Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100218d.jpg" align="left" border="0" height="265" width="353">
Industrial orders in the UK rose to a reading of -36 in
February from -39 marking their best result Since December 2008. The
plus-seven reading for expected output volume is the best reading since
March of 2008.
Orders reside in the 20th percentile of their range a
still-low standing. But export orders stand above the mid point of
their range at a percentile of 51.6%. Similarly expected output volume
is in the 52nd percentile of its range and average prices expected are
in the top 35% of their range. The ranges are from early 1989 to date.
Two observations from these results lead us to the conclusion
first, that conditions are still severely impacted. Second,
expectations are in place that foresee or expect that the economy is
headed for normalcy. Having the three-month outlook variables above
their range mid-point is a sign that things are expected to get back to
normal in &#8216;three-months or so.&#8217; Yet the still very weak readings for
overall and export orders remind us that current conditions still are
under a lot of stress.
The UK industrial sector is making progress. Elsewhere the
housing sector is recovering and the budget deficit is ballooning. The
UK is making progress but still has some great challenges. For now the
news is that the progress continues.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">UK
Industrial Volume Data CBI Survey 
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Feb 10</td>
<td>Jan 10</td>
<td>Dec 09</td>
<td>Nov 09</td>
<td>Oct 09</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-36</td>
<td>-39</td>
<td>-42</td>
<td>-45</td>
<td>-51</td>
<td>-52</td>
<td>34%</td>
<td>9</td>
<td>-59</td>
<td>68</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Export
Orders</td>
<td>-23</td>
<td>-33</td>
<td>-41</td>
<td>-37</td>
<td>-46</td>
<td>-45</td>
<td>53%</td>
<td>3</td>
<td>-52</td>
<td>55</td>
</tr>
<tr>
<td class="firstcol">Stocks:FinGds</td>
<td>12</td>
<td>13</td>
<td>15</td>
<td>20</td>
<td>10</td>
<td>21</td>
<td>42%</td>
<td>31</td>
<td>-2</td>
<td>33</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Looking
ahead</td>
</tr>
<tr>
<td class="firstcol">Output Volume:Nxt
3M</td>
<td>7</td>
<td>4</td>
<td>-7</td>
<td>4</td>
<td>4</td>
<td>-16</td>
<td>72%</td>
<td>28</td>
<td>-48</td>
<td>76</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4Nxt 3m
</td>
<td>8</td>
<td>-6</td>
<td>-7</td>
<td>-5</td>
<td>-4</td>
<td>-10</td>
<td>52%</td>
<td>34</td>
<td>-20</td>
<td>54</td>
</tr>
</tbody>
</table>
</body></html>

Industrial orders in the UK rose to a reading of -36 in February from -39 marking their best result Since December 2008. The plus-seven reading for expected output volume is the best reading since March of 2008. Orders reside in the [...]

