Tom Moeller

A sense of modest improvement returned to small business. The National Federation of Independent Business (NFIB) reported their January small business optimism index made up the prior two months' declines with an increase to 88.0. [...]

U.S. Small Business OptimismImproves Modestly

Louise Curley

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<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100208d.jpg" align="left" border="0" height="265" width="353"></p>
<p>The Bank of France and France's INSEE (Institute National des
Statistiques et Etudes Economiques) publish measures of business
sentiment in industry. The Bank of France measure canvasses about 6000
managers on various business conditions. The responses are based on the
difference between those who view conditions optimistically and those
who views them pessimistically. The resulting balances of opinion are
expressed in terms of their long term average which is set to 100. Thus
the January value of 103.89, released today, indicates that business
sentiment is about 4% above its long term average. It has improved, if
somewhat erratically, since December 2008 when the indicator was 67.40
or about 33% below the long term average but it is still below 109.69,
the peak reached in October 2007, before the current downturn started.</p>
<p>INSEE's measure, which was released last week, is based on the
responses of 4000 companies engaged in manufacturing, food processing
industries and petroleum refining. It also collects balances of opinion
on various business conditions, but expresses the data such that its
average is 100 with a standard deviation of 10. The INSEE measure at 92
for January indicates that sentiment is below average--8%--but it has
been improving since March 2009 when it was 69 or 31%, or more than
three standard deviations, below average.</p>
<p>The two measures are shown in the attached chart. As can be
seen, there is a high degree of correlation between the two. Although
both show that much of the loss in sentiment suffered during the
current downturn has been recovered both show that business sentiment
is well below the peaks reached in <i>2000.</i></p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Business
Sentiment in Industry</b></th>
<th scope="col"><b>Jan 10&nbsp;</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Jan 09</b></th>
<th scope="col"><b>M/M % Chg</b></th>
<th scope="col"><b>Y/Y % Chg</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Bank of France</td>
<td>103.89</td>
<td>102.19</td>
<td>70.47</td>
<td>1.66</td>
<td>47.42</td>
<td>85.89</td>
<td>90.62</td>
<td>107.18</td>
</tr>
<tr>
<td class="firstcol">INSEE</td>
<td>92</td>
<td>88</td>
<td>75</td>
<td>4.55</td>
<td>26.67</td>
<td>79</td>
<td>97</td>
<td>109</td>
</tr>
</tbody>
</table>
</body></html>

The Bank of France and France's INSEE (Institute National des Statistiques et Etudes Economiques) publish measures of business sentiment in industry. The Bank of France measure canvasses about 6000 managers on various business [...]

Two French Authorities Point To Improving Business Sentiment

Robert Brusca

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100208c.jpg" style="width: 353px; height: 265px;" align="right">Canada&#8217;s
housing starts are in a dig-out phase. The sharp-seeming 5.8% rise this
month only takes starts back toward their recent local peak. Starts are
sharply up from their financial crisis low point but are still well
short of being back at what has passed as normal activity levels in
recent years.</p>
<p>Building permits, which lag housing starts are up on
strong growth over the past 3- 6- and 12-months&nbsp;</p>
<p>House price data that
are current only through November, show a rise in November. House
prices are up over three-months as well as the last six months. Over
12-months prices still are lower by 1.1%.&nbsp;</p>
<p>Canada&#8217;s housing market is
still obviously struggling to recover. It has moved up strongly from
the financial crisis lows. But momentum has become suspect. But suspect
momentum is not the same as backsliding. Building permits continue to
pile up albeit at a slower pace. Canada&#8217;s housing market seems to be
suffering the same fate as recovery in many of the worlds leading
markets. It has had a vigorous rebound but is flattening out or slowing
its paces of increase well short of restoring its former level of
activity.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="4" scope="col"><b>Canada's
Housing
Starts</b>
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Starts</td>
<td>Permit</td>
<td>House Prices</td>
</tr>
<tr class="odd">
<td colspan="4" class="firstcol">Month-to-Month</td>
</tr>
<tr>
<td class="firstcol">Jan-2010</td>
<td>5.8%</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Dec-2009</td>
<td>0.2%</td>
<td>2.4%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Nov-2009</td>
<td>-6.5%</td>
<td>11.5%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td colspan="4" class="firstcol">Sequential Growth</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>-0.9%</td>
<td>17.1%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>34.2%</td>
<td>42.5%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>37.4%</td>
<td>33.5%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">From</td>
<td>Jan-2010</td>
<td>Dec-2009</td>
<td>Nov-2009</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Canada’s housing starts are in a dig-out phase. The sharp-seeming 5.8% rise this month only takes starts back toward their recent local peak. Starts are sharply up from their financial crisis low point but are still well short of [...]

