Robert Brusca

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<p></p>
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<p>Retail Sales in the Zone edged higher in January at the same
pace as in December and November. The growth rate for e-Zone retail
sales is improving Yr/Yr but it is still falling. The sequential growth
rates show steady if snail&#8217;s pace improvement.</p>
<p>Auto registrations bolstered by some government incentive
programs made a strong recovery from crisis lows but have fallen over
the past two months. Still the level of sales remains strongly higher
Yr/Yr.</p>
<p>Europe&#8217;s consumer is improving but doing so at a very slow
pace. The consumer sector is not leading but following the trade block
into recovery. Two of the larger EU countries that have reported sales
at this point, Germany and the UK, are laggards when it comes to retail
sales improvement.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro-Area Retail
Sales </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">M/M</td>
<td style="font-weight: bold;" colspan="3">Saar</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Jan-10</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3-Mo</td>
<td style="font-weight: bold;">6-MO</td>
<td style="font-weight: bold;">12-Mo</td>
</tr>
<tr>
<td class="firstcol">Zone Total Value</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>1.1%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">Food,Bev Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="7" class="firstcol">Registrations:</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicle Reg</td>
<td>-0.4%</td>
<td>-3.1%</td>
<td>1.1%</td>
<td>-9.4%</td>
<td>-0.8%</td>
<td>20.8%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="7" class="firstcol">NonFood
Country detail:
Volume</td>
</tr>
<tr>
<td class="firstcol">Germany Value</td>
<td>0.0%</td>
<td>0.9%</td>
<td>-1.2%</td>
<td>-1.2%</td>
<td>-0.6%</td>
<td>-0.2%</td>
</tr>
<tr>
<td class="firstcol">UK(EU) Volume</td>
<td>-1.8%</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>-9.3%</td>
<td>-3.4%</td>
<td>0.8%</td>
</tr>
</tbody>
</table>
</body></html>

Retail Sales in the Zone edged higher in January at the same pace as in December and November. The growth rate for e-Zone retail sales is improving Yr/Yr but it is still falling. The sequential growth rates show steady if snail’s pace [...]

EMU Retail Sales And Car Registrations Show Some Gains

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<p></p>
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<p>The EMU inflation chart tells a quick and dirty story of this
business cycle without all the embellishments over banks lending,
not-lending and financial crisis.</p>
<p>Once upon a time, inflation was steady. Then prices
overheated. Economic activity subsequently plunged bringing inflation
down sharply &#8211; it even negative turned Yr/Yr. All was not well. But
then, weakness subsided and inflation crept back up. Now prices show
signs of stabilizing with inflation around the 1% mark, well below the
2%-plus level where it had resided in the pre-crisis period. So is the
inflation scare over? Will they all now live happily ever after?</p>
<p>Inflation fighting is no fairy tale. The recent urging of the
IMF staff sho9uld make that clear; it said a higher inflation target
might be &#8216;good for&#8217; the US and Europe. It&#8217;s a stunning piece of work
from an organization that has stepped on its own tail more than once
too often. Fortunately Europe has been indignant about the suggestion
and the US seems simply to have ignored it.</p>
<p>Inflation is very much like toothpaste out of the tube. It
becomes a mess that cannot be controlled and leads to waste. Only the
waste caused by excess inflation is much worse than a little excess
toothpaste down the drain. In this financial crisis, however, we may
have learned something that is a bit dangerous: that is that very low
inflation leaves an economy less room for maneuver.</p>
<p>Under the leadership of former Fed Chairman Alan Greenspan all
we heard was how price stability and zero inflation should be our goal
and how the prices indices were biased up and so on. The lesson once
again is, be careful what you wish for. Europe may fare better under
lower inflation because of the breadth of its social welfare system.
The US has had a harder, more stressful, time. But admitting that is
not to say that US inflation should be higher or that the Fed should
notch up its idea of its inflation target. It is simply to face the
facts.</p>
<p>The ECB continues to be fixated on low inflation and, of
course, has its inflation ceiling mandate. The Bank of England is
similarly positioned but it has admitted to an inflation overshoot in
the post crisis period that it says is not serious or lasting and
contends it will ignore the temporary overshoot. The policy angle on
inflation no one has really gotten their arms around is the impact of
commodity prices - especially oil - on headline inflation. The ECB&#8217;s
headline inflation ceiling put it in difficult straights when oil
prices surged and drove headline inflation higher as the economy was
weakening. The Fed&#8217;s focus on core inflation left it more flexibility
to act.</p>
<p>Inflation is one of those peculiar things that we can all
agree upon yet we find reasons to divert our attention and policy from
the task at hand. It&#8217;s a bit like agreeing on what is a healthy diet
yet periodically finding we are overweight and having to do something
about it. The EU inflation situation appears to coming into a soft
landing of sorts. That, of course, is aided and abetted by what looks
like a poor growth result in the recovery. The US is in the same boat.
So while the inflation situation seems in hand for now there will
probably be no happily ever after here. Inflation fighting always
involves pain, vigilance and sacrifice.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"><b>Trends in EMU HICP; Flash Index</b> </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">% Mo/Mo</td>
<td style="font-weight: bold;" colspan="4">SAAR</td>
</tr>
<tr class="even">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Feb-10</td>
<td style="font-weight: bold;">Jan-10</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">3-Mo</td>
<td style="font-weight: bold;">6-Mo</td>
<td style="font-weight: bold;">12-Mo</td>
<td style="font-weight: bold;">Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-13</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.2%</td>
<td>1.4%</td>
<td>0.9%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core</td>
<td>#N/A</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>0.9%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-2.4%</td>
<td>1.4%</td>
<td>0.7%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>1.4%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">HICP</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.5%</td>
<td>2.5%</td>
<td>1.2%</td>
<td>0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.7%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.9%</td>
<td>0.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>1.1%</td>
<td>0.8%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="8" class="firstcol">Core:xFE&amp;A</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>0.9%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.4%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>3.1%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Blue shaded area data
trail by one month</td>
</tr>
</tbody>
</table>
</body></html>

The EMU inflation chart tells a quick and dirty story of this business cycle without all the embellishments over banks lending, not-lending and financial crisis. Once upon a time, inflation was steady. Then prices overheated. Economic [...]

