Louise Curley

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<p></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524l.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524m.jpg" style="width: 312px; height: 265px;">
<p></p>
<p>The
financial turmoil in the Euro Area has resulted in a sharp drop in
confidence in the Euro Area, as a whole.&nbsp; The ZEW Indicator of
Expectations for the entire Euro Area, released last week, fell from a
balance of optimists of 46.0% in April to 37.6% in May. Today, however,
Slovenia, one of the smaller nations and one of the more recent members
of the euro area.&nbsp; reported today an increase in
confidence.&nbsp; (Slovenia has a population of about 2 million and
entered the Euro Area on January 1, 2007) The Statistical Office of
Slovenia publishes an overall sentiment indicator, which is based on
three separate indicators: consumer confidence, confidence in retail
trade and in manufacturing.&nbsp; The indicators are in the form of
percent balances.&nbsp;</p>
<p>Although the overall indicator still shows
an excess of pessimists, the excess of pessimists declined in May to 9
from 12.&nbsp; This is the best balance since October of
2008.&nbsp; Business personnel in Slovenia appear to be more
positive than the consumer.&nbsp; In Retail trade, there is
actually a small excess-2%-of optimists over pessimists and in
Manufacturing, the pessimists outweigh the optimists by only
1%.&nbsp; There are, however, many more pessimists among the
consumers.&nbsp; They exceeded the optimists by 22% in May, but
this was an improvement over April's excess of pessimist of
24%.&nbsp; The percent balance of the four indicators are shown in
the first chart.&nbsp;&nbsp;</p>
<p>The improvement in confidence in
May in Slovenia, in contrast to a decline for the Euro Area as a whole,
may be due in part to Slovenia's relatively favorable financial
situation.&nbsp; Although its government deficit as a percentage of
GDP increased in 2009, part of the increase reflects the decline in GDP
and may improve as the economy recovers.&nbsp; The level of debt to
GDP is well below any danger point&nbsp; These ratios are shown in
the second chart.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SLOVENIA</th>
<th scope="col"><b>May 10&nbsp;</b></th>
<th scope="col"><b>Apr 10&nbsp;</b></th>
<th scope="col"><b>Mar 10</b></th>
<th scope="col"><b>Feb 10</b></th>
<th scope="col"><b>Jan 10</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Combined Sentiment
Indicator (% Bal)</td>
<td>-9</td>
<td>-12</td>
<td>-15</td>
<td>-11</td>
<td>-10</td>
<td>-13</td>
<td>-15</td>
<td>-13</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Consumer Confidence Indicator (% Bal)</td>
<td>-22</td>
<td>-24</td>
<td>-26</td>
<td>-24</td>
<td>-26</td>
<td>-26</td>
<td>-24</td>
<td>-21</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail
Confidence Indicator (%
Bal)</td>
<td>2</td>
<td>2</td>
<td>-3</td>
<td>-4</td>
<td>-6</td>
<td>-4</td>
<td>-7</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing Confidence Indicator
(%Bal)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>-1</td>
<td>-2</td>
<td>-6</td>
<td>-8</td>
<td>-7</td>
<td>-12</td>
<td>-13</td>
<td>-16</td>
</tr>
</tbody>
</table>
</span>
</body></html>

The financial turmoil in the Euro Area has resulted in a sharp drop in confidence in the Euro Area, as a whole. The ZEW Indicator of Expectations for the entire Euro Area, released last week, fell from a balance of optimists of 46.0% [...]

