Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602a.jpg" p align="left" height="265" width="353">
The National Association of Realtors (NAR) reported that
pending sales of existing single-family homes rose 6.0% during April
versus March. The gain left home sales up 37.8% from the low in January
of last year. The latest marginally beat Consensus expectations for a
5.0% increase.
The m/m performance of home sales continued to vary across the
country. Last month sales rose in the Northeast (24.4 y/y), Midwest
(18.0% y/y) and in the West (12.0% y/y). A modest decline in sales was
logged in the South but sales still rose by nearly one-third versus
last year.
Pending home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001 and the data is available in
Haver's PREALTOR database.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602b.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602c.jpg" height="265" width="314">
<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/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></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="even">
<td class="firstcol">Total</td>
<td>110.9</td>
<td>104.6</td>
<td>97.7</td>
<td>22.4</td>
<td>95.1</td>
<td>86.9</td>
<td>95.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>97.9</td>
<td>75.6</td>
<td>77.7</td>
<td>24.4</td>
<td>76.7</td>
<td>73.0</td>
<td>86.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>104.2</td>
<td>100.1</td>
<td>97.7</td>
<td>18.0</td>
<td>88.8</td>
<td>80.7</td>
<td>89.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>123.9</td>
<td>124.6</td>
<td>107.5</td>
<td>31.4</td>
<td>98.9</td>
<td>90.3</td>
<td>107.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>107.9</td>
<td>100.4</td>
<td>98.0</td>
<td>12.0</td>
<td>109.9</td>
<td>99.2</td>
<td>92.1</td>
</tr>
</tbody>
</table>
Challenger Layoffs Near Lowest in
Ten Years 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 2, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602d.jpg" align="left" height="265" width="353">
According to the outplacement firm of Challenger, Grey
&amp; Christmas the level of layoffs rose slightly m/m during May
to 38,810. Nevertheless, the figure was off by roughly two-thirds from
last year and just slightly above the lowest level since 2000. Planned
layoffs announced during the first five months of 2010 totaled 258,319,
down 68.6% from the 822,282 announced during early-2009. In virtually
all industries except entertainment/leisure and pharmaceutical layoffs
were down last month versus May 2009.
Challenger also samples firms' hiring plans. During May plans
fell slightly after a strong gain during April. Versus May '09 plans
rose 83.7% but during the first five months of this year they've fallen
slightly y/y. Plans eased during May in the transportation, health care
&amp; financial sectors but strengthened in the auto, energy,
industrial goods &amp; services industries.
During the last ten years there has been a 67% (inverse)
correlation between the three-month moving average of announced job
cuts and the three-month change in payroll employment.
Job cut announcements differ from layoffs. Many are achieved through
attrition, early retirement or just never occur.
The Challenger figures are available in Haver's SURVEYS
database.

<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/@S3/@S301/@S301.HTM">Challenger,
Gray &amp;
Christmas</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>38,810</td>
<td>38,326</td>
<td>67,611</td>
<td>-65.1%</td>
<td>1,288,030</td>
<td>1,223,993</td>
<td>768,264</td>
</tr>
<tr>
<td class="firstcol">Announced Hiring Plans</td>
<td>14,922</td>
<td>15,654</td>
<td>13,994</td>
<td>83.7%</td>
<td>272,573</td>
<td>118,600</td>
<td>365,583</td>
</tr>
</tbody>
</table>
Euro-Area PPI Takes Off Slowly I
Turn... Err Scratch That 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 2, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602e.jpg" align="left" height="265" width="353">
Producer price trends have been rising sharply in EMU over the
past few months. The PPI has taken a decided and sharp turn for the
worse. Prices are accelerating in two of the three main sectors of the
PPI. Only consumer prices fail to show acceleration from three-months
to six months. Consumer prices and intermediate prices are still lower
Yr/Yr but their trends are nonetheless rising sharply. Intermediate
goods prices are up very strongly from past weakness.
Germany and France show manufacturing prices ex-energy or
ex-energy and ex-food trends (the former for Germany, the latter for
France) with accelerations in train. UK manufactures prices are
accelerating (the UK is an EU member). Italy&#8217;s prices are actually
decelerating over three months compared to stronger pressures earlier.
While the PPI is not the price a gauge of choice for the ECB,
having such pressures stirred up will not be good news. The dropping
euro undoubtedly has something to do with this.
Still Yr/Yr prices are contained for consumer goods and
capital goods. Intermediate goods prices are the biggest problem. There
the rise in the dollar price of oil and the dropping euro form a
double-whammy on prices. If these trends develop in the HICP they will
put the ECB on the spot since growth in the Zone is not doing well and
the ECB will not want inflation trends like this to take hold in
consumer prices.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro-Area and UK
PPI Trends </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Area</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">TotalxConstruct</td>
<td>0.7%</td>
<td>0.6%</td>
<td>5.8%</td>
<td>6.4%</td>
<td>2.8%</td>
<td>-4.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Gds</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.1%</td>
<td>0.4%</td>
<td>-0.2%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Consurmer Gds</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.5%</td>
<td>0.7%</td>
<td>-0.3%</td>
<td>-1.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate&amp;Cap
Gds</td>
<td>1.0%</td>
<td>0.8%</td>
<td>8.1%</td>
<td>6.8%</td>
<td>2.7%</td>
<td>-5.1%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.4%</td>
<td>0.6%</td>
<td>3.9%</td>
<td>6.2%</td>
<td>3.7%</td>
<td>-5.9%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Germany</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Gy
ExEnergy</td>
<td>0.5%</td>
<td>0.2%</td>
<td>4.3%</td>
<td>3.1%</td>
<td>1.1%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td colspan="7">France:Tot</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fr
ExF&amp;Energy</td>
<td>0.6%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>3.3%</td>
<td>1.0%</td>
<td>-1.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.5%</td>
<td>0.5%</td>
<td>3.7%</td>
<td>6.7%</td>
<td>4.1%</td>
<td>-6.2%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>0.9%</td>
<td>0.6%</td>
<td>8.1%</td>
<td>7.1%</td>
<td>5.8%</td>
<td>1.3%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">Euro-Area
Harmonized
PPI ex construction</td>
</tr>
</tbody>
</table>
</body></html>

The National Association of Realtors (NAR) reported that pending sales of existing single-family homes rose 6.0% during April versus March. The gain left home sales up 37.8% from the low in January of last year. The latest marginally [...]