Canada Housing Starts Rise Still It Is Stalked By The Threat Of A Stalled Rebound

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100208a.jpg" style="width: 353px; height: 265px;" align="right"> Consumers
steered away from credit last year.&nbsp; In fact, they avoided it
to a record degree as the outstanding balance fell by $102.3B, or 4.0%,
by yearend from 2008. Released late on Friday, the December decline of
$1.8B was the fifteenth monthly drop since summer 2008 though it was
relatively small. Consumer credit outstanding as a percentage of
disposable income fell to 22.0% from its 2005 high of 24.7%.
Nevertheless, these rates remain up from the low near 16% in
1992.&nbsp;</p><p> Revolving credit usage fell $8.5B in December and by a
record 9.5% during the year. That was part of a pullback that began
late in 2008. Finance companies lowered lending by more than one third
y/y, commercial bank lending fell a record 14.1%, pools of securitized
assets fell 2.6% and savings institutions pulled back lending by 6.1%
y/y. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100208b.jpg" style="width: 353px; height: 265px;" align="right">
Loans from credit unions offset some of these declines with a 6.3%
increase.</p><p> Usage of non-revolving credit (autos &amp; other
consumer durables), which accounts for nearly two-thirds of the total,
rose $6.8B for December and recouped most of the November decline.
Nevertheless, the 0.7% y/y decline was the first since 1992. It
reflected a 13.8% shortfall in pools of securitized assets, an 11.7%
decline in finance company lending and a 7.2% drop in nonfinancial
business credit extensions. These declines were mostly offset by the
federal government &amp; Sallie Mae which expanded lending by more
than two-thirds y/y.</p><p> These figures are the major input to the Fed's
quarterly Flow of Funds accounts for the household sector.</p><p> Credit data
are available in Haver's <b>USECON</b> database. The Flow
of Funds data are in Haver's <b>FFUNDS</b> database.</p><p> <strong>Measuring
the equilibrium real interest rate</strong> from the Federal
Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2010/1qtr2010_part2_justiniano_primiceri.pdf">here</a>.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Consumer
Credit Outstanding (m/m Chg, SAAR)</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-1.8</td>
<td>$-21.8B</td>
<td>&nbsp;$-5.7B</td>
<td>-4.0%</td>
<td>-4.0%</td>
<td>1.6%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-8.5</td>
<td>$-13.8B</td>
<td>$-6.7B</td>
<td>-9.5%</td>
<td>-9.5</td>
<td>1.9%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$6.8</td>
<td>$-8.0B</td>
<td>$1.1B</td>
<td>-0.7%</td>
<td>-0.7%</td>
<td>1.4%</td>
<td>4.4%</td>
</tr>
</tbody>
</table>
</span></body></html>

Consumers steered away from credit last year. In fact, they avoided it to a record degree as the outstanding balance fell by $102.3B, or 4.0%, by yearend from 2008. Released late on Friday, the December decline of $1.8B was the [...]

