Robert Brusca

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204f.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>German Industrial orders are still rising Yr/Yr but they took
a steep fall in December dropping by 2.3%. Foreign orders led the way
lower falling by 3.2% with domestic-sourced orders off by just 1.4%
Overall MFG sales also fell in December dropping at a 2% month-to-month
pace.</p>
<p>With the December drop in place, orders are now decelerating
over three-months compared to six months. The progression of
accelerating growth rates has been interrupted. Foreign orders are
responsible for this backtracking as domestic orders are still
advancing over three months and surpassing their six month growth
results</p>
<p>The report was a shock to markets. On a day in which Greeks
are starting to bristle and strike to avoid the pain of their
self-imposed austerity plan and stock markets in debt-ladened EMU
countries are being bashed it is a &#8216;fitting&#8217; piece of bad news.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"><b>German
Orders and Sales By Sector and Origin</b> </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>Oct-09</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-2.3%</td>
<td>2.7%</td>
<td>-1.7%</td>
<td>-5.5%</td>
<td>-2.8%</td>
<td>6.4%</td>
<td>-30.5%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-3.2%</td>
<td>3.6%</td>
<td>-3.3%</td>
<td>-11.3%</td>
<td>-5.8%</td>
<td>7.2%</td>
<td>-33.2%</td>
<td>10.1%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.4%</td>
<td>1.6%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>1.1%</td>
<td>5.5%</td>
<td>-27.1%</td>
<td>-5.0%</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">Real Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-2.0%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>-8.9%</td>
<td>-4.6%</td>
<td>-5.7%</td>
<td>-12.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer</td>
<td>2.4%</td>
<td>2.0%</td>
<td>-0.2%</td>
<td>18.1%</td>
<td>8.7%</td>
<td>-4.2%</td>
<td>-2.8%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Cons
Durables</td>
<td>0.2%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>24.8%</td>
<td>11.7%</td>
<td>-4.4%</td>
<td>-13.3%</td>
<td>18.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Cons
Non-Durable</td>
<td>2.8%</td>
<td>1.9%</td>
<td>-0.6%</td>
<td>17.3%</td>
<td>8.3%</td>
<td>-4.1%</td>
<td>-0.9%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol">Captial Gds</td>
<td>-3.1%</td>
<td>0.4%</td>
<td>-3.3%</td>
<td>-21.8%</td>
<td>-11.5%</td>
<td>-9.2%</td>
<td>-15.4%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Gds</td>
<td>-2.9%</td>
<td>-0.5%</td>
<td>3.2%</td>
<td>-1.2%</td>
<td>-0.6%</td>
<td>0.0%</td>
<td>-16.1%</td>
<td>11.0%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>-2.0%</td>
<td>0.3%</td>
<td>-0.5%</td>
<td>-8.5%</td>
<td>-4.4%</td>
<td>-5.6%</td>
<td>-12.7%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

German Industrial orders are still rising Yr/Yr but they took a steep fall in December dropping by 2.3%. Foreign orders led the way lower falling by 3.2% with domestic-sourced orders off by just 1.4% Overall MFG sales also fell in [...]

German Orders Dive In December

Tom Moeller

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<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204d.jpg" style="width: 353px; height: 265px;" align="right">Worker
productivity surged during the fourth quarter. Employers kept a tight
hold on costs as the economic recovery began to take hold. The 6.2%
(AR) jump in 4Q productivity followed a downwardly revised 7.2% 3Q gain
but it pulled growth for the full year up to 3.0%, the fastest since
2003. A 6.0% gain in 4Q productivity was the Consensus
expectation.&nbsp;&nbsp;</p>
<p> The rise in productivity came as output jumped
7.2%. The gain was an acceleration from 2.3% growth during 3Q but it
nevertheless left full-year output down 3.6%&nbsp; Hours-worked
(employment times hours) rose 1.0% but for the year fell 6.4% as a
tight rein on costs was kept.&nbsp;Growth in compensation costs
decelerated sharply from 3Q. The 1.5% gain was the slowest since a 1Q
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204e.jpg" style="width: 353px; height: 265px;" align="right">decline&nbsp;and
the 2.0% rise was the slowest since 1994.</p>
<p>Stronger productivity and weaker compensation growth pulled 4Q
unit
labor costs down 4.4%. Except for a slightly greater decline during 1Q,
it was the sharpest decline since 2002 and it was enough to pull costs
down 0.9% for the year, the first decline since 2002.</p>
<p>The surge in 4Q
worker productivity growth reflected vibrancy in the factory sector
where employers held a notably tight rein on costs. Productivity gained
7.8% following an upwardly revised 14.4% 3Q jump. For the year,
productivity rose 1.4% after a 0.8% rise during 2008. Recent gains have
been prompted by quarterly output growth which turned sharply positive
by 3Q and continued up at a 6.1% annual rate at yearend. Nevertheless,
output fell 11.0% for the year. Hours worked similarly fell but by
lesser amounts. Compensation slipped 0.2% but the 4.8% gain earned was
the fastest since 2003. Strong productivity and gains in compensation
combined to lower unit labor costs by 7.4%, about the same as during 3Q
but for the year unit costs rose 3.4%, the strongest rise since
2000.&nbsp;&nbsp;</p>
<p> The productivity &amp; cost figures 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"><a ;="" href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">
</a>(SAAR,%)</th>
<th scope="col">4Q '09</th>
<th scope="col">3Q '09</th>
<th scope="col">2Q '09</th>
<th scope="col">4Q Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Output per Hour</td>
<td>6.2</td>
<td>7.2</td>
<td>6.9</td>
<td>5.1</td>
<td>3.0</td>
<td>1.8</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Compensation per Hour</td>
<td>1.5</td>
<td>5.6</td>
<td>6.8</td>
<td>2.2</td>
<td>2.0</td>
<td>2.8</td>
<td>4.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unit Labor Costs</td>
<td>-4.4</td>
<td>-1.5</td>
<td>0.0</td>
<td>-2.8</td>
<td>-0.9</td>
<td>1.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"><b>Manufacturing Sector</b></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Output per Hour</td>
<td>7.8</td>
<td>14.4</td>
<td>6.8</td>
<td>6.5</td>
<td>1.4</td>
<td>0.8</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Compensation per Hour</td>
<td>-0.2</td>
<td>6.5</td>
<td>6.5</td>
<td>3.0</td>
<td>4.8</td>
<td>3.0</td>
<td>4.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unit Labor Costs</td>
<td>-7.4</td>
<td>-7.0</td>
<td>-0.3</td>
<td>-3.2</td>
<td>3.4</td>
<td>2.2</td>
<td>1.1</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Worker productivity surged during the fourth quarter. Employers kept a tight hold on costs as the economic recovery began to take hold. The 6.2% (AR) jump in 4Q productivity followed a downwardly revised 7.2% 3Q gain but it pulled [...]