Confidence Improves In Slovenia, One Of The Smaller Euro Area Countries

Robert Brusca

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524k.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>After an encouraging spurt in January Japan&#8217;s overall sector
index has fallen back for two straight months and is back barely above
its level of December 2009. Only the industry index is up this month.
The industrial index is up in 12 of the last 13-months but the even the
pace of its increase is tailing off. The construction index is still
eroding. The tertiary index which is a measure of the performance of
the services sector is on a steady slow path of recovery but it fell
sharply in March and in February. The tertiary index is below its
December 2009 level.</p>
<p>The construction index is near the bottom of its five year
range of values. The services sector is in the bottom 12% of its five
year range. The industrial sector is the best performing sector but
stands only in the 60th percentile of its range. As a result of these
standings the overall business index resides in the 28th percentile of
its range.</p>
<p>The sector indices paint an unclear picture of the Japanese
economy. While the trends for the indices are still rising, except for
construction, the recent weakness for industry and services is
disturbing.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"><b>Key Japanese Sector Surveys</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="4">Raw readings of each
survey</td>
<td style="font-weight: bold;" colspan="3">Percent of 5Yr range*</td>
</tr>
<tr>
<td class="firstcol">Indices</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
</tr>
<tr class="odd">
<td class="firstcol">Biz
Activity(METI:Indices)</td>
<td>93.8</td>
<td>94.6</td>
<td>96.8</td>
<td>93.6</td>
<td>28.4%</td>
<td>34.3%</td>
<td>50.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Construction</td>
<td>75.2</td>
<td>78.2</td>
<td>75.0</td>
<td>74.5</td>
<td>2.6%</td>
<td>13.9%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Industry</td>
<td>94.8</td>
<td>93.7</td>
<td>94.3</td>
<td>90.4</td>
<td>60.5%</td>
<td>57.6%</td>
<td>59.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Tertiary(serv)</td>
<td>95.5</td>
<td>98.5</td>
<td>98.8</td>
<td>96.0</td>
<td>12.1%</td>
<td>45.1%</td>
<td>48.4%</td>
</tr>
</tbody>
</table>
</body></html>

After an encouraging spurt in January Japan’s overall sector index has fallen back for two straight months and is back barely above its level of December 2009. Only the industry index is up this month. The industrial index is up in 12 [...]

Japan Sector Index Drops In March

Tom Moeller

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524h.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Hopefully, recent improvement in existing single-family home
sales wasn't all due to buying ahead of the April 30th expiration of a
Federal home-buyer tax credit. Existing home sales rose 7.6% last month
to 5.770M (AR) according to the National Association of Realtors. The
gain followed a similar rise in March which followed declines during
the prior thee months. Sales in April exceeded Consensus expectations
for 5.65M. Total sales include sales of condos and co-ops. Sales of
existing single-family homes alone rose 7.4% from March to 5.050M.
(These data have a longer history than the total sales series). Sales
of condos and co-ops rose 42.3% from last year.</p>
<p>Sales have been helped by a tax credit for first-time home
buyers. Additionally, a credit of up to $6,500 was available to some
existing home owners who move. The full details of the home-buyer tax
credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.</p>
<p>The median price of all existing homes also rose in April to
$173,100 but remained off roughly 25% from the 2007 peak. The price of
a single-family home rose 2.3% to $173,400 (4.5% y/y). Earlier price
weakness sharply raised home affordability -- by three-quarters from
the 2006 low. The median family income for existing home buyers was
$60,498 and mortgage payments amounted to 14.7% of that total.</p>
<p>The number of unsold homes (single-family &amp; co-ops)
for sale rose sharply m/m, up 2.7% y/y. At the current sales rate there
was an 8.4 months' supply of homes on the market. That was down from a
high of 10.1 months during April of 2008. For single-family homes, the
inventory rose m/m to an 8.2 months' supply.</p>
<p>The data on existing home sales, prices and affordability can
be found in Haver's <b>USECON</b> database. The regional
price, affordability and inventory data is available in the <b>REALTOR
</b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524i.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524j.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Existing
Home Sales (Thous, SAAR)</b></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>April y/y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Total</b></td>
<td>5,770</td>
<td>5,360</td>
<td>5,010</td>
<td>22.8%</td>
<td>5,160</td>
<td>4,893</td>
<td>5,674</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>1,090</td>
<td>900</td>
<td>840</td>
<td>41.6</td>
<td>863</td>
<td>845</td>
<td>1,010</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,330</td>
<td>1.210</td>
<td>1,110</td>
<td>29.1</td>
<td>1,166</td>
<td>1,130</td>
<td>1,331</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>2,140</td>
<td>1,970</td>
<td>1,840</td>
<td>23.0</td>
<td>1,913</td>
<td>1,860</td>
<td>2,243</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>1,290</td>
<td>1,220</td>
<td>5.2</td>
<td>1,216</td>
<td>1,064</td>
<td>1,095</td>
</tr>
<tr>
<td class="firstcol"><b>Single-Family Sales</b></td>
<td>5,050</td>
<td>4,700</td>
<td>4,360</td>
<td>20.5</td>
<td>4,573</td>
<td>4,341</td>
<td>4,960</td>
</tr>
<tr>
<td class="firstcol"><b>Median Price, Total, $
(NSA)</b></td>
<td>173,100</td>
<td>169,600</td>
<td>164,600</td>
<td>4.0</td>
<td>172,742</td>
<td>197,233</td>
<td>216,633</td>
</tr>
</tbody>
</table>
</body></html>

Hopefully, recent improvement in existing single-family home sales wasn't all due to buying ahead of the April 30th expiration of a Federal home-buyer tax credit. Existing home sales rose 7.6% last month to 5.770M (AR) according to [...]