U.S. Consumer Credit Becomes Third Rail Of U.S. Economy

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<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100208a.jpg" style="width: 353px; height: 265px;" align="right">Consumers
steered away from credit last year.&nbsp; In fact, they avoided it
to a record degree as the outstanding balance fell by $102.3B, or 4.0%,
by yearend from 2008. Released late on Friday, the December decline of
$1.8B was the fifteenth monthly drop since summer 2008 though it was
relatively small. Consumer credit outstanding as a percentage of
disposable income fell to 22.0% from its 2005 high of 24.7%.
Nevertheless, these rates remain up from the low near 16% in
1992.&nbsp;</p>
<p> Revolving credit usage fell $8.5B in December and by a
record 9.5% during the year. That was part of a pullback that began
late in 2008. Finance companies lowered lending by more than one third
y/y, commercial bank lending fell a record 14.1%, pools of securitized
assets fell 2.6% and savings institutions pulled back lending by 6.1%
y/y. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100208b.jpg" style="width: 353px; height: 265px;" align="right">
Loans from credit unions offset some of these declines with a 6.3%
increase.</p>
<p> Usage of non-revolving credit (autos &amp; other
consumer durables), which accounts for nearly two-thirds of the total,
rose $6.8B for December and recouped most of the November decline.
Nevertheless, the 0.7% y/y decline was the first since 1992. It
reflected a 13.8% shortfall in pools of securitized assets, an 11.7%
decline in finance company lending and a 7.2% drop in nonfinancial
business credit extensions. These declines were mostly offset by the
federal government &amp; Sallie Mae which expanded lending by more
than two-thirds y/y.</p>
<p> These figures are the major input to the Fed's
quarterly Flow of Funds accounts for the household sector.</p>
<p> Credit data
are available in Haver's <b>USECON</b> database. The Flow
of Funds data are in Haver's <b>FFUNDS</b> database.</p>
<p> <strong>Measuring
the equilibrium real interest rate</strong> from the Federal
Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2010/1qtr2010_part2_justiniano_primiceri.pdf">here</a>.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Consumer
Credit Outstanding (m/m Chg, SAAR)</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-1.8</td>
<td>$-21.8B</td>
<td>&nbsp;$-5.7B</td>
<td>-4.0%</td>
<td>-4.0%</td>
<td>1.6%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-8.5</td>
<td>$-13.8B</td>
<td>$-6.7B</td>
<td>-9.5%</td>
<td>-9.5</td>
<td>1.9%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$6.8</td>
<td>$-8.0B</td>
<td>$1.1B</td>
<td>-0.7%</td>
<td>-0.7%</td>
<td>1.4%</td>
<td>4.4%</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Canada Housing Starts Rise Still
It Is Stalked By The Threat Of A Stalled Rebound </span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> February 8, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100208c.jpg" style="width: 353px; height: 265px;" align="right">Canada&#8217;s
housing starts are in a dig-out phase. The sharp-seeming 5.8% rise this
month only takes starts back toward their recent local peak. Starts are
sharply up from their financial crisis low point but are still well
short of being back at what has passed as normal activity levels in
recent years.</p>
<p>Building permits, which lag housing starts are up on
strong growth over the past 3- 6- and 12-months&nbsp;</p>
<p>House price data that
are current only through November, show a rise in November. House
prices are up over three-months as well as the last six months. Over
12-months prices still are lower by 1.1%.&nbsp;</p>
<p>Canada&#8217;s housing market is
still obviously struggling to recover. It has moved up strongly from
the financial crisis lows. But momentum has become suspect. But suspect
momentum is not the same as backsliding. Building permits continue to
