Tom Moeller

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      Lower unemployment has prompted consumers to spend more than they earn.
      Consumer credit outstanding matched expectations and gained another $14.6B
      during December. That followed a downwardly revised $15.9B November increase,
      according to the Federal Reserve. The latest rise left the y/y gain stable
      at 5.7%, nearly its strongest since early-2008.</p>
      <p><b>Use of non-revolving credit lines continued quite strong</b> and
      rose $18.2B, the fifth consecutive double-digit monthly rise. The y/y
      increase of 8.3% was its strongest since late-2002. Federal government
      loans rose by one quarter y/y, credit union lending grew 10.8% y/y,
      securitized loans increased 7.6% y/y, and commercial bank loans gained 3.9%
      y/y. Lending by savings institutions fell 15.7% y/y. Non-revolving credit
      accounts for roughly two thirds of the credit total. In contrast,
      consumers seemed less inclined to quickly pull out their credit cards. <b>Revolving
      credit fell </b>$3.6B after inching up $0.5B in November. The y/y increase
      was a modest 0.3%. Savings institution loans rose 8.6% y/y while pools of
      securitized assets gained 5.0% y/y. Credit union loans increased 2.6% y/y,
      commercial bank lending grew 1.2% but finance company lending fell 14.1%
      y/y. </p>
      <p>The figures used in this report are break-adjusted and calculated by
      Haver Analytics. There is a break in the credit outstanding data from
      November 2010 to December 2010 due to the Fed's benchmarking process.
      Benchmark estimates are based on the Census of Finance Companies (CFC) and
      the Survey of Finance Companies (SFC) conducted in 2010 and 2011,
      respectively. The consumer credit data are available in Haver's <b>USECON</b>
      database. The Action Economics expectation figures are in the <b>AS1REPNA</b>
      database.&nbsp;</p>
      
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      <a href="/comment/130207l_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130207l.png"></a></p>
      <p>&nbsp;</p>


<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>      
      

        <thead>
          <tr>
            <th class="firstcol"  scope="col"><b>Consumer Credit Outstanding (M/M Chg, SA</b></th>
            <th scope="col" ><b>Dec</b></th>
            <th scope="col" ><b>Nov</b></th>
            <th scope="col" ><b>Oct</b></th>
            <th scope="col" ><b>Y/Y</b></th>
            <th scope="col" ><b>2012</b></th>
            <th scope="col" ><b>2011</b></th>
            <th scope="col" ><b>2010</b></th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Total</td>
            <td  >$14.6B</td>
            <td  >$15.9B</td>
            <td  >$13.9B</td>
            <td  >5.7%</td>
            <td  >5.7%</td>
            <td  >3.4%</td>
            <td  >-1.2%</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp; &nbsp;Revolving</td>
            <td  >-3.6</td>
            <td  >0.5</td>
            <td  >3.3</td>
            <td  >0.3</td>
            <td  >0.3</td>
            <td  >0.1</td>
            <td  >-7.4</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp; &nbsp;Non-revolving</td>
            <td  >18.2</td>
            <td  >15.4</td>
            <td  >10.6</td>
            <td  >8.3</td>
            <td  >8.3</td>
            <td  >5.0</td>
            <td  >2.5</td>
          </tr>
        </tbody>
      </table>
      </span>
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Lower unemployment has prompted consumers to spend more than they earn. Consumer credit outstanding matched expectations and gained another $14.6B during December. That followed a downwardly revised $15.9B November increase, according [...]

U.S. Consumers Continue To Borrow Aggressively

Robert Brusca

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	  <p><a href="/comment/130207i_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130207i.png" align="left"></a>

	  German IP struggled to a gain in December rising by 0.3% after four straight months of decay. However, there are some seeds of hope for Q1 growth. While there is only one month of gain in the quarter it came at the quarter's end. The biggest negative pulse for Germany came at the quarter's start. Since the December rise exceeds the November drop by a good margin, the December level for IP actually sits above the Q4 average.  IP is growing at a 0.7% annual rate relative to its Q4 average if it were to stay at this level in January. That means that IP actually has some positive momentum heading into January despite the bleak string of numbers (see the table).  If it is flat month-to-month it still grows quarter-to-quarter.
</p><p>
Capital goods have a strong positive pulse for Q1, despite their -16.7% annual rate drop in Q4. This owes to the rise in output in November and in December after a very sharp fall in October to start the quarter. Capital goods output in December implies January growth at a stunning 12.1% annual rate over the Q4 average if output is flat December to January. 
</p><p>
Consumer goods output fell at a 2.7% rate in Q4 but it also has a positive push to begin Q1 of 2013. 
</p><p>
Intermediate goods are the exception. Output of intermediate goods fell at a 10.5% pace in Q4 and that continued to drop during each month in the quarter. This sector starts out Q1 of 2013 in the hole with a negative rate of growth of -5.1% annualized relative to the Q4 average, on the assumption of flat IP in January (carrying the December level forward).
</p><p>
Interestingly the pattern for German industrial output is superior to the pattern for real MFG orders. MFG output is actually moving ahead into Q1 at a faster pace than orders. Orders are barely above their Q4 average as of December, growing at a 0.3% annual rate in an implied flat January over their Q4 base (average).
</p><p>
Spain, Ireland and the UK share this pattern with Germany; each shows a rise of IP in December. But Ireland and the UK had drops in November like Germany. Ireland shows two gains in a row in output.  Spain's November drop was large so it is looking a December level that implies a shrinking for and unchanged level of output in January at a -2.6% annual rate relative to its Q4 average despite a December gain month-to-month.  But the UK joins Germany with positive momentum in Q1 (and Ireland, of course) on a relatively strong December reading. 
</p><p>
Germany is not alone in trying to start the New Year with some positive momentum on the industrial side.  These are calculations from the real output side not from PMI diffusion data. Although it looks not so strong on the face of it, the turn could be significantly better, as the above calculations suggest because of the unique timing for the bottoming in output at the very middle of the fourth quarter...if output continues to press ahead with its gains and if it has in fact bottomed. That much is still speculative. 
</p>

<table class="centered" width="100%" border="0" cellspacing="0">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
   <tr>
    <th scope="col" colspan=7>Total German IP</th>
    <th scope="col" class="even">Quarter</th>
  </tr>
  </thead>
  <tbody>
    <tr class="even">
      <td class="firstcol"><b>SAAR except M/M</b></td>
      <td><b>Dec-12</b></td>
      <td><b>Nov-12</b></td>
      <td><b>Oct-12</b></td>
      <td><b>3-mo </b></td>
      <td><b>6-mo </b></td>
      <td><b>12-Mo </b></td>
      <td><b>to-Date</b></td>
    </tr>
    <tr>
      <td class="firstcol" >IP Total</td>
      <td>0.3</td>
      <td>-0.2</td>
      <td>-2.0</td>
      <td>-7.3</td>
      <td>-4.8</td>
      <td>-1.1</td>
      <td>-11.3</td>
     </tr> 
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Consumer</td>
      <td>3.9</td>
      <td>-2.3</td>
      <td>-1.1</td>
      <td>2.0</td>
      <td>2.2</td>
      <td>1.3</td>
      <td>-2.7</td>
     </tr>      
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Capital</td>
      <td>1.9</td>
      <td>2.0</td>
      <td>-4.1</td>
      <td>-1.4</td>
      <td>0.5</td>
      <td>0.3</td>
      <td>-16.3</td>
     </tr> 
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Intermediate</td>
      <td>-0.7</td>
      <td>-1.2</td>
      <td>-0.1</td>
      <td>-7.7</td>
      <td>-9.7</td>
      <td>-3.8</td>
      <td>-10.5</td>
     </tr> 
    <tr class="grey1">
      <td class="firstcol" ><b>MEMO:</b></td>
      <td>-8.9</td>
      <td>1.3</td>
      <td>-1.6</td>
      <td>-32.0</td>
      <td>-14.4</td>
      <td>-5.6</td>
      <td>-11.0</td>
     </tr>           
    <tr class="grey1">
      <td class="firstcol" >&nbsp;&nbsp;Construction</td>
      <td>-8.9</td>
      <td>1.3</td>
      <td>-1.6</td>
      <td>-32.0</td>
      <td>-14.4</td>
      <td>-5.6</td>
      <td>-11.0</td>
     </tr> 
    <tr>
      <td class="firstcol" >MFG IP</td>
      <td>1.2</td>
      <td>0.0</td>
      <td>-2.0</td>
      <td>-3.5</td>
      <td>-3.3</td>
      <td>-1.1</td>
      <td>-11.7</td>
     </tr>  
    <tr class="odd">
      <td class="firstcol" >Real MFG Orders</td>
      <td>0.8</td>
      <td>-1.8</td>
      <td>0.0</td>
      <td>11.8</td>
      <td>-1.1</td>
      <td>-1.8</td>
      <td>4.0</td>
     </tr> 
    <tr>
      <td class="firstcol" >Spain</td>
      <td>3.3</td>
      <td>-6.1</td>
      <td>0.0</td>
      <td>2.7</td>
      <td>-6.3</td>
      <td>-5.9</td>
      <td>-9.8</td>
     </tr> 
    <tr class="odd">
      <td class="firstcol" >Ireland</td>
      <td>8.5</td>
      <td>0.2</td>
      <td>0.0</td>
      <td>58.3</td>
      <td>-4.8</td>
      <td>1.6</td>
      <td>-14.4</td>
     </tr>  
    <tr>
      <td class="firstcol" >Portugal</td>
      <td>-1.3</td>
      <td>-3.2</td>
      <td>0.1</td>
      <td>3.5</td>
      <td>-8.4</td>
      <td>-4.1</td>
      <td>-13.9</td>
     </tr> 
    <tr class="odd">
      <td class="firstcol" >UK: EU Member</td>
      <td>1.6</td>
      <td>-0.4</td>
      <td>0.0</td>
      <td>-0.4</td>
      <td>3.6</td>
      <td>-1.5</td>
      <td>-5.2</td>
     </tr>                              
    </tbody>
</table>
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German IP struggled to a gain in December rising by 0.3% after four straight months of decay. However, there are some seeds of hope for Q1 growth. While there is only one month of gain in the quarter it came at the quarter's end. The [...]