U.S. Existing Home Sales Improve With Tax Credit Expiration

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524e.jpg" style="border: 0px solid ; width: 363px; height: 265px; float: left;" align="left"></p>
<p>Economic growth continued to improve last month. The Chicago
Fed indicated that its National Activity Index (CFNAI) rose to 0.29
from an upwardly revised March level. The increase was to the highest
level since 2006 and added to earlier gains from the series' low of
-4.14 reached in January '09. During the last ten years the has been a
76% correlation between the index level and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also rose to its highest
level since early-2007.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_april2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that rebounds in the employment and
in the production components contributed to the total index
improvement. Overall, 51 of the 85 individual indicators made positive
contributions to the index while 34 made negative contributions. The
CFNAI is a weighted average of 85 indicators of economic activity. The
indicators reflect activity in the following categories: production
&amp; income, the labor market, personal consumption &amp;
housing, manufacturing &amp; trade sales, and inventories &amp;
orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during March to its highest level
since December 2008. Indicators for the auto, steel, machinery and
resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524g.jpg" style="width: 312px; height: 265px;">
<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/@S5/@S503/@S503.HTM"><b>Chicago Fed</b></a></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>April '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CFNAI</td>
<td>0.29</td>
<td>0.13</td>
<td>-0.52</td>
<td>-2.12</td>
<td>-1.61</td>
<td>-1.80</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.03</td>
<td>-0.09</td>
<td>-0.29</td>
<td>-2.65</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.41</td>
<td>-0.35</td>
<td>-0.38</td>
<td>-0.56</td>
<td>-0.49</td>
<td>-0.32</td>
<td>-0.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
<td>0.23</td>
<td>0.16</td>
<td>-0.07</td>
<td>-0.89</td>
<td>-0.76</td>
<td>-0.67</td>
<td>-0.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>0.41</td>
<td>0.23</td>
<td>-0.16</td>
<td>-0.39</td>
<td>-0.23</td>
<td>-0.56</td>
<td>-0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>0.06</td>
<td>0.08</td>
<td>0.11</td>
<td>-0.28</td>
<td>-0.13</td>
<td>-0.25</td>
<td>-0.06</td>
</tr>
</tbody>
</table>
</body></html>

Economic growth continued to improve last month. The Chicago Fed indicated that its National Activity Index (CFNAI) rose to 0.29 from an upwardly revised March level. The increase was to the highest level since 2006 and added to [...]

Chicago Fed Index Improves To Highest Since 2006

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<p></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524a.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524b.jpg" style="width: 312px; height: 265px;">&gt;
<p>The National Association For Business Economics (NABE)
indicated in its latest survey of 46 economists that economic growth
would continue this year and next at a 3.2% rate. Though that
expectation is slightly higher than the 3.1% growth forecasted in the
February survey, it remains well short of the four-to-seven percent
growth following past severe recessions.</p>
<p>Improved, but still subpar, growth in consumer spending is
expected to bolster the economic recovery. Growth of 2.6% and 2.8%
compares to the five percent growth after prior recessions.</p>
<p>Capital spending also is expected to improve -- and with more
momentum -- than the consumer's rebound. The 11% gains in equipment
spending this year and next are just shy of the higher double-digit
gains following earlier recessions. The recovery in residential
investment, while respectable at 12.6% in 2011, follows subpar growth
this year and compares to the up to 41% gains after earlier, severe
downturns.</p>
<p>As a result of the economic rebound, the unemployment rate is
expected to fall. Here again, however, the half a percentage point
decline is much smaller than the one-to-three point drops after earlier
recessions. That implied level of continued economic slack is expected
to leave core consumer price inflation roughly stable near 1.5%.
Overall inflation remains relatively higher at 2.0% due to higher oil
prices which is expected to average $88.80 per barrel of crude next
year while interest rates rise modestly with the economic recovery. <br>
<br>
</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524d.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Nat'l
Assn. For Business Economics Outlook</b></th>
<th scope="col"><b>2011</b></th>
<th scope="col"><b>2010</b></th>
<th scope="col"><b>2009</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP (%)</td>
<td>3.2</td>
<td>3.2</td>
<td>-2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption
Expenditures</td>
<td>2.8</td>
<td>2.6</td>
<td>-0.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Spending -
Structures</td>
<td>-1.1</td>
<td>-12.6</td>
<td>-19.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Spending -
Equipment &amp; Software</td>
<td>11.0</td>
<td>10.7</td>
<td>-16.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>12.6</td>
<td>1.9</td>
<td>-20.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>9.0</td>
<td>9.6</td>
<td>9.3</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>2.0</td>
<td>2.0</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Price Index - PCE
Less Food &amp; Energy</td>
<td>1.7</td>
<td>1.3</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">10-Year Treasury Note</td>
<td>4.70</td>
<td>4.20</td>
<td>3.85</td>
</tr>
</tbody>
</table>
</body></html>