Industrial Trends In UK Continue Turning Higher

Tom Moeller

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100218a.jpg" style="width: 353px; height: 265px;" align="right">Producer
prices continued strong
last month led by another jump in fuel costs. In addition, food price
inflation has picked up considerably. Together, this strength lifted
the finished goods PPI by 1.4% last month and increased the 12-month
change to 5.0%; the strongest since late-2008. Finally, the January
increase exceeded Consensus expectations for a 0.8% rise.&nbsp;
 Higher
energy costs led the strength in the PPI last month. The 5.1% m/m gain
raised the y/y increase to 21.5%, its strongest since September 2008.
Gasoline prices increased 10.4% (69.5% y/y) and fuel oil costs rose
11.0% (28.4% y/y). But elsewhere, the gain in energy prices was more
moderate. Natural gas prices increased a lesser 2.4% and were down
12.5% from 12 months ago. Food prices were another source of price
strength last month. They posted a 0.4% gain which raised the y/y
change to 1.5% versus the low of -4.0% last summer. Fresh fruit
&amp;
vegetable prices ballooned 43.8% y/y while pork prices jumped 11.8%.
Also to the upside were dairy product prices by 5.1% and coffee prices
by 2.3% y/y versus a 0.1% uptick last year..&nbsp;&nbsp;
Producer
prices excluding food &amp; energy rose 0.3%. That was enough to
stabilize the y/y change at 1.0% but it still was down from a 3.4% 2008
increase. The m/m increase in the core PPI also exceeded expectations
for a modest 0.1% gain. The PPI for finished consumer goods less food
&amp; energy rose 0.4% (1.6% y/y) and was up from a 0.1% December
gain.
Finished durables prices increased 0.3% (0.7% y/y) while core finished
consumer nondurable goods prices rose 0.4% (2.4% y/y). Capital
equipment prices increased 0.3% which left prices up 0.1% y/y.
 Prices
for intermediate goods jumped 1.7% reflecting the strength in energy
prices. The increase in core prices was, however, stable at 0.5%. Food
prices fell 0.3% but the y/y gain at 1.7% was up from 8.2% price
deflation during all of last year. Copper prices (55.3% y/y) and
nonferrous wire &amp; cable prices (25.1% y/y) have been notably
strong. The crude materials PPI jumped again with the strength in
energy prices. The 9.6% m/m increase was the strongest since 2006 and
raised prices by one-quarter versus last January. Core prices also
jumped. The 6.6% gain lifted prices by more than one-third y/y as
economic growth strengthened following the recession.
The producer
price data is available in Haver's USECON database.
More detailed data is in the PPI and in the PPIR
databases.
The minutes to the latest meeting of the Federal
Open Market Committee can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20100127.pdf">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100218b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100218c.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/USECON/@E8/@E802/@E80201/@E80201.HTM" style="color: rgb(255, 255, 255);">Producer Price Index</a>(%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</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">Finished Goods</td>
<td>1.4</td>
<td>0.4</td>
<td>1.5</td>
<td>5.0</td>
<td>-2.5</td>
<td>6.4</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less Food &amp;
Energy</td>
<td>0.3</td>
<td>0.0</td>
<td>0.5</td>
<td>1.0</td>
<td>2.6</td>
<td>3.4</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.7</td>
<td>0.6</td>
<td>1.2</td>
<td>4.9</td>
<td>-8.4</td>
<td>10.3</td>
<td>4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core Less Food
&amp; Energy</td>
<td>0.5</td>
<td>0.5</td>
<td>0.3</td>
<td>1.1</td>
<td>-4.2</td>
<td>7.4</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>9.6</td>
<td>0.8</td>
<td>5.1</td>
<td>25.1</td>
<td>-30.4</td>
<td>21.4</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core Less Food
&amp; Energy</td>
<td>6.6</td>
<td>4.5</td>
<td>-1.0</td>
<td>35.1</td>
<td>-23.5</td>
<td>14.8</td>
<td>15.6</td>
</tr>
</tbody>
</table>


</body></html>

Producer prices continued strong last month led by another jump in fuel costs. In addition, food price inflation has picked up considerably. Together, this strength lifted the finished goods PPI by 1.4% last month and increased the [...]

