Tom Moeller

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<a href="/comment/100616d_big.png" name="modal" ><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616d.png"></a>The recovery in industrial output due to improved
final demand and inventory replenishment continued last month. Overall
production rose 1.2% after a little revised 0.7% increase during April.
It's up at an 8.1% annual rate so far this year. These gains understate
the degree of improvement following last year's recession. In the
factory sector alone output rose 0.9% during the last two months and it
has risen at a 9.5% rate so far this year.&nbsp;&nbsp;
Strength in output last month was
across-the-board amongst major industry groupings. In individual
industries, output of motor vehicles rose 5.5% last month and by more
than one-third y/y. Output of computers also posted a firm 1.4%
increase (14.3% y/y) while machinery output rose 1.9% (13.3% y/y).
Output of appliances and furniture slipped after
a strong April (+3.6% y/y). The level of production was one-third below
the 2005 peak. Apparel output rose just 0.5% last month (7.9% y/y) and
remained off by two-thirds from 1994 as production has moved out of the
country.
Capacity utilization rose further to
74.7%, its highest level since November 2008. In the factory sector
alone, utilization rose to 71.5%, the highest level since November 2008
and up from the 2009 low of 65.1%.
The industrial production data are
available in Haver's USECON database.
<a href="/comment/100616e_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616e.png"></a>
<a href="/comment/100616f_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616f.png"></a>

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production (SA,%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead>
<tr class="grey2">
<td class="firstcol">Total Output</td>
<td>1.2</td>
<td>0.7</td>
<td>0.3</td>
<td>7.6</td>
<td>-9.7</td>
<td>-2.2</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.9</td>
<td>0.9</td>
<td>1.2</td>
<td>7.9</td>
<td>-11.3</td>
<td>-3.2</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer
Goods</td>
<td>1.1</td>
<td>0.0</td>
<td>0.4</td>
<td>6.3</td>
<td>-5.2</td>
<td>-2.6</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Business
Equipment</td>
<td>1.3</td>
<td>1.7</td>
<td>1.1</td>
<td>10.1</td>
<td>-12.4</td>
<td>-1.1</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction
Supplies</td>
<td>0.7</td>
<td>3.0</td>
<td>2.4</td>
<td>3.9</td>
<td>-17.8</td>
<td>-6.3</td>
<td>-2.0</td>
</tr>
<tr>
<td class="firstcol">Materials</td>
<td>1.4</td>
<td>0.8</td>
<td>-0.1</td>
<td>9.2</td>
<td>-10.9</td>
<td>-1.9</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol" class="firstcol">Utilities</td>
<td>4.8</td>
<td>-1.3</td>
<td>-6.2</td>
<td>4.2</td>
<td>-2.5</td>
<td>0.3</td>
<td>3.4</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capacity Utilization
(%)</td>
<td>74.7</td>
<td>73.7</td>
<td>73.1</td>
<td>68.5(May '09)</td>
<td>70.1</td>
<td>77.5</td>
<td>80.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Factory Utilization</td>
<td>71.5</td>
<td>70.8</td>
<td>70.1</td>
<td>65.3</td>
<td>66.8</td>
<td>75.1</td>
<td>79.0</td>
</tr>

</table>

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The recovery in industrial output due to improved final demand and inventory replenishment continued last month. Overall production rose 1.2% after a little revised 0.7% increase during April. It's up at an 8.1% annual rate so far [...]

U.S. Industrial Production Is Strong Again

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<a href="/comment/100616a_big.png" name="modal" ><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616a.png"></a>If there was any question
that the government's program to stimulate housing was a success, it
should be laid to rest now that it's ended. May housing starts
plummeted 10% m/m to 593,000 (AR), the lowest level since December. The
April level was revised down modestly. The latest figure was well short
of Consensus expectations for 648,000 starts but despite the decline,
starts remain up 21.5% from the low in January 2009. 

