Tom Moeller

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Broad-based weakness in pricing power continues to accompany
moderate U.S.
economic growth. The June Consumer Price Index fell 0.1% (+1.1% y/y)
for the
third consecutive monthly decline. During the first six months of this
year
prices fell at a 0.3% annual rate. The latest figure fell short of
Consensus
expectations for a 0.1% increase.


A 2.9% drop in energy prices was behind much of
last month's total decline. It was the fifth consecutive monthly slip and the
latest was powered by a 4.5% decline (+3.9% y/y) in gasoline prices.
Fuel oil prices also fell 2.6% (+14.1% y/y) while natural gas &amp; electricity prices
dropped 1.6% (+0.8% y/y). Food &amp; beverage prices also 
were weak posting little change for the second straight
month. A 1.3% decline (-0.2 y/y) in fruit &amp; vegetable prices offset a
1.0% rise (2.0% y/y) in meats, poultry, fish &amp; egg prices. The cost of eating
out rose 0.1% (1.2% y/y) for the second month.&nbsp; 
Core consumer pricing power picked up
minimally. A 0.2% increase in prices less food &amp; energy followed seven consecutive months of
little change. A 0.1% uptick had been expected. Year-to-date prices rose at a
0.6% annual rate. Core goods prices rose 0.2% (1.0% y/y)
for the first solid increase this year. A 1.0% increase (8.0% y/y) in tobacco prices led
the gain. Apparel prices increased 0.8% (-0.4% y/y) while prices of home furnishings
&amp;operation declined by 0.4% (-3.1% y/y). New &amp; used motor
vehicles prices increased 0.3% (+4.4% y/y). 
Core services prices rose 0.1% (1.0% y/y)
for the fourth month in the last five. Public transportation costs fell 0.5% (+10.9% y/y) after two
months of sharp increase. Education prices rose 0.4% (4.8% y/y) following
years of 5-6% annual increase while medical care services prices increased a firm
0.4% (3.5% y/y).&nbsp; Weakness in the housing market left shelter prices up
just 0.1% but down 0.5% y/y. Owners equivalent rent of primary residences, a measure
not equivalent to other house price measures, ticked 0.1% higher (-0.2%
y/y). The slight y/y decline in this measure was the weakest reading since the
series' start in 1983. Medical care services prices again rose 0.3% (3.7% y/y).
The chained CPI, which adjusts for shifts in consumption
patterns, slipped last month and rose 0.8% year-to-year. Chained prices less food
&amp; energy were unchanged, up only 0.6% y/y.
The consumer price data is available in Haver's USECON
database while detailed figures can be found in the CPIDATA database.

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<table>
<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/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index (%) </a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June
Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead> <tbody>
<tr>
<td class="firstcol">Total&nbsp;</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-0.1</td>
<td>1.1</td>
<td>-0.3</td>
<td>3.8</td>
<td>2.9</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>0.0</td>
<td>1.0</td>
<td>1.7</td>
<td>2.3</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>-0.3</td>
<td>1.0</td>
<td>1.3</td>
<td>0.1</td>
<td>-0.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;Services less Energy</td>
<td>0.1</td>
<td>0.1</td>
<td>0.2</td>
<td>1.0</td>
<td>1.9</td>
<td>3.1</td>
<td>3.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Energy</td>
<td>-2.9</td>
<td>-2.9</td>
<td>-1.4</td>
<td>3.0</td>
<td>-18.1</td>
<td>13.7</td>
<td>5.6</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.0</td>
<td>0.0</td>
<td>0.2</td>
<td>0.7</td>
<td>1.9</td>
<td>5.4</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM" style="color: black;">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>-0.2</td>
<td>0.1</td>
<td>0.2</td>
<td>0.8</td>
<td>-0.1</td>
<td>3.7</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Total less Food
&amp; Energy&nbsp;</td>
<td>0.0</td>
<td>-0.0</td>
<td>0.0</td>
<td>0.6</td>
<td>1.5</td>
<td>2.0</td>
<td>1.9</td>
</tr>
</tbody>
</table>
&nbsp;
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Broad-based weakness in pricing power continues to accompany moderate U.S. economic growth. The June Consumer Price Index fell 0.1% (+1.1% y/y) for the third consecutive monthly decline. During the first six months of this year prices [...]

U.S. CPI: Broad-Based Declines For Third Straight Month

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Broad-based weakness in pricing power continues to accompany
moderate U.S.
economic growth. The June Consumer Price Index fell 0.1% (+1.1% y/y)
for the
third consecutive monthly decline. During the first six months of this
year
prices fell at a 0.3% annual rate. The latest figure fell short of
Consensus
expectations for a 0.1% increase. 
A 2.9% drop in energy prices was behind
much of
last month's total decline. It was the fifth consecutive monthly slip
and the
latest was powered by a 4.5% decline (+3.9% y/y) in gasoline prices.
Fuel oil
prices also fell 2.6% (+14.1% y/y) while natural gas &amp;
electricity prices
dropped 1.6% (+0.8% y/y). Food &amp; beverage
prices also were weak posting little change for the second straight
month. A
1.3% decline (-0.2 y/y) in fruit &amp; vegetable prices offset a
1.0% rise (2.0%
y/y) in meats, poultry, fish &amp; egg prices. The cost of eating
out rose 0.1%
(1.2% y/y) for the second month.&nbsp; 
Core consumer pricing power picked up
minimally. A 0.2% increase in
prices less food &amp; energy followed seven consecutive months of
little
change. A 0.1% uptick had been expected. Year-to-date prices rose at a
0.6%
annual rate. Core goods prices rose 0.2% (1.0% y/y)
for the first solid
increase this year. A 1.0% increase (8.0% y/y) in tobacco prices led
the gain. Apparel
prices increased 0.8% (-0.4% y/y) while prices of home furnishings
&amp;
operation declined by 0.4% (-3.1% y/y). New &amp; used motor
vehicles prices
increased 0.3% (+4.4% y/y). 
Core services prices rose 0.1% (1.0% y/y)
for the fourth month in the
last five. Public transportation costs fell 0.5% (+10.9% y/y) after two
months
of sharp increase. Education prices rose 0.4% (4.8% y/y) following
years of 5-6%
annual increase while medical care services prices increased a firm
0.4% (3.5%
y/y).&nbsp; Weakness in the housing market left shelter prices up
just 0.1% but
down 0.5% y/y. Owners equivalent rent of primary residences, a measure
not
equivalent to other house price measures, ticked 0.1% higher (-0.2%
y/y). The
slight y/y decline in this measure was the weakest reading since the
series'
start in 1983. Medical care services prices again rose 0.3% (3.7% y/y).
The chained CPI, which adjusts for shifts in consumption
patterns, slipped
last month and rose 0.8% year-to-year. Chained prices less food
&amp; energy
were unchanged, up only 0.6% y/y.
The consumer price data is available in Haver's USECON
database while
detailed figures can be found in the CPIDATA
database.
<div style="text-align: center;">
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100716b.png"> <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100716c.png">
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<table class="centered" 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/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index (%) </a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June
Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead> <tbody>
<tr>
<td class="firstcol">Total&nbsp;</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-0.1</td>
<td>1.1</td>
<td>-0.3</td>
<td>3.8</td>
<td>2.9</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>0.0</td>
<td>1.0</td>
<td>1.7</td>
<td>2.3</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>-0.3</td>
<td>1.0</td>
<td>1.3</td>
<td>0.1</td>
<td>-0.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1</td>
<td>0.1</td>
<td>0.2</td>
<td>1.0</td>
<td>1.9</td>
<td>3.1</td>
<td>3.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Energy</td>
<td>-2.9</td>
<td>-2.9</td>
<td>-1.4</td>
<td>3.0</td>
<td>-18.1</td>
<td>13.7</td>
<td>5.6</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.0</td>
<td>0.0</td>
<td>0.2</td>
<td>0.7</td>
<td>1.9</td>
<td>5.4</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM" style="color: black;">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>-0.2</td>
<td>0.1</td>
<td>0.2</td>
<td>0.8</td>
<td>-0.1</td>
<td>3.7</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Total less Food
&amp; Energy&nbsp;</td>
<td>0.0</td>
<td>-0.0</td>
<td>0.0</td>
<td>0.6</td>
<td>1.5</td>
<td>2.0</td>
<td>1.9</td>
</tr>
</tbody>
</table>
&nbsp;
<div style="text-align: center;">
U.S. Consumer Sentiment
Falls Sharply
</div>
 