U.S. PPI Jumps Again With Energy Price Strength

U.S. PPI Jumps Again With EnergyPrice Strength

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217j.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Exports rebounded strongly in December after coming up flat in
November. Overall exports rose by 3.1% in December as MFG exports rose
by 2.7% in December. Three month growth rates continue to show strong
growth, accelerating slightly for overall exports but with MFG exports
losing a bit of momentum compared to their six-month pace
Import growth is positive. Its three-and six-month rates of
growth have steadied at or below the 10% growth rate mark.
Manufacturing import growth is positive but barely growing at all,
rising at 0.3% annualized rate of growth over three months, having
slowed from nearly a 7% pace over six months.
Europe&#8217;s trade surplus is at a five year high. Exports are at
their highest level in 12-months as well. Europe continues to act as a
region with export-led growth. Exports are digging out from the
recession faster than imports. Imports are lower by 8% Yr/yr compared
to exports that are lower by just 2%.
Domestic demand is lagging in the Euro-Area. Exports are
pulling the region into recovery faster than its own consumers.
Europe&#8217;s recovery depends on the continuation of global growth as much
as any region.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro-Area
Trade trends for goods 
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="2">m/m%</td>
<td style="font-weight: bold;" colspan="3">% Saar</td>
<td style="font-weight: bold;">&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3M</td>
<td style="font-weight: bold;">6M</td>
<td style="font-weight: bold;">12M</td>
<td style="font-weight: bold;">12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&nbsp; 7,003 </td>
<td>&#8364;&nbsp; 5,294 </td>
<td>&#8364;&nbsp; (3,252)</td>
<td>&#8364;&nbsp; 4,482 </td>
<td>&#8364;&nbsp; (3,450)</td>
<td>&#8364;&nbsp; 1,384 </td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">Exports</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exp</td>
<td>3.1%</td>
<td style="color: red;">0.0%</td>
<td>25.6%</td>
<td>22.6%</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>4.8%</td>
<td>1.7%</td>
<td>18.3%</td>
<td>10.6%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>7.7%</td>
<td style="color: red;">-0.7%</td>
<td>51.4%</td>
<td>31.5%</td>
<td>24.6%</td>
<td style="color: red;">-19.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>2.9%</td>
<td style="color: red;">-0.2%</td>
<td>25.6%</td>
<td>23.4%</td>
<td style="color: red;">-2.9%</td>
<td style="color: red;">-7.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; MFG</td>
<td>2.7%</td>
<td style="color: red;">-0.3%</td>
<td>17.7%</td>
<td>21.3%</td>
<td style="color: red;">-5.2%</td>
<td style="color: red;">-7.2%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">IMPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All IMP</td>
<td>1.7%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>10.7%</td>
<td style="color: red;">-7.8%</td>
<td style="color: red;">-9.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td style="color: red;">-1.3%</td>
<td>3.2%</td>
<td style="color: red;">-14.0%</td>
<td style="color: red;">-3.1%</td>
<td style="color: red;">-8.7%</td>
<td style="color: red;">1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>4.4%</td>
<td>3.2%</td>
<td>41.2%</td>
<td>43.8%</td>
<td style="color: red;">-19.0%</td>
<td style="color: red;">-6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>1.7%</td>
<td>0.6%</td>
<td>7.5%</td>
<td>10.5%</td>
<td style="color: red;">-7.2%</td>
<td style="color: red;">-9.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; MFG</td>
<td>1.5%</td>
<td style="color: red;">-0.1%</td>
<td>0.3%</td>
<td>6.9%</td>
<td style="color: red;">-9.2%</td>
<td style="color: red;">-8.5%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">*Eur mlns;
mo or period
average</td>
</tr>
</tbody>
</table>
</body></html>

Exports rebounded strongly in December after coming up flat in November. Overall exports rose by 3.1% in December as MFG exports rose by 2.7% in December. Three month growth rates continue to show strong growth, accelerating slightly [...]

