Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080207g.jpg" align="left" border="0" height="265" width="353">
UK industrial production slowed sharply in December and major
trends are all pointing lower. IP in December was weaker than had been
assumed in the UK GDP report, raising the possibility that GDP could be
revised lower. The quarterly growth rate for manufacturing is -0.4% in
Q4. The sequential growth rates from 12 months to 6 months to 3 months
show a slowing across manufacturing components with the exception of
capital goods. Detailed sectors show food and drink, textile and
leather and motor vehicle sectors in a progressive state of decline and
deceleration. The quarter&#8217;s growth rate for these components is deeply
negative and so would the overall result if it were not for strength in
the utilities output and some growth in mining and quarrying. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> UK IP
and MFG</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Dec 
07</td>
<td>Nov 
07</td>
<td>Dec 
07</td>
<td>Nov 
07</td>
<td>Dec 
07</td>
<td>Nov 
07</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">UK Manufacturing</td>
<td>Dec 
07</td>
<td>Nov 
07</td>
<td>Oct 
07</td>
<td>3mo</td>
<td>3mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-4 
Date</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>-1.9%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-0.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="11">Consumer
Goods</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>1.5%</td>
<td>-1.4%</td>
<td>-1.0%</td>
<td>-3.8%</td>
<td>-16.1%</td>
<td>-3.0%</td>
<td>0.6%</td>
<td>-3.0%</td>
<td>-4.1%</td>
<td>-10.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>-0.4%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-1.6%</td>
<td>-1.2%</td>
<td>-0.2%</td>
<td>-0.8%</td>
<td>-1.6%</td>
<td>-0.4%</td>
<td>-0.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-0.4%</td>
<td>-0.1%</td>
<td>0.7%</td>
<td>0.8%</td>
<td>0.0%</td>
<td>-1.3%</td>
<td>-0.8%</td>
<td>1.5%</td>
<td>0.8%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.6%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>6.0%</td>
<td>1.5%</td>
<td>1.3%</td>
<td>0.7%</td>
<td>2.3%</td>
<td>0.7%</td>
<td>3.6%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Memo: Detail</td>
<td>1Mo%</td>
<td>1Mo%</td>
<td>1-Mo%</td>
<td>3mo</td>
<td>3mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-4 
Date</td>
</tr>
<tr>
<td class="firstcol">Food Drink &amp; Tobacco</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>-3.1%</td>
<td>-2.3%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-1.6%</td>
<td>-0.5%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">Textile &amp; Leather</td>
<td>-1.2%</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-8.5%</td>
<td>-10.4%</td>
<td>-8.0%</td>
<td>-2.5%</td>
<td>-3.1%</td>
<td>-0.8%</td>
<td>-9.2%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles &amp; Trailer</td>
<td>0.8%</td>
<td>0.3%</td>
<td>-2.7%</td>
<td>-6.4%</td>
<td>-14.9%</td>
<td>3.8%</td>
<td>9.5%</td>
<td>9.4%</td>
<td>7.0%</td>
<td>-8.1%</td>
</tr>
<tr>
<td class="firstcol">Mining and Quarry</td>
<td>0.3%</td>
<td>-1.6%</td>
<td>2.7%</td>
<td>5.5%</td>
<td>1.6%</td>
<td>-2.3%</td>
<td>-5.1%</td>
<td>4.0%</td>
<td>0.0%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Electricity, Gas &amp; Water</td>
<td>0.6%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>7.9%</td>
<td>10.2%</td>
<td>5.8%</td>
<td>3.3%</td>
<td>3.7%</td>
<td>2.9%</td>
<td>7.2%</td>
</tr>
</tbody>
</table>
</body></html>

UK industrial production slowed sharply in December and major trends are all pointing lower. IP in December was weaker than had been assumed in the UK GDP report, raising the possibility that GDP could be revised lower. The quarterly [...]