Progress- No Happily Ever After Euro-Area Inflation In February Stays Under Wraps

Tom Moeller

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302c.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Weekly chain store sales gave back a piece of their prior
week's improvement with a 0.8% slip. Since the spring of last year,
sales have gyrated around a sideways trend.<span></span></p>
<p><span style="color: black;">The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.</span></p>
</span> During the last ten years there has been a 69%
correlation between the year-to-year growth in chain store sales and
the growth in general merchandise retail sales.<span> The weekly
figures are available in Haver's <b>SURVEYW </b>database.</span>
<p></p>
<p>The leading indicator of chain store sales has been somewhat
weaker and last week moved to the low end of its year-long range. This
composite leading economic indicator is compiled from four series: (1)
the MBA's volume index of mortgage applications for home purchase (2)
the ABC News/Money magazine's survey of consumer buying conditions (3)
new filings for jobless benefits and (4) the 30-year government bond
yield.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"><span>ICSC-UBS (SA, 1977=100)</span></a></b></th>
<th scope="col"><b>02/20/10</b></th>
<th scope="col"><b>02/13/10</b></th>
<th scope="col"><b>02/06/10</b></th>
<th scope="col"><b>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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>490.4</td>
<td>479.5</td>
<td>487.1</td>
<td>0.9%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body></html>

Weekly chain store sales gave back a piece of their prior week's improvement with a 0.8% slip. Since the spring of last year, sales have gyrated around a sideways trend. The ICSC-Goldman Sachs retail chain-store sales index is [...]

U.S. Weekly Chain Store Sales Slip

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302a.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302b.jpg" style="width: 312px; height: 265px;"></p>
<p>A modest uptick in the <b>pump price for regular
gasoline </b>last week to $2.70 took it to the highest level
since January. This continued a trend of rising prices since
early-2009, which followed a recession-related downturn. Yesterday, the
spot market price for a gallon of regular gasoline retraced some of
that increase with a 3 cent decline. The figures are reported by the
U.S. Department of Energy and can be found in Haver's <b>WEEKLY
&amp; DAILY </b>databases.</p>
<p>The price for a barrel of light sweet crude (WTI) fell last
week to $79.26 and left it down from the early-January high of $82.59.
However, crude oil prices have fueled the same rising trend for
gasoline. Prices have risen from $71.53 early this past December and
are more than double the December 2008 low of $32.37. Yesterday, the
spot price fell moderately to $78.70.</p>
<p>Demand for gasoline fell 2.7% last week versus one year ago.
That decline compared to a 3.9% increase at the beginning of October.
The demand for residual fuel oil fell 3.5% y/y though the decline has
eased from -40.4% in February. Distillate demand fell 11.3% y/y, a
decline more moderate than the 21.6% y/y shortfall at the beginning of
last July. Inventories of crude oil and petroleum products slipped in
February but were up 1.1% from one year ago.</p>
<p>U.S. natural gas prices fell last week to an average $4.88 per
mmbtu (+17.3% y/y) from the high of $6.50 early in January.
Nevertheless they remained double the September low.</p>
<p>The energy price data can be found in Haver's <b>WEEKLY
</b>database while the daily figures are in <b>DAILY</b>.
The gasoline demand figures are in <b>OILWKLY</b>.</p>
<p>Outside of energy, commodity prices also have been strong.
Copper has led the gain as scrap prices have more-than doubled since
early last year. Scrap steel prices also have doubled during the same
period. Not far behind in the metals area are aluminum prices, up by
two-thirds. With improved housing activity has come strength in lumber
prices which have risen more than 50% since early-2009. Cotton prices
also have nearly doubled with improvement in consumer spending. In the
agricultural area, foodstuffs including wheat, corn &amp; butter,
as well as livestock prices have risen by one-half. Finally, gold
prices near $1,100 pounce have risen 50% since the fall of '08 and have
roughly tripled since 2001.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM"><b>Weekly
Prices</b></a></th>
<th scope="col"><b>03/01/10</b></th>
<th scope="col"><b>02/22/10</b></th>
<th scope="col"><b>02/15/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.70</td>
<td>2.66</td>
<td>2.61</td>
<td>39.7%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>79.26</td>
<td>78.30</td>
<td>73.91</td>
<td>89.6%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
</tbody>
</table>

</body></html>

A modest uptick in the pump price for regular gasoline last week to $2.70 took it to the highest level since January. This continued a trend of rising prices since early-2009, which followed a recession-related downturn. Yesterday, [...]