> The National Association For Business Economics (NABE) indicated in its latest survey of 46 economists that economic growth would continue this year and next at a 3.2% rate. Though that expectation is slightly higher than the 3.1% [...]

National Association For Business Economics Expects Positive Growth, Low Inflation & Higher Interest Rates

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<span id="articletext">
<p></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524a.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524b.jpg" style="width: 312px; height: 265px;">&gt;
<p>The National Association For Business Economics (NABE)
indicated in its latest survey of 46 economists that economic growth
would continue this year and next at a 3.2% rate. Though that
expectation is slightly higher than the 3.1% growth forecasted in the
February survey, it remains well short of the four-to-seven percent
growth following past severe recessions.</p>
<p>Improved, but still subpar, growth in consumer spending is
expected to bolster the economic recovery. Growth of 2.6% and 2.8%
compares to the five percent growth after prior recessions.</p>
<p>Capital spending also is expected to improve -- and with more
momentum -- than the consumer's rebound. The 11% gains in equipment
spending this year and next are just shy of the higher double-digit
gains following earlier recessions. The recovery in residential
investment, while respectable at 12.6% in 2011, follows subpar growth
this year and compares to the up to 41% gains after earlier, severe
downturns.</p>
<p>As a result of the economic rebound, the unemployment rate is
expected to fall. Here again, however, the half a percentage point
decline is much smaller than the one-to-three point drops after earlier
recessions. That implied level of continued economic slack is expected
to leave core consumer price inflation roughly stable near 1.5%.
Overall inflation remains relatively higher at 2.0% due to higher oil
prices which is expected to average $88.80 per barrel of crude next
year while interest rates rise modestly with the economic recovery. <br>
<br>
</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524d.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Nat'l
Assn. For Business Economics Outlook</b></th>
<th scope="col"><b>2011</b></th>
<th scope="col"><b>2010</b></th>
<th scope="col"><b>2009</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP (%)</td>
<td>3.2</td>
<td>3.2</td>
<td>-2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption
Expenditures</td>
<td>2.8</td>
<td>2.6</td>
<td>-0.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Spending -
Structures</td>
<td>-1.1</td>
<td>-12.6</td>
<td>-19.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Spending -
Equipment &amp; Software</td>
<td>11.0</td>
<td>10.7</td>
<td>-16.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>12.6</td>
<td>1.9</td>
<td>-20.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>9.0</td>
<td>9.6</td>
<td>9.3</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>2.0</td>
<td>2.0</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Price Index - PCE
Less Food &amp; Energy</td>
<td>1.7</td>
<td>1.3</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">10-Year Treasury Note</td>
<td>4.70</td>
<td>4.20</td>
<td>3.85</td>
</tr>
</tbody>
</table>
<span id="articletitle">Chicago Fed Index Improves To
Highest Since 2006 </span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> May 24, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524e.jpg" style="border: 0px solid ; width: 363px; height: 265px; float: left;" align="left"></p>
<p>Economic growth continued to improve last month. The Chicago
Fed indicated that its National Activity Index (CFNAI) rose to 0.29
from an upwardly revised March level. The increase was to the highest
level since 2006 and added to earlier gains from the series' low of
-4.14 reached in January '09. During the last ten years the has been a
76% correlation between the index level and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also rose to its highest
level since early-2007.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_april2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that rebounds in the employment and
in the production components contributed to the total index
improvement. Overall, 51 of the 85 individual indicators made positive
contributions to the index while 34 made negative contributions. The
CFNAI is a weighted average of 85 indicators of economic activity. The
indicators reflect activity in the following categories: production
&amp; income, the labor market, personal consumption &amp;
housing, manufacturing &amp; trade sales, and inventories &amp;
orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during March to its highest level
since December 2008. Indicators for the auto, steel, machinery and
resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524g.jpg" style="width: 312px; height: 265px;">
<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/@S5/@S503/@S503.HTM"><b>Chicago
