Robert Brusca

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<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left" height="265" width="353"></p>
<p>Don&#8217;t judge a book by its cover- Please pardon the bad grammar
in the title. But I am hopelessly imprinted with Rod Stewart&#8217;s, &#8220;Every
Picture tells, a story, don&#8217;t it?&#8217; In this case&#8230; I wonder: does it or
as SNL&#8217;s Seth Meyers might ask: &#8216;does it, does it really?&#8217; What I mean
is this: does the picture tell THE story? The story in the picture
above is quite clear that GDP in Europe is getting better and at a fast
rate. The DROP in GDP is cut sharply in its Q4 embodiment compared to
its Q3 embodiment for EMU, Germany and for France.<br>
<br>
</p>
<p>Digging deeper -- Yet read ANY market story on these results
for today. The clear theme is one of disappointment. Why are people
disappointed if the Yr-over-Yr drops in GDP are dissipating so fast?
It&#8217;s because a percentage change is a function of TWO things, the
current value and the past value that forms the base for the percentage
change calculation. And the BIG DROP OFF in the pace of GDP&#8217;s decline
Yr/Yr in Europe is more due to a shift in the base than to the result
in the new quarter. In the new quarter GDP rose by only 0.4% at an
annualized rate (that&#8217;s a thin 0.1% Q/Q). So why did the yr/yr pace
improve so much? It&#8217;s because of the shift in the base to Q4 2008 from
Q3 2008. In Q4 2008 EMU GDP fell by 7.4% at an annualized rate. Compare
that to its 2.7% decline in Q3 of 2008. What this means is that we are
comparing growth in Q4 2009 to a much lower base than we did in
2009-Q3, so even a small amount of growth (like 0.1% in the quarter)
makes the Yr/Yr comparison look much better than it did in Q3. It&#8217;s
base-illusion.<br>
<br>
</p>
<p>Euro-sclerosis strikes again - The simple fact is that
Europe&#8217;s recovery is slowing down. The US is speeding up. Europe&#8217;s
vaunted social welfare system may have helped to mitigate the declines
in GDP in the recession but in recovery it is providing no springboard
for growth. Meanwhile, the US recovery is powering ahead. We are set up
for the usual sort of configuration in global growth where the US
economy becomes the engine of growth for the global economy as the US
current account deficit rips a gaping hole in the US balance of
payments and feeds stimulus to the rest of world like a mother
breastfeeding her helpless infant child.<br>
<br>
</p>
<p>You put the load right one me&#8230;One problem with this emerging
scenario is that the US consumer is not is the shape he/she usually is
in a recovery and may not be able to suckle the global economy. While
US retail sales were better than expected in January the result is
still less that robust. It is not clear how much lift the US consumer
will add to the US recovery let alone to the economies of the rest of
the world. The US does import a lot of consumer goods. So a recovering
US consumer will purchase imports. But how many imports can the US
consumer buy if US growth goes flat as the diverted income and blunted
multiplier from surging foreign exports to the US stunt economic growth
back home?<br>
<br>
</p>
<p>The blame game - Get ready for the rest of the world to start
blaming the US for widening deficits even as the US consumer fuels
recovery in Europe and beyond. The simple fact is that China, Japan and
Europe- especially Germany- all want to have export-led growth. They
act as though it&#8217;s a right. If they do who will import? China and Japan
have amassed huge foreign exchange reserves, an act that clearly has
facilitated their currencies, remaining weaker than otherwise, enabling
their strategy of export-led growth while at he same time undermining
US growth and US finanical health..<br>
<br>
</p>
<p>Europe and the 800 pound gorilla - We do not yet have
consumption figures for Europe&#8217;s flash GDP results. Flash-GDP is
usually just a total and may be accompanied by some descriptive
comments but little or no supporting details on GDP. Be sure that this
paltry performance from GDP in Europe is not good news. The hike in
reserve requirements in China has people worried about in growth there
as well. There is a theme of growth pessimism taking hold again
clobbering global stock markets. But China is a taker- an exporter- not
a giver. It does not provide net domestic demand to the world. Its
growth merely absorbs income from elsewhere transforming it into growth
for&#8230;CHINA! In turn that helps to pressure global input prices
(commodity prices). Strong growth in China is usually not beneficial to
the West. People who profess worry over China growth prospects don&#8217;t
get it. It&#8217;s a big and growing ever more complicated world. Be sure to
know the facts. Markets often react to overall themes and only later
get more sophisticated by sorting out winners and losers. Right now
there is an emerging theme of weakness. Europe is faltering China may
slow. There are still lingering concerns about the status of growth in
the US&#8230;Weakness abroad will have repercussions for the US, but the US
recovery is still on track. So don&#8217;t throw out the baby with bath water
in your haste to dump dropping stocks. Markets will eventually &#8216;get it
right&#8217; and face a truer version of reality. China may be an 800 pound
gorilla but if he is sick and starts eating fewer bananas, there are
more for you.<br>
</p>
</span>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"><b>European Growth for Selected Flash GDP Results</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Q/Q Saar</td>
<td colspan="3">Yr/Yr </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>3.8%</td>
<td>9.9%</td>
<td>-3.1%</td>
<td>-1.4%</td>
<td>-3.1%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>2.4%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>-0.3%</td>
<td>-2.3%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.0%</td>
<td>2.9%</td>
<td>1.8%</td>
<td>-2.4%</td>
<td>-4.8%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>-3.1%</td>
<td>-1.9%</td>
<td>-1.2%</td>
<td>-2.6%</td>
<td>-2.5%</td>
<td>-1.9%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.9%</td>
<td>2.6%</td>
<td>-1.9%</td>
<td>-2.8%</td>
<td>-4.6%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>1.0%</td>
<td>2.1%</td>
<td>-4.2%</td>
<td>-2.6%</td>
<td>-4.0%</td>
<td>-5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>0.4%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-4.0%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Memo:US</td>
<td>5.7%</td>
<td>2.2%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-2.6%</td>
<td>-3.8%</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>0.4%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-4.0%</td>
<td>-4.8%</td>
</tr>
</tbody>
</table>
</body></html>