German IP Rises but the Quarter is Lost but Next Year's Q1 May be a Gain!

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      <p>The rate of improvement in the labor market is rising. <b>Initial
      claims for unemployment insurance notched down to 366,000</b> (-1.3% y/y)
      during the week ended February 2 versus a revised 371,000 a week earlier,
      reported initially as 368,000. Consensus expectations were for 360,000
      claims. The four week moving average of claims fell to 350,500, a new low
      for the economic recovery. During the last ten years, there has been a 75%
      correlation between the level of claims and the m/m change in nonfarm
      payrolls.</p>
      <p>Continuing claims for unemployment insurance in the week ended January
      26 ticked up to 3.224M (-8.3% y/y). Here again, however, the four week
      moving average of continuing claims was down in January and near the
      recovery's low. The insured rate of unemployment held at 2.5%, near the
      lowest level since July 2008. This particular count covers only
      &quot;regular&quot; programs and does not include all extended benefit and
      other specialized jobless insurance programs. In the week of January 19,
      the latest figure available, the grand total of all benefit recipients
      rose to a not seasonally adjusted 5.590M, down 27.1% from a year ago. That
      compares to a cycle peak of 12.060M in January 2010.</p>
      <p><b>By state,</b> the insured unemployment rate continued to vary
      greatly with South Dakota (1.21%), Oklahoma (1.53%), Virginia (1.56%),
      Florida (1.69%) Texas (1.68%), Tennessee (2.05%), Indiana (2.28%) and Ohio
      (2.51%) at the low end of the range. At the high end were California
      (3.37%), New York (3.38%), Michigan (3.62%), Massachusetts (3.68%),
      Illinois (3.70%), Idaho, (3.98%), New Jersey (4.14%) and Pennsylvania (4.24%).</p>
      <p>Data on weekly unemployment insurance are contained in Haver's <b>WEEKLY</b>
      database and they are summarized monthly in <b>USECON</b>. Data for
      individual states are in <b>REGIONW</b>. The consensus estimates come from
      the Action Economics survey, carried in the <b>AS1REPNA</b> database.&nbsp;</p>
      <p><b>Long-term Unemployment: What Do We Know?</b> from the Federal
      Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2013/el2013-03.html?utm_source=frbsf-home-highlight-title&amp;utm_medium=frbsf&amp;utm_campaign=economic-letter-2013-02-04">here.</a></p>
      
   <p><a href="/comment/130207g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130207g.png"></a>
      <a href="/comment/130207h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130207h.png"></a></p>
      
      
      <p>&nbsp;</p>
      <table class="centered" border="0" cellSpacing="0">
        <thead>
          <tr>
            <th class="firstcol" scope="col">Unemployment
              Insurance (000s)</th>
            <th>02/02/13</th>
            <th>01/26/13</th>
            <th>01/19/12</th>
            <th>Y/Y %</th>
            <th>2012</th>
            <th>2011</th>
            <th>2010</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol">Initial Claims</td>
            <td>366</td>
            <td>371</td>
            <td>330</td>
            <td>-1.3</td>
            <td>375</td>
            <td>409</td>
            <td>459</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">Continuing Claims</td>
            <td>--</td>
            <td>3,224</td>
            <td>3,216</td>
            <td>-8.3</td>
            <td>3,318</td>
            <td>3,744</td>
            <td>4,544</td>
          </tr>
          <tr>
            <td class="firstcol">Insured Unemployment
              Rate (%)</td>
            <td>--</td>
            <td>2.5</td>
            <td>2.5</td>
            <td>2.8<br>
              (1/12)</td>
            <td>2.6</td>
            <td>3.0</td>
            <td>3.6</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">Total &quot;All
              Programs&quot; (NSA)</td>
            <td>--</td>
            <td>--</td>
            <td>5.590M</td>
            <td>-27.1</td>
            <td>6.047M</td>
            <td>7.750M</td>
            <td>9.850M</td>
            </tr>
              </tbody>
            </table>
            </span>
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The rate of improvement in the labor market is rising. Initial claims for unemployment insurance notched down to 366,000 (-1.3% y/y) during the week ended February 2 versus a revised 371,000 a week earlier, reported initially as [...]

U.S. Initial Claims for Unemployment Insurance Trend Lower

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      <p>Nonfarm business sector productivity for Q4'12 declined 2.0% (SAAR,
      +0.6% y/y) and reversed virtually all of the 3.2% increase during Q3,
      revised from 2.9%. A 1.0% decline has been expected. That left the 1.0% gain for all of last year down
      sharply from the roughly 3.0% annual increases during the two years
      immediately following the last recession. Lower productivity growth last
      quarter was accompanied by a quickened 2.4% rise (2.6% y/y) in
      compensation per hour. Nevertheless, for all of last year compensation
      growth slowed to 1.7%, its weakest since 2009. This combination of lower
      productivity and high compensation caused unit labor costs to jump at a
      4.5% annual rate (1.9% y/y). Declines during the prior two quarters,
      however, left the full year increase at a modest 0.7%.</p>
      <p>In the factory sector, the productivity picture was more encouraging. The
      modest 0.5% rise (1.3% y/y) in productivity reversed the Q3 decline.
      Nevertheless, the 2.0% full year increase was down from 2.5% in 2011 and
      6.4% in 2010. Compensation growth decelerated to 1.0% (4.7% y/y) but the
      four quarter increase surged to 4.7%, its fastest since Q2'09. The full
      year 2.4% rise followed a 2.6% gain in 2011, both of which were slower
      than the 8.0% increase in 2003. The improvement in productivity dropped
      the gain in unit labor costs to 0.4%, its weakest in a year. As a result,
      the full year gain in costs was a modest 0.4%.</p>
      <p>The productivity &amp; cost figures are available in Haver's <b>USECON</b>
      database.&nbsp;</p>

      
 <p><a href="/comment/130207c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130207c.png"></a>
    <a href="/comment/130207d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130207d.png"></a></p>
      <p>&nbsp;</p>