pile up albeit at a slower pace. Canada&#8217;s housing market seems to be
suffering the same fate as recovery in many of the worlds leading
markets. It has had a vigorous rebound but is flattening out or slowing
its paces of increase well short of restoring its former level of
activity.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="4" scope="col"><b>Canada's
Housing
Starts</b>
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Starts</td>
<td>Permit</td>
<td>House Prices</td>
</tr>
<tr class="odd">
<td colspan="4" class="firstcol">Month-to-Month</td>
</tr>
<tr>
<td class="firstcol">Jan-2010</td>
<td>5.8%</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Dec-2009</td>
<td>0.2%</td>
<td>2.4%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Nov-2009</td>
<td>-6.5%</td>
<td>11.5%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td colspan="4" class="firstcol">Sequential
Growth</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>-0.9%</td>
<td>17.1%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>34.2%</td>
<td>42.5%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>37.4%</td>
<td>33.5%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">From</td>
<td>Jan-2010</td>
<td>Dec-2009</td>
<td>Nov-2009</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Two French Authorities Point To
Improving
Business Sentiment
</span><br>
<span id="byline">by <a href="/comment/Curley.html">Louise
Curley</a> February 8, 2010</span>
<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100208d.jpg" align="left" border="0" height="265" width="353"></p>
<p>The Bank of France and France's INSEE (Institute National des
Statistiques et Etudes Economiques) publish measures of business
sentiment in industry. The Bank of France measure canvasses about 6000
managers on various business conditions. The responses are based on the
difference between those who view conditions optimistically and those
who views them pessimistically. The resulting balances of opinion are
expressed in terms of their long term average which is set to 100. Thus
the January value of 103.89, released today, indicates that business
sentiment is about 4% above its long term average. It has improved, if
somewhat erratically, since December 2008 when the indicator was 67.40
or about 33% below the long term average but it is still below 109.69,
the peak reached in October 2007, before the current downturn started.</p>
<p>INSEE's measure, which was released last week, is based on the
responses of 4000 companies engaged in manufacturing, food processing
industries and petroleum refining. It also collects balances of opinion
on various business conditions, but expresses the data such that its
average is 100 with a standard deviation of 10. The INSEE measure at 92
for January indicates that sentiment is below average--8%--but it has
been improving since March 2009 when it was 69 or 31%, or more than
three standard deviations, below average.</p>
<p>The two measures are shown in the attached chart. As can be
seen, there is a high degree of correlation between the two. Although
both show that much of the loss in sentiment suffered during the
current downturn has been recovered both show that business sentiment
is well below the peaks reached in <i>2000.</i></p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Business
Sentiment in Industry</b></th>
<th scope="col"><b>Jan 10&nbsp;</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Jan 09</b></th>
<th scope="col"><b>M/M % Chg</b></th>
<th scope="col"><b>Y/Y % Chg</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Bank of France</td>
<td>103.89</td>
<td>102.19</td>
<td>70.47</td>
<td>1.66</td>
<td>47.42</td>
<td>85.89</td>
<td>90.62</td>
<td>107.18</td>
</tr>
<tr>
<td class="firstcol">INSEE</td>
<td>92</td>
<td>88</td>
<td>75</td>
<td>4.55</td>
<td>26.67</td>
<td>79</td>
<td>97</td>
<td>109</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Consumer Credit Becomes ThirdRail Of U.S. Economy