U.S. Petroleum & Other Commodity Prices Move Higher

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302a.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302b.jpg" style="width: 312px; height: 265px;"></p>
<p>A modest uptick in the <b>pump price for regular
gasoline </b>last week to $2.70 took it to the highest level
since January. This continued a trend of rising prices since
early-2009, which followed a recession-related downturn. Yesterday, the
spot market price for a gallon of regular gasoline retraced some of
that increase with a 3 cent decline. The figures are reported by the
U.S. Department of Energy and can be found in Haver's <b>WEEKLY
&amp; DAILY </b>databases.</p>
<p>The price for a barrel of light sweet crude (WTI) fell last
week to $79.26 and left it down from the early-January high of $82.59.
However, crude oil prices have fueled the same rising trend for
gasoline. Prices have risen from $71.53 early this past December and
are more than double the December 2008 low of $32.37. Yesterday, the
spot price fell moderately to $78.70.</p>
<p>Demand for gasoline fell 2.7% last week versus one year ago.
That decline compared to a 3.9% increase at the beginning of October.
The demand for residual fuel oil fell 3.5% y/y though the decline has
eased from -40.4% in February. Distillate demand fell 11.3% y/y, a
decline more moderate than the 21.6% y/y shortfall at the beginning of
last July. Inventories of crude oil and petroleum products slipped in
February but were up 1.1% from one year ago.</p>
<p>U.S. natural gas prices fell last week to an average $4.88 per
mmbtu (+17.3% y/y) from the high of $6.50 early in January.
Nevertheless they remained double the September low.</p>
<p>The energy price data can be found in Haver's <b>WEEKLY
</b>database while the daily figures are in <b>DAILY</b>.
The gasoline demand figures are in <b>OILWKLY</b>.</p>
<p>Outside of energy, commodity prices also have been strong.
Copper has led the gain as scrap prices have more-than doubled since
early last year. Scrap steel prices also have doubled during the same
period. Not far behind in the metals area are aluminum prices, up by
two-thirds. With improved housing activity has come strength in lumber
prices which have risen more than 50% since early-2009. Cotton prices
also have nearly doubled with improvement in consumer spending. In the
agricultural area, foodstuffs including wheat, corn &amp; butter,
as well as livestock prices have risen by one-half. Finally, gold
prices near $1,100 pounce have risen 50% since the fall of '08 and have
roughly tripled since 2001.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM"><b>Weekly
Prices</b></a></th>
<th scope="col"><b>03/01/10</b></th>
<th scope="col"><b>02/22/10</b></th>
<th scope="col"><b>02/15/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.70</td>
<td>2.66</td>
<td>2.61</td>
<td>39.7%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>79.26</td>
<td>78.30</td>
<td>73.91</td>
<td>89.6%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
</tbody>
</table>
<span id="articletitle">U.S. Weekly Chain Store Sales Slip</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> March 2, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302c.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Weekly chain store sales gave back a piece of their prior
week's improvement with a 0.8% slip. Since the spring of last year,
sales have gyrated around a sideways trend.<span></span></p>
<p><span style="color: black;">The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.</span></p>
</span> During the last ten years there has been a 69%
correlation between the year-to-year growth in chain store sales and
the growth in general merchandise retail sales.<span> The weekly
figures are available in Haver's <b>SURVEYW </b>database.</span>
<p></p>
<p>The leading indicator of chain store sales has been somewhat
weaker and last week moved to the low end of its year-long range. This
composite leading economic indicator is compiled from four series: (1)
the MBA's volume index of mortgage applications for home purchase (2)
the ABC News/Money magazine's survey of consumer buying conditions (3)
new filings for jobless benefits and (4) the 30-year government bond
yield.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"><span>ICSC-UBS
(SA, 1977=100)</span></a></b></th>
<th scope="col"><b>02/20/10</b></th>
<th scope="col"><b>02/13/10</b></th>
<th scope="col"><b>02/06/10</b></th>
<th scope="col"><b>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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>490.4</td>
<td>479.5</td>
<td>487.1</td>
<td>0.9%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
<span id="articletitle">Progress- No Happily Ever
After Euro-Area Inflation In February Stays Under Wraps</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> March 2, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The EMU inflation chart tells a quick and dirty story of this
business cycle without all the embellishments over banks lending,
not-lending and financial crisis.</p>
<p>Once upon a time, inflation was steady. Then prices
overheated. Economic activity subsequently plunged bringing inflation
down sharply &#8211; it even negative turned Yr/Yr. All was not well. But
then, weakness subsided and inflation crept back up. Now prices show
signs of stabilizing with inflation around the 1% mark, well below the
2%-plus level where it had resided in the pre-crisis period. So is the
inflation scare over? Will they all now live happily ever after?</p>
<p>Inflation fighting is no fairy tale. The recent urging of the
IMF staff sho9uld make that clear; it said a higher inflation target
might be &#8216;good for&#8217; the US and Europe. It&#8217;s a stunning piece of work
from an organization that has stepped on its own tail more than once
too often. Fortunately Europe has been indignant about the suggestion
and the US seems simply to have ignored it.</p>
<p>Inflation is very much like toothpaste out of the tube. It
becomes a mess that cannot be controlled and leads to waste. Only the
waste caused by excess inflation is much worse than a little excess
toothpaste down the drain. In this financial crisis, however, we may
have learned something that is a bit dangerous: that is that very low
inflation leaves an economy less room for maneuver.</p>
<p>Under the leadership of former Fed Chairman Alan Greenspan all
we heard was how price stability and zero inflation should be our goal
and how the prices indices were biased up and so on. The lesson once
again is, be careful what you wish for. Europe may fare better under
lower inflation because of the breadth of its social welfare system.
The US has had a harder, more stressful, time. But admitting that is
not to say that US inflation should be higher or that the Fed should
notch up its idea of its inflation target. It is simply to face the
facts.</p>
<p>The ECB continues to be fixated on low inflation and, of
course, has its inflation ceiling mandate. The Bank of England is
similarly positioned but it has admitted to an inflation overshoot in
the post crisis period that it says is not serious or lasting and
contends it will ignore the temporary overshoot. The policy angle on
inflation no one has really gotten their arms around is the impact of
commodity prices - especially oil - on headline inflation. The ECB&#8217;s
headline inflation ceiling put it in difficult straights when oil
prices surged and drove headline inflation higher as the economy was
weakening. The Fed&#8217;s focus on core inflation left it more flexibility
to act.</p>
<p>Inflation is one of those peculiar things that we can all
agree upon yet we find reasons to divert our attention and policy from
the task at hand. It&#8217;s a bit like agreeing on what is a healthy diet
yet periodically finding we are overweight and having to do something
about it. The EU inflation situation appears to coming into a soft
landing of sorts. That, of course, is aided and abetted by what looks
like a poor growth result in the recovery. The US is in the same boat.
So while the inflation situation seems in hand for now there will
probably be no happily ever after here. Inflation fighting always
involves pain, vigilance and sacrifice.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"><b>Trends in
EMU HICP; Flash Index</b> </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">%
Mo/Mo</td>
<td style="font-weight: bold;" colspan="4">SAAR</td>
</tr>
<tr class="even">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Feb-10</td>
<td style="font-weight: bold;">Jan-10</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">3-Mo</td>
<td style="font-weight: bold;">6-Mo</td>
<td style="font-weight: bold;">12-Mo</td>
<td style="font-weight: bold;">Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-13</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.2%</td>
<td>1.4%</td>
<td>0.9%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core</td>
<td>#N/A</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>0.9%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-2.4%</td>
<td>1.4%</td>
<td>0.7%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>1.4%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">HICP</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.5%</td>
<td>2.5%</td>
<td>1.2%</td>
<td>0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.7%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.9%</td>
<td>0.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>1.1%</td>
<td>0.8%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="8" class="firstcol">Core:xFE&amp;A</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>0.9%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.4%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>3.1%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Blue shaded
area data
trail by one month</td>
</tr>
</tbody>
</table>
<span id="articletitle">More Favorable Data From Japan</span><br>
<span id="byline">by <a href="/comment/Curley.html">Louise
Curley</a> March 2,2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302g.jpg" style="width: 353px; height: 265px;" align="right">So
far
releases of January activity in Japan suggest continued good growth for
the economy as a whole in the first quarter.&nbsp; Last week,
foreign trade and industrial production reports were positive and
today's employment and workers' household spending data are further
evidence of increased good news for Japan.&nbsp;&nbsp;</p>
<p>The
unemployment rate in Japan fell to 4.9% from 5.2% in December largely
as a result of an almost unprecedented increase of 540 million
jobs.&nbsp; One has to go back to October 1973, to find a higher
monthly increase in jobs. The changed in the number of employed persons
represents the changes in jobs and is shown in the first
chart.&nbsp; The rise in Active Openings/Applications, though
small, is encouraging as this measure is thought to be a good
indication of future employment.&nbsp; (Active
Openings/Applications,&nbsp; JAOR@JAPAN,&nbsp;
is found in Employment Referral Statistics in Haver's Japan data
base.)&nbsp;&nbsp;</p>
<p>Japan's 4.9% unemployment rate compares
with 9.7% in the United States and 9.9% in the Euro Area.&nbsp;
Japan's <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100302h.jpg" style="width: 353px; height: 265px;" align="right">
tradition of lifetime employment has tended to keep its
unemployment rate low relative to American and European standards, but
the lifetime employment commitment is beginning to erode and many
Japanese firms find they are overstaffed.&nbsp; As a result further
dramatic increases in jobs may be limited.&nbsp;&nbsp;</p>
<p>Disposable income in Workers' Households increased 3.4% in
January from
December.&nbsp; Although the increase in living expenditures was
only 0.42%, it was larger than the 0.31% increase in
December.&nbsp; But with the larger increase in income than in
expenditures, the propensity to consume of these households declined
2.1 percentage points from 75.6% in December to 73.5% in
January.&nbsp; The propensity to consume has shown considerable
volatility, but within a fairly narrow range from 68.7% to 77.5% since
January 2000 when the data first became available.&nbsp; The
propensity to consume since 2001 is 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">JAPAN</th>
<th scope="col"><b>Jan 10&nbsp;</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Jan 09</b></th>
<th scope="col"><b>M/M Chg</b></th>
<th scope="col"><b>Y/Y Chg</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">Employed Persons
(1000)</td>
<td>63030</td>
<td>62490</td>
<td>63830</td>
<td>540</td>
<td>-800</td>
<td>62820</td>
<td>63850</td>
<td>64120</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployed
Persons&nbsp; (1000)</td>
<td>3280</td>
<td>3440</td>
<td>2810</td>
<td>-160</td>
<td>470</td>
<td>3360</td>
<td>2650</td>
<td>2570</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate
(%)</td>
<td>4.9</td>
<td>5.2</td>
<td>4.2</td>
<td>-0.3</td>
<td>0.7</td>
<td>5.1</td>
<td>4.0</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Active
Openings/Applications (ratio)</td>
<td>0.46</td>
<td>0.43</td>
<td>0.65</td>
<td>0.3</td>
<td>-0.19</td>
<td>0.48</td>
<td>0.88</td>
<td>1.04</td>
</tr>
<tr>
<td colspan="9" class="firstcol">Workers'
Households&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Disposable Income
(2005=100)</td>
<td>97.3</td>
<td>94.1</td>
<td>99.1</td>
<td>3.40%</td>
<td>-1.82%</td>
<td>97.0</td>
<td>99.9</td>
<td>99.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Living
Expenditures (2005=100</td>
<td>96.3</td>
<td>95.9</td>
<td>97.2</td>
<td>0.42%</td>
<td>-0.93%</td>
<td>96.9</td>
<td>98.7</td>
<td>98.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Propensity to
Consume (%)</td>
<td>73.5</td>
<td>75.6</td>
<td>72.8</td>
<td>-2.1</td>
<td>0.7</td>
<td>74.2</td>
<td>73.4</td>
<td>73.3</td>
</tr>
</tbody>
</table>
</span></body></html>