<div style="text-align: center;">by&nbsp;<a href="http://haver.com/comment/Moeller.html">Tom
Moeller</a> July 16, 2010</div>


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100716d.png" align="left">Consumers
aren't upbeat about much these days. As of mid-July,
the University
of Michigan reported that its consumer sentiment measure dropped
sharply from
June to 66.5 which was the lowest reading since last August.
Nevertheless the
index level remained up 20.3% since the low in November 2008. During
the last
ten years there has been an 89% correlation between the level of
sentiment and
the y/y change in real consumer spending.
The expectations index dropped sharply m/m but remained up a
modest 12.4%
from the 2008 low. The readings for expected business conditions during
the next
year (-5.8% y/y) and expectations for business conditions during the
next five
years (0.0% y/y) both fell sharply from June. Expectations for personal
finances
also fell hard from June (-6.4% y/y).
Expected price inflation during the next year ticked higher to
3.6% and
remained up from the December 2008 low of 1.7%.&nbsp;Respondents'
view of
government policy, which may eventually influence economic
expectations,
retraced the gains of the prior two months and remained down sharply
from its
high last May. Fifteen&nbsp; percent of respondents thought that a
good job was
being done by government versus 42% who thought a poor job was being
done.
Sentiment about current economic conditions also fell sharply
from June to
the lowest level since November. The assessment of current personal
finances
reversed its improvement (7.1% y/y) since February while perceived
buying
conditions for large household goods, including furniture,
refrigerators, stoves
&amp; televisions fell hard to the lowest level since November
(8.1% y/y).
The Reuters/University of Michigan survey data are not
seasonally adjusted.
The reading is based on telephone interviews with about 500 households
at
month-end. The summary indexes are in Haver's USECON database
with
details in the proprietary UMSCA database. 

