Tom Moeller

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<a href="/comment/100609a_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609a.png"></a> Still in the shadow of the expiration of the
government's housing tax credit, the Mortgage Bankers Association
reported that mortgage applications fell sharply last week reflecting a
collapse in purchase applications. Overall, applications fell 12.2% in
early June from the week earlier.

Applications to purchase a home dropped 5.7% w/w
for the fifth consecutive week of sharp decline. During the last ten
years there has been a 51% correlation between the y/y change in
purchase applications and the change in new plus existing single family
home sales. The correlation has lessened recently. Mortgage refinancings
also fell by 14.3% and reversed increases during the prior two weeks.
 The effective fixed interest rate on conventional
15-year mortgages averaged 4.49% during the latest week, a new cycle
low. For 30-year mortgages the rate also fell to an average 5.01%.
Interest rates on fixed 15-year and 30-year mortgages are closely
correlated (near-90%) with the rate on 10-year Treasury securities.
Rates on adjustable one-year mortgages held roughly steady at
7.01%.&nbsp;
The
Mortgage Bankers Association surveys between 20 to 35 of the top
lenders in the U.S. housing industry to derive its refinance, purchase
and market indexes. The weekly survey covers roughly 50% of all U.S.
residential mortgage applications processed each week by mortgage
banks, commercial banks and thrifts. Visit the Mortgage Bankers
Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The figures for weekly
mortgage applications are available in Haver's SURVEYW
database.
 Economic and financial conditions and
the federal budget is this morning's House testimony by Ben
S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20100609a.htm">here</a>.
<a href="/comment/100609b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609b.png"></a>
<a href="/comment/100609c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609c.png"></a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM%22">BA Mortgage Applications (SA,3/16/90=100)</a>
</th><th scope="col">06/04/10</th>
<th scope="col">05/28/10</th>
<th scope="col">05/21/10</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>560.9</td>
<td>639.0</td>
<td>633.5</td>
<td>-8.2%</td>
<td>736.4</td>
<td>642.9</td>
<td>652.6</td>
</tr>
<tr>
<td class="firstcol">Purchase</td>
<td>167.8</td>
<td>178.0</td>
<td>185.7</td>
<td>-38.0</td>
<td>263.5</td>
<td>345.4</td>
<td>424.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Refinancing</td>
<td>2,859.5</td>
<td>3,336.9</td>
<td>3,257.4</td>
<td>9.7</td>
<td>3,509.2</td>
<td>2,394.1</td>
<td>1,997.9</td>
</tr>
<tr>
<td class="firstcol">15-Year Mortgage Effective Interest Rate (%)</td>
<td>4.49</td>
<td>4.52</td>
<td>4.50</td>
<td>5.21 (06/09)</td>
<td>4.85</td>
<td>5.9</td>
<td>6.2</td>
</tr>
</tbody>
</table>
U.S. Furniture Buying Index At Pre-Recession High 
by&nbsp;<a href="/comment/Moeller.html">Tom Moeller</a> June
9, 2010



 Plans to buy consumer durables are rebounding.
The American Research Group, which surveys consumer buying intentions
as well as other issues, indicated that their Furniture Buying Index
rose this month to its highest level since November 2007. The index has
rebounded by one-third from its recession low. During the last fifteen
years there has been a 45% correlation between the y/y change in the
index and the change retail sales at furniture stores

America's Research Group specializes in consumer research, marketing
plans, strategic marketing, strategic planning, and marketing research.
It interviews more than three million American consumers about their
shopping habits.
 In a typical month, 80 percent of the consumers
interviewed can name a specific furniture item they intend to buy. The
Index's mark signifies what percent of the benchmark 80% actually have
a particular item in mind. The data can be found in Haver's
SURVEYS database.