U.S. Petroleum & OtherCommodity Prices Move Higher

Louise Curley

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100301k.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The Canadian economy grew at a 5% annual rate in the fourth of
last year. It was the second quarter of growth following the three
quarter recession and represented a substantial acceleration from the
0.94% seasonally adjusted annual rate of the third quarter, as can be
seen in the attached chart.</p>
<p>In addition to the rate of growth, the composition of the
growth is particularly important for monetary policy decisions.
Statistics Canada provides a table showing the composition of the
quarter to quarter changes in real GDP. This table can be found in the
National Accounts section of the Haver Analytics data base, <b>CANSIM.
</b>The components of the table are listed below.</p>
<p>The acceleration in growth in the fourth quarter was due
largely to trends in foreign trade. Exports of goods and services were
greater and imports of goods and services were sharply lower than those
in the third quarter. As imports detract from growth, a reduction in
imports from one quarter to the next leads to a higher GDP. The
contribution of domestic demand was much smaller than it was in the
third quarter. Personal and government consumption and business and
government investment all showed lower growth in the fourth quarter
than in the third. Thus in spite of the 5% annual rate of increase in
the fourth quarter, there is little evidence that the economy is
overheating.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Contribution
to Q/Q Percent Change in GDP</th>
<th scope="col"><b>Q4 09&nbsp;</b></th>
<th scope="col"><b>Q3 09</b></th>
<th scope="col"><b>Q2 09</b></th>
<th scope="col"><b>Q3 09</b></th>
<th scope="col"><b>Q4 08</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Q/Q
Percent Change in GDP</td>
<td>1.233</td>
<td>0.235</td>
<td>-0.875</td>
<td>-1.785</td>
<td>-0.940</td>
</tr>
<tr>
<td class="firstcol">
Personal Consumption Expenditures</td>
<td>0.517</td>
<td>0.530</td>
<td>0.238</td>
<td>-0.191</td>
<td>-0.443</td>
</tr>
<tr class="odd">
<td class="firstcol"> Govt.
Current Expenditures</td>
<td>0.309</td>
<td>0.332</td>
<td>0.181</td>
<td>0.104</td>
<td>0.121</td>
</tr>
<tr>
<td class="firstcol">Govt.
Investment in Inventory</td>
<td>0.002</td>
<td>0.001</td>
<td>0.000</td>
<td>-0.007</td>
<td>0.012</td>
</tr>
<tr class="odd">
<td class="firstcol"> Govt.
Fixed Investment</td>
<td>0.155</td>
<td>0.223</td>
<td>0.154</td>
<td>0.07</td>
<td>0.072</td>
</tr>
<tr>
<td class="firstcol">
Business Investment in Inventory</td>
<td>-0.181</td>
<td>0.329</td>
<td>0.082</td>
<td>-1.193</td>
<td>-0.305</td>
</tr>
<tr class="odd">
<td class="firstcol">
Business Fixed Investment</td>
<td>0.188</td>
<td>0.323</td>
<td>-0.505</td>
<td>-1.909</td>
<td>-0.992</td>
</tr>
<tr>
<td class="firstcol">Exports
of Goods and Services</td>
<td>1.027</td>
<td>0.804</td>
<td>-1.526</td>
<td>-2.863</td>
<td>-1.707</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports
of Goods and Services</td>
<td>-0.653</td>
<td>-2.313</td>
<td>0.443</td>
<td>4.035</td>
<td>2.292</td>
</tr>
<tr>
<td class="firstcol">
Statistical Discrepancy</td>
<td>-0.131</td>
<td>0.007</td>
<td>0.058</td>
<td>0.131</td>
<td>0.003</td>
</tr>
<tr class="odd">
<td class="firstcol"> Final
Domestic Demand</td>
<td>0.952</td>
<td>5.352</td>
<td>7.944</td>
<td>-2.700</td>
<td>-5.420</td>
</tr>
</tbody>
</table>
</body></html>