Strong U.S. Worker Productivity Drives Down Costs

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<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204a.jpg" style="width: 353px; height: 265px;" align="right">
The Labor Department reported that initial claims for jobless
insurance last week made up the prior period's decline with a gain to
480,000. Despite the increase, claims remained near the lowest level
since late August, 2008 and were down from the recession peak of
674,000 hit last March. Consensus expectations had been for 454,000
claims. The weekly gains raised the four-week moving average of initial
claims to 468,750 which remained near the cycle low.
</p>
<p>Continuing claims for unemployment insurance during the latest
week held roughly steady at the cycle low. The 2,000 weekly uptick left
claims down by one-third since late-June. Continuing claims were at the
lowest level since mid-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 4,617,500. This
series dates back to 1966. </p>
<p>Extended benefits for unemployment insurance slipped to
another cycle low of 222,833 during the third week of January and were
down by two-thirds from a peak of 597,688 reached in November. </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 unemployment
published by the Bureau of Labor Statistics. </p>
<p>The highest insured unemployment rates in the week ending
January 15 were in Alaska (7.3), Pennsylvania (6.5), Wisconsin (6.4
percent), Montana (6.2), Michigan (6.0), North Carolina (5.3),
Washington (5.3) and Connecticut (5.3). The lowest insured unemployment
rates were in Virginia (2.3), Texas (2.5), Florida (3.4), Maryland
(3.7), Mississippi (3.8), Wyoming (3.8), Ohio (3.9), New York (4.1) and
Maine (4.3). 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
WEEKLY database and the state data is in the REGIONW database.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><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>1/30/10</b></th>
<th scope="col"><b>1/23/10</b></th>
<th scope="col"><b>1/16/10</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>480</td>
<td>472</td>
<td>479</td>
<td>-23.1%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,602</td>
<td>4,600</td>
<td>-3.1%</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>&nbsp;--</td>
<td>3.5</td>
<td>3.5</td>
<td>3.5 (1/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
<p></p>
</span>
</body></html>

The Labor Department reported that initial claims for jobless insurance last week made up the prior period's decline with a gain to 480,000. Despite the increase, claims remained near the lowest level since late August, 2008 and were [...]