U.S. Pending Home Sales StrongAgain

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601e.jpg" align="left" height="265" width="353">
The market MFG barometers for EMU fell across the bard in May.
Only Ireland among the main reports showed a month-to-month boost and
the EU&#8217;s UK edged higher. Greece the well-know troubled EMU ember shows
what troubled straits it is in as it is the only example of a MFG PMI
that is down over three-, six- and twelve-months. Moreover, every other
EU/EMU report in the table is up by 20 index points (or almost) from
its respective cycle low. Greece is not. Notably Greece&#8217;s MFG index is
up by just 3.6 points from its low. The whole of the e-Zone is not even
down that much from its cycle peak! Greece&#8217;s problems are not just
problems with debt but are about problems in getting economic growth
going and improving its tax revenues. The manufacturing sector has been
leading EMU into recovery.
Today EMU unemployment was reported and it ticked up by 0.1%.
In Germany the rate fell and the number unemployed fell by more than
expected as Greece&#8217;s woes are helping German growth by having knocked
down the value of the euro. Germany is benefitting from export
strength. Still it is well recognized that Greece&#8217;s problems could
become a net negative for the Zone. And, of course, Greece is not the
only thing Europe is worried about.
Spain was downgraded by Fitch just before the weekend at the
end of the US trading day. Over the weekend the ECB released estimates
for the first time on the amount of bank loan losses that the Zone&#8217;s
banking system probably faces. The ECB pointed to 195bln euros in loan
losses for 2010 and 2011 saying that it could be worse if growth were
hit hard. Add to this to the news of China slowing and we have a
US-holiday shortened week that has just begun and already is jam-packed
full of negative news. Welcome back!

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Changes in Markit
MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Changes Mo/Mo</td>
<td colspan="3">Change on Frequency</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>From Peak</td>
<td>From Low</td>
</tr>
<tr class="even">
<td class="firstcol">Euro-13</td>
<td>-1.69</td>
<td>0.90</td>
<td>2.42</td>
<td>1.63</td>
<td>4.66</td>
<td>15.18</td>
<td>-2.9</td>
<td>22.3</td>
</tr>
<tr class="even">
<td class="firstcol">Germany</td>
<td>-3.14</td>
<td>1.34</td>
<td>3.02</td>
<td>1.22</td>
<td>5.99</td>
<td>18.85</td>
<td>-3.1</td>
<td>26.5</td>
</tr>
<tr class="even">
<td class="firstcol">France</td>
<td>-0.77</td>
<td>0.08</td>
<td>1.59</td>
<td>0.90</td>
<td>1.38</td>
<td>12.46</td>
<td>-8.2</td>
<td>21.0</td>
</tr>
<tr class="even">
<td class="firstcol">Italy</td>
<td>-0.28</td>
<td>0.57</td>
<td>2.10</td>
<td>2.39</td>
<td>3.93</td>
<td>12.91</td>
<td>-3.6</td>
<td>19.4</td>
</tr>
<tr class="even">
<td class="firstcol">Spain</td>
<td>-1.80</td>
<td>1.46</td>
<td>2.75</td>
<td>2.41</td>
<td>6.23</td>
<td>11.68</td>
<td>-5.7</td>
<td>23.0</td>
</tr>
<tr class="even">
<td class="firstcol">Austria</td>
<td>-2.11</td>
<td>3.62</td>
<td>1.31</td>
<td>2.82</td>
<td>8.29</td>
<td>18.92</td>
<td>-2.1</td>
<td>25.1</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Greece</td>
<td>-1.85</td>
<td>0.71</td>
<td>-1.26</td>
<td>-2.40</td>
<td>-5.45</td>
<td>-4.28</td>
<td>-14.2</td>
<td>3.6</td>
</tr>
<tr class="even">
<td class="firstcol">Ireland</td>
<td>0.67</td>
<td>0.42</td>
<td>4.35</td>
<td>5.44</td>
<td>5.29</td>
<td>14.73</td>
<td>-1.3</td>
<td>20.9</td>
</tr>
<tr class="grey3">
<td colspan="9" class="firstcol">EU</td>
</tr>
<tr class="even">
<td class="firstcol">UK</td>
<td>0.02</td>
<td>0.69</td>
<td>0.67</td>
<td>1.38</td>
<td>5.38</td>
<td>12.92</td>
<td>0.0</td>
<td>22.8</td>
</tr>
<tr class="grey1">
<td colspan="9" class="firstcol">percentile
is over
range since March 2000</td>
</tr>
</tbody>
</table>
</body></html>

The market MFG barometers for EMU fell across the bard in May. Only Ireland among the main reports showed a month-to-month boost and the EU’s UK edged higher. Greece the well-know troubled EMU ember shows what troubled straits it is [...]