The Canadian economy grew at a 5% annual rate in the fourth of last year. It was the second quarter of growth following the three quarter recession and represented a substantial acceleration from the 0.94% seasonally adjusted annual [...]

Canada's Q4 GDP Rise Due Mainly To Foreign Trade Trends

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100301j.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The unemployment rate in the Euro-Area has flattened out just
under 10%. And while the number of unemployed continues to rise the
increase is at a decreasing pace- a good sign or at least a logical
first step. In the larger EU area the pace of the increase in
unemployment over three months is 1.9% well below the 5.4% pace over
six months and 19.8% annual rate over the last 12-monhts.</p>
<p>EMU is doing better still. While all EMU countries are in the
EU, the EMU set is a smaller group that shares a common currency, the
euro. For this group the number of unemployed is rising at a 1.1% pace
over three-months a 4.2% pace over six-months and a 16.4% pace over
twelve-months. EMU unemployment is rising more slowly than in the EU
over all these horizons.</p>
<p>Still the EMU&#8217;s Spain continues with a horrific 18.8 percent
rate of unemployment as Spain&#8217;s property market boom and bust has
proved to be very difficult to remedy.</p>
<p>The focus of attention in the Zone continues to be Greece with
its ongoing problems. Talk from Germany and from the EU Commission
continues to be tough. Greece says it needs help, not money. But the
markets are improving and the euro itself is rising on rumors that some
deal has been cooked up. It is hard to see how Greece can re-group
without financial aid and perhaps some added credit backing. German and
French banks already are greatly exposed to the Greek credit making
them likely participants in a bail our or &#8216;assistance package&#8217; for
Greece. In any event it is clear that Europe does not want Greece to be
the Lehman Brothers of Europe but they do want Greece to do more for
itself so the pain is obvious to any other euro-member that might
contemplate the same path that Greece took. Still, Europe does not want
to let Greece go down and see what else is dragged into the resulting
whirlpool. There are too many other potentially weak euro-members,
enough that it could really stretch the ability of the monetary union&#8217;s
strongest members to help them all. Holding the line on Greece is what
makes the most sense. So look for a deal.</p>
<p>It is easier to do this in an environment, in which the
economies are improving. With the slight nudge up to the market MFG PMI
for the Zone today there is a new cycle high for the MFG index and
reason for hope that he dig-out from recession continues. Sometime this
week we should get some clearer news on the fate of Greece. The fat is
in the fire and it is sizzling.</p>
</span>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"><b>Unemployment rate and changes</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Rate</td>
<td style="font-weight: bold;" colspan="3">Level</td>
<td style="font-weight: bold;" colspan="3">Simple Changes</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Jan-10</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3-Mo</td>
<td style="font-weight: bold;">6-Mo</td>
<td style="font-weight: bold;">12-Mo</td>
</tr>
<tr>
<td class="firstcol">EU-Urate</td>
<td>9.5</td>
<td>9.5</td>
<td>9.4</td>
<td>0.1</td>
<td>0.4</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">EMU-Urate</td>
<td>9.9</td>
<td>9.9</td>
<td>9.9</td>
<td>0.1</td>
<td>0.4</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Unemployment rate
and changes</td>
<td style="font-weight: bold;" colspan="3">m/m%</td>
<td style="font-weight: bold;" colspan="3">Changes (ar)</td>
</tr>
<tr>
<td class="firstcol">EU-U 000s</td>
<td>0.6%</td>
<td>0.7%</td>
<td>0.6%</td>
<td>1.9%</td>
<td>5.4%</td>
<td>19.8%</td>
</tr>
<tr>
<td class="firstcol">EMU-U 000s</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>1.1%</td>
<td>4.2%</td>
<td>16.4%</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">U-Rates</td>
<td style="font-weight: bold;" colspan="3">Level</td>
<td style="font-weight: bold;" colspan="3">Simple Changes</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>7.5</td>
<td>7.5</td>
<td>7.5</td>
<td>0</td>
<td>-0.1</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>10.1</td>
<td>10</td>
<td>10</td>
<td>0.2</td>
<td>0.6</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>18.8</td>
<td>18.9</td>
<td>18.9</td>
<td>-0.2</td>
<td>0.4</td>
<td>3</td>
</tr>
<tr>
<td class="firstcol">USA</td>
<td>9.7</td>
<td>10</td>
<td>10</td>
<td>-0.4</td>
<td>0.3</td>
<td>2</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>#N/A</td>
<td>5.1</td>
<td>5.2</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
</tr>
</tbody>
</table>
</body></html>

The unemployment rate in the Euro-Area has flattened out just under 10%. And while the number of unemployed continues to rise the increase is at a decreasing pace- a good sign or at least a logical first step. In the larger EU area [...]