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The six-month progressions show that the OECD LEIs are getting
progressively stronger. Over 12-months growth rates are positive;
annualized rates accelerate over six months but growth rates backed off
over three months.</p>
<p>The OECD and its main countries are showing consistent and
strong growth rates over the most recent six months.</p>
<p>The 7% to 10% growth rates over 12-months are in excess of
what we have seen in the past two recoveries. Japan is still lagging in
this cycle with a 12-month gain of only 3.5%. But the e-Zone is up by
9.7% and the US indicator is up by 7.3% over 12 months. Japan is
showing strong growth in its LEI over three-months.</p>
<p>The OECD series still seems to endorse the idea of a recovery
that will gain momentum and become strong.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col"><b>OECD
Trend-Restored Leading Indicators</b> </th>
</tr>
</thead>
<tbody>
<tr style="font-weight: bold;" class="odd">
<td colspan="5" class="firstcol">Growth
progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">3Mos</td>
<td style="font-weight: bold;">6Mos</td>
<td style="font-weight: bold;">12mos</td>
<td style="font-weight: bold;">Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td style="color: red; font-weight: bold;">9.4%</td>
<td>11.9%</td>
<td>8.3%</td>
<td style="color: red; font-weight: bold;">-10.8%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td style="color: red; font-weight: bold;">9.8%</td>
<td>12.5%</td>
<td>7.8%</td>
<td style="color: red; font-weight: bold;">-11.6%</td>
</tr>
<tr>
<td class="firstcol">OECD.Ezone</td>
<td style="color: red; font-weight: bold;">9.5%</td>
<td>12.3%</td>
<td>9.7%</td>
<td style="color: red; font-weight: bold;">-11.6%</td>
</tr>
<tr>
<td class="firstcol">OECD.Japan</td>
<td style="color: red; font-weight: bold;">10.3%</td>
<td>11.4%</td>
<td>3.5%</td>
<td style="color: red; font-weight: bold;">-11.4%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td style="color: red; font-weight: bold;">10.1%</td>
<td>12.4%</td>
<td>7.3%</td>
<td style="color: red; font-weight: bold;">-11.5%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="5" class="firstcol">Six Month
Readings at
6-Mo Intervals:</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Recent six</td>
<td style="font-weight: bold;">6Mo Ago</td>
<td style="font-weight: bold;">12Mo Ago</td>
<td style="color: black; font-weight: bold;">18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>11.9%</td>
<td>4.7%</td>
<td style="color: red;">-15.9%</td>
<td style="color: red; font-weight: bold;">-5.3%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td>12.5%</td>
<td>3.2%</td>
<td style="color: red;">-17.3%</td>
<td style="color: red; font-weight: bold;">-5.5%</td>
</tr>
<tr>
<td class="firstcol">OECD.Eur</td>
<td>12.3%</td>
<td>7.1%</td>
<td style="color: red;">-15.4%</td>
<td style="color: red; font-weight: bold;">-7.7%</td>
</tr>
<tr>
<td class="firstcol">OECD.Japan</td>
<td>11.4%</td>
<td>-3.9%</td>
<td style="color: red;">-19.3%</td>
<td>-2.8%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>12.4%</td>
<td>2.4%</td>
<td style="color: red;">-17.9%</td>
<td>-<span style="color: red;">4.5%</span></td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol"><span style="color: red; font-weight: bold;">Slowdowns</span>
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