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<table width="100%" cellspacing="0" >
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">America's Research Group</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June
'09
</th><th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Furniture
Buying Index</td>
<td>72</td>
<td>71</td>
<td>69</td>
<td>59</td>
<td>57</td>
<td>60</td>
<td>77</td>
</tr>
</tbody>
</table>
UK Trade Deficit Ceases Progress Toward Lower
Deficits 
by&nbsp;<a href="/comment/Brusca.html">Robert Brusca</a> June
9, 2010


<body>

<a href="/comment/100609f_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609f.png"></a>
UK exports and imports each backtracked slightly in April after solid
to strong gains in March. The upshot is that the flirtation with
progress in deficit reduction has ground to halt and commenced a
backtracking over the last two months. This backtracking could be
reversed. This episode could be a pause in the process of ongoing
deficit reduction or it could be the start of some real backtracking.
For now it's too soon to tell. So we flash yellow cautionary lights
instead of red ones. 
 For now the trends in the UK data are still
beneficial ones for the prospect of further deficit reduction. Imports
are still growing solidly but steadily with growth rates of 10% to 13%
over various horizons from one-year to 3-months. For exports the growth
rates range from 13% to nearly 40% and the highest growth rates are
more recent ones. That suggests that export growth is still on a strong
track while imports are only steady. One worry of course is that with
the Euro weakened and the German export machine turned on UK exports
could suffer stiffer competition. But the pound has weakened even more
than the euro. Moreover, Germany has done nothing to pump up domestic
demand and the rest of Europe is under a cloud of austerity. Germany
itself is considering further austerity moves. 
 In looking at the UK situation we have three
facts to consider. One is that the trade deficit reduction process has
been under way since that reduction has been somewhat effective. The
second, is that the conditions that made that progress a reality seem
to still be in evidence as export momentum seems stronger than import
momentum over the more recent periods. The pound sterling has fallen in
value, augmenting UK competitiveness even Vs the euro-area. The third
point looks ahead: the macroeconomic facts of life seem to put the UK's
back to the wall. Although it can still do well in exporting to the US
which is growing solidly, the UK trade balance with the EMU group seems
more likely to pose challenges. EMU sends 12% of its exports to the UK.
It's an important market for EMU just as EMU is important to the UK.
Moreover, conditions in EMU will affect the UK. The broad euro real
effective exchange rate (trade-weighted and inflation adjusted) has
gone from being 20% above its estimated parity rate to near parity in
two years' time. There should be repercussions on trade flows from this
in trade with the Zone's key trading partners. But during this period
sterling has fallen sharply even against the Euro. The UK problem in
penetrating the e-Zone will not be price competitiveness but it will be
euro-demand. EMU growth is being stimulated by its trade flows riding
the back of its weak exchange rate, not stimulated from within by
domestic demand. In fact the UK deficit with EU countries widened to
&#163;3.3 billion in April, compared with a deficit of &#163;3.2 billion in
March. Exports rose by &#163;0.1 billion and imports rose by &#163;0.2 billion. A
weak European consumer - even in the Europe's strongest economy,
Germany - is the hurdle faced by UK exporters. Europe simply is not a
strong market even although UK exports can profitably sell there.


<table cellspacing="0" width="100%">
<colgroup><col> <col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan=6 scope="col">UK
Trade trends for goods</th>
</tr>
<tr>
<th scope="col">&nbsp;
</th><td scope="col" colspan="2">m/m%</td>
<td scope="col" colspan="3">% Saar</td>
</tr></thead><tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr>
<td class="firstcol">Balance*</td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.28 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.26 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
6.94 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.15 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
6.90 </td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=6>Exports
of Goods</td>
</tr>
<tr>
<td class="firstcol">All
Exp</td>
<td>-0.6%</td>
<td>1.0%</td>
<td>38.9%</td>
<td>13.3%</td>
<td>14.9%</td>
</tr>
<tr>
<td class="firstcol">Capital
gds</td>
<td>-1.3%</td>
<td>1.2%</td>
<td>3.1%</td>
<td>-3.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Road
Vehicles</td>
<td>11.5%</td>
<td>-3.2%</td>
<td>59.9%</td>
<td>22.5%</td>
<td>77.3%</td>
</tr>
<tr>
<td class="firstcol">Basic
Materials</td>
<td>-4.3%</td>
<td>18.8%</td>
<td>577.7%</td>
<td>52.5%</td>
<td>35.4%</td>
</tr>
<tr>
<td class="firstcol">Food
Feed Bev &amp; Tbco</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>32.8%</td>
<td>10.6%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol" >Other
Exports</td>
<td>-1.7%</td>
<td>0.8%</td>
<td>36.3%</td>
<td>14.1%</td>
<td>12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=6>Imports
of Goods</td>
</tr>
<tr>
<td class="firstcol">All
IMP</td>
<td>-0.4%</td>
<td>4.3%</td>
<td>12.9%</td>
<td>10.5%</td>
<td>11.6%</td>
</tr>
<tr>
<td class="firstcol">Capital
gds</td>
<td>2.6%</td>
<td>-0.1%</td>
<td>5.5%</td>
<td>15.8%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">Road
Vehicles</td>
<td>1.0%</td>
<td>5.1%</td>
<td>23.0%</td>
<td>24.0%</td>
<td>60.0%</td>
</tr>
<tr>
<td class="firstcol">Basic
Materials</td>
<td>-5.7%</td>
<td>6.1%</td>
<td>-4.7%</td>
<td>23.0%</td>
<td>19.7%</td>
</tr>
<tr>
<td class="firstcol">Food
Feed Bev &amp; Tbco</td>
<td>1.9%</td>
<td>1.7%</td>
<td>22.1%</td>
<td>-0.5%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">Other
Imports</td>
<td>-1.3%</td>
<td>5.3%</td>
<td>12.4%</td>
<td>8.9%</td>
<td>9.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan=6>*Stg
Blns; mo or period average. All
data are
seasonally adjusted</td>
</tr>
</tbody>
</table>
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Still in the shadow of the expiration of the government's housing tax credit, the Mortgage Bankers Association reported that mortgage applications fell sharply last week reflecting a collapse in purchase applications. Overall, [...]