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<table class="centered" 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">Mid- July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead> <tbody>
<tr class="odd">
<td class="firstcol" width="337">Consumer
Sentiment</td>
<td>66.5</td>
<td>76.0</td>
<td>73.6</td>
<td>0.8%</td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">Current
Economic Conditions</td>
<td>75.5</td>
<td>85.6</td>
<td>81.0</td>
<td>7.1</td>
<td>69.6</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>60.6</td>
<td>69.8</td>
<td>68.8</td>
<td>-4.1</td>
<td>64.1</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>
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Broad-based weakness in pricing power continues to accompany moderate U.S.
economic growth. The June Consumer Price Index fell 0.1% (+1.1% y/y) for the
third consecutive monthly decline. During the first six months of this year
prices fell at a 0.3% annual rate. The latest figure fell short of Consensus
expectations for a 0.1% increase. 
A 2.9% drop in energy prices was behind much of
last month's total decline. It was the fifth consecutive monthly slip and the
latest was powered by a 4.5% decline (+3.9% y/y) in gasoline prices. Fuel oil
prices also fell 2.6% (+14.1% y/y) while natural gas &amp; electricity prices
dropped 1.6% (+0.8% y/y). Food &amp; beverage
prices also were weak posting little change for the second straight month. A
1.3% decline (-0.2 y/y) in fruit &amp; vegetable prices offset a 1.0% rise (2.0%
y/y) in meats, poultry, fish &amp; egg prices. The cost of eating out rose 0.1%
(1.2% y/y) for the second month.&nbsp; 
Core consumer pricing power picked up minimally. A 0.2% increase in
prices less food &amp; energy followed seven consecutive months of little
change. A 0.1% uptick had been expected. Year-to-date prices rose at a 0.6%
annual rate. Core goods prices rose 0.2% (1.0% y/y) for the first solid
increase this year. A 1.0% increase (8.0% y/y) in tobacco prices led the gain. Apparel
prices increased 0.8% (-0.4% y/y) while prices of home furnishings &amp;
operation declined by 0.4% (-3.1% y/y). New &amp; used motor vehicles prices
increased 0.3% (+4.4% y/y). 
Core services prices rose 0.1% (1.0% y/y) for the fourth month in the
last five. Public transportation costs fell 0.5% (+10.9% y/y) after two months
of sharp increase. Education prices rose 0.4% (4.8% y/y) following years of 5-6%
annual increase while medical care services prices increased a firm 0.4% (3.5%
y/y).&nbsp; Weakness in the housing market left shelter prices up just 0.1% but
down 0.5% y/y. Owners equivalent rent of primary residences, a measure not
equivalent to other house price measures, ticked 0.1% higher (-0.2% y/y). The
slight y/y decline in this measure was the weakest reading since the series'
start in 1983. Medical care services prices again rose 0.3% (3.7% y/y).
The chained CPI, which adjusts for shifts in consumption patterns, slipped
last month and rose 0.8% year-to-year. Chained prices less food &amp; energy
were unchanged, up only 0.6% y/y.
The consumer price data is available in Haver's USECON database while
detailed figures can be found in the CPIDATA database.
&nbsp;
<table width="979" border="0" cellspacing="0" height="204">
 <thead>
 <tr>
 <th scope="col" class="firstcol" height="21" width="360"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
 Price Index</a> (%)</th>
 <th scope="col" height="21" width="89">June</th>
 <th scope="col" height="21" width="89">May</th>
 <th scope="col" height="21" width="89">April</th>
 <th scope="col" height="21" width="89">June Y/Y</th>
 <th scope="col" height="21" width="90">2009</th>
 <th scope="col" height="21" width="90">2008</th>
 <th scope="col" height="21" width="90">2007</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" height="21" width="360">Total&nbsp;</td>
 <td height="21" width="89">-0.1</td>
 <td height="21" width="89">-0.2</td>
 <td height="21" width="89">-0.1</td>
 <td height="21" width="89">1.1</td>
 <td height="21" width="90">-0.3</td>
 <td height="21" width="90">3.8</td>
 <td height="21" width="90">2.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" height="18" width="360">Total less Food &amp; Energy</td>
 <td height="18" width="89">0.2</td>
 <td height="18" width="89">0.1</td>
 <td height="18" width="89">0.0</td>
 <td height="18" width="89">1.0</td>
 <td height="18" width="90">1.7</td>
 <td height="18" width="90">2.3</td>
 <td height="18" width="90">2.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" height="21" width="360">&nbsp; Goods less Food &amp;
 Energy</td>
 <td height="21" width="89">0.2</td>
 <td height="21" width="89">0.1</td>
 <td height="21" width="89">-0.3</td>
 <td height="21" width="89">1.0</td>
 <td height="21" width="90">1.3</td>
 <td height="21" width="90">0.1</td>
 <td height="21" width="90">-0.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" height="21" width="360">&nbsp;&nbsp;&nbsp; Services
 less Energy</td>
 <td height="21" width="89">0.1</td>
 <td height="21" width="89">0.1</td>
 <td height="21" width="89">0.2</td>
 <td height="21" width="89">1.0</td>
 <td height="21" width="90">1.9</td>
 <td height="21" width="90">3.1</td>
 <td height="21" width="90">3.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" height="21" width="360">&nbsp; Energy</td>
 <td height="21" width="89">-2.9</td>
 <td height="21" width="89">-2.9</td>
 <td height="21" width="89">-1.4</td>
 <td height="21" width="89">3.0</td>
 <td height="21" width="90">-18.1</td>
 <td height="21" width="90">13.7</td>
 <td height="21" width="90">5.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" height="21" width="360">&nbsp; Food &amp; Beverages</td>
 <td height="21" width="89">-0.0</td>
 <td height="21" width="89">0.0</td>
 <td height="21" width="89">0.2</td>
 <td height="21" width="89">0.7</td>
 <td height="21" width="90">1.9</td>
 <td height="21" width="90">5.4</td>
 <td height="21" width="90">3.9</td>
 </tr>
 <tr>
 <td class="firstcol" height="21" width="360"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM" style="color: black;">Chained
 CPI: Total (NSA)</a>&nbsp;</td>
 <td height="21" width="89">-0.2</td>
 <td height="21" width="89">0.1</td>
 <td height="21" width="89">0.2</td>
 <td height="21" width="89">0.8</td>
 <td height="21" width="90">-0.1</td>
 <td height="21" width="90">3.7</td>
 <td height="21" width="90">2.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" height="21" width="360">&nbsp; Total less Food &amp;
 Energy&nbsp;</td>
 <td height="21" width="89">0.0</td>
 <td height="21" width="89">-0.0</td>
 <td height="21" width="89">0.0</td>
 <td height="21" width="89">0.6</td>
 <td height="21" width="90">1.5</td>
 <td height="21" width="90">2.0</td>
 <td height="21" width="90">1.9</td>
 </tr>
 </tbody>
</table>
&nbsp;
U.S. Consumer Sentiment Falls Sharply 
by&nbsp;<a href="http://haver.com/comment/Moeller.html">Tom
Moeller</a> July 16, 2010
Consumers aren't upbeat about much these days. As of mid-July, the University
of Michigan reported that its consumer sentiment measure dropped sharply from
June to 66.5 which was the lowest reading since last August. Nevertheless the
index level remained up 20.3% since the low in November 2008. During the last
ten years there has been an 89% correlation between the level of sentiment and
the y/y change in real consumer spending.
The expectations index dropped sharply m/m but remained up a modest 12.4%
from the 2008 low. The readings for expected business conditions during the next
year (-5.8% y/y) and expectations for business conditions during the next five
years (0.0% y/y) both fell sharply from June. Expectations for personal finances
also fell hard from June (-6.4% y/y).
Expected price inflation during the next year ticked higher to 3.6% and
remained up from the December 2008 low of 1.7%.&nbsp;Respondents' view of
government policy, which may eventually influence economic expectations,
retraced the gains of the prior two months and remained down sharply from its
high last May. Fifteen&nbsp; percent of respondents thought that a good job was
being done by government versus 42% who thought a poor job was being done.
Sentiment about current economic conditions also fell sharply from June to
the lowest level since November. The assessment of current personal finances
reversed its improvement (7.1% y/y) since February while perceived buying
conditions for large household goods, including furniture, refrigerators, stoves
&amp; televisions fell hard to the lowest level since November (8.1% y/y).
The Reuters/University of Michigan survey data are not seasonally adjusted.
The reading is based on telephone interviews with about 500 households at
month-end. The summary indexes are in Haver's USECON database with
details in the proprietary UMSCA database. 
<table width="979" cellspacing="0">
 <thead>
 <tr>
 <th scope="col" class="firstcol" width="337"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM" ;>University
 of Michigan</a></th>
 <th scope="col" width="91">Mid- July</th>
 <th scope="col" width="91">June</th>
 <th scope="col" width="91">May</th>
 <th scope="col" width="91">June Y/Y</th>
 <th scope="col" width="91">2009</th>
 <th scope="col" width="91">2008</th>
 <th scope="col" width="92">2007</th>
 </tr>
 </thead>
 <tbody>
 <tr class="even">
 <td class="firstcol" width="337">Consumer Sentiment</td>
 <td width="91">66.5</td>
 <td width="91">76.0</td>
 <td width="91">73.6</td>
 <td width="91">0.8%</td>
 <td width="91">66.3</td>
 <td width="91">63.8</td>
 <td width="92">85.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="337">Current Economic Conditions</td>
 <td width="91">75.5</td>
 <td width="91">85.6</td>
 <td width="91">81.0</td>
 <td width="91">7.1</td>
 <td width="91">69.6</td>
 <td width="91">73.7</td>
 <td width="92">101.2</td>
 </tr>
 <tr class="even">
 <td class="firstcol" width="337">Expectations</td>
 <td width="91">60.6</td>
 <td width="91">69.8</td>
 <td width="91">68.8</td>
 <td width="91">-4.1</td>
 <td width="91">64.1</td>
 <td width="91">57.3</td>
 <td width="92">75.6</td>
 </tr>
 </tbody>
</table>





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<a href="/comment/100715a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100715a.png" align="left"></a>
Pricing pressures at the wholesale level again diminished last month. A 0.5%
decline in the June PPI was the third in a row that owed to consecutive declines
in food &amp; energy prices. The drop exceeded Consensus expectations for a 0.1%
slip. As a result of the decline, the y/y gain in prices backpedaled to 2.7%
from its March high of 6.1%.
Finished food prices fell 2.2%, the third consecutive monthly drop. Not
seasonally adjusted, the latest decline was led by lower fresh &amp; dried
vegetable prices (-11.3 y/y) and lower fresh fruit prices (+5.0% y/y). Beef
prices also declined m/m (+15.2% y/y) but dairy product prices rose (13.6% y/y).&nbsp;Finished
energy prices fell for the fourth month in the last five but remained up 8.0%
y/y. Not seasonally adjusted gasoline prices dropped 4.6% (+6.2% y/y) and home
heating oil prices fell 6.1% (+14.4% y/y). Finally, natural gas prices rose (1.2%
y/y) and electricity prices rose (3.2% y/y).&nbsp;
Core pricing power diminished. The 0.1% increase in finished producer prices
less food &amp; energy was down from the 0.2% gains during the prior two months
and matched Consensus expectations. Finished consumer goods prices less food
&amp; energy rose 0.2% leaving the 1.7% twelve-month increase nearly half the
annual gains during the last two years. Finished durables prices fell 0.3% (-0.3%
y/y) and reversed the May increase but core finished consumer nondurable goods
prices strengthened with a 0.5% rise (3.2% y/y). Capital equipment prices were
unchanged (0.3% y/y) versus annual gains between 1.0% and 3.0% back to 2004.
Earlier strength in intermediate goods prices diminished last month and they
fell 0.9% (+6.3% y/y). Core pricing power also lagged with a 0.4% decline but
prices remained up 5.4% y/y, nearly the strongest rise since late-2008. The
strength continued to reflect increases in the prices of steel (30.5% y/y),
copper (13.4% y/y) and plywood (15.5% y/y).
Price pressures fell last month at the earliest stage of processing. Crude
materials prices fell 2.4% along with a 4.8% decline in core prices. The decline
was led by lower scrap copper (+27.2% y/y) and lower iron &amp; steel scrap
(82.1% y/y) prices.
The producer price data is available in Haver's USECON database. More
detailed data is in the PPI and in the PPIR databases.
 Minutes of the Federal Open Market Committee for
June 22-23, 2010 can be found
<a href="http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20100623.pdf">
 here.</a>
<a href="/comment/100715b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100715b.png"></a>
<a href="/comment/100715c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100715c.png"></a>