Market Indices For MFG Drop Sharply Off-Peak

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601a.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601b.jpg" height="265" width="314">
Rising trends don't have unending momentum. And the current
rebound in factory sector activity appears to be no exception. The
Institute for Supply Management indicated that their May composite
index of factory sector activity slipped to 59.7 from 60.4 in April.
While May's figure was higher than Consensus expectation's for a
decline to 59.0, recent levels have been historically hard to sustain.
Still, the latest figure is up from the low of 32.5 reached in December
'08. (Any figure above the break-even point of 50 suggests rising
activity.) The ISM data is available in Haver's USECON database.
A slower rate of inventory accumulation was the main source of
the composite index's May weakness. The new orders, production and
vendor performance components were roughly unchanged. Notable, however,
was the slight gain in the employment index to 59.8. It was the highest
level since early-2004. During the last ten years there has been an 89%
correlation between the ISM employment index and the m/m change in
factory sector payrolls.
Also showing lift was the separate index of export orders to
62.0 which was the highest level since 1988. During the last ten years
there has been an 88% correlation between the level of the index and
the quarterly change in merchandise exports. Twenty-eight percent of
respondents reported higher export orders while fourteen reported lower
orders.
The separate index of prices paid slipped to 77.5 from its
high for this recovery. It remained up from the December '08 low of
18.0. Sixty percent of respondents reported higher prices while only 5%
indicated lower prices. During the last twenty years there has been an
83% correlation between the price index and the three-month change in
the PPI for intermediate goods.
The ISM data are available in Haver's USECON
database.
The Policy Response to the Crisis in Korea and Other
Emerging Market Economies is Saturday's speech by Fed
Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20100530a.htm">here</a>.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601c.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601d.jpg" height="265" width="312">
<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/@S2/@S201/@S201.HTM" style="color: black;">ISM Mfg</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 class="odd">
<td class="firstcol">Composite Index</td>
<td>59.7</td>
<td>60.4</td>
<td>59.6</td>
<td>43.2</td>
<td>46.2</td>
<td>45.5</td>
<td>51.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>65.7</td>
<td>65.7</td>
<td>61.5</td>
<td>51.4</td>
<td>51.6</td>
<td>42.1</td>
<td>54.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>59.8</td>
<td>58.5</td>
<td>55.1</td>
<td>35.1</td>
<td>40.5</td>
<td>43.3</td>
<td>50.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Production</td>
<td>66.6</td>
<td>66.9</td>
<td>61.1</td>
<td>47.0</td>
<td>50.4</td>
<td>45.2</td>
<td>54.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Supplier Deliveries</td>
<td>61.0</td>
<td>61.3</td>
<td>64.9</td>
<td>50.0</td>
<td>51.4</td>
<td>51.6</td>
<td>51.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>45.6</td>
<td>49.4</td>
<td>55.3</td>
<td>32.7</td>
<td>37.1</td>
<td>45.5</td>
<td>45.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>77.5</td>
<td>78.0</td>
<td>75.0</td>
<td>43.5</td>
<td>48.3</td>
<td>66.5</td>
<td>64.6</td>
</tr>
</tbody>
</table>
</body></html>

Rising trends don't have unending momentum. And the current rebound in factory sector activity appears to be no exception. The Institute for Supply Management indicated that their May composite index of factory sector activity slipped [...]

U.S. ISM Index Indicates Topping Of Factory Sector Growth

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601a.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601b.jpg" height="265" width="314">
Rising trends don't have unending momentum. And the current
rebound in factory sector activity appears to be no exception. The
Institute for Supply Management indicated that their May composite
index of factory sector activity slipped to 59.7 from 60.4 in April.
While May's figure was higher than Consensus expectation's for a
decline to 59.0, recent levels have been historically hard to sustain.
Still, the latest figure is up from the low of 32.5 reached in December
'08. (Any figure above the break-even point of 50 suggests rising
activity.) The ISM data is available in Haver's USECON database.
A slower rate of inventory accumulation was the main source of
the composite index's May weakness. The new orders, production and
vendor performance components were roughly unchanged. Notable, however,
was the slight gain in the employment index to 59.8. It was the highest
level since early-2004. During the last ten years there has been an 89%
correlation between the ISM employment index and the m/m change in
factory sector payrolls.
Also showing lift was the separate index of export orders to
62.0 which was the highest level since 1988. During the last ten years
there has been an 88% correlation between the level of the index and
the quarterly change in merchandise exports. Twenty-eight percent of
respondents reported higher export orders while fourteen reported lower
orders.
The separate index of prices paid slipped to 77.5 from its
high for this recovery. It remained up from the December '08 low of
18.0. Sixty percent of respondents reported higher prices while only 5%
indicated lower prices. During the last twenty years there has been an
83% correlation between the price index and the three-month change in
the PPI for intermediate goods.
The ISM data are available in Haver's USECON
database.
The Policy Response to the Crisis in Korea and Other
Emerging Market Economies is Saturday's speech by Fed
Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20100530a.htm">here</a>.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601c.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601d.jpg" height="265" width="312">
<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/@S2/@S201/@S201.HTM" style="color: black;">ISM Mfg</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 class="odd">
<td class="firstcol">Composite Index</td>
<td>59.7</td>
<td>60.4</td>
<td>59.6</td>
<td>43.2</td>
<td>46.2</td>
<td>45.5</td>
<td>51.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>65.7</td>
<td>65.7</td>
<td>61.5</td>
<td>51.4</td>
<td>51.6</td>
<td>42.1</td>
<td>54.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>59.8</td>
<td>58.5</td>
<td>55.1</td>
<td>35.1</td>
<td>40.5</td>
<td>43.3</td>
<td>50.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Production</td>
<td>66.6</td>
<td>66.9</td>
<td>61.1</td>
<td>47.0</td>
<td>50.4</td>
<td>45.2</td>
<td>54.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Supplier Deliveries</td>
<td>61.0</td>
<td>61.3</td>
<td>64.9</td>
<td>50.0</td>
<td>51.4</td>
<td>51.6</td>
<td>51.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>45.6</td>
<td>49.4</td>
<td>55.3</td>
<td>32.7</td>
<td>37.1</td>
<td>45.5</td>
<td>45.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>77.5</td>
<td>78.0</td>
<td>75.0</td>
<td>43.5</td>
<td>48.3</td>
<td>66.5</td>
<td>64.6</td>
</tr>
</tbody>
</table>
Market Indices For MFG Drop
Sharply Off-Peak 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 1, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601e.jpg" align="left" height="265" width="353">
The market MFG barometers for EMU fell across the bard in May.
Only Ireland among the main reports showed a month-to-month boost and
the EU&#8217;s UK edged higher. Greece the well-know troubled EMU ember shows
what troubled straits it is in as it is the only example of a MFG PMI
that is down over three-, six- and twelve-months. Moreover, every other
EU/EMU report in the table is up by 20 index points (or almost) from
its respective cycle low. Greece is not. Notably Greece&#8217;s MFG index is
up by just 3.6 points from its low. The whole of the e-Zone is not even
down that much from its cycle peak! Greece&#8217;s problems are not just
problems with debt but are about problems in getting economic growth
going and improving its tax revenues. The manufacturing sector has been
leading EMU into recovery.
Today EMU unemployment was reported and it ticked up by 0.1%.
In Germany the rate fell and the number unemployed fell by more than
expected as Greece&#8217;s woes are helping German growth by having knocked
down the value of the euro. Germany is benefitting from export
strength. Still it is well recognized that Greece&#8217;s problems could
become a net negative for the Zone. And, of course, Greece is not the
only thing Europe is worried about.
Spain was downgraded by Fitch just before the weekend at the
end of the US trading day. Over the weekend the ECB released estimates
for the first time on the amount of bank loan losses that the Zone&#8217;s
banking system probably faces. The ECB pointed to 195bln euros in loan
losses for 2010 and 2011 saying that it could be worse if growth were
hit hard. Add to this to the news of China slowing and we have a
US-holiday shortened week that has just begun and already is jam-packed
full of negative news. Welcome back!