Don’t judge a book by its cover- Please pardon the bad grammar in the title. But I am hopelessly imprinted with Rod Stewart’s, “Every Picture tells, a story, don’t it?’ In this case… I wonder: does it or as SNL’s Seth Meyers might [...]

Every Picture Tells A Story...Or Do It?

Tom Moeller

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<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212a.jpg" style="width: 353px; height: 265px;" align="right">Shoppers are
returning to stores after restraining spending at yearend. January
retail sales increased 0.5% after a 0.1% decline during December which
was less than reported initially. The latest figure was firmer than
Consensus expectations for a 0.3% rise. Moreover, the rebound had
nothing to do with shopping for a motor vehicle. Retail sales less
autos rose 0.6% after a 0.2% slip in December that was slightly less
than reported last month. As apparent in earlier figures, the trend in
retail spending has improved. On a three-month basis retail sales rose
at a 9.7% annual rate through January versus the 15.8% rate of decline
one year ago. Less autos, spending growth also recovered on a
three-month basis to 10.1% from -17.9% one year ago.&nbsp;</p><p>
Internet &amp; catalogue sales continued strong. They posted a 1.6%
rise in January (12.4% y/y) following similarly strong increases during
the prior four months. The three-month rate of gain rose to 28.5% from
-9.7% one year ago.&nbsp;</p><p> "Core" discretionary spending also
improved as general merchandise store sales rose 1.5% (3.2% y/y) and
recovered a 1.1% December decline. Sales of electronics &amp;
appliances were strong as well and posted a 1.2% gain but remained down
7.0% from last January. Earlier weakness in clothing &amp;
accessory stores also stabilized and rose 0.3%, however, price
discounting left the y/y gain at just 0.3%. Furniture &amp; home
furnishing store sales have yet to recover much. A 1.4% January decline
(-4.4% y/y) left the three-month annualized growth rate at a negative
1.3%. That was, however, improved from -21.6% at its worst.&nbsp;</p><p>Motor
vehicle sales were unchanged last month (5.5% y/y) but that was better
than the 4.2% m/m decline in unit sales. Higher gasoline prices played
a part in the retail sales picture. Gasoline purchases, however, ticked
up just 0.4% (29.0% y/y) even though prices rose 4.0% (50.5% y/y).
Sales of building materials fell 1.2% (-6.3% y/y).</p><p>The retail sales
data are available in Haver's <b>USECON</b> database.
&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212c.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">&nbsp;</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="odd">
<td class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM" style="color: black;">Total Retail Sales &amp; Food
Services</a> (%)</td>
<td>0.5</td>
<td>-0.1</td>
<td>2.0</td>
<td>4.7</td>
<td>-6.0</td>
<td>-0.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; </b>Excluding
Autos</td>
<td>0.6</td>
<td>-0.2</td>
<td>2.0</td>
<td>4.6</td>
<td>-4.7</td>
<td>2.4</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Non-Auto Less Gasoline</td>
<td>0.6</td>
<td>-0.3</td>
<td>1.1</td>
<td>2.0</td>
<td>-1.9</td>
<td>1.6</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</span></body></html>

Shoppers are returning to stores after restraining spending at yearend. January retail sales increased 0.5% after a 0.1% decline during December which was less than reported initially. The latest figure was firmer than Consensus [...]