Euro-Area Trade Surplus Moves Up Sharply

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217g.jpg" style="width: 353px; height: 265px;" align="right">
Higher oil
prices and the lower dollar have been the primary factors behind the
movement in import prices this past year. Just for January, a 1.4% rise
in prices was nearly the strongest since last June and beat Consensus
expectations for a 1.0% gain.
Petroleum prices jumped 4.8% last month
and they have roughly doubled since last January. This month, the
strength in Brent crude oil prices tapered off with a decline to an
average $72.91 after reaching a daily high near $80 per barrel early in
January.
Conversely the lower value of the U.S. dollar has helped lift
non-oil import prices. A 0.6% January increase was near the elevated
gains during the prior four months. Since their low last March non-oil
import prices have risen 2.4% after a 5.3% decline during the prior
twelve months. (During the last ten years, there has been a negative
81% correlation between the nominal trade-weighted exchange value of
the US dollar vs. major currencies and the y/y change in non-oil import
prices.)&nbsp;
 Prices for nonauto consumer goods rose for the
first month in the last three but the slight y/y increase is improved
from the deflation as of last Fall. Prices for durable consumer goods
increased a firm 0.6% to lift the y/y increase to 0.6% from a 1.1%
decline as of last fall. Capital goods also slipped m/m but the pace of
price deflation has slowed.
Total export prices increased 0.8% (3.4%
y/y) reflecting a 1.4% (4.5% y/y) increase in agricultural export
prices and a 0.7% gain (3.3% y/y) in non-agricultural prices. These
declines reversed just some of the strength through 2008
The
import and export price series can be found in Haver's USECON
database. Detailed figures are available in the USINT
database.
Is
the International Role of the Dollar Changing? from
the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci16-1.pdf">here</a>.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217h.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217i.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/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA, %)</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</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">Import - All Commodities</td>
<td>1.4</td>
<td>0.2</td>
<td>1.5</td>
<td>11.5</td>
<td>-11.5</td>
<td>11.5</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.8</td>
<td>-1.4</td>
<td>5.4</td>
<td>95.5</td>
<td>-36.0</td>
<td>37.7</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.6</td>
<td>0.5</td>
<td>0.6</td>
<td>1.2</td>
<td>-4.2</td>
<td>5.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>0.8</td>
<td>0.6</td>
<td>0.8</td>
<td>3.4</td>
<td>-4.6</td>
<td>6.0</td>
<td>4.9</td>
</tr>
</tbody>
</table>

</body></html>

Higher oil prices and the lower dollar have been the primary factors behind the movement in import prices this past year. Just for January, a 1.4% rise in prices was nearly the strongest since last June and beat Consensus expectations [...]

U.S. Import Price Gains Continue Strong

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217d.jpg" style="width: 353px; height: 265px;" align="right"> With a 0.9%
January increase, U.S. industrial output posted its strongest monthly
gain since August. Moreover, the run-up since the June bottom has
totaled 5.3%. That compares with a 13.2% decline during the prior year
which exceeded the declines during most other postwar recessions. A
1.1% increase in the output of consumer goods paced the January
production increase. The y/y gain of 3.2% has been driven by a nearly
one-half increase in auto products output during the last year. Output
of computers, video &amp; audio output also rose 1.0% (-5.3% y/y)
for the fifth consecutive strong monthly gain. Output of appliances,
furniture &amp; carpeting was unchanged last month (-7.5% y/y)
after a sharp December fall which was part of an 18.1% 2009 drop.
Business equipment output was strong for the second consecutive month
but still was off 3.7% y/y after the 12.5% decline during all of last
year. Finally, apparel output jumped 3.4% last month (0.7% y/y) and
since its bottom has risen 5.9%.&nbsp;Capacity utilization rose
further to 72.67%, its highest level since December 2008. In the
factory sector alone utilization rose to 69.4% from the 2009 low of
65.2%. Utilization in the primary metals area has risen sharply to
61.9% from a 2009 average of 51.2% with the rebound in output. There's
also been rise in utilization in the motor vehicle sector to 55.0% from
a low of 36.8% in June. Utilization was 77.0% in 2005. The rise in
utilization was accompanied by another 0.1% m/m decline in capacity
which was off a record 1.1%y/y.&nbsp;The industrial
production data are available in Haver's USECON
database.Using FOMC Forecasts to Forecast the
Economy from the Federal Reserve Bank of St. Louis can be
found <a href="http://research.stlouisfed.org/publications/net/20100201/netpub.pdf">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217f.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">Industrial
Production (SA,%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output</td>
<td>0.9</td>
<td>0.7</td>
<td>0.6</td>
<td>1.0</td>
<td>-9.7</td>
<td>-2.2</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Manufacturing</td>
<td>0.9</td>
<td>0.0</td>
<td>0.9</td>
<td>1.6</td>
<td>-11.3</td>
<td>-3.2</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Consumer
Goods</td>
<td>1.1</td>
<td>0.7</td>
<td>-0.3</td>
<td>3.2</td>
<td>-5.2</td>
<td>-2.6</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Business
Equipment</td>
<td>1.0</td>
<td>1.3</td>
<td>-0.3</td>
<td>-3.7</td>
<td>-12.5</td>
<td>-1.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Construction
Supplies</td>
<td>0.9</td>
<td>-1.7</td>
<td>1.6</td>
<td>-5.4</td>
<td>-17.6</td>
<td>-6.3</td>
<td>-2.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Materials</td>
<td>0.8</td>
<td>0.5</td>
<td>1.3</td>
<td>2.0</td>
<td>-10.9</td>
<td>-1.9</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>0.7</td>
<td>6.3</td>
<td>-3.0</td>
<td>-0.5</td>
<td>-2.6</td>
<td>0.3</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization
(%)</td>
<td>72.6</td>
<td>71.9</td>
<td>71.3</td>
<td>71.1 (Jan. '09)</td>
<td>70.1</td>
<td>77.5</td>
<td>80.6</td>
</tr>
</tbody>
</table>
</body></html>