Unemployment Rate Steadies In The Euro-Area .... But Not Much Else

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<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100301g.jpg" style="width: 353px; height: 265px;" align="right">Construction
activity continued to move lower in January to the lowest level since
2003. Construction outlays fell 0.6% following an unrevised 1.2%
December decline but the November drop was doubled. The latest decline
roughly equaled the Consensus estimate.</p><p>Although the level of total
private construction activity continued lower in January, residential
building activity increased for the first time in three months. All of
the gain was, however, due to a 4.7% rise (10.6% y/y) in spending on
home improvements. Single-family construction activity slipped 0.2%
(-8.6% y/y) while multi-family building dropped a sharp 11.1% and was
off one-half from the year ago level.&nbsp;</p><p> Nonresidential building
activity fell another 2.1% during January and was off 19.9% during the
last twelve months. Since the 2008 peak, activity has fallen by
one-quarter. Spending on lodging fell 9.8% during January (-46.0% y/y)
while office construction dropped 1.6% (-34.25 y/y). Health care
construction fell a lesser 0.5% (-10.6% y/y) and educational building
also slipped just 0.7% (-15.8% y/y).</p><p>In the public sector, building
activity slipped 0.7% as commercial building fell 9.6% (+9.9% y/y).
Spending on highways &amp; streets offset that decline with a 1.2%
increase (5.5% y/y). Public spending on health care facilities fell a
sharp 8.2% m/m but remained up modestly. Building in the education
sector was unchanged for the month and down 6.2% from last January.</p><p>
The construction put-in-place figures are available in Haver's <b>USECON
</b>database.&nbsp;&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100301h.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100301i.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>Construction
Put In Place (%)</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>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="even">
<td class="firstcol">Total</td>
<td>-0.6</td>
<td>-1.2</td>
<td>-2.5</td>
<td>-9.3</td>
<td>-12.4</td>
<td>-6.9</td>
<td>-1.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Private</td>
<td>-0.6</td>
<td>-1.7</td>
<td>-2.6</td>
<td>-14.3</td>
<td>-18.7</td>
<td>-11.1</td>
<td>-5.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential</td>
<td>1.3</td>
<td>-2.8</td>
<td>-2.5</td>
<td>-6.4</td>
<td>-27.9</td>
<td>-29.1</td>
<td>-19.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-2.1</td>
<td>-0.7</td>
<td>-2.7</td>
<td>-19.9</td>
<td>-10.9</td>
<td>13.2</td>
<td>23.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-2.2</td>
<td>2.1</td>
<td>3.6</td>
<td>5.6</td>
<td>13.1</td>
</tr>
</tbody>
</table>
</span></body></html>

Construction activity continued to move lower in January to the lowest level since 2003. Construction outlays fell 0.6% following an unrevised 1.2% December decline but the November drop was doubled. The latest decline roughly equaled [...]

U.S. Construction Activity Falls To Lowest Since 2003

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

Deflation continues in China

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260112E.jpg

Swiss consumer confidence at end-2025 (in Q4) fell to -34.5 from -32.7 in 2025-Q3. The average level for the confidence reading on data back to 1982 is -16.7 and the current queue standing is 13.9%. The Q4 reading is clearly weak- well below its own average and weaker than this month, less than 15% of the time.

Outlook confidence in Q4 fell to -44.9 from -38.0 in Q3, registering a 15.6 percentile standing. The past confidence reading at -61.2 at end-2025 is down from -43.5 at the end of the third quarter. The standing for this reading is in its 19th percentile. All of these are extremely weak readings.

People provide a job security response in Q4 that eases to -50.1, still well above its historic average of -58.2 for a queue ranking at its 57th percentile.

Personal financial readings are moderate to weak across the board. However, current financial conditions rose to 38.4 in Q4 from 35.2 at the end of Q3 and a queue standing above its median at its 56th percentile. But the outlook for financial conditions is much weaker and also weakened quarter-to-quarter to -31.4 in Q4 from a level of -28.6 in Q3 to a queue ranking in its 8.7 percentile. The evaluation of past financial conditions improved by a very small margin, rising to -38.3 in Q4 from -38.7 in Q3, and to a queue standing at the 11.6 percentile.

The spending environment in Switzerland improved slightly but remained weak, rising to -23.3 in Q4 from -25.5 in Q3 to a standing at their 23.1 percentile standing.

The best part of the report is that the perception of job security is above average, and the current financial situation is above its median. After that, all the individual assessment metrics are weak including overall confidence – everything except assessments for inflation.

On the inflation front, the price outlook is high, rising to a reading of 97.7 in Q4 from 95.8 in Q3 but is still below the second quarter reading at 113.1. The price outlook has a moderately high standing at its 70.5 percentile. This standing is slightly below the standing for prices past which is at 76.3%. The past metric was still rising in the fourth quarter but was weaker than its reading in both Q1 and Q2 of 2025.

260112.jpg

**Summing up**
Inflation fears appear to still linger, but they are not as intense as they once were. Confidence overall is weak, but the most important aspects of job security and assessment of financial conditions have the strongest readings; yet, the environment for major purchases is still at a weak position. In Switzerland, people do not feel threatened or financially unstable, but they are not positive enough to spend freely either. And inflation fears are creeping up again all key trends to watch.

Switzerland

Swiss Confidence Sags at End-2025

Tian Yong Woon

This week, we highlight several pertinent developments that have shaped the start of the year and may carry longer-lasting implications. To begin with, the recent capture of former Venezuelan President Maduro by the US authorities and the subsequent crude oil trade deal could have far-reaching effects—potentially altering China’s imports of Venezuelan crude and broader bilateral trade dynamics (chart 1), as well as global energy supply considerations (chart 2).

In Japan, Prime Minister Takaichi’s reported consideration of early snap elections, if enacted, would likely inject near-term political uncertainty (chart 3). However, should her gambit succeed, it could reduce  policy uncertainty and pave the way for more fiscal policy activism. Against this backdrop, it is unsurprising that investors remain divided over the timing of the Bank of Japan’s next policy tightening, although the upcoming Spring wage negotiations (chart 4) ought to provide clearer signals for the monetary policy outlook.

Turning to investor expectations from the latest Blue Chip survey, India is once again seen as the growth leader among major Asian economies, while also poised to record the highest inflation (chart 5). China, by contrast, is expected to deliver sub-5% growth this year alongside muted inflation. Lastly, in Southeast Asia, pockets of geopolitical tension persist—notably between Thailand and Cambodia (chart 6)—as Thailand prepares for snap elections next month.