U.S. Retail Sales Recover From Yearend Blues

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212a.jpg" style="width: 353px; height: 265px;" align="right">Shoppers
are
returning to stores after restraining spending at yearend. January
retail sales increased 0.5% after a 0.1% decline during December which
was less than reported initially. The latest figure was firmer than
Consensus expectations for a 0.3% rise. Moreover, the rebound had
nothing to do with shopping for a motor vehicle. Retail sales less
autos rose 0.6% after a 0.2% slip in December that was slightly less
than reported last month. As apparent in earlier figures, the trend in
retail spending has improved. On a three-month basis retail sales rose
at a 9.7% annual rate through January versus the 15.8% rate of decline
one year ago. Less autos, spending growth also recovered on a
three-month basis to 10.1% from -17.9% one year ago.&nbsp;</p>
<p>Internet &amp; catalogue sales continued strong. They
posted a 1.6%
rise in January (12.4% y/y) following similarly strong increases during
the prior four months. The three-month rate of gain rose to 28.5% from
-9.7% one year ago.&nbsp;</p>
<p> "Core" discretionary spending also
improved as general merchandise store sales rose 1.5% (3.2% y/y) and
recovered a 1.1% December decline. Sales of electronics &amp;
appliances were strong as well and posted a 1.2% gain but remained down
7.0% from last January. Earlier weakness in clothing &amp;
accessory stores also stabilized and rose 0.3%, however, price
discounting left the y/y gain at just 0.3%. Furniture &amp; home
furnishing store sales have yet to recover much. A 1.4% January decline
(-4.4% y/y) left the three-month annualized growth rate at a negative
1.3%. That was, however, improved from -21.6% at its worst.&nbsp;</p>
<p>Motor
vehicle sales were unchanged last month (5.5% y/y) but that was better
than the 4.2% m/m decline in unit sales. Higher gasoline prices played
a part in the retail sales picture. Gasoline purchases, however, ticked
up just 0.4% (29.0% y/y) even though prices rose 4.0% (50.5% y/y).
Sales of building materials fell 1.2% (-6.3% y/y).</p>
<p>The retail sales
data are available in Haver's <b>USECON</b> database.
&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212c.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">&nbsp;</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="odd">
<td class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM" style="color: black;">Total Retail Sales &amp; Food
Services</a> (%)</td>
<td>0.5</td>
<td>-0.1</td>
<td>2.0</td>
<td>4.7</td>
<td>-6.0</td>
<td>-0.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; </b>Excluding
Autos</td>
<td>0.6</td>
<td>-0.2</td>
<td>2.0</td>
<td>4.6</td>
<td>-4.7</td>
<td>2.4</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Non-Auto Less Gasoline</td>
<td>0.6</td>
<td>-0.3</td>
<td>1.1</td>
<td>2.0</td>
<td>-1.9</td>
<td>1.6</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Every Picture Tells A Story...Or
Do It?</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> February 12, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left" height="265" width="353"></p>
<p>Don&#8217;t judge a book by its cover- Please pardon the bad grammar
in the title. But I am hopelessly imprinted with Rod Stewart&#8217;s, &#8220;Every
Picture tells, a story, don&#8217;t it?&#8217; In this case&#8230; I wonder: does it or
as SNL&#8217;s Seth Meyers might ask: &#8216;does it, does it really?&#8217; What I mean
is this: does the picture tell THE story? The story in the picture
above is quite clear that GDP in Europe is getting better and at a fast
rate. The DROP in GDP is cut sharply in its Q4 embodiment compared to
its Q3 embodiment for EMU, Germany and for France.<br>
<br>
</p>
<p>Digging deeper -- Yet read ANY market story on these results
for today. The clear theme is one of disappointment. Why are people
disappointed if the Yr-over-Yr drops in GDP are dissipating so fast?
It&#8217;s because a percentage change is a function of TWO things, the
current value and the past value that forms the base for the percentage
change calculation. And the BIG DROP OFF in the pace of GDP&#8217;s decline
Yr/Yr in Europe is more due to a shift in the base than to the result
in the new quarter. In the new quarter GDP rose by only 0.4% at an
annualized rate (that&#8217;s a thin 0.1% Q/Q). So why did the yr/yr pace
improve so much? It&#8217;s because of the shift in the base to Q4 2008 from
Q3 2008. In Q4 2008 EMU GDP fell by 7.4% at an annualized rate. Compare
that to its 2.7% decline in Q3 of 2008. What this means is that we are
comparing growth in Q4 2009 to a much lower base than we did in
2009-Q3, so even a small amount of growth (like 0.1% in the quarter)
makes the Yr/Yr comparison look much better than it did in Q3. It&#8217;s
base-illusion.<br>
<br>
</p>
<p>Euro-sclerosis strikes again - The simple fact is that
Europe&#8217;s recovery is slowing down. The US is speeding up. Europe&#8217;s
vaunted social welfare system may have helped to mitigate the declines
in GDP in the recession but in recovery it is providing no springboard
for growth. Meanwhile, the US recovery is powering ahead. We are set up
for the usual sort of configuration in global growth where the US
economy becomes the engine of growth for the global economy as the US
current account deficit rips a gaping hole in the US balance of
payments and feeds stimulus to the rest of world like a mother
breastfeeding her helpless infant child.<br>
<br>
</p>
<p>You put the load right one me&#8230;One problem with this emerging
scenario is that the US consumer is not is the shape he/she usually is
in a recovery and may not be able to suckle the global economy. While
US retail sales were better than expected in January the result is
still less that robust. It is not clear how much lift the US consumer
will add to the US recovery let alone to the economies of the rest of
the world. The US does import a lot of consumer goods. So a recovering
US consumer will purchase imports. But how many imports can the US
consumer buy if US growth goes flat as the diverted income and blunted
multiplier from surging foreign exports to the US stunt economic growth
back home?<br>
<br>
</p>
<p>The blame game - Get ready for the rest of the world to start
blaming the US for widening deficits even as the US consumer fuels
recovery in Europe and beyond. The simple fact is that China, Japan and
Europe- especially Germany- all want to have export-led growth. They
act as though it&#8217;s a right. If they do who will import? China and Japan
have amassed huge foreign exchange reserves, an act that clearly has
facilitated their currencies, remaining weaker than otherwise, enabling
their strategy of export-led growth while at he same time undermining
US growth and US finanical health..<br>
<br>
</p>
<p>Europe and the 800 pound gorilla - We do not yet have
consumption figures for Europe&#8217;s flash GDP results. Flash-GDP is
usually just a total and may be accompanied by some descriptive
comments but little or no supporting details on GDP. Be sure that this
paltry performance from GDP in Europe is not good news. The hike in
reserve requirements in China has people worried about in growth there
as well. There is a theme of growth pessimism taking hold again
clobbering global stock markets. But China is a taker- an exporter- not
a giver. It does not provide net domestic demand to the world. Its
growth merely absorbs income from elsewhere transforming it into growth
for&#8230;CHINA! In turn that helps to pressure global input prices
(commodity prices). Strong growth in China is usually not beneficial to
the West. People who profess worry over China growth prospects don&#8217;t
get it. It&#8217;s a big and growing ever more complicated world. Be sure to