<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
      

        <thead>
          <tr>
            <th class="firstcol" scope="col" ><b>Productivity &amp;
              Costs (SAAR,%)</b></th>
            <th>Q4'12</th>
            <th>Q3'12</th>
            <th>Q2'12</th>
            <th>Q4 Y/Y</th>
            <th>2012</th>
            <th>2011</th>
            <th>2010</th>
          </tr>
        </thead>
        <tbody>
          <tr class="grey3">
            <td class="firstcol" colSpan="8" ><b>Nonfarm Business
              Sector</b></td>
          </tr>
          <tr>
            <td class="firstcol" >Output per Hour (Productivity)</td>
            <td  >-2.0</td>
            <td  >3.2</td>
            <td  >1.9</td>
            <td  >0.6</td>
            <td  >1.0</td>
            <td  >0.7</td>
            <td  >3.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Compensation per Hour</td>
            <td  >2.4</td>
            <td  >0.8</td>
            <td  >1.3</td>
            <td  >2.6</td>
            <td  >1.7</td>
            <td  >2.7</td>
            <td  >2.0</td>
          </tr>
          <tr>
            <td class="firstcol" >Unit Labor Costs</td>
            <td  >4.5</td>
            <td  >-2.3</td>
            <td  >-0.5</td>
            <td  >1.9</td>
            <td  >0.7</td>
            <td  >2.0</td>
            <td  >-1.0</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol" colSpan="8" ><b>Manufacturing
              Sector</b></td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Output per Hour</td>
            <td  >0.5</td>
            <td  >-0.9</td>
            <td  >0.0</td>
            <td  >1.3</td>
            <td  >2.0</td>
            <td  >2.5</td>
            <td  >6.4</td>
          </tr>
          <tr>
            <td class="firstcol" >Compensation per Hour</td>
            <td  >1.0</td>
            <td  >2.3</td>
            <td  >9.0</td>
            <td  >4.7</td>
            <td  >2.4</td>
            <td  >2.6</td>
            <td  >1.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Unit Labor Costs</td>
            <td  >0.4</td>
            <td  >3.2</td>
            <td  >9.0</td>
            <td  >3.4</td>
            <td  >0.4</td>
            <td  >0.1</td>
            <td  >-5.0</td>
          </tr>
        </tbody>
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Nonfarm business sector productivity for Q4'12 declined 2.0% (SAAR, +0.6% y/y) and reversed virtually all of the 3.2% increase during Q3, revised from 2.9%. A 1.0% decline has been expected. That left the 1.0% gain for all of last [...]

U.S. Worker Productivity Declines and Drives Up Costs


      <br>
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  <p><a href="/comment/130206e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206e.png"></a>
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      <p>The factory sector is in a recovery mode. The latest industrial
      commodity price index from the Foundation for International Business and
      Economic Research (FIBER) rose yesterday to its highest level since June
      2011. Tuesday's reading of 176.7, was up 5.8% from 12 months earlier and
      by 8.2% since early November. During the last ten years there has been a 42%
      correlation between the three-month change in prices and the change in
      factory sector industrial production.</p>
  <p><a href="/comment/130206g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206g.png" align="left"></a>
           
      Still leading the improvement were prices in the <b>miscellaneous</b>
      group, up by roughly one quarter versus last year and by one-third from
      the late 2011 low. Prices for structural panels (50.8% y/y) and framing
      lumber (39.1% y/y) have led the advance. Rubber prices (-12.6% y/y),
      however, have moved lower. In the <b>textile</b> group, cotton prices have
      recovered a sharp 17.2% from the November low, while <b>crude oil</b>
      prices also have been strong, up 14.8% (0.4% y/y) from their November low.
      Conversely, prices for the petrochemical benzene have moved lower. In the <b>metals</b>
      group, prices for lead (10.4% y/y) and copper scrap (-2.8% y/y) recently
      have been notably strong as they have moved off their fall lows. However,
      aluminum (+1.1% y/y) and steel scrap (-13.0% y/y) prices have risen
      moderately.&nbsp; </p>
      <p>The current forecast for industrial output from the National
      Association for Business Economics calls for 2.6% growth this year. That
      follows a 3.7% increase last year and is the weakest gain of the economic
      recovery. As such, the rate of improvement in industrial commodity prices
      should ease as 2013 progresses but the direction of change will be upward.</p>
      <p>Commodity price data can be found in Haver's <b>DAILY, WEEKLY, USECON</b>
      and <b>CMDTY</b> databases.</p>
      
  <p><a href="/comment/130206h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206h.png"></a>
     <a href="/comment/130206i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206i.png"></a></p>      
      
     <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
	
        <thead>
          <tr>
            <th class="firstcol" scope="col" >FIBER Industrial
              Materials Price Index (1990=100)</th>
            <th scope="col" ><b>02/05/13</b></th>
            <th scope="col" ><b>Y/Y %</b></th>
            <th scope="col" ><b>2012</b></th>
            <th scope="col" ><b>2011</b></th>
            <th scope="col" ><b>2010</b></th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" ><b>All Items</b></td>
            <td  >176.7</td>
            <td  >5.8</td>
            <td  >166.4</td>
            <td  >173.0</td>
            <td  >157.9</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol" ><b>&nbsp;Textiles</b></td>
            <td  >78.3</td>
            <td  >-3.1</td>
            <td  >77.9</td>
            <td  >86.1</td>
            <td  >81.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp;Cotton (cents per
              pound)</td>
            <td  >76.2</td>
            <td  >-14.4</td>
            <td  >74.5</td>
            <td  >132.8</td>
            <td  >87.8</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol" ><b>&nbsp;Metals</b></td>
            <td  >259.9</td>
            <td  >-1.4</td>
            <td  >243.0</td>
            <td  >278.7</td>
            <td  >240.0</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;Aluminum ($ per metric
              ton)</td>
            <td  >2,078.0</td>
            <td  >-4.5</td>
            <td  >2,019.6</td>
            <td  >2,400.9</td>
            <td  >2,172.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp;Copper Scrap (cents per
              pound)</td>
            <td  >373.0</td>
            <td  >-2.8</td>
            <td  >360.6</td>
            <td  >400.3</td>
            <td  >326.8</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp;Steel Scrap ($ per ton)</td>
            <td  >349.3</td>
            <td  >-13.0</td>
            <td  >366.7</td>
            <td  >412.6</td>
            <td  >326.5</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol"><b>&nbsp;Crude Oil &amp; Benzene</b></td>
            <td>210.57</td>
            <td>3.0</td>
            <td>204.1</td>
            <td>199.3</td>
            <td>182.0</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">&nbsp;&nbsp;Crude Oil (WTI, $ per
              Barrel)</td>
            <td>96.5</td>
            <td>0.4</td>
            <td>94.2</td>
            <td>95.0</td>
            <td>79.4</td>
          </tr>
          <tr class="grey3">
            <td class="firstcol"><b>&nbsp;Miscellaneous</b></td>
            <td>229.2</td>
            <td>22.7</td>
            <td>205.3</td>
            <td>190.6</td>
            <td>179.1</td>
          </tr>
          <tr>
            <td class="firstcol">&nbsp;&nbsp;Framing Lumber ($ per
              1000 board ft.)</td>
            <td>387</td>
            <td>35.3</td>
            <td>321</td>
            <td>273</td>
            <td>283</td>
          </tr>
          <tr class="odd">
            <td class="firstcol">&nbsp;&nbsp;Natural Rubber (cents
              per pound)</td>
            <td>206.0</td>
            <td>-11.5</td>
            <td>211.9</td>
            <td>262.3</td>
            <td>182.9</td>
          </tr>
        </tbody>
      </table>
      </span>




The factory sector is in a recovery mode. The latest industrial commodity price index from the Foundation for International Business and Economic Research (FIBER) rose yesterday to its highest level since June 2011. Tuesday's reading [...]