U.S. Mortgage Applications Collapse

Louise Curley

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<a href="/comment/100608l_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608l.png" align="left"></a>
Japan's seasonally adjusted
current account
balance, reported today, declined 393.5 billion yen from 1,773.1
billion yen in March to 1,379.6 billion yen in April. There has however
been strong uptrend in the balance since the low point of 527.9 billion
yen reached in January 2009.&nbsp; The unseasonally adjusted data
show an 88% increase from 660.6 billion yen in April, 2009 to 1,242.1
billion yen, in April 2010.

Much of the improvement in
the recovery of the
current account balance is due to an increase in the trade
balance.&nbsp; Japanese exports increased 40.4% from April, 2009 to
April, 2010 while imports increased 24.6%.&nbsp; The first two
charts show the year to year percent increases in exports to North
America, mainly the U. S., Western Europe and Asia, mainly China, and
in imports from those same three broad areas.&nbsp; Over the past
five years, Japanese exports to, and imports from imports from, Asia
have generally risen faster than those to North America and Western
Europe.&nbsp; Until&nbsp; late 2008 and early 2009, Japanese
exports to Asia fluctuated between 45 and 51% of total
exports.&nbsp; In mid 2009, exports to Asia began to accelerate and
in March and April of this year, they accounted for more than 56% of
total exports.&nbsp; There was no corresponding jump in the percent
of imports from Asia.&nbsp; The resulting rise in Japan's balance
on trade in goods with Asia has been accompanied by a decline in
Japan's trade surplus with North America as can be seen in the third
chart.