The six-month progressions show that the OECD LEIs are getting progressively stronger. Over 12-months growth rates are positive; annualized rates accelerate over six months but growth rates backed off over three months. The OECD and [...]

OECD LEIs Make Strong Advances

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: right;" align="left"></p>
<p>Past gloom in the job market eased last month. During January
the unemployment rate fell to 9.7%, its lowest level since August.
Expectations had been for a stable 10.0% unemployment rate.
Nevertheless, the figure hardly suggests ebullience in the job market
since the rate still is up two percentage points from last January.
Moreover, the unemployment rate including marginally attached workers
plus those working part time for economic reasons slipped m/m to 16.5%
but remained up from 14.0% last January.</p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205b.jpg" style="width: 353px; height: 265px;" align="right">
Noteworthy is that the overall unemployment rate's decline
resulted from a 541,000 (-2.7% y/y) increase in employment. It was the
largest monthly gain since November 2007 and reflected a 529,000
increase (-1.3% y/y) in adult female employment. Adult male jobs
slipped 1,000 (-3.1% y/y). Along with the rise in the number of jobs
came a 111,000 person increase in the labor force (-0.6% y/y) which was
the first monthly gain since August. The labor force participation rate
thus increased to 64.7% but remained down sharply from 66.0% during all
of 2008. Continued severe weakness in the job market was indicated by
the increase in the average duration of unemployment to 30.2 weeks.</p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205c.jpg" style="width: 353px; height: 265px;" align="right">
Accompanying improvement in the household survey was just a
modest 20,000 worker decline in the establishment survey measure of
nonfarm payrolls. Any easing of the weakness, however, is mitigated by
the benchmark revision which lowered employment by roughly 825,000 last
year. Since the recession began in December of 2007, payrolls have thus
declined by 8.4 million. A 13,000 increase in nonfarm payrolls was the
Consensus expectation.</p>
<p>Factory sector payrolls, with an 11,000 increase, posted their
first monthly gain in three years. Private service sector employment
also rose, for the second time during this economic recovery, due to a
44,000 increase (-3.3% y/y) in professional &amp; business services
employment. Also improved was the number of temporary help services
jobs which rose for the fourth straight month (-0.5% y/y). Counter to
these<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205d.jpg" style="width: 353px; height: 265px;" align="right">
improvements, construction employment fell 75,000 which was the
largest decline since July. Overall the diffusion index of employees on
private nonfarm payrolls rose to 46.8% which was the highest level
since March of 2008. In the government sector payrolls slipped 8,000
(-0.5% y/y) despite a 33,000 rise in federal government hiring
associated with the taking of the census. State government employment
fell 18,000 (-0.8% y/y) and local employment was off 23,000 (-0.9% y/y).</p>
<p>The length of the average workweek also showed improvement,
albeit slight. The rise to 33.3 hours was the third rise in the last
four months. Together with the diminished decline in employment it
raised the level of aggregate hours worked by 0.3% from December and by
0.5% from the 4Q average.</p>
<p>Average hourly earnings improved with the lessened job losses
and rose 0.3% which the largest rise since October. Nevertheless, y/y
growth fell to 2.5% which was near the cycle low and down from 3.8%
growth in 2008.</p>
<p>The figures referenced above are available in Haver's <b>USECON</b>
database. Additional detail can be found in the <b>LABOR </b>and
in the <b>EMPL</b> databases.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Employment:
000s</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-20</td>
<td>-150</td>
<td>64</td>
<td>-3.0%</td>
<td>-4.3%</td>
<td>-0.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Previous</td>
<td>--</td>
<td>-85</td>
<td>4</td>
<td>--</td>
<td>-3.7%</td>
<td>-0.4%</td>
<td>1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Manufacturing</td>
<td>11</td>
<td>-23</td>
<td>-25</td>
<td>-8.0%</td>
<td>-11.3%</td>
<td>-3.4%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Construction</td>
<td>-75</td>
<td>-32</td>
<td>-15</td>
<td>-14.1%</td>
<td>-15.7%</td>
<td>-6.1%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Private Service Producing</td>
<td>48</td>
<td>-69</td>
<td>108</td>
<td>-2.1%</td>
<td>-3.5%</td>
<td>-0.2%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Government</td>
<td>-8</td>
<td>-27</td>
<td>-11</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>1.3%</td>
<td>1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.3</td>
<td>33.2</td>
<td>33.2</td>
<td>33.3 (Jan. '09)</td>
<td>33.1</td>
<td>33.6</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>3.0%</td>
<td>3.8%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>9.7%</td>
<td>10.0%</td>
<td>10.0%</td>
<td>7.7% (Jan. '09)</td>
<td>9.3%</td>
<td>5.8%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
</body></html>

Past gloom in the job market eased last month. During January the unemployment rate fell to 9.7%, its lowest level since August. Expectations had been for a stable 10.0% unemployment rate. Nevertheless, the figure hardly suggests [...]