U.S. Initial Jobless Insurance Claims Inch Up

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204a.jpg" style="width: 353px; height: 265px;" align="right">
The Labor Department reported that initial claims for jobless
insurance last week made up the prior period's decline with a gain to
480,000. Despite the increase, claims remained near the lowest level
since late August, 2008 and were down from the recession peak of
674,000 hit last March. Consensus expectations had been for 454,000
claims. The weekly gains raised the four-week moving average of initial
claims to 468,750 which remained near the cycle low.
</p>
<p>Continuing claims for unemployment insurance during the latest
week held roughly steady at the cycle low. The 2,000 weekly uptick left
claims down by one-third since late-June. Continuing claims were at the
lowest level since mid-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 4,617,500. This
series dates back to 1966. </p>
<p>Extended benefits for unemployment insurance slipped to
another cycle low of 222,833 during the third week of January and were
down by two-thirds from a peak of 597,688 reached in November. </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 unemployment
published by the Bureau of Labor Statistics. </p>
<p>The highest insured unemployment rates in the week ending
January 15 were in Alaska (7.3), Pennsylvania (6.5), Wisconsin (6.4
percent), Montana (6.2), Michigan (6.0), North Carolina (5.3),
Washington (5.3) and Connecticut (5.3). The lowest insured unemployment
rates were in Virginia (2.3), Texas (2.5), Florida (3.4), Maryland
(3.7), Mississippi (3.8), Wyoming (3.8), Ohio (3.9), New York (4.1) and
Maine (4.3). 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
WEEKLY database and the state data is in the REGIONW database.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><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>1/30/10</b></th>
<th scope="col"><b>1/23/10</b></th>
<th scope="col"><b>1/16/10</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>480</td>
<td>472</td>
<td>479</td>
<td>-23.1%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,602</td>
<td>4,600</td>
<td>-3.1%</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>&nbsp;--</td>
<td>3.5</td>
<td>3.5</td>
<td>3.5 (1/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
<p></p>
</span>
<span id="articletitle">Strong U.S. Worker Productivity
Drives Down Costs </span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> February 4, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204d.jpg" style="width: 353px; height: 265px;" align="right">Worker
productivity surged during the fourth quarter. Employers kept a tight
hold on costs as the economic recovery began to take hold. The 6.2%
(AR) jump in 4Q productivity followed a downwardly revised 7.2% 3Q gain
but it pulled growth for the full year up to 3.0%, the fastest since
2003. A 6.0% gain in 4Q productivity was the Consensus
expectation.&nbsp;&nbsp;</p>
<p> The rise in productivity came as output jumped
7.2%. The gain was an acceleration from 2.3% growth during 3Q but it
nevertheless left full-year output down 3.6%&nbsp; Hours-worked
(employment times hours) rose 1.0% but for the year fell 6.4% as a
tight rein on costs was kept.&nbsp;Growth in compensation costs
decelerated sharply from 3Q. The 1.5% gain was the slowest since a 1Q
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204e.jpg" style="width: 353px; height: 265px;" align="right">decline&nbsp;and
the 2.0% rise was the slowest since 1994.</p>
<p>Stronger productivity and weaker compensation growth pulled 4Q
unit
labor costs down 4.4%. Except for a slightly greater decline during 1Q,
it was the sharpest decline since 2002 and it was enough to pull costs
down 0.9% for the year, the first decline since 2002.</p>
<p>The surge in 4Q
worker productivity growth reflected vibrancy in the factory sector
where employers held a notably tight rein on costs. Productivity gained
7.8% following an upwardly revised 14.4% 3Q jump. For the year,
productivity rose 1.4% after a 0.8% rise during 2008. Recent gains have
been prompted by quarterly output growth which turned sharply positive
by 3Q and continued up at a 6.1% annual rate at yearend. Nevertheless,
output fell 11.0% for the year. Hours worked similarly fell but by
lesser amounts. Compensation slipped 0.2% but the 4.8% gain earned was
the fastest since 2003. Strong productivity and gains in compensation
combined to lower unit labor costs by 7.4%, about the same as during 3Q
but for the year unit costs rose 3.4%, the strongest rise since
2000.&nbsp;&nbsp;</p>
<p> The productivity &amp; cost figures 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"><a ;="" href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm
Business Sector</a><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">
</a>(SAAR,%)</th>
<th scope="col">4Q '09</th>
<th scope="col">3Q '09</th>
<th scope="col">2Q '09</th>
<th scope="col">4Q Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Output per Hour</td>
<td>6.2</td>
<td>7.2</td>
<td>6.9</td>
<td>5.1</td>
<td>3.0</td>
<td>1.8</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Compensation per Hour</td>
<td>1.5</td>
<td>5.6</td>
<td>6.8</td>
<td>2.2</td>
<td>2.0</td>
<td>2.8</td>
<td>4.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unit Labor Costs</td>
<td>-4.4</td>
<td>-1.5</td>
<td>0.0</td>
<td>-2.8</td>
<td>-0.9</td>
<td>1.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"><b>Manufacturing Sector</b></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Output per Hour</td>
<td>7.8</td>
<td>14.4</td>
<td>6.8</td>
<td>6.5</td>
<td>1.4</td>
<td>0.8</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Compensation per Hour</td>
<td>-0.2</td>
<td>6.5</td>
<td>6.5</td>
<td>3.0</td>
<td>4.8</td>
<td>3.0</td>
<td>4.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unit Labor Costs</td>
<td>-7.4</td>
<td>-7.0</td>
<td>-0.3</td>
<td>-3.2</td>
<td>3.4</td>
<td>2.2</td>
<td>1.1</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">German Orders Dive In December</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> February 4, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204f.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>German Industrial orders are still rising Yr/Yr but they took
a steep fall in December dropping by 2.3%. Foreign orders led the way