Fed</b></a></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>April '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CFNAI</td>
<td>0.29</td>
<td>0.13</td>
<td>-0.52</td>
<td>-2.12</td>
<td>-1.61</td>
<td>-1.80</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.03</td>
<td>-0.09</td>
<td>-0.29</td>
<td>-2.65</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.41</td>
<td>-0.35</td>
<td>-0.38</td>
<td>-0.56</td>
<td>-0.49</td>
<td>-0.32</td>
<td>-0.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
<td>0.23</td>
<td>0.16</td>
<td>-0.07</td>
<td>-0.89</td>
<td>-0.76</td>
<td>-0.67</td>
<td>-0.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>0.41</td>
<td>0.23</td>
<td>-0.16</td>
<td>-0.39</td>
<td>-0.23</td>
<td>-0.56</td>
<td>-0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>0.06</td>
<td>0.08</td>
<td>0.11</td>
<td>-0.28</td>
<td>-0.13</td>
<td>-0.25</td>
<td>-0.06</td>
</tr>
</tbody>
</table>
<span id="articletitle">U.S. Existing Home Sales Improve
With Tax Credit Expiration</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a>May 24, 2010 </span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524h.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Hopefully, recent improvement in existing single-family home
sales wasn't all due to buying ahead of the April 30th expiration of a
Federal home-buyer tax credit. Existing home sales rose 7.6% last month
to 5.770M (AR) according to the National Association of Realtors. The
gain followed a similar rise in March which followed declines during
the prior thee months. Sales in April exceeded Consensus expectations
for 5.65M. Total sales include sales of condos and co-ops. Sales of
existing single-family homes alone rose 7.4% from March to 5.050M.
(These data have a longer history than the total sales series). Sales
of condos and co-ops rose 42.3% from last year.</p>
<p>Sales have been helped by a tax credit for first-time home
buyers. Additionally, a credit of up to $6,500 was available to some
existing home owners who move. The full details of the home-buyer tax
credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.</p>
<p>The median price of all existing homes also rose in April to
$173,100 but remained off roughly 25% from the 2007 peak. The price of
a single-family home rose 2.3% to $173,400 (4.5% y/y). Earlier price
weakness sharply raised home affordability -- by three-quarters from
the 2006 low. The median family income for existing home buyers was
$60,498 and mortgage payments amounted to 14.7% of that total.</p>
<p>The number of unsold homes (single-family &amp; co-ops)
for sale rose sharply m/m, up 2.7% y/y. At the current sales rate there
was an 8.4 months' supply of homes on the market. That was down from a
high of 10.1 months during April of 2008. For single-family homes, the
inventory rose m/m to an 8.2 months' supply.</p>
<p>The data on existing home sales, prices and affordability can
be found in Haver's <b>USECON</b> database. The regional
price, affordability and inventory data is available in the <b>REALTOR
</b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524i.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524j.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Existing
Home Sales (Thous, SAAR)</b></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>April y/y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Total</b></td>
<td>5,770</td>
<td>5,360</td>
<td>5,010</td>
<td>22.8%</td>
<td>5,160</td>
<td>4,893</td>
<td>5,674</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>1,090</td>
<td>900</td>
<td>840</td>
<td>41.6</td>
<td>863</td>
<td>845</td>
<td>1,010</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,330</td>
<td>1.210</td>
<td>1,110</td>
<td>29.1</td>
<td>1,166</td>
<td>1,130</td>
<td>1,331</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>2,140</td>
<td>1,970</td>
<td>1,840</td>
<td>23.0</td>
<td>1,913</td>
<td>1,860</td>
<td>2,243</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>1,290</td>
<td>1,220</td>
<td>5.2</td>
<td>1,216</td>
<td>1,064</td>
<td>1,095</td>
</tr>
<tr>
<td class="firstcol"><b>Single-Family Sales</b></td>
<td>5,050</td>
<td>4,700</td>
<td>4,360</td>
<td>20.5</td>
<td>4,573</td>
<td>4,341</td>
<td>4,960</td>
</tr>
<tr>
<td class="firstcol"><b>Median Price, Total, $
(NSA)</b></td>
<td>173,100</td>
<td>169,600</td>
<td>164,600</td>
<td>4.0</td>
<td>172,742</td>
<td>197,233</td>
<td>216,633</td>
</tr>
</tbody>
</table>
<span id="articletitle">Japan Sector Index Drops In March</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> May 24, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524k.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>After an encouraging spurt in January Japan&#8217;s overall sector
index has fallen back for two straight months and is back barely above
its level of December 2009. Only the industry index is up this month.
The industrial index is up in 12 of the last 13-months but the even the
pace of its increase is tailing off. The construction index is still
eroding. The tertiary index which is a measure of the performance of
the services sector is on a steady slow path of recovery but it fell