FIBER: Industrial Commodity Price Increases Are Broad-based

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      <p></p>

     
	  <p><a href="/comment/130206j_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206j.png" align="left"></a>
	  
German orders rose unexpectedly on surging foreign demand. German domestic demand weakened as domestic orders fell by 1.2% and are off by 4.6% year-over-year. Meanwhile foreign orders are now up by 0.4% year-over-year. As a result overall orders are off by a tiny 0.1% Year-over-year.  Orders from fellow EMU member countries rose by 7% while orders outside the e-Zone fell by 0.4%. 
</p><p>
Ponder this result for a minute...
</p><p>
<b>Germany: The Oxymoron</b>
Germany is supposed to be the STRONG economy of EMU. But it is certainly no locomotive. But it may have 'loco'-motivations...
</p><p>
Germany's role reminds me of that of a dementor in the Harry Potter stories. They sucked all the happiness and eventually life out of you. Germany sucks out all your demand leaving nothing for the factories at home to satisfy and leaving its fellow EMU members holding the bag in terms of getting their manufacturing sectors to spur their respective economies. Weak demand means weak output
</p><p>
I had a science professor once who noted that it is a bad parasite that kills the host. Yet, that is one way to view the impact of Germany's actions on the weakest members of EMU since the currency Zone was constructed. Aggressive exporting inside the Zone supported by German bank lending and periphery nation over-borrowing is one of the ways the debt crisis came into being.  
</p><p>
<b>Reverse Stimulus from Ynamreg ( 'Germany' spelled backwards)</b>
Now this imagery of Germany may seem a bit unfair. But the point is that Germany does have a stable economy and it is doing much better in just about all respects than its European counterparts but it is not using that strength to invigorate the Zone. Instead, it is making life more difficult for its fellow members. Germany uses its highly enhanced competitiveness to exploit demand conditions INSIDE the Zone with the Zone itself as protection for Germany from outside competition.  Germany does not give back much in terms of domestic demand to fellow Zone members. We can see that orders from German entities placed with German firms are being reduced even as Germany grabs more business from its fellow EMU members. It is the rest of the Zone that is stimulating Germany, not the other way around!
</p><p>
So when we look at aggregate EMU data what we see is that EMU is doing better largely when Germany is doing better, but not necessarily BECAUSE Germany is doing better. That's because many of Germany's gains are at the expense of other EMU members so Germanys rise is offset by someone else's fall within EMU.  Germany is doing better by making its fellow zone members worse off.
</p><p>
While some will want to use these new German data as reason to trumpet the turnaround in in Europe, as the above discussion suggests, I will not blow that horn. What I see is the same old pattern of exploitation.
</p><p>
<b>Past transgressions repeat but with more restraint</b> 
In the pre-debt crisis days German and French firms enhanced their competitive positions Vs countries in the periphery by lending to them and enabling them to buy things they should not have been able to afford. That got the periphery into debt trouble and explains why German and French banks are still struggling with legacy assets. Perched on the very precipice of the onset of the Greek debt crisis Germany pushed one last deal to completion for refurbished submarines sold to Greece before Greece went down. Now Greece can use those submarines to keep an eye in its debt.
</p><p>
What I describe in the paragraphs above is exactly WHY the Zone is not getting better and is continuing to be torn apart.  What is still fundamentally wrong in the Zone and is not fixed is the Zone's competitiveness: Specifically, competitiveness differences. Mario Draghi has ruled out traditional devaluation (ruled out the possibility that a member state would leave the Zone to devalue). Instead, some idiot has coined the term 'internal devaluation' which is a bit like renaming a 'cyanide pill' as a 'sleeping pill.' Internal devaluation is nothing more than deflation which has plagued Japan for nearly two decades and is something that Fed Chairman Bernanke is fighting with all his might and resources to avoid in the US. Why is this 'disease' suddenly the magic elixir for Europe? 
</p><p>
It isn't.
</p><p>
<b>Lie to me...no, not the TV show</b>
Just as US politicians LIE to the US people about their true policy choices and the tax consequences of those choices (think Obamacare and the Afghanistan-Iraq war, just to name two recent 'bipartisan' lies), so too the Europeans lie about their economic options and the likely economic repercussions of holding the Zone together at all costs without a real plan for mending what is wrong. We, the people, are being lied to so it is no wonder we the people are making bad choices in electing our politicians or, they are getting away with kicking the can down the road from election to election. Man may not live by bread alone but politicians do live by elections alone- still, that bread is important and it is in increasingly shorter supply, at least for the people. Sooner or later the bread will run out and the lies will not be nourishing enough and change will come.  
</p>	

<table class="centered" width="100%" border="0" cellspacing="0">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
   <tr>
    <th scope="col" colspan=9>German Orders and Sales by Sector and Origin</th>
  </tr>
  </thead>
  <tbody>
    <tr class="even">
      <td class="firstcol"><b>Real and SA</b></td>
      <td colspan=3><b>% M/M</b></td>
      <td colspan=5><b>% SAAR</b></td>
    </tr>
    <tr class="even">
      <td class="firstcol"><b></b></td>
      <td><b>Dec-12</b></td>
      <td><b>Nov-12</b></td>
      <td><b>Oct-12</b></td>
      <td><b>3-mo</b></td>
      <td><b>6-mo</b></td>
      <td><b>12-Mo</b></td>
      <td><b>Yr-Ago</b></td>
      <td><b>QTR-2-Date</b></td>
    </tr>
    <tr>
      <td class="firstcol" ><b>Total Orders</b></td>
      <td>0.8%</td>
      <td>-1.8%</td>
      <td>3.9%</td>
      <td>11.8%</td>
      <td>-1.1%</td>
      <td>-1.8%</td>
      <td>-0.1%</td>
      <td>4.0%</td>
    </tr>    
    <tr class="odd">
      <td class="firstcol" >Foreign</td>
      <td>2.4%</td>
      <td>-4.2%</td>
      <td>6.4%</td>
      <td>18.4%</td>
      <td>3.2%</td>
      <td>0.4%</td>
      <td>-0.7%</td>
      <td>10.1%</td>
    </tr> 
    <tr>
      <td class="firstcol" >Domestic</td>
      <td>-1.2%</td>
      <td>1.5%</td>
      <td>0.6%</td>
      <td>3.6%</td>
      <td>-6.2%</td>
      <td>-4.6%</td>
      <td>0.7%</td>
      <td>-3.3%</td>
    </tr>  
    <tr class="grey1">
      <td class="firstcol" ><b>Real Sector Sales</b></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
    </tr>  
    <tr>
      <td class="firstcol" ><b>MFG/Mining</b></td>
      <td>-1.0%</td>
      <td>-0.9%</td>
      <td>-0.5%</td>
      <td>-9.1%</td>
      <td>-9.8%</td>
      <td>-3.3%</td>
      <td>0.3%</td>
      <td>-12.6%</td>
    </tr> 
    <tr class="odd">
      <td class="firstcol" >Consumer</td>
      <td>-0.3%</td>
      <td>-0.3%</td>
      <td>1.5%</td>
      <td>3.4%</td>
      <td>-1.0%</td>
      <td>0.1%</td>
      <td>0.3%</td>
      <td>1.0%</td>
    </tr>   
    <tr>
      <td class="firstcol" >Cons Durables</td>
      <td>3.0%</td>
      <td>-1.0%</td>
      <td>-3.9%</td>
      <td>-7.9%</td>
      <td>-10.4%</td>
      <td>-3.5%</td>
      <td>0.0%</td>
      <td>-21.1%</td>
    </tr> 
    <tr class="odd">
      <td class="firstcol" >Cons Non-Durables</td>
      <td>-0.8%</td>
      <td>-0.3%</td>
      <td>2.4%</td>
      <td>5.1%</td>
      <td>0.6%</td>
      <td>0.6%</td>
      <td>0.4%</td>
      <td>5.2%</td>
    </tr>  
    <tr>
      <td class="firstcol" ><b>Capital Gds</b></td>
      <td>1.9%</td>
      <td>-1.0%</td>
      <td>-1.8%</td>
      <td>-3.9%</td>
      <td>-7.4%</td>
      <td>-0.8%</td>
      <td>-1.2%</td>
      <td>-15.6%</td>
    </tr>  
    <tr class="odd">
      <td class="firstcol" ><b>Intermediate Gds</b></td>
      <td>-4.7%</td>
      <td>-1.2%</td>
      <td>0.4%</td>
      <td>-20.2%</td>
      <td>-17.4%</td>
      <td>-7.8%</td>
      <td>1.7%</td>
      <td>-15.4%</td>
    </tr>  
    <tr>
      <td class="firstcol" ><b>All MFG-Sales</b></td>
      <td>-0.9%</td>
      <td>-1.0%</td>
      <td>-0.5%</td>
      <td>-9.0%</td>
      <td>-9.9%</td>
      <td>-3.3%</td>
      <td>0.3%</td>
      <td>-12.8%</td>
    </tr> 
</tbody>
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German orders rose unexpectedly on surging foreign demand. German domestic demand weakened as domestic orders fell by 1.2% and are off by 4.6% year-over-year. Meanwhile foreign orders are now up by 0.4% year-over-year. As a result [...]