With a 0.9% January increase, U.S. industrial output posted its strongest monthly gain since August. Moreover, the run-up since the June bottom has totaled 5.3%. That compares with a 13.2% decline during the prior year which exceeded [...]

Industrial Output Firms

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217a.jpg" style="width: 353px; height: 265px;" align="right">
Housing
starts increased a modest 2.8% last month to 591,000 (AR) units
following a slightly revised decline to 575,000 during December. The
small gain was only enough, however, to lift starts back to the level
reached last summer. In fact, the 21.1% twelve-month increase from near
the recession low pales in comparison to the 50%-90% increases
following downturns since the 1970s. Since their peak in January of
2006, starts remain down by three-quarters. January's figure slightly
beat Consensus expectations for 580,000 starts.&nbsp; Last month,
starts of single-family homes ticked up just 1.5% to 484,000 after
December's 3.0% decline. Year-to-year starts have risen by one-third
but they're up just 1.5% from the 4Q average. During the last ten
years, there has been an 84% correlation between the q/q change in
single-family starts and their contribution to quarterly GDP growth.
The increase in January starts of single-family units was contained by
declines in the Midwest (63.0% y/y) and in the Southern (28.5% y/y)
regions of the country. In the Northeast starts rose moderately m/m
(82.1% y/y) and in the West starts just recouped the moderate December
decline (21.7% y/y).A 9.2% increase in starts of multi-family units
added to firmer increases during the prior two months. Starts of
apartments, condominiums &amp; town houses still were down 76.2%
from the January 2006 peak. Despite a moderate 4.9% m/m decline,
January building permits remain up by one-quarter from their low last
March. Permits to build a single-family home rose slightly m/m
and have risen one-half from their low last January.The
housing starts figures can be found in Haver's USECON database.Mortgage
Choice and the Pricing of Fixed-Rate and Adjustable-Rate Mortgages
from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2010/el2010-03.html">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217c.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">Housing
Starts (000s, SAAR)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Nov. Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>591</td>
<td>575</td>
<td>579</td>
<td>21.1%</td>
<td>553</td>
<td>900</td>
<td>1,342</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>484</td>
<td>477</td>
<td>492</td>
<td>35.6</td>
<td>440</td>
<td>616</td>
<td>1,036</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>107</td>
<td>98</td>
<td>87</td>
<td>-18.3</td>
<td>113</td>
<td>285</td>
<td>306</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>621</td>
<td>653</td>
<td>589</td>
<td>16.9</td>
<td>558</td>
<td>895</td>
<td>1,392</td>
</tr>
</tbody>
</table>
</body></html>

Housing starts increased a modest 2.8% last month to 591,000 (AR) units following a slightly revised decline to 575,000 during December. The small gain was only enough, however, to lift starts back to the level reached last summer. In [...]