sharply in March and in February. The tertiary index is below its
December 2009 level.</p>
<p>The construction index is near the bottom of its five year
range of values. The services sector is in the bottom 12% of its five
year range. The industrial sector is the best performing sector but
stands only in the 60th percentile of its range. As a result of these
standings the overall business index resides in the 28th percentile of
its range.</p>
<p>The sector indices paint an unclear picture of the Japanese
economy. While the trends for the indices are still rising, except for
construction, the recent weakness for industry and services is
disturbing.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"><b>Key
Japanese Sector Surveys</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="4">Raw
readings of each
survey</td>
<td style="font-weight: bold;" colspan="3">Percent
of 5Yr range*</td>
</tr>
<tr>
<td class="firstcol">Indices</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
</tr>
<tr class="odd">
<td class="firstcol">Biz
Activity(METI:Indices)</td>
<td>93.8</td>
<td>94.6</td>
<td>96.8</td>
<td>93.6</td>
<td>28.4%</td>
<td>34.3%</td>
<td>50.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Construction</td>
<td>75.2</td>
<td>78.2</td>
<td>75.0</td>
<td>74.5</td>
<td>2.6%</td>
<td>13.9%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Industry</td>
<td>94.8</td>
<td>93.7</td>
<td>94.3</td>
<td>90.4</td>
<td>60.5%</td>
<td>57.6%</td>
<td>59.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Tertiary(serv)</td>
<td>95.5</td>
<td>98.5</td>
<td>98.8</td>
<td>96.0</td>
<td>12.1%</td>
<td>45.1%</td>
<td>48.4%</td>
</tr>
</tbody>
</table>
<span id="articletitle">Confidence Improves In Slovenia,
One Of The Smaller Euro Area Countries </span><br>
<span id="byline">by <a href="/comment/Curley.html">Louise
Curley</a> May 24, 2010</span>
<span id="articletext">
<p></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524l.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524m.jpg" style="width: 312px; height: 265px;">
<p></p>
<p>The
financial turmoil in the Euro Area has resulted in a sharp drop in
confidence in the Euro Area, as a whole.&nbsp; The ZEW Indicator of
Expectations for the entire Euro Area, released last week, fell from a
balance of optimists of 46.0% in April to 37.6% in May. Today, however,
Slovenia, one of the smaller nations and one of the more recent members
of the euro area.&nbsp; reported today an increase in
confidence.&nbsp; (Slovenia has a population of about 2 million and
entered the Euro Area on January 1, 2007) The Statistical Office of
Slovenia publishes an overall sentiment indicator, which is based on
three separate indicators: consumer confidence, confidence in retail
trade and in manufacturing.&nbsp; The indicators are in the form of
percent balances.&nbsp;</p>
<p>Although the overall indicator still shows
an excess of pessimists, the excess of pessimists declined in May to 9
from 12.&nbsp; This is the best balance since October of
2008.&nbsp; Business personnel in Slovenia appear to be more
positive than the consumer.&nbsp; In Retail trade, there is
actually a small excess-2%-of optimists over pessimists and in
Manufacturing, the pessimists outweigh the optimists by only
1%.&nbsp; There are, however, many more pessimists among the
consumers.&nbsp; They exceeded the optimists by 22% in May, but
this was an improvement over April's excess of pessimist of
24%.&nbsp; The percent balance of the four indicators are shown in
the first chart.&nbsp;&nbsp;</p>
<p>The improvement in confidence in
May in Slovenia, in contrast to a decline for the Euro Area as a whole,
may be due in part to Slovenia's relatively favorable financial
situation.&nbsp; Although its government deficit as a percentage of
GDP increased in 2009, part of the increase reflects the decline in GDP
and may improve as the economy recovers.&nbsp; The level of debt to
GDP is well below any danger point&nbsp; These ratios are shown in
the second chart.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SLOVENIA</th>
<th scope="col"><b>May 10&nbsp;</b></th>
<th scope="col"><b>Apr 10&nbsp;</b></th>
<th scope="col"><b>Mar 10</b></th>
<th scope="col"><b>Feb 10</b></th>
<th scope="col"><b>Jan 10</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Combined Sentiment
Indicator (% Bal)</td>
<td>-9</td>
<td>-12</td>
<td>-15</td>
<td>-11</td>
<td>-10</td>
<td>-13</td>
<td>-15</td>
<td>-13</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Consumer Confidence Indicator (% Bal)</td>
<td>-22</td>
<td>-24</td>
<td>-26</td>
<td>-24</td>
<td>-26</td>
<td>-26</td>
<td>-24</td>
<td>-21</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail
Confidence Indicator (%
Bal)</td>
<td>2</td>
<td>2</td>
<td>-3</td>
<td>-4</td>
<td>-6</td>
<td>-4</td>
<td>-7</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing Confidence Indicator
(%Bal)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>-1</td>
<td>-2</td>
<td>-6</td>
<td>-8</td>
<td>-7</td>
<td>-12</td>
<td>-13</td>
<td>-16</td>
</tr>
</tbody>
</table>
</span>
</body></html>