UK Industrial Production Growth Slows to a Crawl

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080207f.jpg" align="left" border="0" height="265" width="353">
The French trade trends show a declining profile in both the
export and import rates of growth. French export growth shows faltering
growth trends across its main categories except motor vehicles that
rose over three months as well as year/year. French imports were off
sharply in the recent month. But trends over the past year are still
showing growth. Over three months, however, the main trade categories
are showing declines and posting negative rates of growth. 
 

The message from these statistics is that France and its main
trade partners is slowing. Remember that Euro Area (EA) countries&#8217;
foreign trade numbers are tricky to interpret since any trade with
another country is &#8216;foreign&#8217; but trade that remains within the EA is
without direct foreign exchange consequences. So for EA countries not
all foreign trade is created equal. For France the picture is
nonetheless one of faltering flows. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="6" scope="col"> French Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="grey3">
<td class="firstcol">Balance*</td>
<td>-&#8364;&#8364; 4,279.00</td>
<td>-&#8364;&#8364; 4,616.00</td>
<td>-&#8364;&#8364; 4,174.67</td>
<td>-&#8364;&#8364; 3,708.67</td>
<td>-&#8364;&#8364; 3,249.42</td>
</tr>
<tr class="grey2">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">All Exports</td>
<td>-0.8%</td>
<td>-1.2%</td>
<td>-6.5%</td>
<td>-2.7%</td>
<td>1.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital Goods</td>
<td>-2.6%</td>
<td>-0.8%</td>
<td>-21.3%</td>
<td>-4.9%</td>
<td>-1.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Motor Vehicles</td>
<td>2.7%</td>
<td>-3.5%</td>
<td>4.6%</td>
<td>2.1%</td>
<td>4.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Goods</td>
<td>-0.8%</td>
<td>0.0%</td>
<td>-13.8%</td>
<td>-2.6%</td>
<td>-2.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Imports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">All Imports</td>
<td>-1.3%</td>
<td>1.6%</td>
<td>2.5%</td>
<td>2.4%</td>
<td>5.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital Goods</td>
<td>-4.5%</td>
<td>-0.3%</td>
<td>-19.8%</td>
<td>-8.8%</td>
<td>1.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Motor Vehicles</td>
<td>-3.9%</td>
<td>2.3%</td>
<td>-0.2%</td>
<td>-0.9%</td>
<td>8.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Goods</td>
<td>-4.6%</td>
<td>1.5%</td>
<td>-22.6%</td>
<td>-7.3%</td>
<td>-0.5%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">*Eur mlns; mo or period average</td>
</tr>
</tbody>
</table>
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The French trade trends show a declining profile in both the export and import rates of growth. French export growth shows faltering growth trends across its main categories except motor vehicles that rose over three months as well as [...]

French Trade Flows Slow; Imports Drop Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080207e.jpg" align="left" border="0" height="265" width="353">
German orders for December were stronger than expected, a mild
positive surprise to markets. With the economy showing weakening
signals and the euro strong, sentiment is shifting to look for some
weaker results. As a result the spin on the numbers reported today was
to sort of set them aside as though they were something that would not
last. And, indeed, they may not last. 

The German foreign orders series showed that foreign orders
from non-German Euro Area countries fell by 6.8% after a 6.7% rise in
November. This also raises questions about what is going on within the
Euro Area (EA). Foreign orders at German firms from outside the EA rose
by 0.8% in the month after falling in November. 

One thing to understand is that Germany is the STRONGEST of
the EA economies. Other EA countries will be feeling pain before
Germany does. We can see this by looking at one measure of
competitiveness, prices. HICP prices in Germany have fallen by 11.5%
relative to the EA average since January of 1996. Compare this to Italy
where its HICP has risen by 3.7% or Spain where its prices have risen
relative to the average by 12.2%. That sort of result implies a huge
difference in competitiveness for trade both within the EA and outside
it. It should come as no surprise that confidence in Italy and Spain
has been lagging. 