**The US, Venezuela, and China**
2026 got off to a turbulent start following a recent US military operation in Venezuela that resulted in the capture of former President Maduro and his transfer to the US to face drug-related charges. In the aftermath, Venezuela’s former vice president (Delcy Rodriguez) was sworn in as interim leader, while US and Venezuelan authorities have reportedly already reached a new crude oil deal. Under the agreement, Venezuela would sell 30–50 million barrels of crude to the US at market prices, with the proceeds controlled by the US. These developments have several potential implications. First, some Venezuelan crude initially destined for China would likely be diverted to the US. China has been the main buyer of Venezuelan oil in recent years, although this is likely underreported in official data (chart 1), which would tighten conditions for the crude-import-dependent country. Second, an eventual increase in Venezuelan crude supply—previously constrained by heavy US sanctions—would likely exert downward pressure on global oil prices, all else equal, although significant challenges remain, as discussed below.

260112T1.jpg

To illustrate the potential significance of Venezuela’s crude oil industry, chart 2 shows that the country holds nearly a fifth of the world’s proved crude oil reserves. However, output remains disproportionately low relative to reserves, possibly reflecting years of US sanctions as well as mismanagement and chronic underinvestment. Given the current state of the industry, substantial investment will likely be required for Venezuela to restore production to historically high levels and to more fully tap its deep proved reserves. As a result, any meaningful surge in Venezuelan crude output is likely to take time, which may help explain the muted market response to recent US–Venezuelan developments. Also of note, China has been a major lender to Venezuela, including through “oil-for-loan” arrangements in which repayments are made in crude oil. It remains to be seen how these existing and future agreements may be affected by recent developments.

260112T2.jpg

**Japan**
Setting aside the interplay between the US, Venezuela, and China, another economy worth watching early this year is Japan. Developments continue to unfold following renewed China–Japan tensions after Prime Minister Takaichi assumed office. With her approval ratings having remained consistently high since taking the helm, Takaichi is reportedly considering snap elections as early as next month to strengthen her ruling coalition’s parliamentary position. While a stronger mandate could reduce policy uncertainty, near-term political uncertainty would be the likely case. This interim uncertainty may be weighing on the yen. It is being compounded by expectations of upcoming pro-growth measures, including the $118 million supplementary budget passed last December and the prospect of additional fiscal stimulus next fiscal year, contingent on an electoral win (chart 3).

260112T3.jpg

Turning back to Japan and the monetary policy outlook, investors remain divided over the timing of the Bank of Japan’s (BoJ) next policy move following its December rate hike. This uncertainty is understandable given the multiple moving parts shaping the BoJ’s path, including the factors discussed above. Looking ahead, the upcoming annual wage negotiations and broader trends in wage growth (chart 4) will be closely watched by the BoJ as key preconditions for further rate hikes. Reflecting this uncertainty, our latest Blue Chip Economic Indicators survey shows investors split between expectations for a hike in March and views that the next move will only come after April.

260112T4.jpg

**Blue Chip Economic Indicators**
Delving into the latest Blue Chip survey results, chart 5 summarizes panellists’ expectations for growth and inflation this year. Focusing on major Asian economies, and as in 2025, India is seen to be leading the pack in terms of both real GDP growth and CPI inflation. That said, the inflation outlook may be subject to further revisions should India’s currently muted inflation—driven by falling food prices—persist for longer. For China, panellists currently expect sub-5% growth this year, implying a likely miss should a 5% growth target again be pursued. Inflation in China is once again expected to remain subdued. Japan, meanwhile, is forecast to post sub-1% real GDP growth, while CPI inflation is expected to hover around the authorities’ preferred 2% level. Looking ahead, attention will also turn to the IMF’s upcoming World Economic Outlook forecasts, due later this month.

260112T5.jpg

**Southeast Asia**
Last but not least, turning to Southeast Asia, promising AI- and tech-related growth continues in economies such as Malaysia and Vietnam. However, pockets of geopolitical tension persist, notably between Thailand and Cambodia, where border clashes have occurred despite previous attempts at peace, including one co-brokered by US President Trump. Against this backdrop, Thailand’s Prime Minister Anutin is preparing for snap elections in early February, amid a reported rise in nationalist sentiment linked to the ongoing clashes. These developments create latent risks for both Thailand and Cambodia (chart 6), while the uncertainty surrounding the elections also clouds the implementation of longer-term policies aimed at addressing Thailand’s deeper structural challenges.

260112T6.jpg

Asia

Economic Letter from Asia: A Bumpy Start

Michael J. Moran

260109A.jpg

260109B.jpg

Nonfarm payrolls rose 50,000 in December, continuing a pattern of modest increases that began in early 2025 and intensified last spring. The December results were constrained by an outright decline in the goods-producing sector, with both construction companies and manufacturers shedding workers. The private service sector was in the plus column, but the gain of 58,000 was not especially impressive. The retail trade sector was notably soft (-25,000), and a drop of 9,000 among firms in the business-service area was disappointing.

Revisions to results in October and November were more notable than the new figures for December, as downward adjustments of 76,000 more than offset the gain in December and left a net decline in the fourth quarter. Several areas contributed to the revisions (retail trade, construction, health care, transportation & warehousing, business services).

Not only were the recent job numbers soft, but the average workweek among those employed eased 0.1 hour to 34.2 hours. The reading was still within the range of observations from the past two years, but it moved to the bottom of the range. A dip of 0.1 hour might seem trivial, but when applied to 160 million workers, it represents a constraint on production. This decline added to the soft tone of the report.

260109C.jpg

Although the payroll numbers were soft, the unemployment rate dipped 0.1 percentage point to 4.4%. The drop reflected a jump of 232,000 in employment as measured by the survey of households. This employment measure is more volatile than the payroll figures from the survey of business establishments, and thus the gain might contain a healthy dose of random volatility. Still, it offered encouragement in that December marked the fifth consecutive gain, perhaps signaling that the bottom was not falling out of the labor market. 

Average hourly earnings also suggested that the labor market still had a pulse. December showed an increase of 0.3% in average hourly earnings, and results in the prior month were firmer than previously estimated (0.2% growth rather than 0.1%). The underlying trend is still cooling, but the year-over-year advance of 3.8% still represents a gain in real earnings.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

- Modest job growth in December, and downward revisions in October & November.
- The unemployment rate, though, inched lower.

A Soft Tone in the Labor Market

Winnie Tapasanun

260109F17.jpg

260109G17.jpg

Total housing starts fell 4.6% m/m in October to a seasonally adjusted annual rate of 1.246 million units—below expectations—following a 1.2% increase to 1.306 million in September and a 9.1% drop to 1.291 million in August (-8.5% m/m, 1.307 million previously), data from the U.S. Census Bureau showed. The Action Economics Forecast Survey had expected 1.321 million starts for October. The October figure marked the lowest level since May 2020 and represented the second m/m decline in three months after m/m increases in July and June. The year-on-year rate was at -7.8% in October, the steepest y/y drop since November 2024, following -3.8% in September and -1.2% in October 2024. Overall, starts remained 31.5% below the April 2022 peak of 1.820 million.