know the facts. Markets often react to overall themes and only later
get more sophisticated by sorting out winners and losers. Right now
there is an emerging theme of weakness. Europe is faltering China may
slow. There are still lingering concerns about the status of growth in
the US&#8230;Weakness abroad will have repercussions for the US, but the US
recovery is still on track. So don&#8217;t throw out the baby with bath water
in your haste to dump dropping stocks. Markets will eventually &#8216;get it
right&#8217; and face a truer version of reality. China may be an 800 pound
gorilla but if he is sick and starts eating fewer bananas, there are
more for you.<br>
</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"><b>European
Growth for Selected Flash GDP Results</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Q/Q Saar</td>
<td colspan="3">Yr/Yr </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>3.8%</td>
<td>9.9%</td>
<td>-3.1%</td>
<td>-1.4%</td>
<td>-3.1%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>2.4%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>-0.3%</td>
<td>-2.3%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.0%</td>
<td>2.9%</td>
<td>1.8%</td>
<td>-2.4%</td>
<td>-4.8%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>-3.1%</td>
<td>-1.9%</td>
<td>-1.2%</td>
<td>-2.6%</td>
<td>-2.5%</td>
<td>-1.9%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.9%</td>
<td>2.6%</td>
<td>-1.9%</td>
<td>-2.8%</td>
<td>-4.6%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>1.0%</td>
<td>2.1%</td>
<td>-4.2%</td>
<td>-2.6%</td>
<td>-4.0%</td>
<td>-5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>0.4%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-4.0%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Memo:US</td>
<td>5.7%</td>
<td>2.2%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-2.6%</td>
<td>-3.8%</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>0.4%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-4.0%</td>
<td>-4.8%</td>
</tr>
</tbody>
</table>
<span id="articletitle">U.S. Business Inventories Slip
After Two-Month Increase</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> February 12, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212h.jpg" style="width: 353px; height: 265px;" align="right">A
developing
trend towards accumulation of business inventories was cut short in
December. The 0.2% yearend decline partially reversed gains during the
prior two months which were the first in over a year. For the year
business inventories fell a record 9.7% as prices and volumes declined.
Perhaps the earlier accumulation resulted from slower sales growth.
Business sales in December were below the pace during three of the
prior four months. As a result, the inventory/sales ratio fell back to
the cycle low of 1.26 from a January '09 high of 1.46.</p>
<p>Lower
manufacturing and wholesale inventories led the December decline after
earlier gains which, in the case of wholesalers, was led by higher
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212i.jpg" style="width: 353px; height: 265px;" align="right">petroleum
prices.&nbsp;Total retail inventories were unchanged
after steady declines since August 2008. Cuts last month were led by
food &amp; beverage stores with a 1.5% (-0.6% y/y) decline.
Elsewhere, inventory cutting slowed from earlier strong declines.
Furniture inventories even have risen during three of the last four
months while clothing and general merchandise inventories are falling
at slower rates. Auto dealer inventories slipped m/m and are down by
one-quarter y/y.</p>
<p>Retailers' inventory/sales ratio fell to a new cycle
low with sales gains and little inventory growth. The I/S ratio for
department stores led the decline with little increase elsewhere.
Wholesalers' ratio also fell to a near-record low while the I/S ratio
in the factory sector fell to the lowest level since July
2008.&nbsp;</p>
<p> The
business sales and inventory data are available in Haver's <b>USECON</b>
database.</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>Business
Inventories (%)</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</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="odd">
<td class="firstcol">Total</td>
<td>-0.2</td>
<td>0.5</td>
<td>0.3</td>
<td>-9.7</td>
<td>-9.7</td>
<td>0.4</td>
<td>4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.0</td>
<td>-0.2</td>
<td>-0.0</td>
<td>-10.6</td>
<td>-10.6</td>
<td>-3.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Auto</td>
<td>0.2</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-5.1</td>
<td>-5.1</td>
<td>-1.9</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.8</td>
<td>1.6</td>
<td>0.6</td>
<td>-10.2</td>
<td>-10.2</td>
<td>2.5</td>
<td>6.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.4</td>
<td>-8.6</td>
<td>-8.6</td>
<td>2.2</td>
<td>3.7</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Michigan Consumer Sentiment Dips
From Recent High</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> February 12, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212e.jpg" style="width: 353px; height: 265px;" align="right">The
Reuters/University of Michigan Index of Consumer Sentiment for
mid-February fell modestly to 73.7 from is two-year high of to 74.4
reached last month. The latest figure fell short of Consensus
expectations for a higher reading of 75.0; however, it compares
favorably to the low of 55.3 in November 2008. During the last ten
years there has been a two-thirds correlation between the level of
sentiment and the three-month change real consumer spending.&nbsp;</p>
<p>Expected economic conditions accounted for the decline with a
4.6% m/m
drop to the lowest level since November. Expectations for business
conditions during the next year and during the next five years fell
moderately but expectations for personal finances fell to the lowest
level in twelve months.</p>
<p> Sentiment about current economic conditions
increased by another 3.7% to its highest level since March 2008.
Assessments of current financial conditions were unchanged m/m at their
highest since September of 2008. Buying conditions for large household
goods, including furniture, refrigerators, stoves &amp;
televisions, also moved up another 5.3% to the highest level since
January 2008.&nbsp;&nbsp;</p>
<p> Expected price inflation during the
next year slipped m/m to 3.3% but it was up from the December 2008
reading of 1.7%.&nbsp;Respondents' view of government policy, which
may eventually influence economic expectations, slipped. Just sixteen
percent of respondents thought that a good job was being done by
government versus 40% who thought a poor job was being done, a
twelve-month high.&nbsp;&nbsp;</p>
<p>The Reuters/University of
Michigan survey data are not seasonally adjusted. The reading is based
on telephone interviews with about 500 households at month-end. These
results are based on about 320 interviews. The summary indexes are in
Haver's <b>USECON </b>database with details in the
proprietary <b>UMSCA </b>database.&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212f.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212g.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/@EF/@EF14/@EF1402/@EF1402.HTM"><b>University
of Michigan</b></a></th>
<th scope="col"><b>Mid-February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>Feb. y/y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>73.7</td>
<td>74.4</td>
<td>72.5</td>
<td><span>30.9%</span></td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>84.1</td>
<td>81.1</td>
<td>78.0</td>
<td>28.4</td>
<td>69.6</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>66.9</td>
<td>70.1</td>
<td>68.9</td>
<td>32.5</td>
<td>64.1</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>
</span>
</body></html>