German data are reliable and timely. For other countries we
are not always so lucky. But if we piece together the things we know
about Germany and the geographic data in reports like today&#8217;s orders,
there is a real reason to be wary of EA growth going forward. There is
the additional unsavory point that Germany itself may be living a bit
on borrowed time. Its firms may have employed FX hedges to lock in past
more favorable exchange rates on which to do business. But these
devices eventually fail in their ability to afford a safe haven or even
partial escape. A lot of hedging is done on a six-month horizon and six
months ago the euro value Vs the dollar was at $1.34 Compared to the
current $1.45 to $1.50 rate. A year ago, a fairly long period over
which to hedge the euro rate Vs the dollar was at $1.30. Obviously if
hedges set at those times are running off German firms would have to
begin to confront business prospects at current exchange rates.
Interestingly it is the intra-EA orders that are the weakest for
Germany. But it still has a good chunk of business in capital goods
that might be a bit less price elastic in Eastern Europe and in Russia.
It is no surprise in view of these emerging risks, that ECB president
Trichet softened the rhetoric in his remarks today.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> German
Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</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>YrAgo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>-1.7%</td>
<td>3.0%</td>
<td>4.0%</td>
<td>22.5%</td>
<td>10.7%</td>
<td>10.2%</td>
<td>7.3%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-2.8%</td>
<td>2.3%</td>
<td>5.3%</td>
<td>20.1%</td>
<td style="color: red;">9.6%</td>
<td>13.2%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-0.5%</td>
<td>3.7%</td>
<td>2.5%</td>
<td>25.3%</td>
<td>11.9%</td>
<td>7.3%</td>
<td>7.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="8">Sector
Sales</td>
</tr>
<tr>
<td class="firstcol">Manufacturing/Mining</td>
<td>0.2%</td>
<td style="color: red;">-0.7%</td>
<td>1.3%</td>
<td>3.0%</td>
<td style="color: red;">1.5%</td>
<td style="color: red;">4.4%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>-0.4%</td>
<td style="color: red;">-0.6%</td>
<td>0.8%</td>
<td style="color: red;">-0.8%</td>
<td style="color: red;">-0.4%</td>
<td style="color: red;">1.7%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>2.6%</td>
<td>-0.2%</td>
<td>-1.3%</td>
<td>4.1%</td>
<td>2.1%</td>
<td style="color: red;">1.3%</td>
<td>10.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td style="color: red;">-0.9%</td>
<td style="color: red;">-0.6%</td>
<td>1.1%</td>
<td style="color: red;">-1.5%</td>
<td style="color: red;">-0.8%</td>
<td style="color: red;">1.8%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>-0.2%</td>
<td style="color: red;">-2.1%</td>
<td>3.3%</td>
<td>3.4%</td>
<td style="color: red;">1.7%</td>
<td>6.8%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.9%</td>
<td>0.8%</td>
<td>-0.6%</td>
<td>4.3%</td>
<td style="color: red;">2.1%</td>
<td style="color: red;">3.0%</td>
<td>12.1%</td>
</tr>
<tr>
<td class="firstcol">All Manufacturing Sales</td>
<td>0.2%</td>
<td style="color: red;">-0.9%</td>
<td>1.2%</td>
<td>2.0%</td>
<td style="color: red;">1.0%</td>
<td style="color: red;">3.8%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
</body></html>

German orders for December were stronger than expected, a mild positive surprise to markets. With the economy showing weakening signals and the euro strong, sentiment is shifting to look for some weaker results. As a result the spin [...]

German Orders Still Strong, but More Are Disbelieving

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080207d.jpg" width="353">
The National Association of Realtors reported that the level of pending home sales in December fell 1.5% from November following that month&#39;s decline of 3.0%. These notable declines, however, followed increases during the prior two months. The December decline therefore left sales at the cycle&#39;s low set in August. The pattern of sales since then has been essentially sideways.
Despite the sideways movement, the latest monthly figure is about one third below the peak level during the Summer of 2005. The data date back only to 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080207c.jpg" width="353">
These figures are analogous to the new home sales data from the Commerce Dept. They measure existing home sales when the sales contract is signed, not at the time the sale is closed.
The Realtors also indicated in an earlier report that the number of homes on the market and available for sale fell 7.4% to 390,500 units in December. That was the lowest level since March. For all of 2007, however, the inventory of unsold homes rose 13.2% after huge increases of 21.2% and 26.8% during the prior two years.
In the Northeast, pending home sales fell 1.7% after a 13.0% m/m decline in November. For the year sales fell 12.6% following 2006&#39;s decline of 9.2%. Sales out West also fell a sharp 3.1% after a 2.1% November drop and for the year were down 15.8% after a 14.8% shortfall in 2006.
Sales in the Midwest sales ended the year with a 3.4% gain and since August have shown a very slight upward tilt. For the year sales fell 12.0% after the 12.4% 2006 decline. In the South sales fell another 3.0% in December to a new cycle low. For the year sales in the South fell 15.7% after a relatively moderate 5.5% decline in 2006.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market are in the REALTOR database.