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<a href="/comment/100608n_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608n.png"></a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col">JAPAN</th>
<th scope="col">Apr 10&nbsp;</th>
<th scope="col">Mar 10</th>
<th scope="col">Apr 09</th>
<th scope="col">Y/Y %</th>
<th scope="col">Y/Y Bil Yen Chg</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Current
Account Balance
(SA)&nbsp; (Billion Yen)</td>
<td>1379.6</td>
<td>1773.1</td>
<td>848.8</td>
<td>62.5</td>
<td>530.8</td>
<td>13289</td>
<td>16549</td>
<td>24688</td>
</tr>
<tr>
<td class="firstcol">Current
Account Balance&nbsp;
(NSA)&nbsp; (Billion Yen)</td>
<td>1242.1</td>
<td>2534.2</td>
<td>660.6</td>
<td>88.1</td>
<td>581.5</td>
<td>13287</td>
<td>16380</td>
<td>24794</td>
</tr>
<tr class="odd">
<td colspan=9>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Exports
(Billion Yen)</td>
<td>5887.9</td>
<td>6003.6</td>
<td>4194.9</td>
<td>40.4</td>
<td>1693.2</td>
<td>54171</td>
<td>81018</td>
<td>83931</td>
</tr>
<tr>
<td class="firstcol">North
America&nbsp;</td>
<td>951.9</td>
<td>940.3</td>
<td>708.6</td>
<td>34.3</td>
<td>243.3</td>
<td>9456</td>
<td>15331</td>
<td>18135</td>
</tr>
<tr>
<td class="firstcol">Western
Europe</td>
<td>702.8</td>
<td>683.6</td>
<td>576.8</td>
<td>21.8</td>
<td>126.0</td>
<td>7077</td>
<td>11445</td>
<td>12329</td>
</tr>
<tr>
<td class="firstcol">Asia</td>
<td>3323.5</td>
<td>3380.4</td>
<td>2287.9</td>
<td>45.2</td>
<td>1036.6</td>
<td>29333</td>
<td>39966</td>
<td>40401</td>
</tr>
<tr class="odd">
<td colspan=9>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Imports
(Billion Yen)</td>
<td>5147.4</td>
<td>5053.7</td>
<td>4145.7</td>
<td>24.6</td>
<td>1001.6</td>
<td>51499</td>
<td>78955</td>
<td>73136</td>
</tr>
<tr>
<td class="firstcol">North
America&nbsp;</td>
<td>573.4</td>
<td>606.0</td>
<td>534.8</td>
<td>7.21</td>
<td>38.6</td>
<td>6378</td>
<td>9371</td>
<td>9530</td>
</tr>
<tr>
<td class="firstcol">Western
Europe</td>
<td>493.3</td>
<td>590.0</td>
<td>475.5</td>
<td>3.75</td>
<td>17.8</td>
<td>6137</td>
<td>7999</td>
<td>8299</td>
</tr>
<tr>
<td class="firstcol">Asia</td>
<td>2353.9</td>
<td>2203.6</td>
<td>1915.5</td>
<td>22.9</td>
<td>43.8</td>
<td>22989</td>
<td>32034</td>
<td>31564</td>
</tr>
</tbody>
</table>

</html>

Japan's seasonally adjusted current account balance, reported today, declined 393.5 billion yen from 1,773.1 billion yen in March to 1,379.6 billion yen in April. There has however been strong uptrend in the balance since the low [...]

Japan's Current Account Balance And Trade In Goods

Robert Brusca

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<a href="/comment/100608k_big.png" name="modal"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608k.png" class="large" align="left"> </a>
IP over board!
That's right IP is brimming over with growth. German IP is up sharply
in April and it is a race with the IP from Italy- of all places. So
this raises a question: how many European optimists can you fit in one
of those picturesque, red British Telecom phone booths? Answer- all of
them! ...that is if you can find any at all. 

Phone
booths? Who care about a phone booth except Clark Kent? I
know what you are thinking, in an age of cell phones (or mobiles if you
are a Brit) who gives a ding-dong about phone booths? But there you go
again changing the subject. No one wants to talk about optimism.
Everything right now is about pessimism and that is the point. So lets
dot he unthinkable and talk about the empty phone booth. 
 The
end of pessimism is not like waiting for the end of days-
There is in fact no better time to talk about optimism but when things
are so dark and bleak. It's sort of like horror film. You don't need to
have seen 'it' to 'know' what's going to happen, you just need to know
how long the movie is going to be and to pick you spot... No matter how
grisly and unwatchable the movie, in the last 10-15 minutes, the worm
will turn and someone will somehow vanquish the killer vampire, the bug
from outer space or the depraved sadist psycho-killer or whatever. The
difference is that in markets we don't know exactly when it will end.
Bear markets don't come with a time-stamp. We do know that the bear
market will end, for stocks, for the euro, and so on. Everything ends
(well maybe not the oil leak in the Gulf of Mexico- note that the NY
Times, the custodian of language, calls it a 'leak', not a gusher).

Description
as reality - So that raises another point, and that is
that things often become what they are described to be, making the
metamorphosis from what they really are. 
 Man
bites dog is no story; stocks fall forever is a GREAT story
- And, to come full circle, that is sort of why everyone is so
pessimistic. Everyone has a thousand reasons why things are so bad.
It's good to remember that there is a circle of securities trading that
revolves around the evolution of economic data and news. And even the
most basic trader knows that news makes money and if you can get out in
front of the news, that's the safest place to be. Any way that a trader
can manipulate the news can help him (or her) to make money. So there
is no lack of traders trying to feed the beast with stories of how bad
it is or how bad it is going to be, in order to extend the trend and
keep the trading environment 'safe;' safe for traders at least. We have
visited this subject before.