U.S. Unemployment Rate Falls Sharply; Payroll Decline Is Modest

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: right;" align="left"></p>
<p>Past gloom in the job market eased last month. During January
the unemployment rate fell to 9.7%, its lowest level since August.
Expectations had been for a stable 10.0% unemployment rate.
Nevertheless, the figure hardly suggests ebullience in the job market
since the rate still is up two percentage points from last January.
Moreover, the unemployment rate including marginally attached workers
plus those working part time for economic reasons slipped m/m to 16.5%
but remained up from 14.0% last January.</p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205b.jpg" style="width: 353px; height: 265px;" align="right">
Noteworthy is that the overall unemployment rate's decline
resulted from a 541,000 (-2.7% y/y) increase in employment. It was the
largest monthly gain since November 2007 and reflected a 529,000
increase (-1.3% y/y) in adult female employment. Adult male jobs
slipped 1,000 (-3.1% y/y). Along with the rise in the number of jobs
came a 111,000 person increase in the labor force (-0.6% y/y) which was
the first monthly gain since August. The labor force participation rate
thus increased to 64.7% but remained down sharply from 66.0% during all
of 2008. Continued severe weakness in the job market was indicated by
the increase in the average duration of unemployment to 30.2 weeks.</p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205c.jpg" style="width: 353px; height: 265px;" align="right">
Accompanying improvement in the household survey was just a
modest 20,000 worker decline in the establishment survey measure of
nonfarm payrolls. Any easing of the weakness, however, is mitigated by
the benchmark revision which lowered employment by roughly 825,000 last
year. Since the recession began in December of 2007, payrolls have thus
declined by 8.4 million. A 13,000 increase in nonfarm payrolls was the
Consensus expectation.</p>
<p>Factory sector payrolls, with an 11,000 increase, posted their
first monthly gain in three years. Private service sector employment
also rose, for the second time during this economic recovery, due to a
44,000 increase (-3.3% y/y) in professional &amp; business services
employment. Also improved was the number of temporary help services
jobs which rose for the fourth straight month (-0.5% y/y). Counter to
these<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205d.jpg" style="width: 353px; height: 265px;" align="right">
improvements, construction employment fell 75,000 which was the
largest decline since July. Overall the diffusion index of employees on
private nonfarm payrolls rose to 46.8% which was the highest level
since March of 2008. In the government sector payrolls slipped 8,000
(-0.5% y/y) despite a 33,000 rise in federal government hiring
associated with the taking of the census. State government employment
fell 18,000 (-0.8% y/y) and local employment was off 23,000 (-0.9% y/y).</p>
<p>The length of the average workweek also showed improvement,
albeit slight. The rise to 33.3 hours was the third rise in the last
four months. Together with the diminished decline in employment it
raised the level of aggregate hours worked by 0.3% from December and by
0.5% from the 4Q average.</p>
<p>Average hourly earnings improved with the lessened job losses
and rose 0.3% which the largest rise since October. Nevertheless, y/y
growth fell to 2.5% which was near the cycle low and down from 3.8%
growth in 2008.</p>
<p>The figures referenced above are available in Haver's <b>USECON</b>
database. Additional detail can be found in the <b>LABOR </b>and
in the <b>EMPL</b> databases.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Employment:
000s</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-20</td>
<td>-150</td>
<td>64</td>
<td>-3.0%</td>
<td>-4.3%</td>
<td>-0.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Previous</td>
<td>--</td>
<td>-85</td>
<td>4</td>
<td>--</td>
<td>-3.7%</td>
<td>-0.4%</td>
<td>1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Manufacturing</td>
<td>11</td>
<td>-23</td>
<td>-25</td>
<td>-8.0%</td>
<td>-11.3%</td>
<td>-3.4%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Construction</td>
<td>-75</td>
<td>-32</td>
<td>-15</td>
<td>-14.1%</td>
<td>-15.7%</td>
<td>-6.1%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Private Service Producing</td>
<td>48</td>
<td>-69</td>
<td>108</td>
<td>-2.1%</td>
<td>-3.5%</td>
<td>-0.2%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Government</td>
<td>-8</td>
<td>-27</td>
<td>-11</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>1.3%</td>
<td>1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.3</td>