lower falling by 3.2% with domestic-sourced orders off by just 1.4%
Overall MFG sales also fell in December dropping at a 2% month-to-month
pace.</p>
<p>With the December drop in place, orders are now decelerating
over three-months compared to six months. The progression of
accelerating growth rates has been interrupted. Foreign orders are
responsible for this backtracking as domestic orders are still
advancing over three months and surpassing their six month growth
results</p>
<p>The report was a shock to markets. On a day in which Greeks
are starting to bristle and strike to avoid the pain of their
self-imposed austerity plan and stock markets in debt-ladened EMU
countries are being bashed it is a &#8216;fitting&#8217; piece of bad news.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"><b>German
Orders and Sales By Sector and Origin</b> </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>Oct-09</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-2.3%</td>
<td>2.7%</td>
<td>-1.7%</td>
<td>-5.5%</td>
<td>-2.8%</td>
<td>6.4%</td>
<td>-30.5%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-3.2%</td>
<td>3.6%</td>
<td>-3.3%</td>
<td>-11.3%</td>
<td>-5.8%</td>
<td>7.2%</td>
<td>-33.2%</td>
<td>10.1%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.4%</td>
<td>1.6%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>1.1%</td>
<td>5.5%</td>
<td>-27.1%</td>
<td>-5.0%</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">Real Sector
Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-2.0%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>-8.9%</td>
<td>-4.6%</td>
<td>-5.7%</td>
<td>-12.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer</td>
<td>2.4%</td>
<td>2.0%</td>
<td>-0.2%</td>
<td>18.1%</td>
<td>8.7%</td>
<td>-4.2%</td>
<td>-2.8%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Cons
Durables</td>
<td>0.2%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>24.8%</td>
<td>11.7%</td>
<td>-4.4%</td>
<td>-13.3%</td>
<td>18.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Cons
Non-Durable</td>
<td>2.8%</td>
<td>1.9%</td>
<td>-0.6%</td>
<td>17.3%</td>
<td>8.3%</td>
<td>-4.1%</td>
<td>-0.9%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol">Captial Gds</td>
<td>-3.1%</td>
<td>0.4%</td>
<td>-3.3%</td>
<td>-21.8%</td>
<td>-11.5%</td>
<td>-9.2%</td>
<td>-15.4%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Gds</td>
<td>-2.9%</td>
<td>-0.5%</td>
<td>3.2%</td>
<td>-1.2%</td>
<td>-0.6%</td>
<td>0.0%</td>
<td>-16.1%</td>
<td>11.0%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>-2.0%</td>
<td>0.3%</td>
<td>-0.5%</td>
<td>-8.5%</td>
<td>-4.4%</td>
<td>-5.6%</td>
<td>-12.7%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
<span id="articletitle">U.S. Factory Shipments Surge And
Trim Inventories Slightly</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> February 4, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204g.jpg" style="width: 353px; height: 265px;" align="right">actory
shipments surged for the fourth straight month during December. The
1.9% increase followed an upwardly revised 1.6% November gain&nbsp;
and it was the fourth straight month of strong increase. Shipments of
nondurables were strong all during 2009 (9.3% y/y) due to the rise in
oil prices. Excluding oil, factory shipments rose 0.9% y/y, still an
improvement from the 11.9% y/y decline as of July.&nbsp;Shipments
of electrical equipment (-8.4% y/y) were strong for the third
consecutive month. Machinery shipments jumped 5.1% (-16.1% y/y) and
have risen sharply in three of the last four periods. Primary metals
shipments (+2.2% y/y) increased notably during 2H '09 and furniture
shipments (-10.0% y/y) have risen for three months.&nbsp;</p>
<p>Though factory
inventories slipped 0.1% in December that followed much larger declines
extending back to September of 2008. The latest monthly drop came
despite a 3.9% jump (-22.1% y/y) in auto inventories which was the
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100204h.jpg" style="width: 353px; height: 265px;" align="right">third
consecutive strong monthly gain. Elsewhere, petroleum inventories
jumped 4.2% (25.8% y/y) due to higher prices. Excluding oil, factory
inventories slipped 0.3% (-10.2% y/y). Machinery inventories slipped
(-13.4% y/y) but that compares to large declines which extend through
most of last year. Electrical equipment inventories slipped 0.5%
(-17.7% y/y) but the monthly rates of decline also&nbsp; have
slowed considerably. Inventories of computers &amp; electronic
products rose 0.7% (-9.5% y/y) for the first monthly gain in twelve
months.&nbsp;</p>
<p> Factory orders rose 1.0% for the second consecutive
month but that rise also was lifted by higher oil prices. Less oil
(where orders equal shipments), orders rose 0.7% (-1.0% y/y) and have
risen for four consecutive months. Orders for primary metals have been
notably strong (16.9% y/y) as have machinery orders where the 0.1% y/y
decline compares to one-third drops early in 2008.The decline in
electrical equipment orders has moderated to 7.4% from -30.3% as of
June.&nbsp;</p>
<p>&nbsp;The Manufacturers' Shipments, Inventories and Orders
(MSIO) data are available in Haver's <b>USECON</b>
database.&nbsp;</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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory
Survey</a>
(NAICS, %)</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">Inventories</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>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>-0.0</td>
<td>0.3</td>
<td>0.3</td>
<td>-9.2</td>
<td>-9.2</td>
<td>-0.5</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>1.0</td>
<td>1.0</td>
<td>0.8</td>
<td>3.6</td>
<td>-17.2</td>
<td>0.0</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>1.2</td>
<td>2.1</td>
<td>0.7</td>
<td>5.8</td>
<td>-15.8</td>
<td>3.0</td>
<td>1.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.9</td>
<td>1.6</td>
<td>0.9</td>
<td>2.6</td>
<td>-15.2</td>
<td>1.6</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>1.6</td>
<td>1.7</td>
<td>1.6</td>
<td>3.1</td>
<td>-15.3</td>
<td>3.5</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-1.0</td>
<td>-0.7</td>
<td>-0.6</td>
<td>-10.3</td>
<td>-10.3</td>
<td>3.4</td>
<td>17.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>0.2</td>
<td>0.2</td>
<td>-0.1</td>
<td>-8.6</td>
<td>-8.6</td>
<td>-1.4</td>
<td>8.2</td>
</tr>
</tbody>
</table>
</span>
</body></html>