<table width="100%" cellspacing="0" class="centered">
<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/@E8/@E802/@E80201/@E80201.HTM"> Producer
 Price Index (%) </a></th>
 <th scope="col" >June</th>
 <th scope="col" >May</th>
 <th scope="col" >April</th>
 <th scope="col" >June Y/Y</th>
 <th scope="col" >2009</th>
 <th scope="col" >2008</th>
 <th scope="col" >2007</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Finished Goods</td>
 <td>-0.5</td>
 <td>-0.3</td>
 <td>-0.1</td>
 <td>2.7</td>
 <td>-2.5</td>
 <td>6.4</td>
 <td>3.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Less Food &amp; Energy</td>
 <td>0.1</td>
 <td>0.2</td>
 <td>0.2</td>
 <td>1.0</td>
 <td>2.6</td>
 <td>3.4</td>
 <td>2.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Intermediate Goods</td>
 <td>-0.9</td>
 <td>0.4</td>
 <td>0.8</td>
 <td>6.3</td>
 <td>-8.4</td>
 <td>10.3</td>
 <td>4.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Less Food &amp; Energy</td>
 <td>-0.4</td>
 <td>0.3</td>
 <td>1.1</td>
 <td>5.4</td>
 <td>-4.2</td>
 <td>7.4</td>
 <td>2.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Crude Goods</td>
 <td>-2.4</td>
 <td>-2.8</td>
 <td>-1.2</td>
 <td>13.7</td>
 <td>-30.3</td>
 <td>21.4</td>
 <td>11.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Less Food &amp; Energy</td>
 <td>-4.8</td>
 <td>-1.6</td>
 <td>4.0</td>
 <td>30.4</td>
 <td>-23.5</td>
 <td>14.8</td>
 <td>15.6</td>
 </tr>
 </tbody>
</table>


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Pricing pressures at the wholesale level again diminished last month. A 0.5% decline in the June PPI was the third in a row that owed to consecutive declines in food & energy prices. The drop exceeded Consensus expectations for a 0.1% [...]

U.S. Producer Prices Decline For Third Month, Again With Lower Food & Energy Costs

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<a href="/comment/100715j_big.png" name="modal"> <img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100715j.png" align="left"></a>
Perhaps the job market is improving. Initial claims for
jobless insurance
fell last week to 429,000 following a decline during the prior week to
458,000.
It was revised up from 454,000 claims. The latest figure was the lowest
since
August 2008 and was well below Consensus expectations for 450,000
claims. The
four-week moving average of initial claims also fell to 455,250. These
figures
are down from the recession peak of 651,000 reached in March of 2009.
Working
the other way, continuing claims for
unemployment
insurance during
the latest week increased to 4.681M which was the highest level since
late-May,
but still it was off by one-third from the June '09 peak. The overall
decline is
a function of the improved job market but also reflects the exhaustion
of 26
weeks of unemployment benefits. The four-week average of continuing
claims rose
slightly off the cycle low to 4.581M. This series dates back to
1966.&nbsp;
Ongoing
claims do not reflect those who receive
extended
benefits. Extended
benefits for unemployment insurance fell during the latest week to
409,442.&nbsp;These
figures do not include the decreased 3,911,389 benefit recipients
(+50.6% y/y)
under state administered "EUC" emergency&nbsp;programs, but paid
for
by the Federal government.
The
insured unemployment rate increased to 3.7% from
an
upwardly revised 3.5%
during the prior week. It reached a high of 4.9% during May of 2009.
During the
last ten years, there has been a 96% correlation between the level of
the
insured unemployment rate and the overall rate of unemployment
published by the
Bureau of Labor Statistics.&nbsp;
The
highest insured unemployment rates in the week
ending June
26 were in
Puerto Rico (6.3%), Oregon (5.0), Alaska (4.8), Pennsylvania (4.7),
Nevada
(4.4), California (4.3), Connecticut (4.2), Wisconsin (4.1), Rhode
Island (4.0),
Mississippi (3.9), New Jersey (3.9), and South Carolina (3.9). The
lowest
insured unemployment rates were in Virginia (1.8), Wyoming (2.0), Texas
(2.3),
Tennessee (2.6), Maine (2.7), Georgia (2.8), Maryland (2.9), Florida
(3.2), New
York (3.2), Ohio (3.2) and Massachusetts (3.5). These data are not
seasonally
adjusted but the overall insured unemployment rate is.
The
unemployment insurance claims data is available
in Haver's
WEEKLY
database and the state data is in the REGIONW
database.



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<table>
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a></th>
<th scope="col">07/10/10</th>
<th scope="col">07/03/10</th>
<th scope="col">06/26/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead> <tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>429</td>
<td>458</td>
<td>475</td>
<td>-20.3%</td>
<td>572</td>
<td>419</td>
<td>321</td>
</tr>
<tr class="even">
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,681</td>
<td>4,434</td>
<td>-24.7</td>
<td>5,809</td>
<td>3,340</td>
<td>2,549</td>
</tr>
<tr>
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.7</td>
<td>3.5</td>
<td>4.6 (7/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

Perhaps the job market is improving. Initial claims for jobless insurance fell last week to 429,000 following a decline during the prior week to 458,000. It was revised up from 454,000 claims. The latest figure was the lowest since [...]

U.S. Weekly Initial Unemployment Insurance Claims Drop Sharply To Lowest Since 2008

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</head>
<body>
 



<a href="/comment/100715g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100715g.png" align="left"></a>
The
Philadelphia Federal Reserve Bank indicated that as the
third quarter
began, the U.S. economy's forward momentum waned. The Bank's July index
of
regional factory sector activity fell for the second straight month to
5.1, the
lowest level since August of last year. The latest was slightly lower
than
expectations for a reading of 10.0. Nevertheless, it still suggested
positive
economic growth and compared to readings near -40.0 at the recent
recession's
weakest.
During the last ten years there has been an 76% correlation
between the level
of the Philadelphia Fed Business Conditions Index and the three-month
growth in
factory sector industrial production. There has been a 78% correlation
with q/q
growth in real GDP. The latest survey from the Philadelphia Federal
Reserve Bank
can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2010/bos0710.cfm">here</a>.
Underlying the deterioration in the General Activity
Index were negative readings for new orders and (quicker) delivery
times. Shipments
also slipped but the employment reading improved to its highest since
April.
During the last ten years, there has been a 75% correlation between the
index
level and the three-month change in manufacturing sector
payrolls.&nbsp;
The prices paid index improved slightly m/m but remained well
below its April
high. During the last ten years there has been a 70% correlation
between the
prices paid index and the three-month growth in the intermediate goods
PPI.
There has been an 81% correlation with the change in core intermediate
goods
prices.
The separate index of expected business conditions in six
months deteriorated
sharply to its lowest level since January of last year. Expectations
for new
orders, shipments and employment fell sharply. However, expected
capital
expenditures improved m/m but remained well below the February high.
The figures from the Philadelphia Federal Reserve can be found
in Haver's SURVEYS
database.

