AUSTRALIA
AND NEW ZEALAND&nbsp;</th>
<th scope="col">Jan 31, 2008</th>
<th scope="col">Sep 7, 2007&nbsp;</th>
<th scope="col">Jul 24, 2007&nbsp;</th>
<th scope="col">Jan 31, 2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Australian $&nbsp;
(U. S.$)</td>
<td>.8968</td>
<td>.8259</td>
<td>.8841</td>
<td>.7740</td>
</tr>
<tr class="odd">
<td class="firstcol">New Zealand $ (U. S.$)</td>
<td>.7884</td>
<td>.6889</td>
<td>.8069</td>
<td>.6856</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td>Jan 2008</td>
<td>Sep 2007&nbsp;</td>
<td>Jan 2007&nbsp;</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Australian Trade
Weighted 2000=100</td>
<td>129.6</td>
<td>128.7</td>
<td>122.7</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol"> New Zealand Trade
Weighted (2000=100)</td>
<td>140.4</td>
<td>135.1</td>
<td>135.9</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="5">2-Year
Government
Security&nbsp;&nbsp;(EOP) %</td>
</tr>
<tr class="odd">
<td class="firstcol">Australia</td>
<td>6.63</td>
<td>6.43</td>
<td>6.15</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">New
Zealand&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>7.21</td>
<td>6.97</td>
<td>9.57</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">U. S.</td>
<td>2.48</td>
<td>3.97</td>
<td>4.88</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201c.jpg" align="left" border="0" height="265" width="353">
The NTC MFG PMIs show that EMU MFG took a hit to growth late
in 2007 but has been on a steady mend since then. The EU Commission
readings do not share such a benign view as that report&#8217;s industrial
sector as its readings are still losing ground. The NTC framework is
much more upbeat in that respect. However, the NTC data, while more
upbeat in a time-series sense (momentum), has its readings relatively
weaker in early 2008 compared to their past history than the EU
Commission data. For example the over the same time period the EU data
put industrial strength in the 76th percentile of its range stronger
than NTC&#8217;s 66th percentile. 
 

The NTC data showed eight of nine members (see table) losing
momentum still in December, but in January it reports only four of nine
still slipping, only the UK among them one of the larger EMU economies.
In January NTC shows only two of these countries with MFG contracting
(readings below 50), Italy does that for the second month running. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> NTC MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>52.77</td>
<td style="color: red;">52.56</td>
<td>52.80</td>
<td>52.71</td>
<td>52.87</td>
<td>54.09</td>
<td>66.7%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>54.43</td>
<td style="color: red;">53.59</td>
<td>53.74</td>
<td>53.92</td>
<td>54.04</td>
<td>55.46</td>
<td>71.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>53.92</td>
<td>53.85</td>
<td>52.55</td>
<td>53.44</td>
<td>52.32</td>
<td>53.03</td>
<td>66.9%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>50.80</td>
<td style="color: red;">50.74</td>
<td>51.34</td>
<td>50.96</td>
<td>51.71</td>
<td>52.88</td>
<td>52.7%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>49.77</td>
<td style="color: red;">49.51</td>
<td>50.73</td>
<td>50.00</td>
<td>50.43</td>
<td>52.65</td>
<td style="color: red;">46.1%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>54.10</td>
<td style="color: red;">53.21</td>
<td>55.00</td>
<td>54.10</td>
<td>54.16</td>
<td>54.38</td>
<td>69.4%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td style="color: red;">51.44</td>
<td style="color: red;">52.67</td>
<td style="color: red;">54.28</td>
<td>52.80</td>
<td>53.51</td>
<td>53.64</td>
<td>50.6%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td style="color: red;">46.37</td>
<td style="color: red;">49.54</td>
<td>52.34</td>
<td>49.42</td>
<td>51.54</td>
<td>52.22</td>
<td style="color: red;">6.6%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td style="color: red;">53.10</td>
<td style="color: red;">54.40</td>
<td style="color: red;">54.47</td>
<td>53.99</td>
<td>55.11</td>
<td>56.39</td>
<td>61.1%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td style="color: red;">50.63</td>
<td style="color: red;">52.42</td>
<td>53.94</td>
<td>52.33</td>
<td>53.35</td>
<td>54.10</td>
<td style="color: red;">47.6%</td>
</tr>
</tbody>
</table>
</body></html>

The NTC MFG PMIs show that EMU MFG took a hit to growth late in 2007 but has been on a steady mend since then. The EU Commission readings do not share such a benign view as that report’s industrial sector as its readings are still [...]