U.S. Retail Sales Recover FromYearend Blues

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<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211e.jpg" style="width: 353px; height: 265px;" align="right">Injection of
liquidity by the Federal Reserve into the banking system typically
raises inflationary concerns in the credit markets. And this time is no
different. Long-term interest rates have remained fairly stable as the
Fed funds rate has lingered near zero for over one year. The steepened
yield curve thus suggests a future inflationary problem.</p><p>Not only has
the Fed held interest rates low, it's provided liquidity to the banks,
particularly through its Term Auction Facility (TAF). Through last year
this provision fell as banks re-liquefied. But so far, it has not
stimulated bank lending and money supply growth has decelerated
sharply. Instead, the liquidity has been used to shore up balance
sheets.</p><p> Indeed, money supply growth (M2) has decelerated as demand
deposit balances have been flat since the middle of last year.
Precaution remains the operative word for banks as they lend and also
for individuals who remain cautious about job prospects.</p><p>The data
referenced above can be found in Haver's <b>WEEKLY</b>
database.</p><p> <b>Interest on Required Balances and Excess Balances </b>from
the Federal Reserve Board is available&nbsp; <a href="http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm">here</a>.&nbsp;
Earlier this week, Chairman Bernanke indicated in Congressional
testimony that the interest rate shown here would become a key tool in
the Fed's liquidity management going forward.&nbsp; These data are
also in Haver's <b>WEEKLY</b> database.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211f.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Liquidity Measures</a></b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reserve Bank Assets - Term
Auction Facility</td>
<td>$3,8531M</td>
<td>$7,518</td>
<td>$450,319</td>
</tr>
<tr>
<td class="firstcol">Yield Curve (10 Yr. Treas. less
Fed Funds)</td>
<td>3.62%</td>
<td>3.10%</td>
<td>1.74%</td>
</tr>
<tr class="odd">
<td class="firstcol">Money Supply - Demand Deposits</td>
<td>-0.5% y/y</td>
<td>24.4 % y/y</td>
<td>11.3</td>
</tr>
</tbody>
</table>
</span></body></html>

Injection of liquidity by the Federal Reserve into the banking system typically raises inflationary concerns in the credit markets. And this time is no different. Long-term interest rates have remained fairly stable as the Fed funds [...]

Federal Reserve Injects Liquidity Into Banks

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211d.jpg" style="width: 353px; height: 265px;" align="right">Seven
quarters in a row and still no hint of growth in Spain&#8217;s GDP. The
quarter to quarter drops are diminishing and the year-over-year drop is
lessening but the dropping continues.</p>
<p>On a day that Greece is getting
assistance because its own people won&#8217;t pay taxes to service the
payments on debt for their own bills, it must be a bitter day for
Spain. Spain&#8217;s construction sector blew up in the financial crisis and
has taken the economy down along with it. Spain accounts for the bulk
of European unemployment. Because its problem is real estate it will
not be fixed soon. Its real estate woes cannot be exported. Spain has a
long hard road ahead.</p><p>
&nbsp;But economists like to look at growth rates and
the growth rates in the chart are turning higher. Yes, they are still
negative but they are headed higher. Spain has been making progress but
not enough to translate into positive growth. </p>
<p>Household consumption
has been faltering (we do not have the Q4 reading on this yet). Much of
turn has been at the hand of government spending- that&#8217;s spending when
other sectors won&#8217;t. Both exports and imports are rebounding- exports a
bit faster. </p><p>
At this point Spain is still trying just to hold it
together. It will still take sometime to know what its recovery is made
of. It has yet to cross into that space. Spain remains a euro-laggard.
</p>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"><b>Spain's
FLASH GDP</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Q/Q</td>
<td style="font-weight: bold;">Yr/Yr</td>
</tr>
<tr>
<td class="firstcol">Q4-2009</td>
<td>-0.4</td>
<td>-3.1</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-2009</td>
<td>-1.2</td>
<td>-4.0</td>
</tr>
<tr>
<td class="firstcol">Q2-2009</td>
<td>-4.4</td>
<td>-4.2</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-2009</td>
<td>-6.4</td>
<td>-3.2</td>
</tr>
<tr>
<td class="firstcol">Q4-2008</td>
<td>-4.4</td>
<td>-1.2</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-2008</td>
<td>-2.4</td>
<td>0.5</td>
</tr>
<tr>
<td class="firstcol">Q2-2008</td>
<td>0.0</td>
<td>1.7</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-2008</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Q4-2007</td>
<td>2.4</td>
<td>3.1</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-2007</td>
<td>2.8</td>
<td>3.5</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Seven quarters in a row and still no hint of growth in Spain’s GDP. The quarter to quarter drops are diminishing and the year-over-year drop is lessening but the dropping continues. On a day that Greece is getting assistance because [...]