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<table class="centered" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead> <tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">July '09</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead> <tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>5.1</td>
<td>8.0</td>
<td>21.4</td>
<td>-8.9</td>
<td>-7.6</td>
<td>-21.4</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-4.3</td>
<td>9.0</td>
<td>6.1</td>
<td>-5.2</td>
<td>-9.7</td>
<td>-14.7</td>
<td>6.9</td>
</tr>
<tr>
<td class="firstcol">Shipments</td>
<td>4.0</td>
<td>14.2</td>
<td>15.8</td>
<td>-12.1</td>
<td>-8.0</td>
<td>-9.2</td>
<td>9.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Delivery Times</td>
<td>-8.1</td>
<td>6.8</td>
<td>-1.2</td>
<td>-12.5</td>
<td>-15.3</td>
<td>-10.6</td>
<td>-6.1</td>
</tr>
<tr>
<td class="firstcol">Number of Employees</td>
<td>4.0</td>
<td>-1.5</td>
<td>3.2</td>
<td>-25.9</td>
<td>-23.8</td>
<td>-8.8</td>
<td>6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>4.5</td>
<td>4.6</td>
<td>-7.9</td>
<td>-19.8</td>
<td>-24.0</td>
<td>-16.7</td>
<td>-3.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>13.1</td>
<td>10.0</td>
<td>35.5</td>
<td>-8.7</td>
<td>-3.9</td>
<td>36.3</td>
<td>26.3</td>
</tr>
</tbody>
</table>
</body></html>

The Philadelphia Federal Reserve Bank indicated that as the third quarter began, the U.S. economy's forward momentum waned. The Bank's July index of regional factory sector activity fell for the second straight month to 5.1, the [...]

Philadelphia Fed Index Suggests Further Economic Slowdown

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The recovery in industrial output ground to a halt last month.
Overall
production ticked up just 0.1 after a little-revised 1.3 May increase.
But all
of the latest increase was due to hot temperatures and higher utility
output. In
the factory sector, output fell 0.4% for the second decline this year.
Nevertheless, output is up 8.3%&nbsp;since the end of the last
recession with
output of business equipment, usually a laggard, up 11.4%.&nbsp;

Amongst major industry groupings, it was output of business
equipment that
held up last month with a 0.9% rise. The 11.4% annual gain in equipment
output
also outpaced the gains in most other categories. In individual
industries,
output of machinery is up 16.5% y/y, computers &amp; electronic
products is up
16.3% and electrical equipment, appliances &amp; components is up
5.8%. Overall
consumer goods output has risen 6.8% y/y led by a 52.5% jump in motor
vehicle
output but in June it declined slightly. Less motor vehicles, consumer
goods
output fell 1.3% last month (+2.4% y/y). Working the other way, apparel
output
rose 1.4% last month (9.5% y/y).
Capacity utilization held stable at 74.1%, its highest level
since November
2008. In the factory sector alone, utilization fell slightly to 71.4%,
still
near the highest level since October 2008 and up from the 2009 low of
65.4%.
The industrial production data are available in Haver's USECON
database with more detail available in the IP
database.


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<a href="/comment/100715f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100715f.png"></a>
<table>
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead> <tr>
<th scope="col" class="firstcol">Industrial
Production (SA,%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June
Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead> <tbody>
<tr>
<td class="firstcol">Total Output</td>
<td>0.1</td>
<td>1.3</td>
<td>0.3</td>
<td>8.2</td>
<td>-9.3</td>
<td>-3.3</td>
<td>2.7</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.4</td>
<td>1.0</td>
<td>0.8</td>
<td>8.3</td>
<td>-11.1</td>
<td>-4.5</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>-0.5</td>
<td>1.9</td>
<td>-0.9</td>
<td>6.8</td>
<td>-5.8</td>
<td>-4.20</td>
<td>0.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>0.9</td>
<td>1.4</td>
<td>1.8</td>
<td>11.4</td>
<td>-12.2</td>
<td>-1.5</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-0.3</td>
<td>0.4</td>
<td>3.8</td>
<td>5.2</td>
<td>-16.7</td>
<td>-9.5</td>
<td>-1.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Materials</td>
<td>0.4</td>
<td>1.0</td>
<td>0.5</td>
<td>9.8</td>
<td>-9.7</td>
<td>-2.7</td>
<td>3.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>2.8</td>
<td>5.5</td>
<td>-4.3</td>
<td>7.2</td>
<td>-2.6</td>
<td>-0.1</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">Capacity Utilization
(%)</td>
<td>74.1</td>
<td>74.1</td>
<td>73.1</td>
<td>68.2 (June '09)</td>
<td>70.0</td>
<td>77.9</td>
<td>81.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Factory Utilization</td>
<td>71.4</td>
<td>71.7</td>
<td>70.9</td>
<td>65.4</td>
<td>67.2</td>
<td>75.0</td>
<td>79.6</td>
</tr>
</tbody>
</table>
</body></html>

The recovery in industrial output ground to a halt last month. Overall production ticked up just 0.1 after a little-revised 1.3 May increase. But all of the latest increase was due to hot temperatures and higher utility output. In the [...]

U.S. Industrial Production Recovery Stutters

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Pricing pressures at the wholesale level again diminished last month. A 0.5%
decline in the June PPI was the third in a row that owed to consecutive declines
in food &amp; energy prices. The drop exceeded Consensus expectations for a 0.1%
slip. As a result of the decline, the y/y gain in prices backpedaled to 2.7%
from its March high of 6.1%.
Finished food prices fell 2.2%, the third consecutive monthly drop. Not
seasonally adjusted, the latest decline was led by lower fresh &amp; dried
vegetable prices (-11.3 y/y) and lower fresh fruit prices (+5.0% y/y). Beef
prices also declined m/m (+15.2% y/y) but dairy product prices rose (13.6% y/y).&nbsp;Finished
energy prices fell for the fourth month in the last five but remained up 8.0%
y/y. Not seasonally adjusted gasoline prices dropped 4.6% (+6.2% y/y) and home
heating oil prices fell 6.1% (+14.4% y/y). Finally, natural gas prices rose (1.2%
y/y) and electricity prices rose (3.2% y/y).&nbsp;
Core pricing power diminished. The 0.1% increase in finished producer prices
less food &amp; energy was down from the 0.2% gains during the prior two months
and matched Consensus expectations. Finished consumer goods prices less food
&amp; energy rose 0.2% leaving the 1.7% twelve-month increase nearly half the
annual gains during the last two years. Finished durables prices fell 0.3% (-0.3%
y/y) and reversed the May increase but core finished consumer nondurable goods
prices strengthened with a 0.5% rise (3.2% y/y). Capital equipment prices were
unchanged (0.3% y/y) versus annual gains between 1.0% and 3.0% back to 2004.
Earlier strength in intermediate goods prices diminished last month and they
fell 0.9% (+6.3% y/y). Core pricing power also lagged with a 0.4% decline but
prices remained up 5.4% y/y, nearly the strongest rise since late-2008. The
strength continued to reflect increases in the prices of steel (30.5% y/y),
copper (13.4% y/y) and plywood (15.5% y/y).
Price pressures fell last month at the earliest stage of processing. Crude
materials prices fell 2.4% along with a 4.8% decline in core prices. The decline
was led by lower scrap copper (+27.2% y/y) and lower iron &amp; steel scrap
(82.1% y/y) prices.
The producer price data is available in Haver's USECON database. More
detailed data is in the PPI and in the PPIR databases.
 Minutes of the Federal Open Market Committee for
June 22-23, 2010 can be found
<a href="http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20100623.pdf">
 here.</a>
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<table width="100%" cellspacing="0" class="centered">
<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/@E8/@E802/@E80201/@E80201.HTM">Producer
 Price Index (%) </a></th>
 <th scope="col" >June</th>
 <th scope="col" >May</th>
 <th scope="col" >April</th>
 <th scope="col" >June Y/Y</th>
 <th scope="col" >2009</th>
 <th scope="col" >2008</th>
 <th scope="col" >2007</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Finished Goods</td>
 <td>-0.5</td>
 <td>-0.3</td>
 <td>-0.1</td>
 <td>2.7</td>
 <td>-2.5</td>
 <td>6.4</td>
 <td>3.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Less Food &amp; Energy</td>
 <td>0.1</td>
 <td>0.2</td>
 <td>0.2</td>
 <td>1.0</td>
 <td>2.6</td>
 <td>3.4</td>
 <td>2.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Intermediate Goods</td>
 <td>-0.9</td>
 <td>0.4</td>
 <td>0.8</td>
 <td>6.3</td>
 <td>-8.4</td>
 <td>10.3</td>
 <td>4.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Less Food &amp; Energy</td>
 <td>-0.4</td>
 <td>0.3</td>
 <td>1.1</td>
 <td>5.4</td>
 <td>-4.2</td>
 <td>7.4</td>
 <td>2.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Crude Goods</td>
 <td>-2.4</td>
 <td>-2.8</td>
 <td>-1.2</td>
 <td>13.7</td>
 <td>-30.3</td>
 <td>21.4</td>
 <td>11.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Less Food &amp; Energy</td>
 <td>-4.8</td>
 <td>-1.6</td>
 <td>4.0</td>
 <td>30.4</td>
 <td>-23.5</td>
 <td>14.8</td>
 <td>15.6</td>
 </tr>
 </tbody>
</table>