<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">Pending Home Sales (2001=100)&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&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>85.9</td>
<td>&nbsp;87.2</td>
<td>&nbsp;&nbsp; -24.2%</td>
<td>95.9</td>
<td>112.1&nbsp;</td>
<td>124.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>68.9</td>
<td>70.1</td>
<td>-26.0</td>
<td>85.7</td>
<td>98.0</td>
<td>108.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>84.9</td>
<td>82.1</td>
<td>-17.3</td>
<td>89.7</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>96.4</td>
<td>99.4</td>
<td>-27.0</td>
<td>107.4</td>
<td>127.4</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>83.9</td>
<td>86.6</td>
<td>-24.1</td>
<td>92.3</td>
<td>109.6</td>
<td>128.7</td>
</tr>
</tbody>
</table>
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The National Association of Realtors reported that the level of pending home sales in December fell 1.5% from November following that month's decline of 3.0%. These notable declines, however, followed increases during the prior two [...]

U.S. Pending Home Sales Seeking a Bottom?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080207a.jpg" width="353">
Initial claims for jobless insurance slipped 22,000 last week to 356,000. The decline pulled back only a piece of the prior week&#39;s upwardly revised 72,000 surge. The latest remained near the highest level 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 335,000 (+7.5% y/y).
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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080207b.jpg" width="353">
Continuing claims for unemployment insurance jumped 75,000 following a 41,000 increase during the week prior. That was revised down just slightly. 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 rose w/w back to 2.1%.
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">02/02/08</th>
<th scope="col">01/26/07</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;356</td>
<td>378</td>
<td>13.4%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,785</td>
<td>12.8%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
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Initial claims for jobless insurance slipped 22,000 last week to 356,000. The decline pulled back only a piece of the prior week's upwardly revised 72,000 surge. The latest remained near the highest level since October of 2005. The [...]

U.S. Initial Unemployment Insurance Claims Slipped

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080206e.jpg" align="left" border="0" height="265" width="353">
French sequential growth rates are working their way lower for
the volume of total retail sales. Passenger car registrations have,
however, picked up a bit. The spike up in car registrations has to do
with some changing regulations in France and are clustering sales into
the current periods much as they did at the end of 2006 for Germany as
buyers there tried to avoid the coming VAT hike. The overall retail
numbers do not show much of this effect since the impact is for an
auto-specific change related to environmental concerns. 
 

Retail sales volumes in France continue to move ahead at a 2%
pace over three months, a bit less than their 3% yr/yr rate and the
same as the year ago pace of 2%. French consumers, like other Euro Area
consumers are having a hard time getting spending on track. With the
new financial turmoil, higher energy prices, strong euro and slowing
economy, the consumer may not turn that corner to better times. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">French Real Retail Sales </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</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>Yr Ago</td>
<td>QTR: SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">VOLUME</td>
</tr>
<tr>
<td class="firstcol">Retail Volume</td>
<td>0.9%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>3.0%</td>
<td>2.0%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Registrations</td>
</tr>
<tr>
<td class="firstcol">Passenger Cars</td>
<td>10.7%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>54.7%</td>
<td>35.4%</td>
<td>19.8%</td>
<td>-4.4%</td>
<td>26.7%</td>
</tr>
</tbody>
</table>
</body></html>

French sequential growth rates are working their way lower for the volume of total retail sales. Passenger car registrations have, however, picked up a bit. The spike up in car registrations has to do with some changing regulations in [...]