Seven Strikes And You’re Out?

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<colgroup></colgroup>
<thead><tr>
<th scope="col" class="firstcol"> Today's scheduled reports on retail sales and business inventories will be released tomorrow.</th></tr></thead></table>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211a.jpg" style="width: 353px; height: 265px;" align="right"> Earlier
suggestions of labor market deterioration were reversed by today's
Labor Department report that initial claims. Jobless insurance fell
43,000 to the lowest level since early-January. Last week's decline to
440,000 followed an upwardly revised increase to 483,000 during the
prior week and claims remained near the lowest level since late-August,
2008. Initial claims were down from the recession peak of 674,000 hit
last March. Consensus expectations had been for a lesser decline to
465,000 claims. The four-week moving average of initial claims fell
slightly to 468,500 and remained near the cycle low.&nbsp;</p><p> Continuing
claims for unemployment insurance during the latest week also declined
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211b.jpg" style="width: 353px; height: 265px;" align="right">
to a new cycle low and left claims down by one-third since late-June.
Continuing claims are at the lowest level since early-January of last
year. The overall decline is a function of the improved job market but
also reflects the exhaustion of 26 weeks of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims fell to a cycle
low of 4,603,500. This series dates back to
1966.&nbsp;</p><p>&nbsp;Extended benefits for unemployment insurance
rose moderately to 236,041 from its cycle low during the fourth week of
January and were down by two-thirds from a peak of 597,688 reached in
November.&nbsp;</p><p>The insured rate of unemployment remained stable
at a low of 3.5%. The rate reached a high of 5.2% during late-June.
During the last ten years, there has been a 93% correlation between the
level of the insured unemployment rate and the overall rate of
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211c.jpg" style="width: 353px; height: 265px;" align="right">
unemployment published by the Bureau of Labor
Statistics.&nbsp;</p><p> The highest insured
unemployment rates in the week ending January 15 were in Alaska (7.5%),
Wisconsin (6.4), Pennsylvania (6.2), Montana (6.2), Michigan (5.8),
North Carolina (5.4), Washington (5.3) and Connecticut (5.3). The
lowest insured unemployment rates were in Virginia (2.3), Texas (2.5),
Florida (3.4), Maryland (3.6), Wyoming (3.7), Mississippi (3.8), Ohio
(3.9), Indiana (4.0), New York (4.1) and Maine (4.4). These data are
not seasonally adjusted but the overall insured unemployment rate is.</p><p>The unemployment insurance claims data is available in Haver's <b>WEEKLY</b>
database and the state data is in the <b>REGIONW</b>
database.<span style="font-weight: bold;"></span></p><p><span style="font-weight: bold;"></span><b>Productivity, Welfare, and Reallocation:</b>
<b>Theory and Firm&#8208;Level Evidence</b> from the Federal
Reserve Bank of New England can be found <a href="http://www.bos.frb.org/economic/wp/wp2009/wp0919.pdf">here</a>.</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/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></b></th>
<th scope="col"><b>2/5/10</b></th>
<th scope="col"><b>1/30/10</b></th>
<th scope="col"><b>1/23/10</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 class="odd">
<td class="firstcol">Initial Claims</td>
<td>440</td>
<td>483</td>
<td>472</td>
<td>-28.7%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,538</td>
<td>4,617</td>
<td>-4.6%</td>
<td>5,835</td>
<td>3,345</td>
<td>2,552</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.5</td>
<td>3.5</td>
<td>3.8 (2/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</span></body></html>

Earlier suggestions of labor market deterioration were reversed by today's Labor Department report that initial claims. Jobless insurance fell 43,000 to the lowest level since early-January. Last week's decline to 440,000 followed an [...]