Phases of the market and the moon and the milky way -
Markets have up-phases and down-phases and right now we are in a
down-phase, for stocks and the euro and up-phase for gold; oil is not
quite sure what it is doing it is just plain 'phased out'. I will
remind you that there are accumulation and distribution phases to
market trading and if ever there was a distribution phase this is one.
Stocks have been sold to extremes the euro has been sold to an extreme
and the all the easy money has been made. Whatever moves are left to
these current trends they will reap profits for those who already have
the positions passing the riskier trades onto the Johnny-come-lately
investor. Don't let that be you. So Johnny don't come late, just go
quietly. There is no sense in getting short by trying to make money
over already-been-spilled-milk.

Reality
bites ...back - Economic forecasts for Switzerland today
were just lifted. German data are looking good. Yes Spain can be added
to the list of countries undertaking austerity with public sector
blow-back. But what profession takes pay cuts sitting down? Not
firemen! Not policeman! Not teachers! Not Wall Street! OK point made.
Blowback is part of the process, it's NOT NEWS!

Fairy
tales can come true, but what if they do? - Meanwhile the
underlying disturbing development everyone is watching with
baited-breath is Germany's early move to adopt some austerity. How
risky is this after all? On the face of it this seems a little bit like
a fairy tale in which the king that likes the goose's golden eggs so
much he wonders what its flesh tastes like. Germany should not go there
and disrupt the golden egg of growth by messing with fiscal policy. But
even if it does, it's far from clear to me that it would do enough
damage to seriously disrupt the recovery that is in process. That's
right Germany's flirtation with austerity is another red-herring for
weak growth. 

Achtung
baby... NEWS FLASH!! German growth does not depend on German
demand! In Germany, the recovery is substantially about exploiting
FOREIGN DEMAND. Yr/Yr capital goods output is up by 14% intermediate
goods output is up by 21%. The output of consumer goods is up by 1%-
yes that also is Year over year. How much more damage to that +1% Yr/Yr
growth can Germany do? Oh, and over three months German consumer goods
consumption is falling at 5.8% annual rate while overall IP is rising
at a 21% annual rate. So do we even care about the German consumer?
Achtung baby, but none for the German consumer. 
 What
Germany wants, what Germany needs - The issue in Germany
is that it 'is needed' to promote domestic consumption but that it
'needs' to do this for the rest of the world not for itself. But
Germany 'wants' to attain more fiscal discipline so it will throw the
consumer under the bus and that will not affect German export growth.
But it could make for a good horror movie called "Schnell II' starring
Keanu Reeves and Sandra Bullock as unwilling runaway bus drivers.
Whether domestic private consumption lags or contracts in Germany does
not seem to matter much; the consumer seems destined to be a footnote
in Germany's expansion which for Germany will press ahead on export-led
growth fueled by a weak euro. This fiscal tact, of course, is a very
selfish act by Angela Merkel who has problems of her own. As for any
politician, self preservation is job-one. But let's also remember that
killing off growth never did any politician any good (you can think
about eating the goose and talk about it, but actually eating it is
something else). What Merkel needs is the appearance of fiscal
consolidation much more than severe fiscal consolidation. .So keep that
thought active, as the pessimists swirl overhead sucking the very life
out of optimism like the death eaters circling and closing in over the
inert body of Harry Potter. Not to spoil the movie, but Harry did
escape. 
 Not
as bad as it seems - Put Europe in perspective. Growth is
actually much better than people give it credit for. The downside risks
are not a big as they seem when you factor in the politics of the
situation (politicians need to seem to be people of action more than
they need to be people of action except in a real crisis -which this is
not). And pessimism has the bit in its teeth and is running wild,
completely out of control. If Diogenes were alive today he could go
hunting for an honest-optimist in Europe, but he clearly would run out
of oil for his lamp before he would find one. Few in the financial
markets ever give you an honest opinion and fewer still are optimists.
Diogenes would be looking for a needle in a field of haystacks. In the
markets everyone has a trading position and that gets in the way of a
good honest opinion every single time. So the best approach always is
to think for yourself. Read the papers and be skeptical. Ask yourself,
"does what is going on the market make any sense?" That is always a
good place to start. Joining a rally or sell off you don't really
understand is one of the most dangerous things you can do. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th colspan="8" scope="col">Total
German IP</th>
</tr>
</thead><tbody>
<tr class="even">
<td class="firstcol">Saar
exept m/m</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-Date</td>
</tr>
<tr>
<td class="firstcol">IP
total</td>
<td>0.9%</td>
<td>4.3%</td>
<td>-0.2%</td>
<td>21.6%</td>
<td>10.0%</td>
<td>13.2%</td>
<td>24.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Consumer</td>
<td>-1.2%</td>
<td>2.0%</td>
<td>-2.3%</td>
<td>-5.8%</td>
<td>2.5%</td>
<td>1.0%</td>
<td>-3.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital</td>
<td>-1.0%</td>
<td>5.3%</td>
<td>1.2%</td>
<td>23.8%</td>
<td>9.6%</td>
<td>14.1%</td>
<td>18.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Intermed</td>
<td>2.8%</td>
<td>3.8%</td>
<td>-0.1%</td>
<td>29.1%</td>
<td>14.6%</td>
<td>21.1%</td>
<td>36.7%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>2.6%</td>
<td>24.4%</td>
<td>0.0%</td>
<td>166.0%</td>
<td>16.6%</td>
<td>5.1%</td>
<td>171.3%</td>
</tr>
<tr>
<td class="firstcol">MFG
IP</td>
<td>0.6%</td>
<td>3.9%</td>
<td>0.0%</td>
<td>19.2%</td>
<td>9.9%</td>
<td>14.1%</td>
<td>20.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG
Orders</td>
<td>2.8%</td>
<td>5.1%</td>
<td>0.0</td>
<td>36.7%</td>
<td>32.2%</td>
<td>29.8%</td>
<td>44.3%</td>
</tr>
</tbody>
</table>