German Orders Surge Mae West Strategy: Depending On the Demand of 'Strangers'

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   <p><a href="/comment/130206a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206a.png"></a>
      <a href="/comment/130206b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206b.png"></a></p>


      <p>The Mortgage Bankers Association index of total mortgage applications
      rose 3.4% (4.6% y/y) last week and recovered some of the prior week's
      decline.&nbsp; Home <i>purchase</i> applications rose 2.2% (18.6% y/y) to
      the highest level since May 2010. Applications to <i>refinance</i> an
      existing loan increased 3.5% (1.5% y/y) and recovered a piece of the prior
      week's decline.</p>
      
      <p>Applications for fixed interest rate loans rose by 7.4% y/y while
      adjustable rate loan applications fell by more than one-third y/y. The
      average mortgage loan size fell to a six-month low of $207,700. The
      average size for home purchases was $253,700 last week while for
      refinancings it was $195,000. The average size of a fixed rate loan was
      $193,800 last week and for variable rate loans it was $568,600.&nbsp;</p>
      
      <p>The effective rate on fixed-interest, conventional 15-year mortgages
      increased to 3.08% and was up from December's weekly low of 2.89%. The
      effective rate on a 30-year fixed rate was 3.86% last week while the rate
      on a Jumbo 30-year loan was 4.07%. Though it's recently narrowed, the
      spread between 15- and 30-year loan rates continued wide by historical
      standards. The effective interest rate on an adjustable 5-year mortgage
      increased to 2.83%, up from its November low of 2.72%.</p>
      
      <p>The Mortgage Bankers Association surveys between 20 to 35 of the top
      lenders in the U.S. housing industry to derive its refinance, purchase and
      market indexes. The weekly survey covers roughly 50% of all U.S.
      residential mortgage applications processed each week by mortgage banks,
      commercial banks and thrifts. The figures for weekly mortgage applications
      are available in Haver's <b>SURVEYW</b> database.</p>
      
   <p><a href="/comment/130206c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206c.png"></a>
      <a href="/comment/130206d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130206d.png"></a></p>
      <p>&nbsp;</p>


<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>      
      
        <thead>
          <tr>
            <th class="firstcol" scope="col"  >MBA
              Mortgage Applications (SA, 3/16/90=100)</th>
            <th scope="col"  >02/01/13</th>
            <th scope="col"  >01/25/13</th>
            <th scope="col"  >01/18/13</th>
            <th scope="col"  >Y/Y%</th>
            <th scope="col"  >2012</th>
            <th scope="col"  >2011</th>
            <th scope="col"  >2010</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol"  >Total Market Index</td>
            <td   >849.8</td>
            <td   >822.1</td>
            <td   >894.8</td>
            <td   >4.9</td>
            <td   >813.8</td>
            <td   >572.3</td>
            <td   >659.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol"  >&nbsp;Purchase</td>
            <td   >215.8</td>
            <td   >211.1</td>
            <td   >214.9</td>
            <td   >18.6</td>
            <td   >187.8</td>
            <td   >182.6</td>
            <td   >199.8</td>
          </tr>
          <tr>
            <td class="firstcol"  >&nbsp;Refinancing</td>
            <td   >4,567.6</td>
            <td   >4,415.2</td>
            <td   >4,916.7</td>
            <td   >1.5</td>
            <td   >4,505.0</td>
            <td   >2,858.4</td>
            <td   >3,348.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol"  >15-Year Mortgage
              Effective Interest Rate (%)</td>
            <td   >3.08</td>
            <td   >3.05</td>
            <td   >2.97</td>
            <td   >3.45<br>
              (2/12)</td>
            <td   >3.25</td>
            <td   >3.97</td>
            <td   >4.39</td>
          </tr>
        </tbody>
      </table>
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The Mortgage Bankers Association index of total mortgage applications rose 3.4% (4.6% y/y) last week and recovered some of the prior week's decline. Home purchase applications rose 2.2% (18.6% y/y) to the highest level since May 2010. [...]

U.S. Mortgage Applications Recover; Interest Rates Move Higher

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            <p>The <b>pump price for a gallon of regular gasoline surged 18
            cents</b> last week to $3.54 per gallon (1.6% y/y). That followed a
            4 cent rise during the prior week. Prices remain down 34 cents per
            gallon since their September peak. The norm for this time of year,
            when driving is reduced, is for prices to decline. Haver Analytics
            constructs seasonal factors to account for seasonal volatility and
            the adjusted price jumped 17 cents w/w to $3.77 per gallon. Since
            their October peak, prices are down 6 cents per gallon.</p>
            <p>The price for a barrel of <b>light sweet crude oil</b> also rose
            another $1.61 last week to $97.44 per barrel (-0.4% y/y) but
            yesterday prices slipped back to $96.14. Brent crude oil prices rose
            to $115.69 per barrel last week (4.0% y/y) and increased further to
            $116.84 yesterday.</p>
            <p><b>Natural gas </b>prices retreated last week to $3.27 per mmbtu
            (+32.5% y/y) but rose to $3.29 yesterday.</p>
            <p>The<b> demand for gasoline increased 3.0% y/y last week. </b>Residual
            fuel oil needs, used for heating, fell by roughly one-third y/y
            while distillate demand was off 6.3% y/y. Inventories of crude oil
            &amp; petroleum products rose 2.7% y/y.</p>
            <p>The energy price data are reported by the U.S. Department of
            Energy and can be found in Haver's <b>WEEKLY </b>database. The daily
            figures are in <b>DAILY</b> and the gasoline demand figures are in <b>OILWKLY.</b>&nbsp;</p>
            <table class="centered" border="0" cellSpacing="0" width="1231">
              <thead>
                <tr>
                  <th class="firstcol" scope="col" width="580">Weekly Price</th>
                  <th scope="col" width="95">02/02/13</th>
                  <th scope="col" width="95">01/28/13</th>
                  <th scope="col" width="95">01/21/13</th>
                  <th scope="col" width="95">Y/Y%</th>
                  <th scope="col" width="95">2012</th>
                  <th scope="col" width="95">2011</th>
                  <th scope="col" width="95">2010</th>
                </tr>
              </thead>
              <tbody>
                <tr>
                  <td class="firstcol" width="580">Retail Regular Gasoline ($
                    per Gallon, Regular)</td>
                  <td width="95" align="center">3.54</td>
                  <td width="95" align="center">3.36</td>
                  <td width="95" align="center">3.32</td>
                  <td width="95" align="center">1.6</td>
                  <td width="95" align="center">3.62</td>
                  <td width="95" align="center">3.52</td>
                  <td width="95" align="center">2.78</td>
                </tr>
                <tr class="odd">
                  <td class="firstcol" width="580">Light Sweet Crude Oil, WTI ($
                    per bbl.)</td>
                  <td width="95" align="center">97.44</td>
                  <td width="95" align="center">95.83</td>
                  <td width="95" align="center">94.54</td>
                  <td width="95" align="center">-0.4</td>
                  <td width="95" align="center">94.20</td>
                  <td width="95" align="center">95.14</td>
                  <td width="95" align="center">79.51</td>
                </tr>
                <tr>
                  <td class="firstcol" width="580">Natural Gas ($/mmbtu)</td>
                  <td width="95" align="center">3.27</td>
                  <td width="95" align="center">3.52</td>
                  <td width="95" align="center">3.43</td>
                  <td width="95" align="center">32.5</td>
                  <td width="95" align="center">2.75</td>
                  <td width="95" align="center">3.99</td>
                  <td width="95" align="center">4.</td>
                </tr>
              </tbody>
            </table>
            </span>
          </div>
        </div>
      </div>
      