Starts of single-family homes fell 17.2% from April to 468,000, the
lowest level in twelve months. In the South, single-family starts fell
by one-quarter (+10.1% y/y) while starts in the Midwest dropped 10.9%
(+15.5% y/y). In the Northeast starts fell a lesser 1.7% (+54.1 y/y)
and were off 2.0% (+11.1 y/y) in the West.

Activity in the the multi-family sector continued to improve and starts
of apartments, condominiums &amp; town houses jumped by one-third
to 125,000, the highest level in twelve months. 

Building permits during fell 5.9% to the lowest level in one-year.
Permits to build a single-family home repeated their April decline and
fell roughly 10.0% (+3.1% y/y). Permits to build
multi-family homes increased 9.7% and were 26.0% higher than the low
last July.
The housing starts
figures can be found in Haver's USECON database.
&nbsp;
<a href="/comment/100616b_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616b.png"></a>
<a href="/comment/100616c_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616c.png"></a>

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May 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</td>
<td>593</td>
<td>659</td>
<td>634</td>
<td>7.8%</td>
<td>554</td>
<td>900</td>
<td>1,342</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>468</td>
<td>565</td>
<td>535</td>
<td>15.3</td>
<td>442</td>
<td>616</td>
<td>1,036</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>125</td>
<td>94</td>
<td>99</td>
<td>-13.2</td>
<td>112</td>
<td>284</td>
<td>306</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>574</td>
<td>610</td>
<td>685</td>
<td>4.4</td>
<td>583</td>
<td>896</td>
<td>1,392</td>
</tr>
</tbody>
</table>

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If there was any question that the government's program to stimulate housing was a success, it should be laid to rest now that it's ended. May housing starts plummeted 10% m/m to 593,000 (AR), the lowest level since December. The [...]

U.S. Housing Starts Decline, Erasing Year's Increase

Robert Brusca

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<a href="/comment/100615m.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615m.png"></a>
The seasonally adjusted and working day adjusted EMU trade balance
improved in April widening to &#128;1.39Bln surplus. Still, the trend is for
the surplus to shrink. Growth rates show that exports and imports are
building on the earlier strong rates of growth, getting successively
larger over more recent periods- even with this month's backtracking. 
Export and import categories are off across the
board this month with one exception, a monthly rise in the export value
of raw materials 
The chart above shows a pattern for the surplus
is that it is slowly deteriorating after peaking early in 2009. This is
interesting because if European growth gets weak we would expect this
pattern to reverse and to produce surpluses as growth slows and as
imports slow down as domestic demand weakens. But, we also expect
Europe to stave off surplus reduction because the euro is weak and the
increase in competitiveness should expand exports and retard imports.
The fact of the ongoing current surplus deterioration suggests that
there is a J-Curve at work. The rise in the surplus this month may hint
that we have reached the end of the J-curve effect. So, let's look at
how that works. 
The J-curve refers to the tendency for traded
goods prices to react first to the change in the exchange rate and for
trade volumes to react later. There is a timing asymmetry; in fact,
there are probably several of them. For example, with the euro's fall
in value there is not necessarily an immediate impact on export prices.
Export prices are denominated in euros based on their euro-area costs.
But export volumes eventually will respond positively to the exchange
rate drop because unchanged euro-based export prices will translate
them into much lower foreign currency prices. 
Initially nothing happens to export prices.
Secondly, the volume sold overseas eventually grows as overseas buyers
respond to lower prices expressed in their domestic currency. Thirdly,
eventually European exporters might even RAISE their euro prices to
increase their profits more immediately, and blunt the degree of
competitiveness improvement. But these latter two effects are second
and third round occurrences. The initial effect on exports and export
prices is that nothing much happens due to the exchange rate change. 
Import prices, however, are under pressure from
the very start of the currency weakening. The minute that the euro
falls, foreign prices expressed in euro currency terms are adjusted up.
For example $70/bbl oil that used to cost &#128; &nbsp;53.85 at &#128;&nbsp;1.30 will require
&#128;&nbsp;58.33 at &#128;&nbsp;1.20. So the terms of trade (PX/PM) move sharply against a
country as a first step after a currency drop. That means that the
ratio drops as import prices rise faster then export prices (...and all
other things the same, that will widen the trade deficit). But
eventually because demand elasticities (demand responsiveness) are
greater than one in absolute value, the percentage drop in import
volumes will surpass the percentage rise in import prices, bringing
about a drop in the value of imports and a rise in the trade surplus. 
And, as discussed above, eventually the drop in
foreign currency prices for exports will spur export volumes to expand
in foreign markets. Both of these effects argue for an expanded
surplus, eventually. But the immediate impact is that surplus gets
smaller because price effects take place before demand impacts play
out. The deterioration in the terms of trade is the dominant
first-round effect and that creates the J-curve, a move in the wrong
direction before a move in the right direction. Right now the
combination of the J-curve effects driving up import prices up and
stronger recovery growth sucking in imports is wining the battle
against strong exports driven by a strong overseas recovery. As a
result the surplus is shrinking. This is the first round, or the start
of the J-curve effect, It is temporary and with the euro's drop slowing
the one month rise in the trade surplus could be a hint of things to
come. 
Weaker growth in EMU could stem the ongoing rise
in imports too, but so will the eventual response to higher import
prices as the euro has fallen. One of theses effects will do it by
enhancing growth; the other by retarding it. There will be little
confusion about which effect is winning out. Either way, we expect
Europe's surplus to return for good and for this declining phase in the
surplus to prove temporary. Perhaps the rise in the monthly surplus is
the start of that process.