</body></html>

IP over board! That's right IP is brimming over with growth. German IP is up sharply in April and it is a race with the IP from Italy- of all places. So this raises a question: how many European optimists can you fit in one of those [...]

German IP Continues To Press Ahead In The Face Of Growth Pessimism The Dire Straights Of Europe And Other Fairy [...]

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<a href="/comment/100608i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608i.png"></a>
<a href="/comment/100608j_big.png" name="modal"><img class="small" height: px src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608j.png"></a>

Consumers continued to hold their breath after
their late-April shopping spree. Chain store sales last week rose just
modestly but roughly equaled the May average. In turn, they were down
from the April high. However, versus late-February sales broke from the
earlier malaise and rose 3.6%.
During the last ten years there has
been a 68% correlation between the y/y change in chain store sales and
the change in retail sales at general merchandise stores. That correlation recently
has increased.
The ICSC-Goldman Sachs retail
chain-store sales index is constructed using the same-store sales
(stores open for one year) reported by 78 stores of seven retailers:
Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. During the last ten years
there has been a 69% correlation between the year-to-year growth in
chain store sales and the growth in general merchandise retail sales. The weekly figures are
available in Haver's SURVEYW database.
The leading indicator of chain store sales
continued to move sideways. During all of May it equaled April but was
at the high end of the range in place since the middle of last year.
Nevertheless, stability in the index compares to roughly 6% y/y
declines late in 2008. The composite leading economic indicator is
compiled from four series: (1) the MBA's volume index of mortgage
applications for home purchase (2) the ABC News/Money magazine's survey
of consumer buying conditions (3) new filings for jobless benefits and
(4) the 30-year government bond yield.&nbsp;


<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM" ;="">ICSC-UBS (SA, 1977=100)</a>
</th><th scope="col">06/05/10</th>
<th scope="col">05/29/10</th>
<th scope="col">05/22/10</th>
<th scope="col">y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>503.5</td>
<td>499.7</td>
<td>496.7</td>
<td>3.1%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>



</html>

Consumers continued to hold their breath after their late-April shopping spree. Chain store sales last week rose just modestly but roughly equaled the May average. In turn, they were down from the April high. However, versus late- [...]

U.S. Weekly Chain Store Sales' Improvement Volatile But Real

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<a href="/comment/100608f_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608f.png"></a> 
U.S. gasoline prices are down from their recent
high, but the decline seems to be loosing momentum. The pump price of regular
gasoline held steady last week at $2.73 per gallon prices
and prices remained up more than three-quarters since the December 2008
low. Yesterday the spot market price for a gallon of regular gasoline
also held roughly steady with last week's average of $1.94 which was up
from the prior two weeks' average. The figures are reported by the U.S.
Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.