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th colspan="9" scope="col"> Changes in Markit
MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Changes Mo/Mo</td>
<td colspan="3">Change on Frequency</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>From Peak</td>
<td>From Low</td>
</tr>
<tr class="even">
<td class="firstcol">Euro-13</td>
<td>-1.69</td>
<td>0.90</td>
<td>2.42</td>
<td>1.63</td>
<td>4.66</td>
<td>15.18</td>
<td>-2.9</td>
<td>22.3</td>
</tr>
<tr class="even">
<td class="firstcol">Germany</td>
<td>-3.14</td>
<td>1.34</td>
<td>3.02</td>
<td>1.22</td>
<td>5.99</td>
<td>18.85</td>
<td>-3.1</td>
<td>26.5</td>
</tr>
<tr class="even">
<td class="firstcol">France</td>
<td>-0.77</td>
<td>0.08</td>
<td>1.59</td>
<td>0.90</td>
<td>1.38</td>
<td>12.46</td>
<td>-8.2</td>
<td>21.0</td>
</tr>
<tr class="even">
<td class="firstcol">Italy</td>
<td>-0.28</td>
<td>0.57</td>
<td>2.10</td>
<td>2.39</td>
<td>3.93</td>
<td>12.91</td>
<td>-3.6</td>
<td>19.4</td>
</tr>
<tr class="even">
<td class="firstcol">Spain</td>
<td>-1.80</td>
<td>1.46</td>
<td>2.75</td>
<td>2.41</td>
<td>6.23</td>
<td>11.68</td>
<td>-5.7</td>
<td>23.0</td>
</tr>
<tr class="even">
<td class="firstcol">Austria</td>
<td>-2.11</td>
<td>3.62</td>
<td>1.31</td>
<td>2.82</td>
<td>8.29</td>
<td>18.92</td>
<td>-2.1</td>
<td>25.1</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Greece</td>
<td>-1.85</td>
<td>0.71</td>
<td>-1.26</td>
<td>-2.40</td>
<td>-5.45</td>
<td>-4.28</td>
<td>-14.2</td>
<td>3.6</td>
</tr>
<tr class="even">
<td class="firstcol">Ireland</td>
<td>0.67</td>
<td>0.42</td>
<td>4.35</td>
<td>5.44</td>
<td>5.29</td>
<td>14.73</td>
<td>-1.3</td>
<td>20.9</td>
</tr>
<tr class="grey3">
<td colspan="9" class="firstcol">EU</td>
</tr>
<tr class="even">
<td class="firstcol">UK</td>
<td>0.02</td>
<td>0.69</td>
<td>0.67</td>
<td>1.38</td>
<td>5.38</td>
<td>12.92</td>
<td>0.0</td>
<td>22.8</td>
</tr>
<tr class="grey1">
<td colspan="9" class="firstcol">percentile
is over
range since March 2000</td>
</tr>
</tbody>
</table>
U.S. Construction Activity
Rebounds Across-the-Board 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 1,2010 


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601f.jpg" align="left" height="265" width="353">
Perhaps busting out of its malaise, construction activity
rebounded a sharp 2.7% during April after a 0.4% March uptick. The
latest increase vastly exceeded Consensus expectations for a 0.1%
uptick. The impetus for the April rise was a 2.9% jump in private
sector building off the March low. Nevertheless, private sector
building was off 13.5 y/y and 41.2% from the early-2006 high.
Higher residential building activity provided the impetus
behind the gain in the total with a 4.4% increase. A 6.3% jump (2.7%
y/y) in spending on home improvements led the April gain. It was
followed by single-family construction activity which rose 3.4% rise
(29.0% y/y) and was the eleventh consecutive monthly increase. It
lifted activity by more than one-third from last year's low. However,
building remained off three-quarters from the 2006 high. Multi-family
building fell another 1.9% during April to a new series' low (-57.4%
y/y).
Nonresidential building activity also recovered 1.7%, though
that was the cycle's first meaningful monthly gain. Since the 2008
peak, activity has fallen by 29.0%. Higher factory sector building led
the April gain with a 2.7 increase (-31.3% y/y) followed by a 1.3% rise
(-15.7% y/y) in health-care building. Office building (-36.4% y/y) and
educational construction (-16.6% y/y) both fell sharply. In the public
sector, building activity also firmed by 2.4% (-4.4% y/y) led by a 3.6%
jump in spending on highways &amp; streets (5.1% y/y).
The construction put-in-place figures are available in Haver's
USECON database.
Policy Challenges for Central Banks in the Aftermath
of the Crisis is last week's speech by St. Louis Fed
President James Bullard and it can be found here <a href="http://www.stlouisfed.org/newsroom/displayNews.cfm?article=688">here</a>.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601g.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601h.jpg" height="265" width="314">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Construction
Put In Place (%)</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="even">
<td class="firstcol">Total</td>
<td>2.7</td>
<td>0.4</td>
<td>-2.4</td>
<td>-10.5</td>
<td>-12.5</td>
<td>-6.9</td>
<td>-1.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Private</td>
<td>2.9</td>
<td>-0.5</td>
<td>-2.9</td>
<td>-13.5</td>
<td>-18.8</td>
<td>-11.1</td>
<td>-5.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential</td>
<td>4.4</td>
<td>0.0</td>
<td>-4.4</td>
<td>4.1</td>
<td>-28.0</td>
<td>-29.1</td>
<td>-19.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.7</td>
<td>-0.9</td>
<td>-1.7</td>
<td>-24.6</td>
<td>-11.1</td>
<td>13.2</td>
<td>23.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>2.4</td>
<td>2.0</td>
<td>-1.3</td>
<td>-4.4</td>
<td>3.3</td>
<td>5.6</td>
<td>13.1</td>
</tr>
</tbody>
</table>
</body></html>