U.S. Initial Jobless InsuranceClaims Inch Up

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100203k.jpg" align="left" border="0" height="265" width="353"></p>
<p>EMU areas retail sales continue to disappoint. Sales edged up
in December and were revised higher in earlier months, infusing the
series with some good news to help paper over the month of December&#8217;s
poor showing. The sequential growth rates show that the value of retail
sales is increasing gradually from a -2.3% pace over 12-months to a
-0.2% annual pace over six-months to a +1% pace over three-months. But
motor vehicle registrations are backsliding now that the major
government incentive plans have had their impact.</p>
<p>Both Germany and the UK, large EU area economies, are showing
some stability in their respective retail sales. But there is no lift
or punch from the consumer. It is good to see that the drag on growth
from the consumer is being put behind it. But there is no thrust
propelling growth forward.</p>
<p>Quite apart from economists&#8217; estimates we can look at retail
sales in EMU with a kinder gentler eye. While job growth is still being
undermined and consumer confidence is still shaky, getting consumer
spending to stabilize is good news. It is the sort of thing that
Europe&#8217;s social welfare state is supposed to achieve in times like this.</p>
<p>The problem for Europe is that its rate of unemployment is
structurally higher than in the US. And With consumers and businesses
in Europe still concerned about future unemployment, the actual rate
could creep higher still while the US rate that has ratcheted higher
drops sharply (sharply by the standards of unemployment rates, that
is). Already European governments are using moral suasion to try to get
firms not to lay off more workers and worsen their business cycle.
Europe&#8217;s social welfare system does provide it with some buffers but
those buffers are also modifiers to the economy&#8217;s ability to mount
recovery once an economic crisis begins to pass.</p>
<p>Europe still labors under many problems. I sit back and wonder
how long the recent disgraceful; episode with Greece will go on. If we
did not know it before, we are finding out that it not possible to have
a currency union- a monetary union- without also a fiscal union as
well. EMU sought to trick the laws of economics and prudence when it
was formed. Perhaps that is why it adopted a fiscal criterion called
the mass-trick (Maastricht). It sought to replace a true fiscal union
with a set of rules that are to be &#8216;;binding&#8217; in manner that is not
specified. In that way Europeans could have their cake and eat it too.
There would be monetary union and no need to mesh together national
priorities. National autonomy could coexist with monetary union, or so
they supposed. Early in the game Italy defied these rules by using
asset sales to make its deficits seem to correspond with the strictures
imposed by rules. Upon its entry Greece had managed to hide the extent
of its indebtedness. But business cycles have a way of bringing out the
truth-especially when it is a harsh truth and now Greece is out of
kilter again.</p>
<p>We find Europe in much the same state as were banks in the
financial crisis with off balance sheet liabilities that came back home
to roost on their balance sheet where they never supposed to reside.
Europe &#8211; and its darling, the euro- has the weight of Greece to bear.
For its part Greece has set out a very tough program to get back where
it needs to get. Yet, it is not clear that this plan will work or that
Greece will be able to stick to it long enough to find out if it does
work. If Greece&#8217;s plan fails for any reason what then? Does the EU step
in to help it? If so, what precedent does that set? If not what then?
Blowing Greece of out the EMU would certainly not be the end of the
damage from such a move.</p>
<p>Maybe, short of a full fiscal union, Europe needs a to tax
members to fund an adjustment facility with some draconian conditions
to assure that members don&#8217;t seek to use it too often.</p>
<p>In any event Europe is caught in the great lie of the
euro-Area. That lie says you can have a monetary union without fiscal
harmony. One corollary is that fiscal separateness is exactly that;
regardless of the rules meant to bind. If fiscal policies are under
different national domains they will be different and in time they will
drift too far apart. Without a common fiscal pool and common currency
the issue of breakdowns and leakages will come to the surface and zone
participants will be forced to make the hard decisions they tried to
avoid when they concocted the system that doesn&#8217;t make sense: the euro
zone. It could yet work out the way they laid it out, but as we can
see, it probably won&#8217;t.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"><b>Euro-Area
Retail Sales</b>
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">M/M</td>
<td style="font-weight: bold;" colspan="3">Saar</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol"><br>
</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">Oct-09</td>
<td style="font-weight: bold;">3-Mo</td>
<td style="font-weight: bold;">6-MO</td>
<td style="font-weight: bold;">12-Mo</td>
</tr>
<tr>
<td class="firstcol">Zone Total Value</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>1.0%</td>
<td>-0.2%</td>
<td>-2.3%</td>
</tr>
<tr>
<td class="firstcol">Food,Bev Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr>
<td class="firstcol">NonFood </td>
<td>-0.1%</td>
<td>-1.2%</td>
<td>0.4%</td>
<td>-4.4%</td>
<td>-1.8%</td>
<td>-3.0%</td>
</tr>
<tr style="font-weight: bold;" class="even">
<td colspan="7" class="firstcol">Registrations:</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicle Reg</td>
<td>-3.0%</td>
<td>1.0%</td>
<td>0.6%</td>
<td>-5.4%</td>
<td>0.1%</td>
<td>19.9%</td>
</tr>
<tr style="font-weight: bold;" class="even">
<td colspan="7" class="firstcol">NonFood Country detail:
Volume</td>
</tr>
<tr>
<td class="firstcol">Germany Value</td>
<td>0.8%</td>
<td>-1.7%</td>
<td>0.9%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">UK(EU) Volume</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>2.5%</td>
<td>2.3%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body></html>

EMU areas retail sales continue to disappoint. Sales edged up in December and were revised higher in earlier months, infusing the series with some good news to help paper over the month of December’s poor showing. The sequential [...]