<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan=7 scope="col">Euro-Area
Trade trends for goods</th>
</tr></thead>

<td>&nbsp;</td>
m/m%
% Saar
<td>&nbsp;</td>


<td>&nbsp;</td>
Apr-10
Mar-10
3M
6M
12M
12M
Ago

<tr>
<td class="firstcol">Balance*</td>
<td>&#128;&nbsp;1,397 </td>
<td>&#128;&nbsp;(26)</td>
<td>&#128;&nbsp;(1,435)</td>
<td>&#128;&nbsp;1,870 </td>
<td>&#128;&nbsp;(3,931)</td>
<td>&#128;&nbsp;219
</td>
</tr>
<tr class="even">
<td class="firstcol" colspan=7>Exports</td>
</tr>
<tr>
<td class="firstcol">All
Exp</td>
<td style="color:red;">-2.4%</td>
<td>9.8%</td>
<td>51.2%</td>
<td>27.2%</td>
<td>17.4%</td>
<td style="color:red;">-24.3%</td>
</tr>
<tr>
<td class="firstcol">Food
and Drinks</td>
<td style="color:red;">-2.9%</td>
<td>6.2%</td>
<td>22.4%</td>
<td>19.2%</td>
<td>7.9%</td>
<td style="color:red;">-10.0%</td>
</tr>
<tr>
<td class="firstcol">Raw
materials</td>
<td>0.8%</td>
<td>6.5%</td>
<td>54.5%</td>
<td>39.3%</td>
<td>31.6%</td>
<td style="color:red;">-25.3%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td style="color:red;">-2.4%</td>
<td>10.1%</td>
<td>53.6%</td>
<td>27.6%</td>
<td>17.8%</td>
<td style="color:red;">-25.3%</td>
</tr>
<tr>
<td class="firstcol">
MFG</td>
<td style="color:red;">-4.8%</td>
<td>12.1%</td>
<td>43.9%</td>
<td>21.2%</td>
<td>14.8%</td>
<td style="color:red;">-23.4%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan=7>IMPORTS</td>
</tr>
<tr>
<td class="firstcol">All IMP</td>
<td style="color:red;">-3.5%</td>
<td>12.2%</td>
<td>49.0%</td>
<td>32.7%</td>
<td>17.3%</td>
<td style="color:red;">-25.1%</td>
</tr>
<tr>
<td class="firstcol">Food
and Drinks</td>
<td style="color:red;">-2.4%</td>
<td>5.5%</td>
<td style="color:red;">-4.4%</td>
<td>11.0%</td>
<td style="color:red;">-1.8%</td>
<td style="color:red;">-4.9%</td>
</tr>
<tr>
<td class="firstcol">Raw
materials</td>
<td style="color:red;">-5.0%</td>
<td>22.9%</td>
<td>96.7%</td>
<td>68.8%</td>
<td>40.0%</td>
<td style="color:red;">-37.9%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td style="color:red;">-3.5%</td>
<td>12.1%</td>
<td>51.5%</td>
<td>32.7%</td>
<td>17.8%</td>
<td style="color:red;">-25.7%</td>
</tr>
<tr>
<td class="firstcol">
MFG</td>
<td style="color:red;">-5.1%</td>
<td>12.6%</td>
<td>31.9%</td>
<td>28.4%</td>
<td>14.1%</td>
<td style="color:red;">-21.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan=7>*Eur
mlns; mo or period average (SA, WDA)</td>
</tr>