NTC Shows a Rebound in Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201e.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index for all of last month did improve by 3.8% m/m to a reading of 78.4. But that gain was reduced by nearly one half from the rise reported at mid-month. A level for the month of 79 had been expected.
The current conditions index rose by 3.7% m/m, half the rise reported initially. The gain in current conditions for buying large household goods was reduced to 6.6% (-12% y/y). The gain in the view of current personal finances disintegrated to zero (-20.3% y/y) following two months of decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201d.jpg" width="353">
Improvement in expected business conditions during the next year was lowered slightly to 3.8% m/m (-22.3% y/y). Expectations for business conditions during the next five years disappeared (-42.4% y/y) but expectations for personal finances were slightly improved and rose 3.6% (-8.7% y/y).
Expectations for inflation during the next twelve months slipped to 4.0%. For the next five to ten years expectations similarly slipped to a 3.4% rise in prices, equal to the expected gain during all of last year.
Opinions about government policy rose, but by a reduced 5.4% m/m (-18.8% y/y).
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Jan (Final)</th>
<th scope="col">Jan (Prelim)</th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Jan&nbsp; y/y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>78.4</td>
<td>80.5</td>
<td>75.5</td>
<td>76.1</td>
<td>-19.1% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>94.4</td>
<td>98.1</td>
<td>91.0</td>
<td>91.5</td>
<td>-15.2%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>68.1</td>
<td>69.1</td>
<td>65.6</td>
<td>66.2</td>
<td>-22.3%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's consumer sentiment index for all of last month did improve by 3.8% m/m to a reading of 78.4. But that gain was reduced by nearly one half from the rise reported at mid-month. A level for the month of 79 [...]

Michigan Consumer Sentiment's Earlier Gains Diminished

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201f.jpg" align="left" border="0" height="265" width="353">
The Institute of Supply Management (ISM) reported that its
Composite Index of Manufacturing Sector Activity recovered last month.
The m/m gain to 50.7 from a revised 48.4 in December (figures were
revised back to 2005) contrasted with Consensus expectations for a slip
to 47.5. Data points above 50 indicate growth in factory sector
activity.
Last month's composite reading was the highest since August of
last year.
During the last twenty years there has been a 64% correlation
between the level of the Composite Index and the three month growth in
factory sector industrial production.
It is appropriate to correlate the ISM index level
with factory sector growth because the ISM index
is a diffusion index. It measures growth by being constructed using all
of the absolute positive changes in activity added to one half of the
no change in activity measures.
Strong gains in the production and in the inventory components
accounted for most of the rise in the composite index. The orders and
the vendor deliveries components also rose but to much lesser degrees.
The index of new export orders recovered all of the m/m
decline during December. The latest was the highest level since last
May.
The employment index declined sharply m/m to its lowest level
since 2003. During the last twenty years there has been a 67%
correlation between the level of the ISM employment Index and the three
month growth in factory sector employment.
The prices paid index jumped sharply m/m to its highest level
since July 2006. During the last twenty years there has been a 77%
correlation between the price index and the three month change in the
PPI for intermediate goods. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201g.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201h.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January '07</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">Composite Index</td>
<td>50.7</td>
<td>48.4</td>
<td>49.3</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>49.5</td>
<td>46.9</td>
<td>52.4</td>
<td>54.3</td>
<td>53.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>76.0</td>
<td>68.0</td>
<td>53.0</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
</body></html>

The Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity recovered last month. The m/m gain to 50.7 from a revised 48.4 in December (figures were revised back to 2005) contrasted with [...]