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
According to the Nationwide Building Society&#8217;s measure, U.K.
consumer confidence fell in March by the most since July 2008 as the
election due within weeks fueled Britons&#8217; doubts about the economy.
Small surprise that is: so much for politicians shoring up a feeling of
hope and security. Increasingly elections are about making the opponent
seem worse than you are. The consumer confidence polls seem to have
picked up on this, with the obvious consequences. The index of
sentiment fell 9 points from February to 72, erasing the gains in
confidence seen so far this year. A gauge measuring expectations for
the economy in the next six months fell 11 points to 105.This fall
disappointed as the market consensus level was a reading of 81.
We contrast this result with the GfK survey above. It seems to
show less of hit from the electioneering effect but it does demonstrate
some backsliding in the assessment of the economy; plenty of raw nerves
here for the politicians to tap into. The household financial situation
eroded in March as did people&#8217;s assessment of their savings. Both lower
and higher income respondents saw a worsening.
Looking ahead, fears of unemployment have been rising. The
general economic situation is seen as poorer and households expect
their financial situation to deteriorate further. There are increased
concerns about savings adequacy and growing concerns about inflation.
With this as a back-drop there is plenty of fodder for
election politicking to push all the consumers&#8217; buttons. This appears
to be in train. Still consumer confidence in the GfK measure is in the
92nd percentile of its two-year range showing considerable progress has
been made, but that compares to a standing of just 60% in its 10_year
range which emphasizes a bit more how far there is to go. Clearly the
UK consumer remains challenged and will find his and her senses
assaulted in this election season. May the least worse man win.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="7" scope="col"> GFK Consumer Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Of 2Yr</td>
<td>Of 10Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Range</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-18</td>
<td>-16</td>
<td>-15</td>
<td>-14</td>
<td>80.8%</td>
<td>55.3%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Current</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>16</td>
<td>17</td>
<td>18</td>
<td>18</td>
<td>25.0%</td>
<td>18.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-21</td>
<td>-20</td>
<td>-17</td>
<td>-16</td>
<td>71.0%</td>
<td>36.7%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Last 12
Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>-13</td>
<td>-14</td>
<td>-15</td>
<td>-13</td>
<td>43.8%</td>
<td>29.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Econ Sit</td>
<td>-45</td>
<td>-47</td>
<td>-49</td>
<td>-50</td>
<td>94.9%</td>
<td>53.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>72</td>
<td>79</td>
<td>72</td>
<td>63</td>
<td>26.9%</td>
<td>40.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>-5</td>
<td>-7</td>
<td>-13</td>
<td>-6</td>
<td>37.7%</td>
<td>29.9%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Next
12-Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>-3</td>
<td>2</td>
<td>4</td>
<td>6</td>
<td>62.5%</td>
<td>46.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Econ Sit</td>
<td>-9</td>
<td>-1</td>
<td>0</td>
<td>4</td>
<td>76.8%</td>
<td>76.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment</td>
<td>36</td>
<td>33</td>
<td>36</td>
<td>31</td>
<td>11.1%</td>
<td>27.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-26</td>
<td>-27</td>
<td>-28</td>
<td>-31</td>
<td>82.4%</td>
<td>56.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>2</td>
<td>1</td>
<td>5</td>
<td>7</td>
<td>29.4%</td>
<td>19.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>71</td>
<td>67</td>
<td>63</td>
<td>60</td>
<td>60.8%</td>
<td>60.8%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">By Income</td>
</tr>
<tr class="odd">
<td class="firstcol">Lower</td>
<td>-24</td>
<td>-22</td>
<td>-21</td>
<td>-18</td>
<td>77.8%</td>
<td>50.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Upper</td>
<td>-11</td>
<td>-8</td>
<td>-5</td>
<td>-3</td>
<td>72.4%</td>
<td>55.3%</td>
</tr>
</tbody>
</table>
</body></html>

According to the Nationwide Building Society’s measure, U.K. consumer confidence fell in March by the most since July 2008 as the election due within weeks fueled Britons’ doubts about the economy. Small surprise that is: so much for [...]

UK Consumer Confidence Is Challenged By Electioneering

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528a.jpg" align="left" height="265" width="353">
Lower gasoline prices and a pause in auto purchases braked
consumer spending last month. Personal consumption
expenditures were unchanged during April after an unrevised
0.6% March gain. A 0.3% increase had been expected. Spending on
gasoline slipped for the third straight month due to price declines.
The price influence is clear when observing that during the last year
nominal spending rose 35.9%; but in constant dollars, spending was
roughly unchanged. A large contribution from spending on autos also is
clear, but the trend is improved. Real spending fell 1.3% in April
after an 8.9% gain in March; but versus last year, spending on motor
vehicles has increased 11.3%. 