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The seasonally adjusted and working day adjusted EMU trade balance improved in April widening to 1.39Bln surplus. Still, the trend is for the surplus to shrink. Growth rates show that exports and imports are building on the earlier [...]

EMU Exports And Imports Hit A One-Month Backtrack But Is The Surplus Really On A Sustained Declining Trend?

Louise Curley

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<a href="/comment/100615l.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615l.png"></a>

While
German analysts and institutional investors who participate in the ZEW
Survey have become less negative about current conditions, they have
become much more concerned about the economic outlook six months
ahead.&nbsp; The percentage excess of those looking for improvement
over those looking for deterioration dropped to 28.7% in June from 45.8
% in May.&nbsp; The June value is close to the long term average of
27.4%, as seen in the first chart.&nbsp; The sovereign debt crisis
in the Euro Area and the plans to improve government imbalances through
stringent budgetary measures have, no doubt, been responsible for much
of the sharp change in sentiment.
Increases in industrial production and exports and
declines in the unemployment rate have resulted in a less negative
appraisal of current condition.&nbsp; The pessimists among the
German financial community exceeded the optimists by 7.9% in June, down
from an excess of pessimist of 21.6% in May.&nbsp; German financial
types tend to be pessimistic about current conditions.&nbsp; Over
the entire period from December 1991 to the present, the average
appraisal of current conditions is minus 32.4%, as seen in the second
chart.
Last month, the participants in the survey were
optimistic about the outlook for profits.&nbsp; The balance of
people between those expecting increases in profits and those expecting
decreases in profits rose for the Automotive, Chemical/Pharmaceutical,
Steel, Machinery, Consumption/Trade, Construction, Utilities, Service,
Telecommunication and Information Technology industries.&nbsp; Only
Banking and Insurance industries were expected to do poorly.&nbsp;
This month the balances between the people expecting increases in
profits and those expecting decreases in profits have changed
dramatically.
Only in the&nbsp; Automotive,
Chemical/Pharmaceutical and Machinery industries have the balances of
opinion increased.&nbsp;&nbsp; In all other cases, expectations
are for a deceleration in profit growth, and in the case of the
consumption/trade industry, the participants expect a decline in
profits, as can be seen in the table
below.&nbsp;&nbsp;&nbsp;


<table widt="100% cellspacing="0">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup><thead>
<tr>
<th scope="col">&nbsp;</th>
<th scope="col">Jun 10</th>
<th scope="col">May 10</th>
<th scope="col">Apr 10&nbsp;</th>
<th scope="col">Mar 10</th>
<th scope="col">Feb 10</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09&nbsp;</th>
</tr></thead>
<tr>
<td class="firstcol">Macroeconomic Expectation 6 mo
Ahead (%Bal)</td>
<td>28.7</td>
<td>45.8</td>
<td>53.0</td>
<td>44.5</td>
<td>45.1</td>
<td>47.2</td>
<td>50.4</td>
<td>51.1</td>
</tr>
<tr>
<td class="firstcol">Current Economic
Conditions (%Bal)</td>
<td>-7.9</td>
<td>-21.6</td>
<td>-39.2</td>
<td>-51.9</td>
<td>-54.8</td>
<td>-56.6</td>
<td>-60.6</td>
<td>-65.6</td>
</tr>
<tr class="even">
<td colspan=9 class="firstcol">Responding Increase - Decrease in
Profits&nbsp; (%Bal)</td>