ISM Index Improved

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201a.jpg" width="353">
The Bureau of Labor Statistics reported that nonfarm payrolls fell in January by 17,000 versus expectations for a rise of 70,000. In December, the rise payrolls was revised to a stronger gain of 82,000, but November&#39;s increase was halved to 60,000. Moreover, the gain for all of last year was revised down slightly to 1.1% from the 1.3% reported earlier.
The decline in jobs during January was the first since August 2003. Five years ago, job declines continued through 2002 &amp; 2003 though economic recession ended in November 2001.
Fewer jobs in government accounted for the outright decline in overall January employment. An 18,000 worker decline (+0.8% y/y) in gov&#39;t jobs overall owed to a 24,000 worker decline (+0.1% y/y) in state gov&#39;t jobs. That left employment in private industries last month to rise a negligible 1,000 (0.7% y/y) but a similar preliminary reading for December was revised up to a gain of 54,000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201b.jpg" width="353">
In the private service sector employment rose by a weak 52,000 (1.4% y/y) although December&#39;s increase was about doubled to 115,000. Professional &amp; business services jobs fell by 11,000 (+1.6% y/y), the first material m/m decline since 2004. Temporary help services jobs fell 9,000 (-3.3% y/y). Retail employment rose 11,200 (0.4% y/y) but jobs in finance fell 2,000 (-1.1% y/y), the eleventh decline in the last thirteen months (Here is where the earlier job numbers were revised down sharply.)
Jobs in education continued firm and rose 15,700 (3.1% y/y) while job gains in the health care sector also were strong and rose 30,900 (3.1% y/y). Jobs in the leisure &amp; hospitality sector have been strong as well and rose 19,000 (2.7% y/y) in January.
Factory sector payrolls fell another 28,000. Construction employment fell as well, by 27,000, which was the seventh consecutive monthly drop.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080201c.jpg" width="353">
Continuing to portend weakness in job creation was one month diffusion index of 46.2%. This measure of the breadth of job creation amongst industries was at its lowest level since 2003.
The unemployment rate slipped to 4.9% last month after the jump to 5.0% in December. Household employment rose 37,000 (0.2% y/y) while the labor force fell 42,000 (+0.6% y/y). Unemployment fell 79,000 (+7.6% y/y) but the labor force participation rate rose to 66.1%, its highest since last June.
Average hourly earnings rose 0.2%. Factory sector earnings jumped 0.5% (2.9% y/y) and private service-providing earnings rose 0.2% (4.0% y/y).

<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/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">January</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">Payroll Employment</td>
<td>-17</td>
<td>82</td>
<td>60</td>
<td>0.7%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>18</td>
<td>115</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-28</td>
<td>-20</td>
<td>-3</td>
<td>-1.9%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-27</td>
<td>-45</td>
<td>-57</td>
<td>-3.6%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.8</td>
<td>33.8</td>
<td>33.9 (Jan. &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.7%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.9%</td>
<td>5.0%</td>
<td>4.7%</td>
<td>4.6% (Jan &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Bureau of Labor Statistics reported that nonfarm payrolls fell in January by 17,000 versus expectations for a rise of 70,000. In December, the rise payrolls was revised to a stronger gain of 82,000, but November's increase was [...]

U.S. Payrolls Fell Unexpectedly, Revisions & Jobless Rate Down Slightly

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 0.6% (-3.6% y/y) during the four weeks ended May 9, 2025. The improvement followed sharp declines in April.

Miscellaneous group prices increased 2.4% (5.9% y/y) over the last four weeks. Natural rubber price soared 13.9% (11.7% y/y). The price of tallow (used in the soap industry) rose 10.6% (41.3% y/y) in four weeks but the cost of framing lumber declined 5.6%, but rose 7.3% y/y.

Prices in the Metals group edged 0.2% higher (-7.3% y/y) over the most recent four weeks. Variation in pricing was wide. Copper scrap prices rose 7.4% (-3.3% y/y) while lead costs rose 4.0% in four weeks (-11.1% y/y). The cost of aluminum increased 2.3% in four weeks, off 4.4% y/y. Working lower, the cost of steel scrap declined 8.1% (-11.6% y/) in four weeks while tin prices followed with a 4.9% decline (-2.9% y/y). Zinc prices eased 0.7% in four weeks and declined 10.3% y/y.