The
average price for a barrel of light sweet crude (WTI) rose last week to
$72.89 but remained down from the high of $84.23 averaged during April.
Yesterday, crude prices slipped with Friday's weak U.S. employment
report but at $71.44 per barrel were up from the May 24th low of $66.88.

Demand
for gasoline seems to be slipping with higher prices. It fell
0.5% last week versus one year ago but that compares to a 3.0% decline
in early-February. The demand for residual fuel oil jumped 32.0%% and
distillate demand also surged 11.7% y/y. That's improved from a 12.3%
decline during February. Inventories of crude oil and petroleum
products slipped in late-May but still were up sharply from the early
2010 low.

U.S.
natural gas prices strengthened further last
week to an average $4.46 per mmbtu (17.5% y/y). Nevertheless, prices
remained down from a high of $6.50 early in January.

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/100608g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608g.png"></a>
<a href="/comment/100608h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608h.png"></a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol">
<a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM" ;="">Weekly
Prices</a></th>
<th scope="col">06/07/10</th>
<th scope="col">05/31/10</th>
<th scope="col">05/24/10</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 class="odd">
<td class="firstcol">Retail
Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.73</td>
<td>2.73</td>
<td>2.79</td>
<td>3.8%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>72.89</td>
<td>71.13</td>
<td>69.02</td>
<td>7.0%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
<tr class="odd">
<td class="firstcol">Natural
Gas Price ($/mmbtu)</td>
<td>4.46</td>
<td>4.18</td>
<td>4.25</td>
<td>17.5%</td>
<td>3.95</td>
<td>8.88</td>
<td>6.97</td>
</tr>
</tbody>
</table>

</body></html>

U.S. gasoline prices are down from their recent high, but the decline seems to be loosing momentum. The pump price of regular gasoline held steady last week at $2.73 per gallon prices and prices remained up more than three-quarters [...]

U.S. Gasoline Price Decline Stabilizes

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<a href="/comment/100608c_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608c.png"></a>
Small businesses are joining in with the broader improvement in the economy. The National
Federation of Independent Business (NFIB) reported their May small
business optimism index rose m/m to 92.2. It remained the highest level
since September 2008. During the last ten years there has been an 85%
correlation between the level of the NFIB index and the two-quarter
change in real GDP.
The
lift came as an increased percentage of firms expected the economy to
improve with higher sales and (much) higher earnings. Firms also
expected to add to inventories for the first time since late-2007.

Hiring plans have improved. The percentage of firms with one or more
job openings slipped m/m but the percentage planning to lift employment
was positive for the first time since September 2008. During the last
ten years there has been a 74% correlation between the NFIB employment
index and the six-month change in nonfarm payrolls.

Pricing activity improved. The percentage of firms planning
to raise prices rose to its highest level since late-2008. The
percentage of firms actually raising prices slipped
to -15% (indicating deflation).&nbsp;Finally, the percentage
planning to raise worker compensation slipped m/m to 4% though that was
improved from none in March 2009. During the last ten years there has
been a 51% correlation between the six-month change in the producer
price index and the level of the NFIB price index.
The
most important problems seen by business were poor sales (30%), taxes
(22%), government requirements (13%), insurance cost &amp;
availability (9%), competition from large businesses (6%) and inflation
(4%).
About
24 million small businesses exist
in the United States. Small business creates 80% of all new jobs in
America and the NFIB figures can be found in Haver's SURVEYS
database.&nbsp;
<a href="/comment/100608d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608d.png"></a>
<a href="/comment/100608e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608e.png"></a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol">
<a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat'l
Federation of Independent Business</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May '09</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead><tbody>
<tr>
<td class="firstcol">Small
Business Optimism Index
(SA, 1986=100)</td>
<td>92.2</td>
<td>90.6</td>
<td>86.8</td>
<td>88.9</td>
<td>86.7</td>
<td>89.8</td>
<td>96.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent of Firms Expecting
Economy To Improve
</td>
<td>8 </td>
<td>&nbsp;0</td>
<td>-8</td>
<td>12</td>
<td>-0</td>
<td>-10</td>
<td>-4</td>
</tr>
<tr>
<td class="firstcol">Percent
of Firms With One or More Job Openings
</td>
<td>9</td>
<td>11</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>18</td>
<td>24</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent
of Firms Reporting That Credit Was Harder To Get</td>
<td>13</td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>14</td>
<td>9</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Percent of Firms Raising Avg.
Selling Prices (Net)
</td>
<td>-15</td>
<td>-11</td>
<td>-20</td>
<td>-22</td>
<td>-20</td>
<td>17</td>
<td>15</td>
</tr>
</tbody>
</table>