</body>

</html>

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

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

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Winnie Tapasanun

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Industrial production (IP) rose a more-than-expected 0.4% m/m in December following a 0.4% rise in November (+0.2% initially) and a 0.3% decline in October (-0.1% previously), data from the Federal Reserve Board showed. December marked the third m/m gain in four months. A 0.1% m/m December increase had been expected in the Action Economics Forecast Survey. The year-on-year growth rate slowed to 2.0% in December, the lowest since September, from 2.5% in November; this compared with a 0.3% y/y decline in December 2024. The December IP index at 102.3 was 3.1% above a low of 99.2 in January 2024. IP rose 0.2% q/q in Q4 2025 after a 0.6% q/q gain in Q3 2025, increasing at a 0.7% annualized rate following a 2.3% Q3 annualized pace. In 2025, IP rose 1.3% after declines of 0.7% in 2024 and 0.2% in 2023.

By **industry groups**, manufacturing production grew 0.2% (2.0% y/y) in December, up for the third time in four months, following a 0.3% increase in November (0.0% initially) and a 0.6% drop in October (-0.4% previously). Durable goods production edged up 0.1% (3.1% y/y) in December, the first m/m increase since September, after a 0.1% downtick in November. Within durables, the following categories rose m/m in December, including output rises of 2.4% (3.5% y/y) in primary metals, 1.7% (1.3% y/y) in electrical equipment, appliances & components, 1.5% (17.2% y/y) in aerospace & miscellaneous transportation equipment, 0.8% (-2.2% y/y) in furniture & related products, 0.2% (4.8% y/y) in machinery, and 0.1% (7.4% y/y) in computer & electronic products. Notably, aircraft & parts production climbed 2.1% (30.0% y/y), the third m/m increase in four months, reversing a 2.1% November drop. To the downside, the following durable goods categories fell m/m in December, including drops of 2.3% (-5.5% y/y) in wood products, 1.1% (-2.8% y/y) in motor vehicles & parts, 1.1% (-1.0% y/y) in nonmetallic mineral products, 0.1% (+2.6% y/y) in fabricated metal products, and 0.1% (-3.7% y/y) in miscellaneous durables goods.

Nondurable goods production increased 0.3% (1.0% y/y) in December, the third m/m gain in four months, after a 0.8% rebound in November. The December increase reflected m/m output rises of 1.8% (2.1% y/y) in petroleum & coal products, 0.5% (1.9% y/y) in food, beverages & tobacco, and 0.3% (-0.2% y/y) in plastics & rubber products. In contrast, the following nondurable goods categories declined m/m in December, including output drops of 1.3% (-0.8% y/y) in textiles & product mills, 1.1% (-0.5% y/y) in apparel & leather goods, 0.3% (-3.1% y/y) in paper, 0.3% (-3.4% y/y) in printing & related support activities, and 0.1% (+1.6% y/y) in chemicals.

Utilities output recovered 2.6% (2.3% y/y) in December, the third m/m rise in four months, following a 0.3% decline in November (-0.4% initially), reflecting a 1.2% rebound (1.3% y/y) in electric utilities output and a 12.0% jump (8.7% y/y) in natural gas utilities output. Mining activity, however, fell 0.7% (+1.7% y/y), the third m/m slide in four months, after an unrevised 1.7% November gain.

By **market groups**, business equipment output advanced 0.8% (10.1% y/y) in December, up for the third time in four months, after a 0.3% increase in November. Consumer goods output rose 0.7% (0.7% y/y) after a 0.7% November rebound, reflecting a 0.7% decline (-3.5% y/y) in durable consumer goods and a 1.1% gain (1.8% y/y) in nondurable consumer goods. Materials production grew 0.2% (1.7% y/y), the third m/m increase in four months, after a 0.5% November rise. In contrast, construction supplies production fell 0.3% (+1.3% y/y) in December, the second m/m fall in three months, reversing a 0.3% increase in November.

In **special classifications**, factory output of selected high-tech industries increased 0.7% (10.9% y/y) in December, the third successive m/m gain, following a downwardly revised 0.5% rise in November (+1.1% initially). Manufacturing production excluding selected high-tech industries rose 0.2% (1.7% y/y) in December after a 0.3% gain in November, and manufacturing production excluding selected high-tech and motor vehicles & parts rose 0.3% (2.1% y/y) after a 0.4% increase; both measures posted their third m/m gain in four months.

Capacity utilization rose to 76.3% in December, the highest since July, from 76.1% in November (76.0% initially). The Action Economics Forecast Survey forecasted 76.0%. The December reading was 3.2 percentage points below its long-run (1972–2024) average. Manufacturing capacity utilization held at 75.6% in December and November (75.4% previously); the December rate was 2.6 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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260116U23.jpg

- December IP +0.4% (+2.0% y/y), third m/m rise in four months, led by a 2.6% gain in utilities.
- Manufacturing +0.2% (+2.0% y/y), w/ durables +0.1% and nondurables +0.3%.
- Selected high-tech +0.7%, third consecutive m/m rise; motor vehicles -1.1%, fourth straight m/m fall.
- Mining -0.7%, third m/m decline in four months.
- Key categories in market groups mostly increase.
- Capacity utilization at a five-month-high 76.3%; mfg. capacity utilization steady at 75.6%.

U.S. Industrial Production Increases in December on Utilities Rebound

Robert Brusca

260116E.jpg

The European Monetary Union has concluded a year of weak-to-moderate growth with inflation largely toeing the line. As always, the inflation picture is more complicated than a simple statement. When we look at inflation, we look at the headline, we look at the core, to make sure that the volatile food & energy elements aren't dominating the index, and then we look across some of the main participants to see if the trend for inflation is shared broadly across the largest countries in the Monetary Union. When we apply those kinds of standards, the grading for the year is reduced. However, based on the headline alone, it was an excellent year for the ECB.

**Headline Inflation in 2025**
Headline inflation in 2025 rose by 2%, exactly on the target of the European Central Bank. It rose over six months at a 2% annual rate and then concluded the year over the last three months, rising at a 1.6% annual rate with some margin below the target set by the central bank itself.