National Association For BusinessEconomics Expects Positive Growth, Low Inflation & Higher Interest Rates

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100521a.jpg" style="border: 0px solid ; width: 363px; height: 265px; float: left;" align="left"></p>
<p>The outlook for U.S. consumer spending remains firm. That
should be the conclusion after looking at the Royal Bank of Canada
(RBC) CASH Index. It monitors several aspects of the consumer
environment and rose early this month to 72.7 from 64.6 in April. It
was up by more than two-thirds from last May.</p>
<p>Deterioration this month in the subcategories accompanied the
overall index improvement. Nevertheless, each remained solid versus
last year and portends continued improvement in consumer spending.
Since inception in 2002, the CASH index has an 85% correlation with the
y/y change in real personal consumption expenditures. The jobs index
has a similar correlation with the change in payroll employment.</p>
<p>The RBC U.S. CASH (Consumer Attitudes &amp; Spending by
Households) index is based on data collected from interviews with a
sample of 1,008 U.S. adults conducted over a five-day polling period
during the first week of each month by Ipsos, a market and opinion
research firm.</p>
<p>The RBC Financial Group figures can be found in Haver's <b>SURVEYS</b>
database.The latest report from RBC can be found <a href="http://www.rbc.com/newsroom/2010/0506-us-consumer.html">here</a>.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100521b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100521c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>RBC
Consumer Attitudes &amp; Spending by Households Survey (CASH)</b></th>
<th scope="col"><b>May</b></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>May '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nat'l RBC Index</td>
<td>72.7</td>
<td>64.6</td>
<td>58.2</td>
<td>43.0</td>
<td>30.0</td>
<td>36.1</td>
<td>82.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions
Index</td>
<td>63.6</td>
<td>66.5</td>
<td>56.7</td>
<td>45.0</td>
<td>28.2</td>
<td>46.0</td>
<td>99.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations Index</td>
<td>74.2</td>
<td>78.0</td>
<td>57.3</td>
<td>34.0</td>
<td>19.5</td>
<td>-12.4</td>
<td>34.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Jobs Index</td>
<td>74.2</td>
<td>74.9</td>
<td>68.2</td>
<td>54.4</td>
<td>50.9</td>
<td>88.7</td>
<td>122.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Investment Index</td>
<td>73.8</td>
<td>75.3</td>
<td>65.1</td>
<td>49.6</td>
<td>37.2</td>
<td>51.1</td>
<td>91.1</td>
</tr>
</tbody>
</table>
</body></html>

The outlook for U.S. consumer spending remains firm. That should be the conclusion after looking at the Royal Bank of Canada (RBC) CASH Index. It monitors several aspects of the consumer environment and rose early this month to 72.7 [...]

U.S. Consumer Spending Outlook Improves According To RBC

U.S. Consumer Spending OutlookImproves According To RBC

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

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

260115Z4.jpg

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

260115Z5.jpg

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

260115Z6.jpg

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

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Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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

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

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

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

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

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

260115L.jpg

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

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

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

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

Import & Export Prices: Generally Modest Changes

Winnie Tapasanun

260115J39.jpg

260115JK9.jpg

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

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

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

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

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

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

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

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

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260115M39.jpg

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

U.S. Empire State Manufacturing Index Returns to Positive Territory in January

Sandy Batten

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260115O2.jpg

The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia rose to 12.6 in January from -8.8 in December. The survey covers the third Federal Reserve District. A reading of -4.5 for January was expected by the Action Economics Forecast Survey. Over 23% of respondents reported increases in activity in January (up from 21% last month), exceeding the 11% reporting decreases (down from 30%); 63% of the firms reported no change in current activity (up from 50%). Survey responses were collected from January 5 to January 12.