</tr>
<tr>
<td class="firstcol">Banking</td>
<td>5.6</td>
<td>18.2</td>
<td>28.2</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Insurance</td>
<td>4.9</td>
<td>13.7</td>
<td>15.8</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Automotive</td>
<td>32.9</td>
<td>29.1</td>
<td>3.1</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Chemical/Pharmaceutical</td>
<td>59.4</td>
<td>56.4</td>
<td>48.2</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Steel</td>
<td>43.7</td>
<td>46.7</td>
<td>37.2</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Electronics</td>
<td>48.0</td>
<td>48.5</td>
<td>41.2</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Machinery</td>
<td>63.4</td>
<td>61.2</td>
<td>52.1</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Consumption/Trade</td>
<td>-9.1</td>
<td>0.4</td>
<td>-2.3</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>0.4</td>
<td>11.0</td>
<td>10.4</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Utilities</td>
<td>0.8</td>
<td>21.5</td>
<td>20.5</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Service</td>
<td>19.6</td>
<td>29.4</td>
<td>30.6</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Telecommunications</td>
<td>6.2</td>
<td>10.8</td>
<td>7.8</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Information Technology</td>
<td>38.9</td>
<td>46.0</td>
<td>45.3</td>
<td colspan=5>&nbsp;</td>
</tr>

</table>

</html>

While German analysts and institutional investors who participate in the ZEW Survey have become less negative about current conditions, they have become much more concerned about the economic outlook six months ahead. The percentage [...]

Confidence Among German Investors And Analysts Down Sharply

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<a href="/comment/100615h_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615h.png" align="left"></a> U.S. gasoline prices
slipped again last week. The pump price of regular gasoline of
$2.70 per gallon prices was down three cents w/w but that still left
prices up more than three-quarters since the December 2008 low.
Continuing the earlier reversal, the spot market price for a gallon of
regular gasoline rose yesterday to $2.02 which was the highest level in
four weeks. The figures are reported by the U.S. Department of Energy
and can be found in Haver's WEEKLY &amp;
DAILY databases.
Also
moving up was the average price for a barrel of light sweet crude (WTI)
to $73.41 last week. Nevertheless the price remained down from the high
of $84.23 averaged during April. Yesterday crude prices moved higher to
$75.12 per barrel, up from the May 24th low of $66.88.
U.S. natural gas prices also have strengthened
recently to an average $4.75 per mmbtu (33.4% y/y), the highest level
since early-March. Nevertheless, prices remained down from a high of
$6.50 early in January.

Demand for gasoline fell 1.0% last week versus one year ago and that
compares to a 2.0% increase last month. The demand for residual fuel
oil increased 4.8% while distillate demand surged 12.1% y/y. That's
improved from a 12.3% decline during February. Inventories of crude oil
and petroleum products slipped in early June but still were up sharply
from the early-2010 low.
The
energy price data can be found in Haver's WEEKLY database
while the daily figures are in DAILY. The gasoline
demand figures are in OILWKLY.