French Retail Sales Trend Slips

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080206d.jpg" align="left" border="0" height="265" width="353">
Not every inflation report or trend in the EMU is bad news.
But the news is still not pleasing to an ECB that is trying to inherit
the mantel of inflation fighting respectability from the Bundesbank.
Inflation in the Euro Area consists of an overall HICP measure but
there is also the country level data that contribute to the HICP.
Italy&#8217;s new inflation report is shown below. Headline inflation slowed
sharply in January and the three-month growth rate edged slightly lower
from its six-month value. Even so, that rate is unacceptably high.
Across categories inflation slowed producing a diffusion rate of 42%
implying that the deceleration was relatively widespread. But over six
months diffusion shows that it has accelerated and over 12 months it is
about the same as it was a year ago in terms of the breadth of the
acceleration/deceleration (diffusion) even though it is higher in terms
of the headline and the core. 
 

The chart shows that the core rate has been steadily
accelerating. But if energy prices abate that trend should be
truncated. In short Italy&#8217;s data are the exact reason that the ECB
remains wary. While the current month hints at a break in the pace the
trends are simply not good enough to take the ECB off guard.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Italy HICP
and CPI details </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">HICP Total</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>3.9%</td>
<td>3.1%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>--</td>
<td>0.3%</td>
<td>0.2%</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>1.6%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">All</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.4%</td>
<td style="color: red;">4.9%</td>
<td style="color: red;">3.8%</td>
<td>2.9%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI excl Tobacco</td>
<td>--</td>
<td>0.4%</td>
<td>0.4%</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>0.5%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>6.0%</td>
<td style="color: red;">6.9%</td>
<td style="color: red;">4.5%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Alcohol</td>
<td>0.9%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>4.6%</td>
<td style="color: red;">4.7%</td>
<td>3.5%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.8%</td>
<td style="color: red;">1.8%</td>
<td style="color: red;">1.6%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rent &amp; Utilities</td>
<td>1.1%</td>
<td>0.5%</td>
<td>0.7%</td>
<td style="color: red;">9.8%</td>
<td style="color: red;">7.4%</td>
<td>4.0%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Housing &amp; Furniture</td>
<td>0.8%</td>
<td>0.2%</td>
<td>0.2%</td>
<td style="color: red;">4.7%</td>
<td style="color: red;">3.6%</td>
<td style="color: red;">3.6%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Health Care</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-1.0%</td>
<td>0.5%</td>
<td style="color: red;">0.7%</td>
<td>-1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport</td>
<td>0.9%</td>
<td>1.1%</td>
<td>0.7%</td>
<td style="color: red;">11.7%</td>
<td style="color: red;">7.4%</td>
<td style="color: red;">5.5%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Communication</td>
<td>-0.7%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td style="color: red;">-3.4%</td>
<td style="color: red;">-4.2%</td>
<td>-8.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Recreation &amp; Culture</td>
<td>-1.1%</td>
<td>0.6%</td>
<td>0.1%</td>
<td>-1.6%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.8%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.4%</td>
<td style="color: red;">3.7%</td>
<td style="color: red;">3.5%</td>
<td style="color: red;">3.1%</td>
<td>2.3%</td>
</tr>
<tr class="even">
<td class="firstcol">Diffusion</td>
<td colspan="3">&nbsp;</td>
<td>41.7%</td>
<td style="color: red;">66.7%</td>
<td>50.0%</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Not every inflation report or trend in the EMU is bad news. But the news is still not pleasing to an ECB that is trying to inherit the mantel of inflation fighting respectability from the Bundesbank. Inflation in the Euro Area [...]

Italy’s Inflation Rate Shows Core Pressure Through Dec; In Jan Headline Abates

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.


251112.jpg

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

Global Money Supplies Deliver Growth-Rate Plateau

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: 2008

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UK Industrial Production Growth Slows to a Crawl

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U.S. Pending Home Sales Seeking a Bottom?

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