<td>33.2</td>
<td>33.2</td>
<td>33.3 (Jan. '09)</td>
<td>33.1</td>
<td>33.6</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>3.0%</td>
<td>3.8%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>9.7%</td>
<td>10.0%</td>
<td>10.0%</td>
<td>7.7% (Jan. '09)</td>
<td>9.3%</td>
<td>5.8%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
<span id="articletitle">OECD LEIs Make Strong Advances</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> February 5, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100205e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The six-month progressions show that the OECD LEIs are getting
progressively stronger. Over 12-months growth rates are positive;
annualized rates accelerate over six months but growth rates backed off
over three months.</p>
<p>The OECD and its main countries are showing consistent and
strong growth rates over the most recent six months.</p>
<p>The 7% to 10% growth rates over 12-months are in excess of
what we have seen in the past two recoveries. Japan is still lagging in
this cycle with a 12-month gain of only 3.5%. But the e-Zone is up by
9.7% and the US indicator is up by 7.3% over 12 months. Japan is
showing strong growth in its LEI over three-months.</p>
<p>The OECD series still seems to endorse the idea of a recovery
that will gain momentum and become strong.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col"><b>OECD
Trend-Restored Leading Indicators</b> </th>
</tr>
</thead>
<tbody>
<tr style="font-weight: bold;" class="odd">
<td colspan="5" class="firstcol">Growth
progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">3Mos</td>
<td style="font-weight: bold;">6Mos</td>
<td style="font-weight: bold;">12mos</td>
<td style="font-weight: bold;">Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td style="color: red; font-weight: bold;">9.4%</td>
<td>11.9%</td>
<td>8.3%</td>
<td style="color: red; font-weight: bold;">-10.8%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td style="color: red; font-weight: bold;">9.8%</td>
<td>12.5%</td>
<td>7.8%</td>
<td style="color: red; font-weight: bold;">-11.6%</td>
</tr>
<tr>
<td class="firstcol">OECD.Ezone</td>
<td style="color: red; font-weight: bold;">9.5%</td>
<td>12.3%</td>
<td>9.7%</td>
<td style="color: red; font-weight: bold;">-11.6%</td>
</tr>
<tr>
<td class="firstcol">OECD.Japan</td>
<td style="color: red; font-weight: bold;">10.3%</td>
<td>11.4%</td>
<td>3.5%</td>
<td style="color: red; font-weight: bold;">-11.4%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td style="color: red; font-weight: bold;">10.1%</td>
<td>12.4%</td>
<td>7.3%</td>
<td style="color: red; font-weight: bold;">-11.5%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="5" class="firstcol">Six Month
Readings at
6-Mo Intervals:</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Recent six</td>
<td style="font-weight: bold;">6Mo Ago</td>
<td style="font-weight: bold;">12Mo Ago</td>
<td style="color: black; font-weight: bold;">18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>11.9%</td>
<td>4.7%</td>
<td style="color: red;">-15.9%</td>
<td style="color: red; font-weight: bold;">-5.3%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td>12.5%</td>
<td>3.2%</td>
<td style="color: red;">-17.3%</td>
<td style="color: red; font-weight: bold;">-5.5%</td>
</tr>
<tr>
<td class="firstcol">OECD.Eur</td>
<td>12.3%</td>
<td>7.1%</td>
<td style="color: red;">-15.4%</td>
<td style="color: red; font-weight: bold;">-7.7%</td>
</tr>
<tr>
<td class="firstcol">OECD.Japan</td>
<td>11.4%</td>
<td>-3.9%</td>
<td style="color: red;">-19.3%</td>
<td>-2.8%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>12.4%</td>
<td>2.4%</td>
<td style="color: red;">-17.9%</td>
<td>-<span style="color: red;">4.5%</span></td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol"><span style="color: red; font-weight: bold;">Slowdowns</span>
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Unemployment Rate FallsSharply; Payroll Decline Is Modest

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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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.

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**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.

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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

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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

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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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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.