<a href="/comment/100615i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615i.png"></a><a href="/comment/100615j_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615j.png"></a>

<table 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/WEEKLY/@W4/@W4.HTM" ;="">Weekly Prices</a></th>
<th scope="col">06/14/10</th>
<th scope="col">06/07/10</th>
<th scope="col">05/31/10</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">Retail
Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.70</td>
<td>2.73</td>
<td>2.73</td>
<td>1.1%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr class="odd">
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>73.41</td>
<td>72.89</td>
<td>71.13</td>
<td>3.6%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
<tr>
<td class="firstcol">Natural Gas Price ($/mmbtu)</td>
<td>4.75</td>
<td>4.46</td>
<td>4.18</td>
<td>33.6%</td>
<td>3.95</td>
<td>8.88</td>
<td>6.97</td>
</tr>
</tbody>
</table>
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U.S. gasoline prices slipped again last week. The pump price of regular gasoline of $2.70 per gallon prices was down three cents w/w but that still left prices up more than three-quarters since the December 2008 low. Continuing the [...]

U.S. Gasoline Prices Slip But Crude Oil Prices Rise

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<a href="/comment/100615e_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615e.png"></a>Business must be improving if it takes longer to
take delivery from sellers. The Federal Reserve Bank of New York
reported that its June Empire State Factory Index of General
Business Conditions increased modestly to 19.57 after a sharp
May decline. Nevertheless, the June level suggests positive growth in
factory sector activity. The latest reading matched Consensus
expectations.
Shorter delivery times were the primary impetus
for the gain in the overall index. The rise in the delivery-time index
was to the highest level since 2004. Also rising modestly were the
orders &amp; shipments series though the gains failed to recoup
earlier declines. The employment index also gave back increases during
the prior two months but remained positive.
The figures are diffusion indexes. Since the
series' inception in 2001, there has been a 75% correlation between the
overall level and the three-month change in U.S. factory sector
production. Like the Philadelphia Fed Index of General Business
Conditions, the Empire State Business Conditions Index reflects answers
to independent survey questions; it is not a weighted combination of
the components. The series dates back only to 2001.
The prices paid index fell
to 27.16 and reversed all of the gains earlier this year. Since
inception there has been a 76% correlation between the index of prices
paid and the three-month change in the core intermediate materials
PPI.&nbsp;
The Empire State index of expected
business conditions in six months slipped m/m to its lowest
level since July of last year. Virtually all of the component series
again fell including capital expenditures and technology spending
They're both, however, well above the recession lows.
The Empire State Manufacturing Survey is a
monthly survey of manufacturers in New York State. Participants from
across the state in a variety of industries respond to a questionnaire
and report the change in indicators from the previous month. Each index
is seasonally adjusted. Respondents also state the likely direction of
these same indicators six months ahead. For more on the
Empire State Manufacturing Survey, including methodologies and the
latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.
The
Empire State data is available in Haver's SURVEYS database.
<a href="/comment/100615f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615f.png"></a><a href="/comment/100615g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615g.png"></a>

<table 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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">June
</th><th scope="col">May
</th><th scope="col">April
</th><th scope="col">June
'09&nbsp;
</th><th scope="col">2009
</th><th scope="col">2008
</th><th scope="col">2007
</th></tr></thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index,%)</td>
<td>19.57</td>
<td>19.11</td>
<td>31.86</td>
<td>-9.51</td>
<td>-2.76</td>
<td>-9.97</td>
<td>17.22</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>17.53</td>
<td>14.30</td>
<td>29.49</td>
<td>-7.58</td>
<td>-2.52</td>
<td>-6.22</td>
<td>15.70</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td>-1.23</td>
<td>1.32</td>
<td>11.39</td>
<td>-25.29</td>
<td>-22.89</td>
<td>-7.87</td>
<td>-3.95</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>12.35</td>
<td>22.37</td>
<td>20.25</td>
<td>-21.84</td>
<td>-17.28</td>
<td>-5.36</td>
<td>11.28</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>27.16</td>
<td>44.74</td>
<td>41.77</td>
<td>-5.75</td>
<td>1.33</td>
<td>46.99</td>
<td>35.64</td>
</tr>
</tbody>
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Business must be improving if it takes longer to take delivery from sellers. The Federal Reserve Bank of New York reported that its June Empire State Factory Index of General Business Conditions increased modestly to 19.57 after a [...]