      
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      <div id="content">
        <div id="rightside">
          <div id="entire" class="col">
            <span id="articletitle">U.S. Chain Store Sales Rise W/W But Remain
            Well Below Holiday Peak</span><br>
            <span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
            Moeller</a>&nbsp;&nbsp;February 5, 2013</span><span id="articletext">
            <p>The latest report from the International Council of Shopping
            Centers and Goldman Sachs indicated that consumers continue to spend
            cautiously. Chain store sales rose 2.4% last week (2.6% y/y)
            following a 3.2% pullback during all of January. During the last ten
            years there has been a 72% correlation between the y/y change in
            chain store sales and the change in retail sales at general
            merchandise stores. That correlation recently has increased.</p>
            <p>General merchandise store sales account for 15% of total retail
            sales. The ICSC-Goldman Sachs retail chain-store sales index is
            constructed using the same-store sales (stores open for one year)
            reported by 78 stores of seven retailers: Dayton Hudson, Federated,
            Kmart, May, J.C. Penney, Sears and Wal-Mart.</p>
            <p>Prospects for sales also deteriorated slightly. The leading
            indicator of chain store sales fell 0.8% (+4.7% y/y) after two weeks
            of increase. The composite leading economic indicator is compiled
            from four series: (1) The MBA's volume index of mortgage
            applications for home purchase, (2) the ABC News/Money magazine's
            survey of consumer buying conditions, (3) new filings for jobless
            benefits, and (4) the 30-year government bond yield.</p>
            <p>The chain store figures can be found in Haver's <b>WEEKLY</b>
            database. </p>
            <table class="centered" border="0" cellSpacing="0" width="1231">
              <colgroup>
                <col>
                <col>
                <col>
                <col>
                <col>
                <col>
                <col>
                <col>
              </colgroup>
              <thead>
                <tr>
                  <th class="firstcol" scope="col" width="536">ICSC-Goldman
                    Sachs (SA, 1977=100)</th>
                  <th scope="col" width="98">02/02/13</th>
                  <th scope="col" width="98">01/26/13</th>
                  <th scope="col" width="99">01/19/13</th>
                  <th scope="col" width="99">Y/Y</th>
                  <th scope="col" width="99">2012</th>
                  <th scope="col" width="99">2011</th>
                  <th scope="col" width="99">2010</th>
                </tr>
              </thead>
              <tbody>
                <tr class="odd">
                  <td class="firstcol" width="536">Total Weekly Chain Store
                    Sales</td>
                  <td align="center" width="98">530.0</td>
                  <td align="center" width="98">517.8</td>
                  <td align="center" width="99">523.2</td>
                  <td align="center" width="99">2.6%</td>
                  <td align="center" width="99">3.0%</td>
                  <td align="center" width="99">3.2%</td>
                  <td align="center" width="99">2.9%</td>
                </tr>
                <tr>
                  <td class="firstcol" width="536">&nbsp;&nbsp; W/W %</td>
                  <td align="center" width="98">2.4</td>
                  <td align="center" width="98">-1.0</td>
                  <td align="center" width="99">-1.5</td>
                  <td align="center" width="99">--</td>
                  <td align="center" width="99">--</td>
                  <td align="center" width="99">--</td>
                  <td align="center" width="99">--</td>
                </tr>
              </tbody>
            </table>
            </span>
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      &nbsp;
      <p><span id="articletitle">U.S. ISM Nonmanufacturing Index Improvement
      Stalls</span><br>
      <span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
      Moeller</a>&nbsp;&nbsp;February 5, 2013</span></p>
      
      <p>The <b>Composite Index for the service and construction sectors</b>
      from the Institute for Supply Management (ISM) matched expectations and
      slipped to 55.2 last month from a revised 55.7 during December. (Earlier
      figures were revised due to updated seasonal factors.) Since the series'
      inception in 1997 there has been a 75% correlation between the level of
      the nonmanufacturing composite index and the q/q change in real GDP for
      the service and the construction sectors. <span id="articletext"><b>Haver
      Analytics calculates an index</b> using the ISM nonmanufacturing and the
      ISM manufacturing sector index released last Friday. The figure was
      roughly unchanged m/m at 55.0. During the last ten years there has been a
      74% correlation between the composite and the quarterly change in real
      GDP.
      <p>Last month's nonmanufacturing index was supported by the employment
      component, which rose to 57.5, its highest level since February 2006.
      Since the series' inception in 1997 there has been an 88% correlation
      between the level of the ISM nonmanufacturing employment index and the m/m
      change in payroll employment in the service-producing plus the
      construction industries. The supplier delivery index also recovered to
      52.5, its highest level since May, indicating slower delivery speeds.
      Offsetting these improvements were declines in the business activity and
      new orders components. </p>
      <p>The prices index improved m/m to 58.0 but remained near its lowest
      level since July. An increased 23% of respondents reported higher prices
      while just 5% reported them lower. Since inception ten years ago, there
      has been a 65% correlation between the price index and the Q/Q change in
      the GDP services chain price index.</p>
      <p>Beginning with the January 2008 Nonmanufacturing <cite>Report On
      Business, </cite>the composite index is calculated as an indication of
      overall economic conditions for the non-manufacturing sector. It is a
      composite index based on the diffusion indices of four of the indicators
      (business activity, new orders, employment and supplier deliveries) with
      equal weights.</p>
      <p>The ISM data are available in Haver's <b>USECON</b> database. The
      expectations figure from ACTION ECONOMICS is in the <b>AS1REPNA </b>database.&nbsp;&nbsp;</p>
      <table class="centered" border="0" cellSpacing="0" width="1231">
        <thead>
          <tr>
            <th class="firstcol" scope="col" width="566"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
              Nonmanufacturing Survey (SA)</a></th>
            <th scope="col" width="94">Jan</th>
            <th scope="col" width="94">Dec</th>
            <th scope="col" width="94">Nov</th>
            <th scope="col" width="94">Jan'12</th>
            <th scope="col" width="95">2012</th>
            <th scope="col" width="95">2011</th>
            <th scope="col" width="95">2010</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" width="566">Composite Diffusion Index</td>
            <td align="center" width="94">55.2</td>
            <td align="center" width="94">55.7</td>
            <td align="center" width="94">54.8</td>
            <td align="center" width="94">56.0</td>
            <td align="center" width="95">54.6</td>
            <td align="center" width="95">54.5</td>
            <td align="center" width="95">54.1</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="566">&nbsp;&nbsp; Business Activity</td>
            <td align="center" width="94">56.4</td>
            <td align="center" width="94">60.8</td>
            <td align="center" width="94">60.9</td>
            <td align="center" width="94">58.7</td>
            <td align="center" width="95">57.7</td>
            <td align="center" width="95">57.2</td>
            <td align="center" width="95">57.6</td>
          </tr>
          <tr>
            <td class="firstcol" width="566">&nbsp;&nbsp; New Orders</td>
            <td align="center" width="94">54.4</td>
            <td align="center" width="94">58.3</td>
            <td align="center" width="94">58.0</td>
            <td align="center" width="94">57.8</td>
            <td align="center" width="95">56.6</td>
            <td align="center" width="95">56.3</td>
            <td align="center" width="95">57.0</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="566">&nbsp;&nbsp; Employment</td>
            <td align="center" width="94">57.5</td>
            <td align="center" width="94">56.3</td>
            <td align="center" width="94">51.4</td>
            <td align="center" width="94">46.5</td>
            <td align="center" width="95">53.5</td>
            <td align="center" width="95">52.4</td>
            <td align="center" width="95">49.8</td>
          </tr>
          <tr>
            <td class="firstcol" width="566">&nbsp;&nbsp; Supplier Deliveries
              (NSA)</td>
            <td align="center" width="94">52.5</td>
            <td align="center" width="94">48.5</td>
            <td align="center" width="94">49.0</td>
            <td align="center" width="94">51.0</td>
            <td align="center" width="95">50.6</td>
            <td align="center" width="95">51.9</td>
            <td align="center" width="95">52.2</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="566">Prices Index</td>
            <td align="center" width="94">58.0</td>
            <td align="center" width="94">56.1</td>
            <td align="center" width="94">56.9</td>
            <td align="center" width="94">62.3</td>
            <td align="center" width="95">59.3</td>
            <td align="center" width="95">65.1</td>
            <td align="center" width="95">61.4</td>
          </tr>
        </tbody>
      </table>
      </span>
    </p>
  


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The pump price for a gallon of regular gasoline surged 18 cents last week to $3.54 per gallon (1.6% y/y). That followed a 4 cent rise during the prior week. Prices remain down 34 cents per gallon since their September peak. The norm [...]

U.S. Gasoline and Crude Oil Prices Jump

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

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

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Michael J. Moran

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The consumer price index rose 0.2% in January, slower than the expected increase of 0.3% (and it rounded up to reach the published advance – 0.17% when calculated with more precision; annual rate of 2.04%). The latest monthly increase left the year-over-year at 2.4%, down from a recent high of 3.0% in September and bested by only one other recent reading: 2.3% in April of last year.

A drop of 1.5% in energy prices helped to contain the headline index. The drop was led by sharp retreats in the prices of both fuel oil and gasoline (off 5.7% and 3.2%, respectively). Energy prices have jumped around from month-to-month, but they have stayed within a narrow range in the past two years. Food prices rose 0.2% in January after a surge of 0.7% in the prior month. The food category experienced severe pressure during the inflation burst in 2022 (peak of 11.4%). Pressure settled in 2024, with annual food inflation easing to a low of 2.0% in August of that year. However, prices picked up again in 2025, with the year-over-year increase moving to 3.2% in August and staying close to that pace in subsequent months. The year-over-year increase in January totaled 2.9%.