Crude Oil & Benzene group prices edged 0.1% higher (-19.4% y/y) in four weeks. The cost of West Texas Intermediate crude oil weakened 4.0% to $58.50 per barrel and was 25.6% lower y/y. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 8.5% (-41.8% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.9% (-2.1% y/y) during the last four weeks.

Textile group prices edged 0.9% lower (-0.5% y/y) during the last four weeks. Burlap costs declined 14.3% (+7.4% y/y) but the cost of cotton rose 4.5% (-7.7% y/y) over four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

250509D1.jpg

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- Metals prices are mixed.
- Crude oil prices fall sharply.
- Textile prices ease.

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

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Wholesale trade inventories increased 0.4% (2.2% y/y) during March after rising 0.5% in February, revised from 0.3% after a 0.8% January rise. The increase compared to expectations for a 0.5% rise in the Informa Global Markets Survey and compared to a 0.6% gain in the advance report issued two weeks ago.

Durable goods inventories rose 0.6% in March (1.5% y/y) after rising 0.5% in February. Machinery inventories, the largest sector, increased 0.6% (1.7% y/y) while inventories of motor vehicles & parts, the second largest grouping, rose 1.2% (0.8% y/y). Furniture inventories strengthened 2.7% (6.8% y/y) while electrical equipment inventories declined 1.0% (-3.1% y/y). Inventories of nondurable goods edged 0.1% higher (3.4% y/y). Drug inventories, which make up one-quarter of nondurable inventories, advanced 1.0% (4.6% y/y). Grocery inventories, the second largest category, rose 0.4% (8.3% y/y). Apparel inventories fell 0.8% (-6.5% y/y) and chemical inventories rose 2.1% both m/m and y/y. Petroleum inventories increased 0.7% (0.3% y/y).

Sales at the wholesale level rose 0.6% (6.1% y/y) in March after rising 2.0% in February and falling 0.9% in January. A 0.9% March rise had been expected in the Action Economics Forecast Survey.

Durable goods sales rose 1.0% (8.5% y/y) in March after strengthening 3.2% in February. Sales of electrical equipment & electronic goods, the largest sector, rose 2.5% (20.9% y/y), after a 2.3% rise. Professional and commercial equipment sales, which includes computers, rose 1.2% (11.9% y/y), while vehicle sales declined 1.0% (1.1% y/y). Sales of machinery improved 0.7% (4.2% y/y). Nondurable product sales rose 0.3% (3.9% y/y) in March after gaining 0.9% in February. Drug store sales, the largest category, increased 2.8% (13.4% y/y), while grocery store sales eased 0.2% (+4.3% y/y). Sales of apparel weakened 0.8% (+3.5% y/y) while paper sales declined 1.7% (0.5% y/y). Petroleum product sales fell 4.6% both m/m and y/y.

The inventory-to-sales (I/S) ratio at the wholesale level remained at 1.30 in March and has been moving lower for the last two years.

The wholesale I/S ratio for durable goods eased to 1.69 in March and also has been trending lower. The machinery ratio fell to 2.92 while motor vehicles rose to 1.78. The I/S ratio for nondurable goods slipped to 0.93 and remained down from 1.02 early in 2023. The drug industry ratio eased to 0.94. Apparel's I/S ratio held at 2.06, but remained below its 2.28 level one year earlier, and has been declining since early 2023. The petroleum industry I/S ratio rose to 0.33.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

**Assessing Maximum Employment** from Federal Reserve Governor Adriana D. Kugler is available [here](https://www.federalreserve.gov/newsevents/speech/kugler20250509a.htm).

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- Inventories trend higher y/y.
- Sales increase broadly.
- Inventory-to-sales ratio steadies.

U.S. Wholesale Inventories & Sales Increase in March

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Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

Carol Stone, CBE

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

Economy in Brief: February 2008

Jump to:

PPI Main Sector Trends Still Excessive But Lose Some Momentum

U.S. Construction Spending Decline Largest Since 1991

U.S. Vehicle Sales in January Lowest in Over Two Years

U.S. Construction Spending Decline Largest Since 1991

NTC Shows a Rebound in Europe

Michigan Consumer Sentiment's Earlier Gains Diminished

ISM Index Improved

U.S. Payrolls Fell Unexpectedly, Revisions & Jobless Rate Down Slightly