U.S. Housing Starts Rise But Forward Momentum Is Weak

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217a.jpg" style="width: 353px; height: 265px;" align="right">Housing
starts increased a modest 2.8% last month to 591,000 (AR) units
following a slightly revised decline to 575,000 during December. The
small gain was only enough, however, to lift starts back to the level
reached last summer. In fact, the 21.1% twelve-month increase from near
the recession low pales in comparison to the 50%-90% increases
following downturns since the 1970s. Since their peak in January of
2006, starts remain down by three-quarters. January's figure slightly
beat Consensus expectations for 580,000 starts.&nbsp;
 Last month,
starts of single-family homes ticked up just 1.5% to 484,000 after
December's 3.0% decline. Year-to-year starts have risen by one-third
but they're up just 1.5% from the 4Q average. During the last ten
years, there has been an 84% correlation between the q/q change in
single-family starts and their contribution to quarterly GDP growth.
The increase in January starts of single-family units was contained by
declines in the Midwest (63.0% y/y) and in the Southern (28.5% y/y)
regions of the country. In the Northeast starts rose moderately m/m
(82.1% y/y) and in the West starts just recouped the moderate December
decline (21.7% y/y).
A 9.2% increase in starts of multi-family units
added to firmer increases during the prior two months. Starts of
apartments, condominiums &amp; town houses still were down 76.2%
from the January 2006 peak.
 Despite a moderate 4.9% m/m decline,
January building permits remain up by one-quarter from their low last
March. Permits to build a single-family home rose slightly m/m
and have risen one-half from their low last January.
The
housing starts figures can be found in Haver's USECON database.
Mortgage
Choice and the Pricing of Fixed-Rate and Adjustable-Rate Mortgages
from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2010/el2010-03.html">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217c.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">Housing
Starts (000s, SAAR)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Nov. Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>591</td>
<td>575</td>
<td>579</td>
<td>21.1%</td>
<td>553</td>
<td>900</td>
<td>1,342</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>484</td>
<td>477</td>
<td>492</td>
<td>35.6</td>
<td>440</td>
<td>616</td>
<td>1,036</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>107</td>
<td>98</td>
<td>87</td>
<td>-18.3</td>
<td>113</td>
<td>285</td>
<td>306</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>621</td>
<td>653</td>
<td>589</td>
<td>16.9</td>
<td>558</td>
<td>895</td>
<td>1,392</td>
</tr>
</tbody>
</table>

Industrial Output Firms 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 17, 2010



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217d.jpg" style="width: 353px; height: 265px;" align="right">With
a 0.9%
January increase, U.S. industrial output posted its strongest monthly
gain since August. Moreover, the run-up since the June bottom has
totaled 5.3%. That compares with a 13.2% decline during the prior year
which exceeded the declines during most other postwar recessions.
 A
1.1% increase in the output of consumer goods paced the January
production increase. The y/y gain of 3.2% has been driven by a nearly
one-half increase in auto products output during the last year. Output
of computers, video &amp; audio output also rose 1.0% (-5.3% y/y)
for the fifth consecutive strong monthly gain. Output of appliances,
furniture &amp; carpeting was unchanged last month (-7.5% y/y)
after a sharp December fall which was part of an 18.1% 2009 drop.
Business equipment output was strong for the second consecutive month
but still was off 3.7% y/y after the 12.5% decline during all of last
year. Finally, apparel output jumped 3.4% last month (0.7% y/y) and
since its bottom has risen 5.9%.
&nbsp;Capacity utilization rose
further to 72.67%, its highest level since December 2008. In the
factory sector alone utilization rose to 69.4% from the 2009 low of
65.2%. Utilization in the primary metals area has risen sharply to
61.9% from a 2009 average of 51.2% with the rebound in output. There's
also been rise in utilization in the motor vehicle sector to 55.0% from
a low of 36.8% in June. Utilization was 77.0% in 2005. The rise in
utilization was accompanied by another 0.1% m/m decline in capacity
which was off a record 1.1%y/y.&nbsp;
The industrial
production data are available in Haver's USECON
database.
Using
FOMC Forecasts to Forecast the
Economy from the Federal Reserve Bank of St. Louis can be
found <a href="http://research.stlouisfed.org/publications/net/20100201/netpub.pdf">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217f.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">Industrial
Production (SA,%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output</td>
<td>0.9</td>
<td>0.7</td>
<td>0.6</td>
<td>1.0</td>
<td>-9.7</td>
<td>-2.2</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Manufacturing</td>
<td>0.9</td>
<td>0.0</td>
<td>0.9</td>
<td>1.6</td>
<td>-11.3</td>
<td>-3.2</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Consumer
Goods</td>
<td>1.1</td>
<td>0.7</td>
<td>-0.3</td>
<td>3.2</td>
<td>-5.2</td>
<td>-2.6</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Business
Equipment</td>
<td>1.0</td>
<td>1.3</td>
<td>-0.3</td>
<td>-3.7</td>
<td>-12.5</td>
<td>-1.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Construction
Supplies</td>
<td>0.9</td>
<td>-1.7</td>
<td>1.6</td>
<td>-5.4</td>
<td>-17.6</td>
<td>-6.3</td>
<td>-2.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Materials</td>
<td>0.8</td>
<td>0.5</td>
<td>1.3</td>
<td>2.0</td>
<td>-10.9</td>
<td>-1.9</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>0.7</td>
<td>6.3</td>
<td>-3.0</td>
<td>-0.5</td>
<td>-2.6</td>
<td>0.3</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization
(%)</td>
<td>72.6</td>
<td>71.9</td>
<td>71.3</td>
<td>71.1 (Jan. '09)</td>
<td>70.1</td>
<td>77.5</td>
<td>80.6</td>
</tr>
</tbody>
</table>