U.S. Initial Jobless Insurance Claims Reverse Three-Week Increase

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<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th scope="col" class="firstcol"> Today's
scheduled reports on retail sales and business inventories will be
released tomorrow.</th>
</tr>
</thead>
</table>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211a.jpg" style="width: 353px; height: 265px;" align="right">Earlier
suggestions of labor market deterioration were reversed by today's
Labor Department report that initial claims. Jobless insurance fell
43,000 to the lowest level since early-January. Last week's decline to
440,000 followed an upwardly revised increase to 483,000 during the
prior week and claims remained near the lowest level since late-August,
2008. Initial claims were down from the recession peak of 674,000 hit
last March. Consensus expectations had been for a lesser decline to
465,000 claims. The four-week moving average of initial claims fell
slightly to 468,500 and remained near the cycle low.&nbsp;</p>
<p> Continuing
claims for unemployment insurance during the latest week also declined
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211b.jpg" style="width: 353px; height: 265px;" align="right">to
a new cycle low and left claims down by one-third since late-June.
Continuing claims are at the lowest level since early-January of last
year. The overall decline is a function of the improved job market but
also reflects the exhaustion of 26 weeks of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims fell to a cycle
low of 4,603,500. This series dates back to
1966.&nbsp;</p>
<p>&nbsp;Extended benefits for unemployment insurance
rose moderately to 236,041 from its cycle low during the fourth week of
January and were down by two-thirds from a peak of 597,688 reached in
November.&nbsp;</p>
<p>The insured rate of unemployment remained stable
at a low of 3.5%. The rate reached a high of 5.2% during late-June.
During the last ten years, there has been a 93% correlation between the
level of the insured unemployment rate and the overall rate of
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211c.jpg" style="width: 353px; height: 265px;" align="right">unemployment
published by the Bureau of Labor
Statistics.&nbsp;</p>
<p> The highest insured
unemployment rates in the week ending January 15 were in Alaska (7.5%),
Wisconsin (6.4), Pennsylvania (6.2), Montana (6.2), Michigan (5.8),
North Carolina (5.4), Washington (5.3) and Connecticut (5.3). The
lowest insured unemployment rates were in Virginia (2.3), Texas (2.5),
Florida (3.4), Maryland (3.6), Wyoming (3.7), Mississippi (3.8), Ohio
(3.9), Indiana (4.0), New York (4.1) and Maine (4.4). These data are
not seasonally adjusted but the overall insured unemployment rate is.</p>
<p>The unemployment insurance claims data is available in Haver's
<b>WEEKLY</b>
database and the state data is in the <b>REGIONW</b>
database.<span style="font-weight: bold;"></span></p>
<p><span style="font-weight: bold;"></span><b>Productivity,
Welfare, and Reallocation:</b>
<b>Theory and Firm&#8208;Level Evidence</b> from the Federal
Reserve Bank of New England can be found <a href="http://www.bos.frb.org/economic/wp/wp2009/wp0919.pdf">here</a>.</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/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></b></th>
<th scope="col"><b>2/5/10</b></th>
<th scope="col"><b>1/30/10</b></th>
<th scope="col"><b>1/23/10</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 class="odd">
<td class="firstcol">Initial Claims</td>
<td>440</td>
<td>483</td>
<td>472</td>
<td>-28.7%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,538</td>
<td>4,617</td>
<td>-4.6%</td>
<td>5,835</td>
<td>3,345</td>
<td>2,552</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.5</td>
<td>3.5</td>
<td>3.8 (2/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Seven Strikes And You&#8217;re Out?</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> February 11, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211d.jpg" style="width: 353px; height: 265px;" align="right">Seven
quarters in a row and still no hint of growth in Spain&#8217;s GDP. The
quarter to quarter drops are diminishing and the year-over-year drop is
lessening but the dropping continues.</p>
<p>On a day that Greece is getting
assistance because its own people won&#8217;t pay taxes to service the
payments on debt for their own bills, it must be a bitter day for
Spain. Spain&#8217;s construction sector blew up in the financial crisis and
has taken the economy down along with it. Spain accounts for the bulk
of European unemployment. Because its problem is real estate it will
not be fixed soon. Its real estate woes cannot be exported. Spain has a
long hard road ahead.</p>
<p>&nbsp;But economists like to look at growth rates and
the growth rates in the chart are turning higher. Yes, they are still
negative but they are headed higher. Spain has been making progress but
not enough to translate into positive growth. </p>
<p>Household consumption
has been faltering (we do not have the Q4 reading on this yet). Much of
turn has been at the hand of government spending- that&#8217;s spending when
other sectors won&#8217;t. Both exports and imports are rebounding- exports a
bit faster. </p>
<p>At this point Spain is still trying just to hold it
together. It will still take sometime to know what its recovery is made
of. It has yet to cross into that space. Spain remains a euro-laggard.
</p>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"><b>Spain's
FLASH GDP</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Q/Q</td>
<td style="font-weight: bold;">Yr/Yr</td>
</tr>
<tr>
<td class="firstcol">Q4-2009</td>
<td>-0.4</td>
<td>-3.1</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-2009</td>
<td>-1.2</td>
<td>-4.0</td>
</tr>
<tr>
<td class="firstcol">Q2-2009</td>
<td>-4.4</td>
<td>-4.2</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-2009</td>
<td>-6.4</td>
<td>-3.2</td>
</tr>
<tr>
<td class="firstcol">Q4-2008</td>
<td>-4.4</td>
<td>-1.2</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-2008</td>
<td>-2.4</td>
<td>0.5</td>
</tr>
<tr>
<td class="firstcol">Q2-2008</td>
<td>0.0</td>
<td>1.7</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-2008</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Q4-2007</td>
<td>2.4</td>
<td>3.1</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-2007</td>
<td>2.8</td>
<td>3.5</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Federal Reserve Injects Liquidity
Into Banks</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> February 11, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211e.jpg" style="width: 353px; height: 265px;" align="right">Injection
of
liquidity by the Federal Reserve into the banking system typically
raises inflationary concerns in the credit markets. And this time is no
different. Long-term interest rates have remained fairly stable as the
Fed funds rate has lingered near zero for over one year. The steepened
yield curve thus suggests a future inflationary problem.</p>
<p>Not only has
the Fed held interest rates low, it's provided liquidity to the banks,
particularly through its Term Auction Facility (TAF). Through last year
this provision fell as banks re-liquefied. But so far, it has not
stimulated bank lending and money supply growth has decelerated
sharply. Instead, the liquidity has been used to shore up balance
sheets.</p>
<p> Indeed, money supply growth (M2) has decelerated as demand
deposit balances have been flat since the middle of last year.
Precaution remains the operative word for banks as they lend and also
for individuals who remain cautious about job prospects.</p>
<p>The data
referenced above can be found in Haver's <b>WEEKLY</b>
database.</p>
<p> <b>Interest on Required Balances and Excess Balances </b>from
the Federal Reserve Board is available&nbsp; <a href="http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm">here</a>.&nbsp;
Earlier this week, Chairman Bernanke indicated in Congressional
testimony that the interest rate shown here would become a key tool in
the Fed's liquidity management going forward.&nbsp; These data are
also in Haver's <b>WEEKLY</b> database.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211f.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Liquidity Measures</a></b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reserve Bank Assets - Term
Auction Facility</td>
<td>$3,8531M</td>
<td>$7,518</td>
<td>$450,319</td>
</tr>
<tr>
<td class="firstcol">Yield Curve (10 Yr. Treas. less
Fed Funds)</td>
<td>3.62%</td>
<td>3.10%</td>
<td>1.74%</td>
</tr>
<tr class="odd">
<td class="firstcol">Money Supply - Demand Deposits</td>
<td>-0.5% y/y</td>
<td>24.4 % y/y</td>
<td>11.3</td>
</tr>
</tbody>
</table>
</span>
</body></html>