EMU Retail Sales And The Euro-Area Prospects For Stability

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<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100203j.jpg" align="left" border="0" height="265" width="353"></p>
<p>Earlier labor market improvement paused last month as
announced job cuts rose and hiring plans fell, according to the
outplacement firm of Challenger, Grey &amp; Christmas. Their
measure of job cut announcements increased last month to 71,482 but
that still was well below the high of 241,748 in January of last year.
Layoffs increased sharply in the pharmaceutical, retail and
telecommunications industries.</p>
<p>Challenger also samples firms' hiring plans. During January,
plans fell slightly m/m but were up nearly one-third from the year-ago
level. Plans picked up sharply in the electronics and
entertainment/leisure industries. The net of hires less layoffs fell
slightly m/m but remained near its ebb in 2007.</p>
<p>During the last ten years there has been a 67% (inverse)
correlation between the three-month moving average of announced job
cuts and the three-month change payroll employment<em>.</em>
Job cut announcements differ from layoffs. Many are achieved through
attrition, early retirement or just never occur.</p>
<p>The Challenger figures are available in Haver's <b>SURVEYS</b>
database.</p>
<p><b>The Recession in Perspective</b> from the
Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/">here</a>.</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"><a ;="" href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM" style="color: black;"><b>Challenger, Gray &amp;
Christmas</b></a></th>
<th scope="col"><strong>January</strong></th>
<th scope="col"><strong>December</strong></th>
<th scope="col"><strong>November</strong></th>
<th scope="col"><strong>Y/Y</strong></th>
<th scope="col"><strong>2009</strong></th>
<th scope="col"><strong>2008</strong></th>
<th scope="col"><strong>2007</strong></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>71,482</td>
<td>45,094</td>
<td>50,349</td>
<td>-70.4%</td>
<td>1,288,030</td>
<td>1,223,993</td>
<td>768,264</td>
</tr>
<tr>
<td class="firstcol">Announced Hiring Plans</td>
<td>31,381</td>
<td>35,592</td>
<td>10,076</td>
<td>30.9</td>
<td>272,573</td>
<td>118,600</td>
<td>365,583</td>
</tr>
</tbody>
</table>
</body></html>

Earlier labor market improvement paused last month as announced job cuts rose and hiring plans fell, according to the outplacement firm of Challenger, Grey & Christmas. Their measure of job cut announcements increased last month to [...]

Challenger Indicates Labor Market Deterioration

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100203g.jpg" style="width: 353px; height: 265px;" align="right">There's
been little expansion but less contraction in the nonmanufacturing
sector. That's the message from the Institute for Supply Management
(ISM) for the service &amp; construction sectors. Their Composite
Index ticked up to 50.5 from a downwardly revised 49.8 during December.
Material improvement is indicated by the rise in the series from a low
of 37.2 late in 2008. The latest figure about matched Consensus
expectations. Since the series' inception in 1997 there has been a 65%
correlation between the level of the composite index in the
nonmanufacturing sector and the q/q change in real GDP for the services
and the construction sectors.</p><p>ISM surveys more than 370 purchasing
managers in more than 62 industries including law firms, hospitals,
government and retailers. The nonmanufacturing survey dates back to
July 1997. The figures are available in Haver's <b>USECON </b>database.</p><p>
Amongst the components, the business activity index for the service
sector was above break-even for the fifth month in the last six. The
new orders index was even stronger as it posted a rise to the highest
level since June of 2007. Also, the employment index improved to the
highest level since August 2008 and was up sharply from its low at the
end of that year. Since the series' inception in 1997 there has been an
80% correlation between the level of the ISM nonmanufacturing
employment index and the m/m change in payroll employment in the
service-producing plus the construction industries.&nbsp;</p><p>As
activity improved, pricing power did as well with a rise for the fourth
straight month to near the highest level since September 2008. The
pricing index rose m/m to 58.7 and was up sharply from one year ago.
Since its inception ten years ago, there has been a 73% correlation
between the price index and the q/q change in the GDP services chain
price index.</p><p>Beginning with the January 2008 Nonmanufacturing <cite>Report
On Business</cite> &#174;, the composite index is calculated as an
indicator of the overall economic condition for the non-manufacturing
sector. It is a composite index based on the diffusion indices of four
of the indicators (business activity, new orders, employment and
supplier deliveries) with equal weights. The latest report from the ISM
can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.<span class="style1"></span></p><p><span class="style1"></span><b>Recessions
Happen: Now What?</b> from the Federal Reserve Bank of St. Louis
is available here <a href="http://www.stlouisfed.org/publications/br/articles/?id=1859">here</a>.&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100203h.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100203i.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></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>Jan. '09</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">Composite Index</td>
<td>50.5</td>
<td>49.8</td>
<td>48.4</td>
<td>43.2</td>
<td>46.2</td>
<td>47.3</td>
<td>53.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business
Activity</td>
<td>52.2</td>
<td>53.2</td>
<td>49.6</td>
<td>44.1</td>
<td>48.0</td>
<td>47.4</td>
<td>56.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>54.7</td>
<td>52.0</td>
<td>53.7</td>
<td>41.6</td>
<td>47.9</td>
<td>47.0</td>
<td>54.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>44.6</td>
<td>43.6</td>
<td>41.7</td>
<td>35.4</td>
<td>39.9</td>
<td>43.8</td>
<td>52.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Supplier
Deliveries</td>
<td>50.5</td>
<td>50.5</td>
<td>48.5</td>
<td>51.5</td>
<td>49.0</td>
<td>51.1</td>
<td>51.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Index</td>
<td>61.2</td>
<td>59.6</td>
<td>57.1</td>
<td>42.1</td>
<td>49.4</td>
<td>66.0</td>
<td>63.8</td>
</tr>
</tbody>
</table>
</span></body></html>

There's been little expansion but less contraction in the nonmanufacturing sector. That's the message from the Institute for Supply Management (ISM) for the service & construction sectors. Their Composite Index ticked up to 50.5 from [...]