</body></html>

Small businesses are joining in with the broader improvement in the economy. The National Federation of Independent Business (NFIB) reported their May small business optimism index rose m/m to 92.2. It remained the highest level since [...]

U.S. Small Business Optimism Continues To Improve Sharply

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<a href="/comment/100608a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608a.png"></a><a href="/comment/100608b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608b.png"></a>

The latest consumer credit numbers released
late-yesterday indicated that credit rose $1.0B during April. However,
the Federal Reserve revised the March figure to a sharp $5.4B decline
from a $2.0B increase reported last month. While these m/m figures
should initially be interpreted with caution, the trend in credit usage
seems to be turning away from the sharp reductions of last year. The
y/y change has moderated to -3.2% from -4.4% at its worst last December
and the three-month change is -2.0% (AR). &nbsp;
he most
that can be said
about the pullback in the usage of revolving credit is that it perhaps
is stabilizing. An $8.5B April decline followed a revised $3.7B drop
and the three-month change of $-9.4% was reduced from the worst of
$-12.9B in January. Pools of securitized assets were virtually
unchanged (-88.7% y/y) after a sharp March decline. Finance companies
also held lending constant (+28.9% y/y) though commercial bank lending
slipped (+79.7% y/y). Loans from credit unions also were constant
(+5.5% y/y) while lending by savings institutions slipped (+15.1%).
Usage of
non-revolving credit (autos &amp;
other consumer durables), which accounts for nearly two-thirds of the
total seems firmer. It fell modestly during the recession but
has
increased this year. Usage rose $9.5B in April after falling $1.7B, but
that March decline initially was reported as a $5.2B increase. Federal
government &amp; Sallie Mae lending expanded by three-quarters y/y
while commercial bank lending rose 6.8% after last year's 1.0%
increase. These gains offset a nearly one-half y/y decline in pools of
securitized assets, a 16.6% fall in savings institutions, an easier
3.3% decline in finance companies and a 3.2% fall in credit union
lending.&nbsp;

During the
last ten years,
there has been a 60% correlation between the y/y change in credit
outstanding and the change in personal consumption
expenditures.&nbsp; Moreover, these figures are the major input to
the Fed's quarterly Flow of Funds accounts for the household sector.
Credit
data are available
in Haver's USECON database. The Flow of Funds data
are in Haver's FFUNDS database.
Moving
Beyond the
Financial Crisis is today's speech by Fed Governor Elizabeth
A. Duke and it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/Duke20100608a.htm">here</a>.
&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol">Consumer Credit Outstanding
(m/m Chg, SAAR)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</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 class="odd">
<td class="firstcol">Total</td>
<td>$1.0B</td>
<td>$-5.4B</td>
<td>$-7.8B</td>
<td>-3.2%</td>
<td>-4.4%</td>
<td>1.5%</td>
<td>5.7%</td>
</tr>
<tr>
<td class="firstcol">
Revolving</td>
<td>$-8.5B</td>
<td>$-3.7B</td>
<td>$-8.7B</td>
<td>-9.6%</td>
<td>-9.6%</td>
<td>1.6%</td>
<td>8.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Non-revolving</td>
<td>$9.5B</td>
<td>$-1.7B</td>
<td>$0.9B</td>
<td>0.5%</td>
<td>-1.3%</td>
<td>1.5%</td>
<td>4.4%</td>
</tr>
</tbody>
</table>

</body></html>

The latest consumer credit numbers released late-yesterday indicated that credit rose $1.0B during April. However, the Federal Reserve revised the March figure to a sharp $5.4B decline from a $2.0B increase reported last month. While [...]

U.S. Consumer Credit Expands Modestly In April

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.

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**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.

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**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.

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**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.

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**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.

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**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.

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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

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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.

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**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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