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<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100210e.jpg" style="width: 353px; height: 265px;" align="right">
The Mortgage
Bankers Association reported that mortgage applications slipped 1.2%
last week after a 21.0% jump at the end of January. As a result,
applications began February up sharply from last month.&nbsp;
&nbsp;</p><p>Applications to <i>refinance</i> mortgages
increased 1.4% last week and were double the June low due to rate
declines. Applications to <i>purchase</i> a home have not
shared that degree of strength. They fell 7.0% last week after
declining in January from December. The volatility in the numbers
likely reflects the expiration of an up-to $8,000 Federal tax credit
for first-time homebuyers which was extended to April. During the last
ten years there has been a 51% correlation between the y/y change in
purchase applications and the change in new plus existing single family
home sales. The correlation has lessened recently.</p><p>The effective fixed
interest rate on conventional 15-year mortgages slipped last week to
4.57%. That equaled the November low and was down from the June average
of 5.21%. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100210f.jpg" style="width: 353px; height: 265px;" align="right">
For 30-year mortgages the rate ticked up last week to 5.16%
from a November average of 5.06%. Rates reached a high of 5.79% in
early-June. Interest rates on fixed 15-year and 30-year mortgages are
closely correlated (near-90%) with the rate on 10-year Treasury
securities. Rates on adjustable one-year mortgages fell to 6.64% last
week from a November average of 6.81%.&nbsp;</p><p>Since a December low,
the number of fixed-rate mortgages has risen by one third and roughly
equaled the rise in adjustable-rate mortgage
applications.&nbsp;</p><p>The Mortgage Bankers Association
surveys between 20 to 35 of the top lenders in the U.S. housing
industry to derive its refinance, purchase and market indexes. The
weekly survey covers roughly 50% of all U.S. residential mortgage
applications processed each week by mortgage banks, commercial banks
and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.<span class="title">&nbsp;</span>The figures for weekly
mortgage applications are available in Haver's <b>SURVEYW</b>
database.</p><p><b>Federal Reserve's exit strategy</b>
is this morning's House testimony by Fed Chairman Ben S. Bernanke and
it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20100210a.htm">here</a>.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM%22" style="color: black;"><b>MBA Mortgage Applications
(SA, 3/16/90=100)</b></a></th>
<th scope="col"><b>02/05/10</b></th>
<th scope="col"><b>01/29/10</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>613.1</td>
<td>620.7</td>
<td>2.1%</td>
<td>736.4</td>
<td>642.9</td>
<td>652.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>221.2</td>
<td>237.8</td>
<td>-6.2</td>
<td>263.5</td>
<td>345.4</td>
<td>424.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,893.9</td>
<td>2,854.8</td>
<td>6.3</td>
<td>3,509.2</td>
<td>2,394.1</td>
<td>1,997.9</td>
</tr>
<tr>
<td class="firstcol">15-Year Mortgage Effective
Interest Rate (%)</td>
<td>4.57</td>
<td>4.62</td>
<td>5.07 (02/09)</td>
<td>4.85</td>
<td>5.9</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</span></body></html>

The Mortgage Bankers Association reported that mortgage applications slipped 1.2% last week after a 21.0% jump at the end of January. As a result, applications began February up sharply from last month. Applications to refinance [...]

U.S. Weekly Mortgage Applications Slip

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.

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**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.

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Asia

Economic Letter from Asia: A Bumpy Start

Michael J. Moran

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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.

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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

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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.

Economy in Brief

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