The core component (ex food and energy) rose 0.3% in January, one of the sharpest advances of the past year or so. However, the increase was not especially troubling, as it was influenced by a jump of 6.5% in airfares, which added nearly a full tenth percentage point to the core component (0.08%). Airfares often move erratically, and the ups and downs in the past few years have left little net change. Discounting, most likely, will unfold in coming months. Even with the jump in airfares, the year-over-year increase in core prices moved to a new low for the current period of deceleration (2.5%). Core inflation appeared to be picking up in the spring and summer of last year (a recent peak of 3.1% in August), but pressure has eased since then.

The source of the waxing and waning in core prices lies primarily in the goods component of the CPI. Goods prices were declining noticeably in the first half of 2024 (deflation!), but, they began to shift direction in the second half of 2024 and moved to price increases in 2025. The upward trend seems to have peaked at 1.5% in September and October, with the year-over-year change easing to 1.1 percent in January. Service prices have been decelerating over the past few years, but the rate of decline began to slow last year, and the latest months have shown no further improvement, stuck at 3.0% in the past three months.

Within the core component, the movement of housing costs is notable. Rental rates rose 0.2% in January, a marked shift from the experience in 2022 and 2023, when increases in excess of 0.6% were common.  This component jumps around from month-to-month, but the downtrend is unmistakable. After peaking at 8.2% in 2022, the latest year-over-increase totaled 3.0% in January.

The cost of electricity is now gathering the attention of the public and politicians because of the pressure being exerted by the infrastructure requirements of artificial-intelligence. Costs were tame in January (down 0.1%), but increases have largely been the norm in the past year or so. The year-over-year increase totaled 6.3% in January, down from 7.0% in November but still a challenge for many households. Many observers are expecting more upward pressure down the road. Some observers perhaps recall (and fear) the experience in 2022, when electricity inflation touched 15.8%.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

260213N.jpg

260213O.jpg

- The year-over-year change in the headline index moved to the bottom of its recent range.
- The annual change in the core index moved to a new low for the current cycle.

Consumer Price Index: Slow, but Steady, Deceleration

Andrew Cates

**The Blue Chip Growth Consensus**
The first chart this week highlights a striking feature of recent forecast revisions: the outperformance of Asia, and Taiwan in particular. Over the past six months, Blue Chip panelists have upgraded their 2026 GDP growth forecasts most aggressively for Taiwan, far outpacing revisions elsewhere. This reflects the central role Taiwan plays in the global AI supply chain, especially in advanced semiconductors, where demand linked to data centres, AI accelerators and high-performance computing continues to strengthen. More broadly, positive revisions across parts of Asia suggest that the current AI-driven investment cycle is not just a US story, but one that is increasingly feeding through global tech supply chains, boosting exports, industrial production and capital spending across the region. In contrast, forecast changes elsewhere remain far more muted, underscoring how tightly the near-term growth impulse from AI is concentrated in economies most directly exposed to the semiconductor and hardware build-out.

260212Z1.jpg

**The Blue Chip Inflation Consensus**
The second chart highlights a growing theme of cross-country divergence, this time through the lens of inflation and monetary policy. Recent changes to Blue Chip CPI forecasts for 2026 show upward revisions in economies such as Japan, Australia and Canada, where inflation pressures are proving more persistent and policy tightening is either already under way or increasingly expected. In contrast, inflation forecasts in the US have been revised lower, consistent with softer recent data and reinforcing expectations of further monetary easing. The result is an increasingly asymmetric global policy backdrop: some central banks are still leaning against residual inflation risks, while others are preparing to shift toward rate cuts. This divergence, moreover, could matter more for global capital flows, exchange rates and financial conditions in the period ahead.

260212Z2.jpg

**South Korea’s Semiconductor Trade**
The third chart provides a concrete, high-frequency illustration of the forces underpinning the forecast upgrades seen earlier for Asia. South Korea’s semiconductor exports have surged sharply on a year-on-year basis, marking one of the strongest upswings of the past decade and underscoring the revival of the global tech cycle. This acceleration is closely linked to AI-related demand, particularly for advanced memory chips used in data centres and high-performance computing. Alongside Taiwan, South Korea sits at the core of the AI hardware supply chain, and the strength of semiconductor exports helps explain why growth expectations in parts of Asia have been revised higher so decisively. In this sense, the chart offers a real-economy counterpart to the consensus forecast revisions: the AI boom is not just a financial or expectations story, but one that is already showing up clearly in trade and industrial data across the region.

260212Z3.jpg

**Global Supply Chain Pressures**
The fourth chart places recent inflation dynamics in a broader supply-chain context and offers little evidence that current US tariff policies are materially exacerbating global bottlenecks. The Global Supply Chain Pressure Index has remained close to historical norms in recent months, a sharp contrast with the extreme dislocations seen during the pandemic period. Consistent with this, producer price inflation across advanced economies has remained muted, reinforcing the tight relationship between supply-chain stress and upstream price pressures. While tariffs may still influence relative prices at the margin and contribute to sector-specific adjustments, the data do not point to a broad-based resurgence in supply-chain pressures of the kind that would generate renewed, systemic inflationary pressure.

260212Z4.jpg

**Uncertainty in the US versus Europe** 
The fifth chart highlights a striking shift in the global policy uncertainty landscape. The US news-based economic policy uncertainty index has risen sharply and is now approaching levels more typically associated with Europe — a vivid contrast with the post-GFC and post-pandemic period, when US policy uncertainty was consistently well below European norms. This convergence likely reflects a combination of factors: renewed uncertainty around US trade policy and tariffs, questions over fiscal sustainability and debt dynamics, and growing debate around institutional independence, including the role of the Federal Reserve. At the same time, political polarisation and an increasingly unpredictable policy environment have become more prominent features of the US backdrop. The implications are potentially important for markets. A sustained rise in policy uncertainty would argue for a higher risk premium on US assets, particularly if it begins to influence corporate investment decisions, capital flows or the perceived safe-haven status of US markets.

260212Z5.jpg

**The Global Business Cycle** 
The final chart brings the story together by highlighting a further strengthening in global economic sentiment in February. The Sentix global expectations index moved higher alongside a renewed run of positive economic surprises across a number of major economies, as captured by the Citi Global Economic Surprise Index. This combination points to an environment in which incoming data have consistently exceeded expectations, helping to reinforce investor confidence and support risk appetite. Taken together, the improvement in sentiment and the upside surprise in activity data underscore the constructive macroeconomic backdrop that markets have been responding to in recent months — one characterised by resilient growth, easing inflation pressures and still-supportive financial conditions, even as policy paths and regional dynamics continue to diverge.

260212Z6.jpg

While markets have been unsettled at times by shifting policy expectations, geopolitical noise and questions around valuation, underlying global macroeconomic signals remain broadly supportive. Upgrades to Blue Chip consensus growth forecasts for parts of Asia — led by Taiwan — point to the tangible impact of the AI-driven tech cycle, a theme reinforced by the sharp rebound in semiconductor exports from South Korea (charts 1 and 3). At the same time, revisions to inflation forecasts underline a growing divergence in monetary policy paths, with easing still expected in the US and UK, while tighter stances persist elsewhere (chart 2). Importantly, there is little evidence so far that global supply-chain pressures are re-emerging in a way that would reignite inflation, notwithstanding lingering trade policy tensions (chart 4). Against this backdrop, rising policy uncertainty — particularly in the US — stands out as a potential source of risk, with implications for asset pricing and risk premia (chart 5). Yet the improvement in global sentiment surveys and a continued run of positive economic surprises suggest that markets are responding not just to policy noise, but to a genuinely resilient and improving macroeconomic environment (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/6wkBik7cLDk3qoA0p1AKaG?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: AI-Led Growth Meets Monetary Divergence

Winnie Tapasanun

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Existing home sales fell 8.4% m/m (-4.4% y/y) to a lower-than-expected 3.91 million units (SAAR) in January following a downwardly revised 4.4% gain to 4.27 million in December (previously +5.1%; 4.35 mil.), according to the National Association of Realtors (NAR). January sales registered the lowest level since September 2024 and the deepest m/m drop since February 2022, well below the Action Economics Forecast Survey expectation of 4.20 million. Sales were 39.2% below a high of 6.43 million in January 2022 and 40.8% below a peak of 6.60 million in January 2021. The sales fall accompanied a drop in the average 30-year fixed mortgage rate to 6.11% in January, the lowest since September 2022, after declining to 6.20% in December, according to Freddie Mac. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales slid 9.0% (-4.3% y/y) to 3.53 million units in January, the lowest level since September 2024, after a 4.3% gain to 3.88 million in December. Sales of condos and co-ops fell 2.6% (-5.0% y/y) to 380,000 following a 5.4% December rebound to 390,000.

