Tom Moeller

The January Business Activity Index for the non-manufacturing sector, from the Institute for Supply Management, fell out of bed to 41.9 from 54.4 in December. A figure above 50 indicates rising activity and the latest was quite a bit [...]

U.S. ISM Non-Manufacturing Index Down Sharply, Lowest Since 2001

Louise Curley

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<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>

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 [...]

Currencies in Australia and New Zealand Continue to Strengthen

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

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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>
</html>

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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<body>
 



<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

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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

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

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

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

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

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

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

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

U.S. Energy Prices Remain Mixed in Latest Week

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

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

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

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

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

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

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

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

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

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

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

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

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


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

Global Money Supplies Deliver Growth-Rate Plateau

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: 2008

Jump to:

U.S. ISM Non-Manufacturing Index Down Sharply, Lowest Since 2001

Currencies in Australia and New Zealand Continue to Strengthen

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