Challenger Indicates Labor MarketDeterioration

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100203d.jpg" style="width: 353px; height: 265px;" align="right"> The
beginning of the new year brought an attempt by car-makers to back away
from end-of-year sales promotions. As a result, higher prices as well
as reduced inventories caused <b>U.S. unit sales of&nbsp;
light vehicles</b> during January to fall. According to the
Autodata corporation, the decline to a seasonally adjusted 10.78M units
from 11.25M in December nevertheless left sales up 12.1% from last
January when the recession was near its depths. Sales were slightly
weaker than Consensus expectations for 11.0M. (Seasonal adjustment of
these figures is provided by the U.S. Bureau of Economic Analysis).</p><p>Sales of <b>domestically made vehicles</b> fell 6.4% last
month to 7.88M units from 8.42M in December. Sales of fuel efficient
cars fell 8.2% for the month (+30.3% y/y) following strength during
December. Light truck sales similarly fell 4.7% m/m to the lowest level
since September.</p><p> Contrary to the declines in domestics, <b>i</b><b>mported
light vehicle</b> sales mirrored their December gain with a 2.5%
m/m increase. The rise to 2.90M was to the highest level since August
and raised them 2.2% y/y. Sales of imported autos inched up another
1.5% m/m while light truck sales rose 4.6% during January and by 18.0%
from last year's low.</p><p>Overall,<b> import's
share </b>of the U.S. light vehicle market during January
improved m/m to 26.9%. That was its highest level since September but
still down from its high of 27.6% during all of last year. (Imported
vehicles are those produced outside the United States.) Imports' share
of the U.S. car market improved m/m to 33.7% but that still was below
34.3% during all 2009. Imports' share of the light truck market rose
m/m to 19.1%, roughly stable with 19.6% last year.</p><p>The
U.S. vehicle sales figures can be found in Haver's<b> USECON </b>database.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100203e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100203f.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/@ED/@ED09/@ED0901/@ED0901.HTM%22" style="color: rgb(0, 0, 0);"><b>Light Vehicle Sales
(SAAR, Mil. Units)</b></a></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>Jan. 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>10.78</td>
<td>11.25</td>
<td>10.93</td>
<td>12.1%</td>
<td>10.37</td>
<td>13.22</td>
<td>16.16</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>5.70</td>
<td>6.01</td>
<td>5.65</td>
<td>21.6</td>
<td>5.46</td>
<td>6.76</td>
<td>7.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>3.78</td>
<td>4.11</td>
<td>3.77</td>
<td>30.3</td>
<td>3.56</td>
<td>4.44</td>
<td>5.06</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>1.92</td>
<td>1.89</td>
<td>1.88</td>
<td>7.6</td>
<td>1.90</td>
<td>2.32</td>
<td>2.52</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>5.08</td>
<td>5.24</td>
<td>5.28</td>
<td>3.1</td>
<td>4.91</td>
<td>6.46</td>
<td>8.60</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.11</td>
<td>4.31</td>
<td>4.40</td>
<td>5.8</td>
<td>3.95</td>
<td>5.28</td>
<td>7.10</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>0.97</td>
<td>0.93</td>
<td>0.88</td>
<td>-7.1</td>
<td>0.96</td>
<td>1.18</td>
<td>1.47</td>
</tr>
</tbody>
</table>
</span></body></html>

The beginning of the new year brought an attempt by car-makers to back away from end-of-year sales promotions. As a result, higher prices as well as reduced inventories caused U.S. unit sales of light vehicles during January to fall. [...]

U.S. Vehicle Sales Suffer From Promotions' End

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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Tian Yong Woon

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

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

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

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

260112T1.jpg

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

260112T2.jpg

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

260112T3.jpg

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

260112T4.jpg

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

260112T5.jpg

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

260112T6.jpg

Asia

Economic Letter from Asia: A Bumpy Start

Michael J. Moran

260109A.jpg

260109B.jpg

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

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

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

260109C.jpg

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

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

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

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

A Soft Tone in the Labor Market

Winnie Tapasanun

260109F17.jpg

260109G17.jpg

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

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

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

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

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

260109H17.jpg

260109I17.jpg

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

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

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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.

Germany

German Industrial Production Perks Up-Surprise!

Andrew Cates

**Global growth**
This first chart below highlights a still-fragmented global growth picture, with momentum and current activity levels varying markedly across economies. India stands out at the top-left of the chart, combining a very strong composite PMI reading with some recent cooling in momentum, suggesting activity remains robust even as growth rates moderate. Brazil and Spain sit at another end of the spectrum, pairing solid expansionary PMI levels with strong positive three-month momentum, signalling accelerating activity into year-end. By contrast, much of continental Europe — including France, Germany and Italy — remains clustered close to the 50 threshold, with modest (or no) improvements in momentum and only tentative signs of underlying expansion, underscoring the euro area’s sluggish growth backdrop. The US occupies a middle ground by remaining in expansionary territory, but recent momentum has softened, consistent with a gradual cooling rather than a downturn. Overall, the chart reinforces the message that while global growth remains positive, it is neither synchronised nor particularly strong.