**Country Headline Inflation Trends**
On a country basis, the performance is not nearly as good. While year-on-year results look pretty good, with Germany at 2%, France at 0.7% and Italy at 1.3%, Spain comes in at 3.1%. So the three largest monetary union economies come in at or below 2% with Spain as a rogue observation. When we look further at the sequence of inflation within the year, we see Germany at 2% over 12 months, rising to 3.1% over 6 months, rising further to 4% over 3 months. Inflation is accelerating at the end of the year even as Germany hits the target! This is something to keep an eye on. For France, the inflation rate also accelerates slightly but stays below the bar of 2% over three months, six months, and 12 months. For Italy, inflation is decelerating from 1.3% over 12 months to -0.3% over six months, and then inflation in Italy is contracting at a 1.9% annual rate over three months. Spanish inflation shows clear trouble with a 3.1% 12-month pace, rising to 4.6% at an annual rate over six months, and rising further to 5.9% at an annual rate over three months.

**Core Inflation**
For core inflation, the Monetary Union’s consolidated numbers are not yet compiled. However, for the four largest economies, we do have core or ex-energy inflation. For Germany, it's inflation excluding energy. On that basis, German inflation is 2.2% over 12 months, it rises to 2.7% over six months, then falls back to a 2% annual pace over three months All-in-all not a bad performance. For France, core inflation is below 2% over 12 months, six months, and three months. In Italy, once again, we see inflation decelerating: Italian inflation is 2% over 12 months - right on the ECB target. It falls to a 1.3% annual rate over six months and then falls further to a 0.3% annual rate over three months. For Spain, the core has another very difficult story for the Monetary Union. Inflation is 2.7% over 12 months, it rises to 3.1% over six months and stays at an annual rate of about 3% over three months. This is too high and it looks stubborn, particularly because it is the core.

260116.jpg

**Across the Big Four**
On balance, what we see is that the ECB grades-out well, based on headline inflation and based on its sequential performance for the European economic union as a whole. But large countries, show headline inflation building some steam particularly in the largest economy, Germany, and in Spain, the smallest of the BIG-4 economies. Inflation is once again mixed in the Monetary Union with German and Spanish inflation too high and with French and Italian inflation running either at or below the 2% mark and with Italy showing a tendency towards weaker prices for both the headline and the core. The change in prices over these various periods shows inflation gets the most help from oil prices over 12 months where Brent, measured in euros, falls by 22.6%; over six months Brent prices fall by 37% at an annual rate; and over three months Brent oil prices are unchanged, so that the headline isn't getting help at all from oil prices except through lagged effects.

**Summing Up**
Meanwhile, there are some signs of stronger growth taking root in Europe, especially in Germany with better industrial production being logged and with German industrial production looking significantly stronger than the PMI data, suggesting that perhaps PMI data are missing something about the rebound that is developing. Nonetheless, it was a good year for inflation and the ECB; however, it doesn't exactly end the year in the catbird’s seat. On the other hand, it does not end the year behind the curve. There are scattered pressures and needs among member countries which always makes monetary policy difficult. When some countries need higher interest rates and others need lower interest rates, the ECB is in a difficult spot. Clearly, Spain and Germany are experiencing different phenomenon than France and Italy. That could be the policy challenge for the year ahead.

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

**The growth consensus for 2026** 
Consensus growth forecasts for 2026 have continued to firm over the past six months, with upward revisions most pronounced in economies that are more directly exposed to the global AI investment cycle. Taiwan stands out, reflecting its central role in advanced semiconductor manufacturing and the spillovers from sustained AI-related capex across the global tech supply chain. The US has also seen a sizeable upgrade, consistent with strong domestic investment in AI infrastructure and data-centre capacity, alongside resilient demand for high-value tech services. Elsewhere in Asia, upgrades to South Korea and, to a lesser extent, China and India point to a broader regional benefit from the AI-driven electronics and capital-goods cycle, even as underlying macro conditions remain mixed. Canada has also seen modest upward revisions, likely reflecting its close integration with US investment trends. By contrast, revisions across much of Europe and Japan have been more muted, while forecasts for Russia remain under downward pressure.

260115Z1.jpg

**The next steps for central bank policy** 
Based on responses to the special questions in the latest Blue Chip survey, the chart highlights how uncertain panelists remain about the precise timing of the next policy move, even where there is broad agreement on direction. Expectations for both the Fed and the Bank of England are now loosely centred on March 2026 as the most likely window for the next easing step, but the spread of responses points to limited conviction and a high sensitivity to incoming data. By contrast, panelists continue to see the ECB as largely through its easing cycle, with a clear majority expecting any further move only later, if at all. The Bank of Japan remains the clear outlier: while further tightening is still the central expectation, views are split on timing, with panelists divided between a March move and a hike pushed beyond April 2026—highlighting ongoing uncertainty over the durability of domestic inflation and wage dynamics.

260115Z2.jpg

**The UK economy and BoE policy** 
While Blue Chip panelists remain divided on the precise timing of the Bank of England’s next policy cut, the latest run of UK data is tilting market expectations toward an earlier move. Economic releases have increasingly fallen short of expectations, a pattern that has coincided with a steady decline in short-dated gilt yields. The negative surprise profile reflects a combination of weak household demand and softer labour-market indicators. This has generated downside momentum in the data, reinforcing the case—at least from a market perspective—for earlier or deeper policy easing.

260115Z3.jpg

**The impact of Artificial Intelligence**
Responses to the special questions in the latest Blue Chip survey also suggest that panelists are divided over the timing of AI’s macroeconomic impact in the US. A sizeable share already reports seeing noticeable effects, consistent with the rapid pace of AI-related investment and adoption over the past year. At the same time, a similarly large group expects AI’s impact to become more evident only over the next one to three years, implying a belief that productivity and growth effects will materialise with a lag. These views are notable given that a majority of panelists continue to judge anticipated AI-related gains as being overstated in financial markets, underscoring the risk of disappointment—and potential equity market volatility—if realised outcomes fail to match elevated expectations.

260115Z4.jpg

**US business formation and productivity growth**
The chart points to a renewed pick-up in US productivity growth alongside a marked step-up in business applications, a combination that has naturally fuelled interest in the role of AI. The acceleration in output per hour over the past year coincides with a surge in corporate formations, potentially reflecting both heightened investment in new technologies and the emergence of new, AI-enabled business models. That said, productivity growth has historically been highly cyclical, often strengthening late in the cycle or during periods of labour hoarding and cost discipline, before fading again. As such, while AI may be contributing at the margin, it remains too early to conclude that the recent improvement marks a durable, technology-driven shift rather than another cyclical upswing.

260115Z5.jpg

**China’s export growth**
This week’s China trade data revealed that its export growth has continued to rotate away from the US and toward Europe and ASEAN, a pattern that has become more pronounced over the past year. While exports to the US have fallen sharply on a year-on-year basis, shipments to both Europe and ASEAN have held up markedly better, and in recent months have returned to positive growth. This divergence is consistent with the tightening of US trade policy toward China, including higher tariffs, expanded export controls and broader efforts to “de-risk” supply chains. By contrast, trade with Europe and ASEAN appears to be benefiting from trade diversion and re-routing, as Chinese firms redirect exports toward markets where barriers remain lower and supply-chain integration is deeper.

260115Z6.jpg

The global backdrop remains unsettled, reflected in rising gold prices amid geopolitical tensions—most recently around Venezuela—and renewed political noise, including questions over Federal Reserve independence. At the same time, however, many major equity indices remain at or close to all-time highs, buoyed by optimism around AI and reinforced by a run of relatively benign US inflation readings. Against this mixed backdrop, the charts this week point to a global outlook that is becoming more differentiated rather than uniformly weaker. Blue Chip forecasts for 2026 growth have edged higher over the past six months, with upgrades concentrated in economies most exposed to the AI investment cycle, notably the US and parts of Asia (chart 1). Central bank expectations remain fluid: while panelists broadly anticipate easing by the Fed and Bank of England, conviction around timing is limited, and the Bank of Japan remains an outlier with further tightening still expected (chart 2). In the UK, that uncertainty sits alongside a deteriorating data flow, with negative economic surprises increasingly tilting market expectations toward an earlier BoE rate cut (chart 3). Turning to the US, special questions highlight a divide over whether AI is already having a noticeable macro impact or whether its effects will emerge more gradually, a tension that mirrors concerns about over-optimism in financial markets (chart4). That debate is echoed in the recent pick-up in US productivity growth and the step-change in business formation—developments that may reflect AI-related dynamics but which also warrant caution given the historically cyclical nature of productivity (chart 5). Finally, China’s trade data point to a continued re-orientation of export growth away from the US and toward Europe and ASEAN, consistent with evolving US trade policy and broader supply-chain realignment (chart 6).