U.S. Import Price Gains Continue
Strong 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 17, 2010



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217g.jpg" style="width: 353px; height: 265px;" align="right">Higher
oil
prices and the lower dollar have been the primary factors behind the
movement in import prices this past year. Just for January, a 1.4% rise
in prices was nearly the strongest since last June and beat Consensus
expectations for a 1.0% gain.
Petroleum prices jumped 4.8% last month
and they have roughly doubled since last January. This month, the
strength in Brent crude oil prices tapered off with a decline to an
average $72.91 after reaching a daily high near $80 per barrel early in
January.
Conversely the lower value of the U.S. dollar has helped lift
non-oil import prices. A 0.6% January increase was near the elevated
gains during the prior four months. Since their low last March non-oil
import prices have risen 2.4% after a 5.3% decline during the prior
twelve months. (During the last ten years, there has been a negative
81% correlation between the nominal trade-weighted exchange value of
the US dollar vs. major currencies and the y/y change in non-oil import
prices.)&nbsp;
 Prices for nonauto consumer goods rose for the
first month in the last three but the slight y/y increase is improved
from the deflation as of last Fall. Prices for durable consumer goods
increased a firm 0.6% to lift the y/y increase to 0.6% from a 1.1%
decline as of last fall. Capital goods also slipped m/m but the pace of
price deflation has slowed.
Total export prices increased 0.8% (3.4%
y/y) reflecting a 1.4% (4.5% y/y) increase in agricultural export
prices and a 0.7% gain (3.3% y/y) in non-agricultural prices. These
declines reversed just some of the strength through 2008
The
import and export price series can be found in Haver's USECON
database. Detailed figures are available in the USINT
database.
Is
the International Role of the Dollar Changing? from
the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci16-1.pdf">here</a>.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217h.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217i.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/USECON/@E8/@E807/@E807.HTM">Import/Export
Prices (NSA, %)</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</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">Import - All Commodities</td>
<td>1.4</td>
<td>0.2</td>
<td>1.5</td>
<td>11.5</td>
<td>-11.5</td>
<td>11.5</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.8</td>
<td>-1.4</td>
<td>5.4</td>
<td>95.5</td>
<td>-36.0</td>
<td>37.7</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.6</td>
<td>0.5</td>
<td>0.6</td>
<td>1.2</td>
<td>-4.2</td>
<td>5.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>0.8</td>
<td>0.6</td>
<td>0.8</td>
<td>3.4</td>
<td>-4.6</td>
<td>6.0</td>
<td>4.9</td>
</tr>
</tbody>
</table>