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**Supply chain pressures and inflation surprises**
The NY Fed’s Global Supply Chain Pressure Index has remained subdued in recent months, reinforcing the view that supply-side frictions are no longer a material source of inflation risk. After the extreme dislocations of 2021–22, the index has settled close to, and at times below, its long-run average, consistent with largely normalised delivery times, inventories and transportation costs. The latest reading for December 2025, however, does point to some marginal tightening in supply-chain conditions, though from very low levels and still well within historical norms. Still, this modest firming has so far coincided with a broadly benign profile for inflation surprises across the G10. While geopolitical risks and trade fragmentation remain medium-term considerations, the current signal from global supply chains continues to point to limited immediate upside pressure on inflation.

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**Policy rate expectations**
In the meantime, policy-rate expectations across the major economies continue to diverge, reflecting differences in inflation dynamics and where central banks sit in their respective cycles. The latest Blue Chip survey of Financial Forecasts points to further easing over the next 12 months in the UK and the US. By contrast, expectations for the euro area and Canada are more subdued, in part because both central banks are already at a more advanced stage of their easing campaigns, leaving less scope for additional near-term adjustment. Australia stands apart, with lingering inflation pressures tempering expectations for rate cuts despite softer growth momentum. Japan, meanwhile, remains at a very different point in the cycle: having only recently begun a less accommodative campaign from ultra-loose policy, it is the sole major economy where forecasters still anticipate modest further policy tightening rather than easing.

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**Venezuela, the oil market and implications**
Venezuela’s outsized share of _world crude oil proved reserves_ — nearly one-fifth of the global total — looms large in market narratives even as its _actual production_ has languished well below historic highs. At the start of 2026, dramatic political and strategic events — including the capture of President Nicolás Maduro by U.S. forces and a tightening U.S. oil blockade that has halted Venezuelan exports — have injected fresh uncertainty into oil markets. While immediate impacts on global prices have been modest amid ample global supplies, geopolitical risk premiums have briefly lifted crude benchmarks, reflecting market sensitivity to potential supply disruptions and future policy shifts. In the short run, sustained low exports and production cuts due to storage constraints could tighten crude balances marginally, but most analysts see limited influence on overall market fundamentals this year. Over the longer term, however, any successful revival of Venezuelan output — contingent on massive investment, infrastructure rehabilitation and changes to sanctions policy — could eventually expand heavy crude availability and weigh on prices, with broader implications for OPEC+ dynamics and energy security in the Western Hemisphere.

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**China’s excess capacity and traded goods price disinflation** 
China’s export sector looks set to remain a key swing factor for the global economy in the year ahead, not least because of persistent surplus manufacturing capacity and weak domestic demand. As the chart illustrates, periods of falling relative export prices have tended to coincide with rising export volumes, highlighting China’s ability — and willingness — to clear excess capacity through external markets. With producer prices still under pressure and policy support focused more on supply than demand, the risk is that excess capacity is once again exported via more aggressive price competition, rather than absorbed domestically. If sustained, this dynamic would reinforce global disinflation forces, intensify competitive pressures on manufacturers elsewhere, and heighten trade tensions, particularly in sectors already sensitive to Chinese overcapacity such as autos, machinery and green technologies. In that sense, China’s export pricing behaviour may prove as important for the global inflation and trade outlook in 2026 as any shift in domestic growth momentum.

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**Public sector indebtedness**
This next chart, drawn up by the IMF, underlines a defining feature of the post-pandemic macro landscape: public debt is not only higher than before Covid, but is set to keep rising — and at a faster pace — with the largest economies doing much of the heavy lifting. The clustering of the biggest bubbles in the upper-right quadrant shows that countries accounting for roughly two-thirds of global GDP have already experienced sizeable increases in debt-to-GDP ratios since 2019 and are projected to see further rises through the second half of the decade. This combination of elevated starting points and ongoing fiscal expansion reflects the persistence of structural pressures — higher interest costs, ageing populations, defence spending and climate-related investment — rather than temporary crisis measures. For the global economy, the implication is a world in which fiscal policy remains active but increasingly constrained, raising difficult questions about debt sustainability, the tolerance for higher real interest rates, and the scope for counter-cyclical fiscal support when the next downturn arrives.

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Over the past few weeks, global financial markets have taken comfort from cooling inflation, resilient earnings and continued upside surprises in the dataflow, with equity markets extending gains as confidence in a soft-landing outcome has firmed. While AI-related optimism was questioned toward the end of last year, amid valuation concerns and uncertainty over near-term payoffs, sentiment has improved again in recent days. Latest business surveys suggest little immediate cause for alarm on the global growth front (chart 1), despite clear signs of divergence across regions. At the same time, there are few near-term inflation concerns evident in the data, with global supply-chain pressures remaining subdued (chart 2). Taken together, these developments leave little immediate challenge to the prevailing outlook for monetary policy, with expectations for further gradual easing across several major economies remaining broadly intact (chart 3). At the same time, geopolitical shocks — most notably the upheaval in Venezuela — have reignited focus on energy market risks and sovereign debt uncertainties, adding complexity to oil price expectations and fiscal trajectories (chart 4). Shifting focus, China’s role also continues to remain pivotal: surplus industrial capacity and competitive export pricing continue to shape global trade and exert disinflationary influence (chart 5). Against this backdrop, public debt levels that are both elevated and still rising in many large economies underscore the structural imbalances that could limit policy flexibility and amplify market sensitivities in the immediate months ahead (chart 6).

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