Empire State Business Conditions Improve As Delivery Times Lengthen

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<a href="/comment/100615a_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615a.png"></a>U.S. import prices in May posted their second
monthly decline this year with lower energy prices. The Bureau of Labor
Statistics indicated that, overall, import prices fell 0.6% last month
but the decline was short of Consensus expectations for a 1.3% drop.
Excluding petroleum, import prices rose 0.5%, the same as the upwardly
revised April increase. During the last twelve months, energy prices
increased by roughly one-third and non-oil import prices rose an
elevated 3.7%.

Petroleum prices fell 5.0% last month and more-than reversed the prior
month's increase. Nevertheless, energy prices have risen 4.0% this year
following last year's 78.6% increase from December-to-December.
Yesterday, Brent crude oil prices rose to $75.15 per barrel, their
highest since mid-May.

Non-oil import prices prices continued to reflect the dollar's earlier
weakness as well as the firmer U.S. economy. Prices rose 0.5% in May
following an upwardly revised 0.5% April increase. As a result, prices
rose at a 3.5% annual rate since December and reversed last year's 4.1%
decline. (During the last ten years, there has been a negative 81%
correlation between the nominal trade-weighted exchange value of the US
dollar vs. major currencies and the y/y change in non-oil import
prices.)&nbsp;
<a href="/comment/100615b_big.png" name="modal"><img class="large" align="right" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615b.png"></a>
Stronger food &amp; beverage prices continued to provide lift to
overall import prices this year with a 1.5% May increase, 12.8% (AR)
gain YTD. That compares to a 2.8% decline during 2009. Prices for
nonauto consumer goods also have turned and risen at a still-modest
0.7% rate this year after a 0.3% decline last year.
Appliance prices
have strengthened at a 5.3% rate after last year's more modest
increase. Apparel prices have risen at a 0.5% annual rate after no
change last year. Imported auto prices fell at a 1.1% rate YTD after a
0.4% uptick last year.
&nbsp;Capital goods slipped 0.5% YTD and
excluding computers also slipped 0.4% YTD following a 0.7% gain last
year.
Total export prices continued firm with a 0.7%
increase last month after a 1.2% April gain. The rise reflected a 0.6%
gain (8.2% YTD) in non-agricultural export prices and a 1.4% jump in
agricultural goods prices (0.3% YTD).
The import and
export price series can be found in Haver's USECON database.
Detailed figures are available in the USINT
database.
The Global Recovery and Monetary
Policy is this morning's speech by St. Louis Fed
President James Bullard and it can be found <a href="http://www.stlouisfed.org/newsroom/speeches/pdf/2010-06-15.pdf">here</a>.

<a href="/comment/100615c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615c.png"></a>
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<colgroup><col><col><col><col><col><col><col><col></colgroup>

<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export
Prices (NSA, %)</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>

</tr><tbody>
<tr>
<td class="firstcol">Import - All Commodities</td>
<td>-0.6</td>
<td>1.1</td>
<td>0.4</td>
<td>8.6</td>
<td>-11.5</td>
<td>11.5</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">Petroleum</td>
<td>-5.0</td>
<td>3.7</td>
<td>2.5</td>
<td>35.9</td>
<td>-35.9</td>
<td>37.7</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol">Nonpetroleum</td>
<td>0.5</td>
<td>0.5</td>
<td>-0.1</td>
<td>3.7</td>
<td>-4.1</td>
<td>5.3</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.7</td>
<td>1.2</td>
<td>0.7</td>
<td>5.8</td>
<td>-4.6</td>
<td>6.0</td>
<td>4.9</td>
</tr>
</tbody>

</html>

U.S. import prices in May posted their second monthly decline this year with lower energy prices. The Bureau of Labor Statistics indicated that, overall, import prices fell 0.6% last month but the decline was short of Consensus [...]

U.S. Import Prices Fall With Lower Oil Costs

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

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). 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 jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief

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U.S. Industrial Production Is Strong Again

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