Euro-Area Trade Surplus Moves Up
Sharply 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 17, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100217j.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Exports rebounded strongly in December after coming up flat in
November. Overall exports rose by 3.1% in December as MFG exports rose
by 2.7% in December. Three month growth rates continue to show strong
growth, accelerating slightly for overall exports but with MFG exports
losing a bit of momentum compared to their six-month pace
Import growth is positive. Its three-and six-month rates of
growth have steadied at or below the 10% growth rate mark.
Manufacturing import growth is positive but barely growing at all,
rising at 0.3% annualized rate of growth over three months, having
slowed from nearly a 7% pace over six months.
Europe&#8217;s trade surplus is at a five year high. Exports are at
their highest level in 12-months as well. Europe continues to act as a
region with export-led growth. Exports are digging out from the
recession faster than imports. Imports are lower by 8% Yr/yr compared
to exports that are lower by just 2%.
Domestic demand is lagging in the Euro-Area. Exports are
pulling the region into recovery faster than its own consumers.
Europe&#8217;s recovery depends on the continuation of global growth as much
as any region.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro-Area
Trade trends for goods 
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="2">m/m%</td>
<td style="font-weight: bold;" colspan="3">%
Saar</td>
<td style="font-weight: bold;">&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3M</td>
<td style="font-weight: bold;">6M</td>
<td style="font-weight: bold;">12M</td>
<td style="font-weight: bold;">12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&nbsp; 7,003 </td>
<td>&#8364;&nbsp; 5,294 </td>
<td>&#8364;&nbsp; (3,252)</td>
<td>&#8364;&nbsp; 4,482 </td>
<td>&#8364;&nbsp; (3,450)</td>
<td>&#8364;&nbsp; 1,384 </td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">Exports</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exp</td>
<td>3.1%</td>
<td style="color: red;">0.0%</td>
<td>25.6%</td>
<td>22.6%</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>4.8%</td>
<td>1.7%</td>
<td>18.3%</td>
<td>10.6%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>7.7%</td>
<td style="color: red;">-0.7%</td>
<td>51.4%</td>
<td>31.5%</td>
<td>24.6%</td>
<td style="color: red;">-19.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>2.9%</td>
<td style="color: red;">-0.2%</td>
<td>25.6%</td>
<td>23.4%</td>
<td style="color: red;">-2.9%</td>
<td style="color: red;">-7.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; MFG</td>
<td>2.7%</td>
<td style="color: red;">-0.3%</td>
<td>17.7%</td>
<td>21.3%</td>
<td style="color: red;">-5.2%</td>
<td style="color: red;">-7.2%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">IMPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All IMP</td>
<td>1.7%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>10.7%</td>
<td style="color: red;">-7.8%</td>
<td style="color: red;">-9.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td style="color: red;">-1.3%</td>
<td>3.2%</td>
<td style="color: red;">-14.0%</td>
<td style="color: red;">-3.1%</td>
<td style="color: red;">-8.7%</td>
<td style="color: red;">1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>4.4%</td>
<td>3.2%</td>
<td>41.2%</td>
<td>43.8%</td>
<td style="color: red;">-19.0%</td>
<td style="color: red;">-6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>1.7%</td>
<td>0.6%</td>
<td>7.5%</td>
<td>10.5%</td>
<td style="color: red;">-7.2%</td>
<td style="color: red;">-9.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; MFG</td>
<td>1.5%</td>
<td style="color: red;">-0.1%</td>
<td>0.3%</td>
<td>6.9%</td>
<td style="color: red;">-9.2%</td>
<td style="color: red;">-8.5%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">*Eur mlns;
mo or period
average</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Housing Starts Rise ButForward Momentum Is Weak

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.

260109H17.jpg

260109I17.jpg

- 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

260109E.jpg

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.

260109.jpg

**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.