The headline index is the answer to just one question: whether activity increased, decreased or was unchanged from the previous month. Haver Analytics calculates an ISM-adjusted current activity diffusion index from the five key components using the methodology employed to construct the national ISM index. This figure rose to 52.9 in January from 52.5 in December, inching further above the critical 50 value that separates contraction from expansion.

For the component indexes, the new orders index rose to 14.4 from 5.7 in December. The percentage of respondents reporting an increase in orders edged up to 28.3% in January from 27.4% in the prior month while 13.9% reported a decrease, down markedly from 21.7% in December. The shipments index increased to 9.5 in January from 3.2 in December. The percentage of respondents reporting an increase in shipments rose slightly to 27.3% from 26.2% while the percentage reporting a decrease fell to 17.8% from 23.0%. Delivery times lengthened marginally to 7.3 in January from 5.2 in December. The inventories index fell 17 points to -8.4 in January, its lowest level since July 2024.

Respondents continued to report overall increases in employment with the employment index remaining in positive territory. However, the index fell to 9.7 in January from 13.0 in December, indicating that gains in employment slowed in the latest month. The percentage of respondents reporting an increase in employment rose to 19.8% from 13.6% in December but the percentage reporting a decline jumped to 10.1% in January from 0.6% in December. The average workweek index fell from 12.5 in December to 9.1 in January.

On balance, the firms continued to report overall increases in prices. The prices paid index edged down 2 points to 46.9 in January, its second consecutive decrease and its lowest level since June. Nearly 47% of respondents reported increases in input prices, while none reported decreases; 53% reported no change. The current prices received index ticked up 2 points to 27.8. More than 31% of respondents reported increases in the prices of their own goods, 3% reported decreases, and 66% reported no change.

The diffusion index for future general activity declined from a revised reading of 38.1 in December to 25.5 in January, its lowest reading since July. Nearly 35% of respondents expect an increase in activity over the next six months (down from 53% last month), exceeding the 9% that expect a decrease. The future new orders index fell 6 points to 32.9, while the future shipments index ticked up 1 point to 40.8. On balance, the firms continue to expect increases in employment over the next six months with the future employment index rising 4 points to 28.8. Both future price indexes were well above their long-run averages: The future prices paid index rose 2 points to 66.6; the future prices received index moved up 5 points to 61.8. The index for future capital expenditures edged up 1 point to 30.3.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The indexes range from -100 to +100 with positive values indicating an increase in activity. The series from the survey dating back to May 1968 can be found in Haver’s **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

260115P2.jpg

260115Q2.jpg

- The headline index increased to 12.6 in January, the highest reading since September, from -8.8 in December.
- Both new orders and shipments increased in January.
- Delivery times lengthened while the pace of input price increases slowed.
- Employment decreased but remained in positive territory, indicating further gains in employment though at a slower pace.

Philly Fed Manufacturing Activity Rebounds in January

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined by 9,000 to 198,000 in the week ending January 10, from 207,000 in the week ending January 3, revised from 208,000. The four-week moving average of initial claims was 205,000 in the January 10 week, a decline of 6,500 from 211,500 in the January 3 week, revised from 211,750, and reaching is the lowest level for this average since January 20, 2024, when it was 203,250.

Federal government employees initially filed 646 (NSA) jobless insurance claims in the week ended January 3, after filing 476 claims in the week ended December 27.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 19,000 to 1.884 million in the week ended January 3 from 1.903 million in the December 27 week, revised from 1.914 million. The four-week moving average was 1.889 million in the week ending January 3, a decrease of 250 from the prior week, revised from 1.893 million. The insured unemployment rate stood at 1.2% in the week of January 3, unchanged from previous 5 weeks.

Federal government employees’ continuing benefits claims were 12,803 (NSA) in the week of December 27, 12,161 (NSA) from 12,129 (NSA) in the week of December 20. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 27, the highest unemployment rates were in Rhode Island (2.86%), New Jersey (2.85%), Washington (2.81%), Minnesota (2.74%), Massachusetts (2.59%), Oregon (2.28%), Montana (2.16%), California and Connecticut (both 2.12%) and Alaska (2.06%). The lowest rates were in Florida (0.31%), North Carolina (0.41%), Louisiana (0.43%), Alabama and Virginia (both 0.49%). Rates in other notable states include Illinois (2.18%), New York (2.10%), Pennsylvania (2.02%), and Texas (1.20%). 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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260115D5.jpg

- Initial claims declined from the prior week.
- Continuing claims declined from the prior week.
- The insured unemployment rate was unchanged.