Elsewhere, spending looked firm. April spending on home
furnishings rose 1.4% (7.4% y/y) for the third such monthly increase.
Even after allowing for higher prices, real spending was up 1.8% y/y
following the 5.9% decline during 2009. Apparel spending took a
breather, falling 0.8% last month after gains between 1.7% and 2.1%
during March &amp; February. More impressive was that spending rose
5.7% y/y after the 3.5% decline last year. Adjusting for lower prices
spending jumped 6.8% y/y after falling 4.3% in 2009. Spending on
services continued firm at 2.8% y/y following last year's 1.6%
increase. The gain still was bloated by the 4.3% y/y jump in health
care expenditures but spending on financial services (4.3% y/y),
restaurants &amp; accommodations (2.8% y/y) and recreation (0.8%
y/y) each was greatly improved.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528b.jpg" align="right" height="265" width="353">
Last month an expected 0.4% gain in personal income
accompanied the spending numbers. April disposable income rose an even
firmer 0.5% (2.8% y/y). Year-to-year, both are much improved versus
2009 but tax cuts have fueled take-home pay more. Higher gasoline
prices also cut into income growth. The 0.9% y/y gain in real
disposable income just equaled last year's increase. The outgrowth of
spending gains that exceeded income growth during the last twelve
months lowered the personal savings rate to 3.6%
from its high of 6.4% when the tax cuts were enacted. The latest rate
still was up, however, from the 1.0% low at the beginning of the last
recession. 

Employment declines left wages &amp; salaries up just 0.3%
y/y, though that followed a sharp 4.1% decline last year. Wages in the
factory sector, however, rose a firmer 0.7% in April (-3.4% y/y) and
compared to last year's 11.3% shortfall. In the private service sector,
wages increased 0.8% y/y after last year's 4.0% decline. Improvement in
the housing market pulled proprietors' income up 5.4% y/y, its
strongest gain since early 2006 while the stabilization of interest
rates left interest income up 0.3% y/y following last year's 5.3%
decline. Dividend income remained down 1.6% y/y but that compared
favorably to last year's 19.3% drop and the 10.3% 2008 decline.
Finally, gains in unemployment insurance benefits (13.1% y/y) have
tapered off with the improved labor market. 

The PCE chain price index was unchanged
with the 2.3% slip (+38.1% y/y) in gasoline prices. The core PCE price
deflator ticked up 0.1%, held back by a 0.9% decline (-1.0% y/y) in
apparel prices and a 0.4% decline (-4.3% y/y) in furniture &amp;
appliance prices. Services prices also gained 0.2% (1.7% y/y), while
health care prices rose 0.3% (2.6% y/y). 

The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528c.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528d.jpg" height="265" width="314">
<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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a>
(%)&nbsp;</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">Personal Income</td>
<td>0.4</td>
<td>0.4</td>
<td>0.0</td>
<td>2.5</td>
<td>-1.8</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;Disposable Personal Income</td>
<td>0.5</td>
<td>0.4</td>
<td>0.0</td>
<td>2.8</td>
<td>1.0</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.0</td>
<td>0.6</td>
<td>0.5</td>
<td>4.6</td>
<td>-0.4</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>3.6</td>
<td>3.1</td>
<td>3.3</td>
<td>4.9 (April '09)</td>
<td>4.2</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.0</td>
<td>0.1</td>
<td>0.0</td>
<td>2.0</td>
<td>0.2</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Less food &amp; energy</td>
<td>0.1</td>
<td>0.1</td>
<td>0.0</td>
<td>1.2</td>
<td>1.5</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
</body></html>

Lower gasoline prices and a pause in auto purchases braked consumer spending last month. Personal consumption expenditures were unchanged during April after an unrevised 0.6% March gain. A 0.3% increase had been expected. Spending on [...]

U.S. Personal Spending Mixed & Income Firm

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528a.jpg" align="left" height="265" width="353">
Lower gasoline prices and a pause in auto purchases braked
consumer spending last month. Personal consumption
expenditures were unchanged during April after an unrevised
0.6% March gain. A 0.3% increase had been expected. Spending on
gasoline slipped for the third straight month due to price declines.
The price influence is clear when observing that during the last year
nominal spending rose 35.9%; but in constant dollars, spending was
roughly unchanged. A large contribution from spending on autos also is
clear, but the trend is improved. Real spending fell 1.3% in April
after an 8.9% gain in March; but versus last year, spending on motor
vehicles has increased 11.3%. 

Elsewhere, spending looked firm. April spending on home
furnishings rose 1.4% (7.4% y/y) for the third such monthly increase.
Even after allowing for higher prices, real spending was up 1.8% y/y
following the 5.9% decline during 2009. Apparel spending took a
breather, falling 0.8% last month after gains between 1.7% and 2.1%
during March &amp; February. More impressive was that spending rose
5.7% y/y after the 3.5% decline last year. Adjusting for lower prices
spending jumped 6.8% y/y after falling 4.3% in 2009. Spending on
services continued firm at 2.8% y/y following last year's 1.6%
increase. The gain still was bloated by the 4.3% y/y jump in health
care expenditures but spending on financial services (4.3% y/y),
restaurants &amp; accommodations (2.8% y/y) and recreation (0.8%
y/y) each was greatly improved.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528b.jpg" align="right" height="265" width="353">
Last month an expected 0.4% gain in personal income
accompanied the spending numbers. April disposable income rose an even
firmer 0.5% (2.8% y/y). Year-to-year, both are much improved versus
2009 but tax cuts have fueled take-home pay more. Higher gasoline
prices also cut into income growth. The 0.9% y/y gain in real
disposable income just equaled last year's increase. The outgrowth of
spending gains that exceeded income growth during the last twelve
months lowered the personal savings rate to 3.6%
from its high of 6.4% when the tax cuts were enacted. The latest rate
still was up, however, from the 1.0% low at the beginning of the last
recession. 

Employment declines left wages &amp; salaries up just 0.3%
y/y, though that followed a sharp 4.1% decline last year. Wages in the
factory sector, however, rose a firmer 0.7% in April (-3.4% y/y) and
compared to last year's 11.3% shortfall. In the private service sector,
wages increased 0.8% y/y after last year's 4.0% decline. Improvement in
the housing market pulled proprietors' income up 5.4% y/y, its
strongest gain since early 2006 while the stabilization of interest
rates left interest income up 0.3% y/y following last year's 5.3%
decline. Dividend income remained down 1.6% y/y but that compared
favorably to last year's 19.3% drop and the 10.3% 2008 decline.
Finally, gains in unemployment insurance benefits (13.1% y/y) have
tapered off with the improved labor market. 