By region, January existing home sales decreased m/m across all major regions. Sales in the West slumped 10.3% (-7.9% y/y) to 700,000 in January after a 4.0% increase in December, marking the third m/m decline in four months and the lowest level since December 2023. Sales in the South dropped 9.0% (-1.6% y/y) to 1.81 million, the lowest reading since October 2024, reversing a 6.4% December gain. Sales in the Midwest fell 7.1% (-7.1% y/y) to 920,000, the lowest level since September 2024, after a 2.1% December increase. Sales in the Northeast declined 5.9% (-4.0% y/y) to 480,000, the lowest level since June 2025, after rising 2.0% in December and November. The South remained the dominant region, accounting for 46.3% of total U.S. existing home sales.

The median price of all existing homes (NSA) fell 2.0% (+0.9% y/y) to $396,800 in January after a 1.2% decline to $405,100 in December ($405,400 initially), representing the sixth m/m fall in seven months and the lowest level since February 2025. Prices were 8.3% below a high of $432,700 in June 2025. The median price of an existing single-family home, also down for the sixth time in seven months, slid 2.2% (+0.6% y/y) to a one-year-low $400,300 in January after a 1.3% decline to $409,500 in December. The median price of condos and co-ops, up for the third time in four months, rose 0.9% (3.8% y/y) to $364,600, the highest level since August, after a 0.4% December increase to $361,200. Regionally, overall prices fell m/m in the Midwest (-3.6%; +2.3% y/y) and South (-2.3%; +0.1% y/y) in January, but increased m/m in the Northeast (+1.1%; +5.8% y/y) and West (+0.4%; -1.4% y/y).

Inventories of homes for sale weakened further in January. The number of existing homes for sale (NSA) fell 0.8% (+3.4% y/y) to 1.22 million units on top of a 14.6% December plunge to 1.23 million, posting the fourth consecutive m/m fall and the lowest level since January 2025. The supply of homes on the market at the current selling rate (NSA) rose to 3.7 months in January after falling to 3.5 months in December (the lowest since January 2025). The most recent high of 4.6 months was in August 2025, while a record low in supply of 1.6 months was in January 2022.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

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- January sales -8.4% (-4.4% y/y) to 3.91 mil., below expectations; steepest m/m fall since Feb. ’22.
- Widespread regional m/m declines: West (-10.3%), South (-9.0%), Midwest (-7.1%), Northeast (-5.9%); all regions down y/y.
- Median sales price -2.0% (+0.9% y/y) to $396,800, lowest since Feb. ’25.
- Unsold inventory -0.8% (+3.4% y/y) to 1.22 mil. units, a one-year low; 3.7 months' supply.

U.S. Existing Home Sales Drop in January; Lowest Level Since Sept. ’24

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 5,000 to 227,000 in the week of February 7, from 232,000, revised from 231,000, in the week ended January 31. The four-week average rose 7,000 to 219,500 from 212,500. The Action Economics Forecast Survey looked for 225,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 21,000 to 1.862 million in the week ending January 31, from 1.841 million, revised from 1.844 million, in the week ending January 24. The four-week moving average stood at 1.847 million in the January 31 week, the lowest level for this average since October 5, 2024, when it was 1.846 million. The prior week was 1.850 million. The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous nine weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 24, the highest unemployment rates were in Rhode Island (2.95%), New Jersey (2.78%), Massachusetts (2.68%), Minnesota and Washington (both 2.58%), California (2.30%), and Montana (2.21%). The lowest rates were in Florida (0.31%), Arkansas (0.39%), North Carolina (0.43%), Louisiana (0.41%), and Alabama (0.45%). Rates in other notable states include Illinois (2.23%), New York (2.11%), Pennsylvania (1.91%), and Texas (1.16%). These state data are not seasonally adjusted.

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

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- New claims dropped 5,000 to 227,000.
- Continuing claims rose to 1.862 million.
- The insured unemployment rate remained at 1.2% for the tenth consecutive week.

U.S. Initial Unemployment Claims Declined in Latest Week

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U.K. GDP slowed to a crawl at the end of the year, with growth at a 0.2% (annualized) rate logged in both the third and fourth quarters as 2025 drew to a close. The year had started with a strong 2.7% growth rate in Q1, which slipped to a 0.8% pace in the second quarter and decelerated to negligible growth at the end of the year.

These quarterly growth rates correspond to higher but obviously declining year over year growth rates. Because the quarterly growth rates diminished as the year progressed, year over year growth to start 2025 was at 1.8%; growth slipped to 1.4% in the second quarter and then to 1.2% in the third quarter. By the end of the year, growth had slipped to 1%.

The quarterly growth rates in the fourth quarter show public spending picked up to a 1.7% annual rate following 1% in the third quarter and erratic behavior in the first two quarters. Capital formation has remained relatively strong but has also oscillated, with first quarter growth at a blowout annual rate of 14.3%, falling to a contraction of 3.1% in Q2, rising back to 4.4% in Q3, and then declining at a 0.5% annual rate in Q4. So the year-over-year growth rates for capital formation during the course of the year only slipped from 4% in the first quarter to 3.6% in the fourth quarter, holding up fairly solidly and indicating strong rates of expansion for capital spending.

Housing, which was firm and strong in Q1 and Q2, slipped to a 0.8% annual rate of growth in the third quarter, and then housing investment fell at a 9.1% annualized rate in the fourth quarter. Year over year trends for housing show mostly low to moderate spending growth for residential investment.

U.K. exports have been floundering quarter-to-quarter, alternating between expanding and contracting; this corresponds to year over year growth rates that steadily diminish. In the first quarter of 2025, exports grew 3.5% year-over-year; that slipped to a 2% growth rate in Q2, then to a 1.5% growth rate in the third quarter. In the fourth quarter, U.K. exports are falling at a 0.5% annual rate of growth.
 
The export pattern contrasts with U.K. imports. They have mostly continued to grow, posting positive growth rates in three of the four quarters, starting the year with 5% quarterly growth and ending the fourth quarter with a 3.3% annual growth rate. Import growth rates have slipped, but not as much as other growth rates in GDP. For example, first quarter import growth was extremely strong at 7.6%; that year over year growth rate slips to 2.1% in Q2, then rises back to 5.3% in Q3, and finishes the year at 2.3%. There is slippage, but still significant growth, and the year began on a really high note.

Domestic demand has been fluctuating. In both quarterly and annual terms, there is unevenness. Quarterly growth rates range from 3.1% at an annual rate in Q1, to a 0.6% and 0.7% annual rate in the middle two quarters of the year; domestic demand ends the fourth quarter with a quarterly growth rate of 2.1% annualized. This causes year-over-year growth to be 2.9% in the first quarter; that falls to 1.2% in the second quarter, rebounds to 2.1% in the third quarter, and ends the year at 1.6% year-over-year.

Domestic demand has consistently been stronger than private consumption and it has been supported by both public consumption and by capital formation. Private consumption in 2025 has been erratic, logging 1.2% quarterly growth, annualized, in the first quarter; growth dropped to 0.2% in Q2, rising back to 1.7% in Q3, and then ending the year at a 0.6% rate of expansion quarter-over-quarter. The year-over-year data showed private consumption slipping but not dramatically, at a pace of 1.1% in the first quarter, up to 1.2% in the second quarter and then logging 0.9% in both the third and fourth quarters of 2025 as domestic demand ended the year stronger.

All of the U.K. growth rates are consistently and substantially below their five year growth rates. The economy continues to have a problem with inflation. Some recent inflation signals, however, suggest that there may be deceleration and progress, but the Bank of England hasn’t been convinced yet, even though Monetary Policy Committee members continue to speak favorably about the prospects for rate reductions ahead. The U.K. also has a corseted fiscal situation as there’s not much flexibility to spend more given its relatively bloated budget. The economy is waffling. The current administration has had its share of political issues, having recently had to eject several members from leadership positions in government. The outlook for growth is still touch and go. The outlook for inflation holds slightly more promise for deescalation. But overall, there is a lot of uncertainty over events and the growth path for the U.K. economy.