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Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October to include with the November report. The charts above have a gap in October, and the November figures are represented by a small dot.

Import prices have been remarkably stable in the past three years, as shown by the sideways movement in the level of the import price index (left chart). Focusing on percent changes (i.e. inflation rates) rather than the level of the index shows deflation in 2023 and early 2024 followed by higher prices more recently (right chart). Still, the net change in the past 12 months has totaled only 0.1% and the cumulative change in the past three years amounted to a decline of 0.4%.

A calm environment in the energy sector has helped to restrain import prices, as the price of crude oil showed little change in 2023 and 2024 and declined in 2025. Import prices excluding petroleum products have increased in recent years, but the changes have been modest: 0.9 in the past 12 months and 1.3% in the past three years.

The non-oil components of import prices have traced various patterns in recent years, but shifts have been largely offsetting. Prices of food and autos increased noticeably in 2023 and 2024, but they gave back much of those increases in 2025. Prices of capital goods were stable in 2023 and 2024, but they started to increase in 2025. Prices of consumer goods have been volatile, showing bursts of higher prices followed by discounting, leaving a modest net increase in the past three years.

The calm energy environment also seemed to play a role on the export side, as the industrial supply category showed little net change in prices over 2023 and 2024 before jumping in early 2025. Food prices followed a similar pattern, showing two years of restraint before moving higher in 2025. These two categories account for much of the upward movement in overall export prices in 2025. Prices of consumer goods also started to move higher in 2025 after little net change in the prior two years. Prices of capital goods and automobiles have traced reasonably steady upward paths.

Many observers might try to use the import component of this report to gain insight into the effect of tariffs on prices. That will be difficult because the figures from this report are pre-tariff; there will be no independent upward pressure on prices in this report because of tariffs. In fact, one should look for lower import prices in searching for a tariff effect. That is, if a foreign exporter were to absorb the tariff burden, that would be accomplished by reducing the pre-tariff price in order to keep the after-tariff price steady.

260115L.jpg

Some exporters to the US may have made such efforts. The nearby chart shows the month-to-month change in import prices in 2025, and May and June both showed lower prices. These months were especially important because they followed the announcement by President Trump of marked increases in tariffs in April. Also, some of the downward pressure occurred in components that would be sensitive to price (autos and consumer goods). Of course, May and June might be too soon after the announcement of draconian tariffs for foreign exporters to assess and change their pricing strategy.

The chart on monthly changes ends in September because the absence of an October reading prevents the calculation of the month-to-month changes for October and November. However, the two-month change from September to November is easily calculated, and the increase of 0.4% suggests little or no effort to absorb the burden of tariffs.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

- Import prices have changed little in the past three years.
- Export prices were stable in 2023-24, but moved higher in 2025.

Import & Export Prices: Generally Modest Changes

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The Empire State Manufacturing Index of General Business Conditions rose to a higher-than-expected 7.7 in January following a 17.2-drop to -3.7 in December, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 1.0 for January had been expected in the Action Economics Forecast Survey. The positive January figure indicated that the business activity in New York State expanded for the third time in four months; it was an improvement from -7.4 in January 2025 and a low of -29.7 in January 2024, though still below a high of 16.8 in November 2024. The percentage of respondents reporting an increase in general business conditions was 34.2% in January, up from 31.7% in December; the percentage reporting a decrease was 26.5%, down from December’s 35.4%. The latest survey was conducted between January 2 and January 9.

The headline index reflects the answer to a single question concerning the state of economic activity and is not calculated from the components. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index increased to 51.2 in January following a 4.2-point decline to the neutral-level 50.0 in December (the lowest level since September); it was slightly up from 50.7 in January 2025 and well above a low of 43.0 in January 2024. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index rose to 6.6 in January after a 10.6-point drop to -1.0 in December, marking the third m/m gain in orders in four months and a sharp improvement from a low of -30.7 in January 2024. The shipments index jumped to 16.3 in January, the highest level since November 2024, following a 16.5-point fall to -5.0 in December; it was well above a low of -21.7 in April 2024. The unfilled orders index improved to -8.2 in January after a 9.1-point decrease to -14.9 in December, indicating that unfilled orders contracted for the eighth straight month but at a less severe pace; the index reached a low of -24.2 in January 2024. The inventories index fell to -2.1 in January, the lowest level since September, after a 2.7-point decline to 4.0 in December, signaling the first inventory contraction since October. Meanwhile, the delivery times index increased to 0.0 in January from -5.9 in December, with 12.4% of respondents reporting longer delivery times and an identical 12.4% reporting shorter times, indicating that delivery times were unchanged.

On the labor front, the number of employees index fell to -9.0 in January after a 1.0-point increase to 7.5 in December, indicating that employment contracted for the first time since September and reached its lowest level since January 2024. The index remained well below a peak of 24.9 in February 2022. In January, only 7.9% of respondents reported an increase in employment while a higher 16.8% reported a decline. The average workweek index dropped to -5.4 in January from 2.5 in December, turning negative for the first time since October and hitting the lowest level since April 2025.

Inflation pressures eased in January but remained high. The prices paid index fell to 42.8 in January, the lowest level since March 2025, after a 5.9-point decrease to 44.2 in December. Although still well below a peak of 84.9 in April 2022, the index remained above a low of 25.9 in December 2024 and a low of 20.8 in December 2023. In January, 44.5% of respondents reported higher prices paid while only 1.7% reported lower prices paid. The prices received index fell to 14.4 in January, the lowest reading since January 2025, from 25.4 in December. The index was up from a low of 7.5 in December 2024 and a low of 7.7 in July 2023 but far below a high of 51.9 in March 2022. In January, 18.9% of respondents reported higher prices received while 4.4% reported lower prices received.

Firms remained fairly optimistic about the future business outlook in the latest survey. The index for future business conditions eased to 30.3 in January after rising to 33.5 in December, with 50.6% of respondents expecting business conditions to improve over the next six months. Future new orders edged down to 33.3 in January from 34.5 in December, while future shipments rose to 34.9—the highest level since March 2022—from December’s 30.7. Growth in future employment strengthened to 14.9, the highest reading since November 2024, from December’s 7.8. Capital spending plans remained positive for the third consecutive month in January, with the future capital expenditures index rising to 10.3 from December’s 6.9. Expected prices paid fell to 52.6 in January from 55.4 in December and expected prices received fell to 36.5 from 41.6, with both measures at their lowest levels since December 2024.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- General Business Conditions Index up 11.4 pts. to 7.7 in January.
- Positive: Shipments (16.3, highest since Nov. ’24) and new orders (6.6).
- Negative: Employment (-9.0, lowest since Jan. ’24), unfilled orders (-8.2), and inventories (-2.1, a four-month low).
- Prices paid at a 10-month-low 42.8 and prices received at a one-year-low 14.4.
- Firms fairly optimistic: Future Business Conditions Index down to a still-positive 30.3; future prices paid at a one-year-low 52.6.

Economy in Brief

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