The PCE chain price index was unchanged
with the 2.3% slip (+38.1% y/y) in gasoline prices. The core PCE price
deflator ticked up 0.1%, held back by a 0.9% decline (-1.0% y/y) in
apparel prices and a 0.4% decline (-4.3% y/y) in furniture &amp;
appliance prices. Services prices also gained 0.2% (1.7% y/y), while
health care prices rose 0.3% (2.6% y/y). 

The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528c.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528d.jpg" height="265" width="314">
<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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a>
(%)&nbsp;</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">Personal Income</td>
<td>0.4</td>
<td>0.4</td>
<td>0.0</td>
<td>2.5</td>
<td>-1.8</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;Disposable Personal Income</td>
<td>0.5</td>
<td>0.4</td>
<td>0.0</td>
<td>2.8</td>
<td>1.0</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.0</td>
<td>0.6</td>
<td>0.5</td>
<td>4.6</td>
<td>-0.4</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>3.6</td>
<td>3.1</td>
<td>3.3</td>
<td>4.9 (April '09)</td>
<td>4.2</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.0</td>
<td>0.1</td>
<td>0.0</td>
<td>2.0</td>
<td>0.2</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Less food &amp; energy</td>
<td>0.1</td>
<td>0.1</td>
<td>0.0</td>
<td>1.2</td>
<td>1.5</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
UK Consumer Confidence Is
Challenged By Electioneering 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 28, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
According to the Nationwide Building Society&#8217;s measure, U.K.
consumer confidence fell in March by the most since July 2008 as the
election due within weeks fueled Britons&#8217; doubts about the economy.
Small surprise that is: so much for politicians shoring up a feeling of
hope and security. Increasingly elections are about making the opponent
seem worse than you are. The consumer confidence polls seem to have
picked up on this, with the obvious consequences. The index of
sentiment fell 9 points from February to 72, erasing the gains in
confidence seen so far this year. A gauge measuring expectations for
the economy in the next six months fell 11 points to 105.This fall
disappointed as the market consensus level was a reading of 81.
We contrast this result with the GfK survey above. It seems to
show less of hit from the electioneering effect but it does demonstrate
some backsliding in the assessment of the economy; plenty of raw nerves
here for the politicians to tap into. The household financial situation
eroded in March as did people&#8217;s assessment of their savings. Both lower
and higher income respondents saw a worsening.
Looking ahead, fears of unemployment have been rising. The
general economic situation is seen as poorer and households expect
their financial situation to deteriorate further. There are increased
concerns about savings adequacy and growing concerns about inflation.
With this as a back-drop there is plenty of fodder for
election politicking to push all the consumers&#8217; buttons. This appears
to be in train. Still consumer confidence in the GfK measure is in the
92nd percentile of its two-year range showing considerable progress has
been made, but that compares to a standing of just 60% in its 10_year
range which emphasizes a bit more how far there is to go. Clearly the
UK consumer remains challenged and will find his and her senses
assaulted in this election season. May the least worse man win.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="7" scope="col"> GFK Consumer Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Of 2Yr</td>
<td>Of 10Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Range</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-18</td>
<td>-16</td>
<td>-15</td>
<td>-14</td>
<td>80.8%</td>
<td>55.3%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Current</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>16</td>
<td>17</td>
<td>18</td>
<td>18</td>
<td>25.0%</td>
<td>18.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-21</td>
<td>-20</td>
<td>-17</td>
<td>-16</td>
<td>71.0%</td>
<td>36.7%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Last
12
Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>-13</td>
<td>-14</td>
<td>-15</td>
<td>-13</td>
<td>43.8%</td>
<td>29.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Econ Sit</td>
<td>-45</td>
<td>-47</td>
<td>-49</td>
<td>-50</td>
<td>94.9%</td>
<td>53.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>72</td>
<td>79</td>
<td>72</td>
<td>63</td>
<td>26.9%</td>
<td>40.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>-5</td>
<td>-7</td>
<td>-13</td>
<td>-6</td>
<td>37.7%</td>
<td>29.9%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Next
12-Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>-3</td>
<td>2</td>
<td>4</td>
<td>6</td>
<td>62.5%</td>
<td>46.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Econ Sit</td>
<td>-9</td>
<td>-1</td>
<td>0</td>
<td>4</td>
<td>76.8%</td>
<td>76.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment</td>
<td>36</td>
<td>33</td>
<td>36</td>
<td>31</td>
<td>11.1%</td>
<td>27.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-26</td>
<td>-27</td>
<td>-28</td>
<td>-31</td>
<td>82.4%</td>
<td>56.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>2</td>
<td>1</td>
<td>5</td>
<td>7</td>
<td>29.4%</td>
<td>19.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>71</td>
<td>67</td>
<td>63</td>
<td>60</td>
<td>60.8%</td>
<td>60.8%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">By
Income</td>
</tr>
<tr class="odd">
<td class="firstcol">Lower</td>
<td>-24</td>
<td>-22</td>
<td>-21</td>
<td>-18</td>
<td>77.8%</td>
<td>50.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Upper</td>
<td>-11</td>
<td>-8</td>
<td>-5</td>
<td>-3</td>
<td>72.4%</td>
<td>55.3%</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Improves 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 28,2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528f.jpg" align="left" height="265" width="353">
Consumers' mood has improved, but lately not by much. The
University of Michigan reported that its May reading of consumer
sentiment rose to 73.6 from 72.2 during April. The slight m/m increase
characterizes sentiment's performance during 2010. The figure has moved
sideways following sharp improvement during 2009. The latest figure was
as expected. During the last ten years there has been an 89%
correlation between the level of sentiment and the y/y change in real
consumer spending.
The index of expected economic conditions improved m/m to
68.8. Here again, the figure has moved sideways of late but is more
than one-third above the recession low. The readings for expected
change in personal finances (-3.5% y/y), business conditions during the
next twelve months (10.7% y/y) and expected five-year business
conditions (-6.8% y/y) each recently have been flat-to-lower.
Sentiment about current economic conditions recently moved
sideways, as well. Nevertheless, it remained up 19.6% from last year
and by nearly one-half from the 2008 low. The assessment of current
personal finances rose nearly one-third versus last year but buying
conditions for large household goods, including furniture,
refrigerators, stoves &amp; televisions, recently slipped (+16.8%
y/y).
Expected price inflation during the next year increased to
4.1% and was up from the December 2008 reading of 1.7%.Respondents'
view of government policy, which may eventually influence economic
expectations, nudged up m/m but was down nearly one-third from its high
last May. Thirteen percent of respondents thought that a good job was
being done by government versus 37% who thought a poor job was being
done, near the twelve-month high.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528g.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528h.jpg" height="265" width="314">
<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/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">May</th>
<th scope="col">Mid-May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>73.6</td>
<td>73.3</td>
<td>72.2</td>
<td>73.6</td>
<td>7.1%</td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>81.0</td>
<td>81.1</td>
<td>81.0</td>
<td>82.4</td>
<td>19.6</td>
<td>69.6</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>68.8</td>
<td>68.3</td>
<td>66.5</td>
<td>67.9</td>
<td>-0.9</td>
<td>64.1</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>
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U.S. Personal Spending Mixed& Income Firm