Single-family starts rebounded 5.4% (-7.8% y/y) to 874,000 in October, the highest level since July, after declines of 4.6% to 829,000 in September and 8.6% to 869,000 in August (890,000 previously). They reached a high of 1.218 million in November 2021 and a high of 1.273 in December 2020. Multi-family starts plunged 22.0% (-7.9% y/y) to 372,000, the lowest level since May, following a 13.0% September gain to 477,000 and a 10.0% August drop to 422,000 (417,000 previously). They reached a high of 629,000 units in November 2022 and a high of 616,000 units in April 2022.

By region, housing starts delivered a mixed performance. Starts in the West slumped 21.9% (-25.9% y/y) to 243,000 in October, the lowest level since July, after a 1.6% increase in September. Starts in the Northeast slid 0.6% (+41.3% y/y) to 154,000, the third m/m slide in four months, after a 58.2% September surge. To the upside, starts in the South rebounded 1.2% (-2.1% y/y) to 650,000 in October after a 3.6% decline in September and starts in the Midwest rose 0.5% (-20.7% y/y) to 199,000 after a 10.4% September decrease; for both regions, October represented the first m/m increase since July. Notably, the South continued to lead all regions with 650,000 starts, accounting for 52.2% of total U.S. housing starts; the region previously peaked at 1.044 million in April 2022.

Building permits fell 0.2% (-1.1% y/y) to 1.412 million in October, the sixth m/m fall in seven months, following a 6.4% rise to 1.415 million in September and a 2.3% decline to 1.330 million in August. They remained well below a high of 1.920 million in January 2022 and a high of 1.855 million in January 2021. Single-family permits fell 0.5% (-9.4% y/y) to 876,000, the second m/m fall in three months, after a 2.6% September increase to 880,000. They reached highs of 1.243 million in both January 2022 and January 2021. In contrast, multi-family permits rose 0.2% (16.3% y/y) to 536,000, the highest level since February 2024, after a 13.3% September gain to 535,000. They reached a peak of 817,000 units in February 2023 and a high of 787,000 units in June 2022. Regionally, permits fell m/m in the South (-3.3%; -3.9% y/y), the Midwest (-2.0%; -0.5% y/y), and the Northeast (-1.4%; +5.8% y/y), but increased m/m in the West (+9.1%; +2.1% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Housing starts -4.6% (-7.8% y/y) to 1.246 mil. in Oct.; second m/m fall in three months.
- Single-family starts up to a three-month high; multi-family starts down to a five-month low.
- Housing starts m/m down the West and Northeast but up in the South and Midwest.
- Building permits fall for the sixth time in seven months, led by a drop in single-family permits.

U.S. Housing Starts Decline in October; Lowest Level Since May ’20

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German industrial production advanced by 0.8% month-to-month in November performing better than had been expected. Consumer goods output fell by 0.3% month-to-month, capital goods output soared with a 4.9% gain, while intermediate goods output fell back by 0.8%.  

On the whole, manufacturing output had been expected to be weak. But looking at manufacturing alone, rather than total industrial production, the gain was even stronger at 2.1% month-to-month. Real manufacturing orders in November rose by 5.6%, real sales in manufacturing rose by 2.7%. This is solid performance.

**Survey data have been weak and listless**
However, apart from anecdotal evidence, as monthly data unfold, the kinds of numbers that we have to look at first are various economic surveys that come from diffusion data. The ZEW’s current index was slightly stronger month-to-month at a still very weak -78.7 (net) reading compared to -80 in October although both of those were weaker than the ZEW net September reading of -76.4. IFO manufacturing weakened month-to-month in November at 87.1 compared to 88.1 in October and it was slightly weaker than its September value as well. IFO manufacturing expectations slipped to 94.1 in November from 96.9 in October although expectations were slightly higher than their level in September. The EU Commission index weakened in November to -18.9 from -18.1 in October although there was an improvement from -20.1 in September.

These comparisons show us that the survey data which we had in hand before getting the industrial production reading from Germany had given us a lot of weak readings and a lot of very weak momentum.

**Compare survey data to IP data using ranking technique**
We can compare industrial production data to survey data using two different columns in this table. The first is the queue standing column where we see the industrial production data with rankings mostly in their 50th percentile: intermediate goods have a ranking of 37.7% with construction at 33.4%; they are the weaker exceptions. We rank IP data by sector according to their annual growth rates compared to past growth rates.  However, by comparison the survey data (that we rank on levels) range between 12.1% and 29.8%; all of those are very weak readings. No wonder a focus on survey data leads to a weak upcoming assessment of production data. We can also look at a slightly more up-to-date, but shorter ranking, from January 2021. There we see that the industrial production data average rankings from the mid-60th percentile up to the 81.4 percentile for total industrial production. Surveys generally have rankings in the 20th and 30th percentile with the exception of IFO manufacturing expectations which reaches 67.8%, which is a solid reading.

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**Survey data signals should be downgraded?**
These comparisons show us that while it's hard to compare industrial output directly to the diffusion readings if we take those two metrics over the same timeline and compare the level of the diffusion index to the growth rate of the manufacturing index we get the capability to compare the two on more even footing. When we do that, we see that manufacturing data are doing better than the survey data very broadly speaking. So, while there's some surprise on the strength of manufacturing data, maybe we should place a greater emphasis on it because those data come from a real accounting process rather than from a survey process that is much less closely linked to magnitudes. And, essentially, we are really much more interested in magnitudes than just if something is higher and lower.

**Other Europe doing ‘well’, too**
Not so incidentally the industrial production readings for France, Spain, Portugal, and Norway, all of whom are fairly early reporters of industrial production data, rank well on the queue standing column as well as in the shorter rank standing column from January 2021. In fact, for these countries the difference in ranking between the two periods is not markedly different, certainly not as markedly different as it is for Germany. On the whole, it may be that Europe has been doing better than we thought because we've been spending too much time looking at the more up-to-date survey data on a PMI basis, rather than waiting for the more traditional and lagging industrial production reports that are accounting-based data and more thorough.