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<img style="border: 0px solid ; width: 353px; height: 265px; float: left;" alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527h.jpg">
The Insee index of household confidence has dropped again marking the
fourth straight month of decline. This is not some garden variety
slippage in confidence from France. The four month drop marks a
cumulative drop of eight points in the index which is the 12th largest
four month decline in the series history. That makes the drop a top 5%
event. This not exactly what Europe is looking for in May. 

Until quite recently most European reports had
been upbeat. But now there are some signs of erosion. The GFK German
confidence index for June edged slightly lower on expectations decay.
The UK CBI distributive trades index also reported today plunged
sharply in May. Now in France the household confidence index that has
been slipping has continued on that path. 

Until now we had seen a fairly steady and strong
recovery of economic data in the wake of the financial crisis. The MFG
sector has been rebounding in Europe particularly strongly. The service
sector has lagged. And the household sector has lagged even further.
But in France it&#8217;s not a case of lagging but of the sector declining,
backtracking. 

The European economy is fighting off the remnants
of recession and financial crisis with a new layering of financial
crisis stemming from Greece&#8217;s problems, the knock effects to banks that
hold European debt (substantially French and German banks) and the
adverse market sentiment stemming from the need for fiscal austerity in
Europe including France. It looks like the French consumer has figured
out that the recovery will not be a bed of roses and maybe even that
sector wide strikes that make such great theater in France will serve
no purpose this time. The French consumer appears to be going down
without a fight. 
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="8" scope="col">INSEE
Household Monthly
Survey
</th>
</tr>
</thead><tbody>
<tr class="even">
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">Since
Jan 1990</td>
</tr>
<tr class="grey3">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">May-10</td>
<td style="font-weight: bold;">Apr-10</td>
<td style="font-weight: bold;">Mar-10</td>
<td style="font-weight: bold;">Feb-10</td>
<td style="font-weight: bold;">Percentile</td>
<td style="font-weight: bold;">Rank
%</td>
<td style="font-weight: bold;">Mean</td>
</tr>
<tr>
<td class="firstcol">Household
Confidence</td>
<td>-38</td>
<td>-37</td>
<td>-34</td>
<td>-33</td>
<td>15.8</td>
<td>5.7</td>
<td>-19</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Living
Standards</td>
</tr>
<tr>
<td class="firstcol">past
12 Mos</td>
<td>-67</td>
<td>-68</td>
<td>-68</td>
<td>-67</td>
<td>13.3</td>
<td>10.2</td>
<td>-41</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Next
12-Mos</td>
<td>-53</td>
<td>-48</td>
<td>-43</td>
<td>-37</td>
<td>9.2</td>
<td>4.1</td>
<td>-22</td>
</tr>
<tr>
<td class="firstcol">Unemployment:
Next 12</td>
<td>62</td>
<td>63</td>
<td>63</td>
<td>58</td>
<td>77.3</td>
<td>83.7</td>
<td>33</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Price
Developments</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Past 12Mo</td>
<td>-20</td>
<td l="">-18</td>
<td>-25</td>
<td>-26</td>
<td>30.8</td>
<td>56.7</td>
<td l="">-16</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Next 12-Mos</td>
<td>-26</td>
<td>-31</td>
<td>-34</td>
<td>-37</td>
<td>37.0</td>
<td>82.4</td>
<td>-35</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Savings</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Favorable to save</td>
<td>14</td>
<td>17</td>
<td>18</td>
<td>20</td>
<td>43.2</td>
<td>19.2</td>
<td l="">22</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Ability to save Next 12</td>
<td>-10</td>
<td>-10</td>
<td>-8</td>
<td>-10</td>
<td>44.8</td>
<td>49.8</td>
<td>-9</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Spending</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Favorable
for major purchase</td>
<td>-24</td>
<td>-26</td>
<td>-23</td>
<td>-24</td>
<td>31.0</td>
<td>25.3</td>
<td>-14</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Financial
Situation</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Current</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>61.9</td>
<td>82.9</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Past 12 MOs</td>
<td>-25</td>
<td>-25</td>
<td>-24</td>
<td>-25</td>
<td>
35.5</td>
<td>13.9</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Next 12-Mos</td>
<td>-19</td>
<td>-16</td>
<td>-13</td>
<td>-12</td>
<td>11.8</td>
<td>3.7</td>
<td>-2</td>
</tr>
<tr class="grey1">
<td>&nbsp;</td>
<td colspan="5">Number of observations
in the period</td>
<td colspan="2">245</td>
</tr>
</tbody>
</table>

</body></html>

The Insee index of household confidence has dropped again marking the fourth straight month of decline. This is not some garden variety slippage in confidence from France. The four month drop marks a cumulative drop of eight points in [...]

Some Bad News From Europe…

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

**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.

260205C15.jpg

260205D15.jpg

- 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

260205A2.jpg

260205B2.jpg

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.

260205C2.jpg

260205D2.jpg

- 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

260205E.jpg

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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