Louise Curley

<html>
<head>
<style>
.odd{
    background-color:#edf5ff;
}
.even{
    background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100215a.jpg" width="353"></p>
<p>Japan&#39;s fourth quarter real Gross Domestic Product rose more than expected--4.6% at an annual rate. However, the third quarter was revised downward from 1.3% annual rate to no change. The biggest contributor to growth was foreign trade: exports increased 21.7% (saar) while imports increased only 5.3% (saar). Data for inventories are not yet available, so there are no data for Gross Capital Formation, but Fixed Capital Formation showed only a minimal decline after four quarters of double digit declines (The fourth quarter of 2008, not shown below, declined 17.3% (saar). Nominal GDP rose only 0.9% at an annual rate. As a result, deflation intensified. The first chart shows the widening gap between real and nominal GDP.</p>
<p>Masaaki Shirakawa, Governor of the Bank of Japan, recently addressed the problem of deflation in a January 29, 2010 speech. The rationalization of the distribution system and deregulation of the eighties and nineties played a significant and benign role in reducing Japan&#39;s high cost economy; but once the price level had become more in line with that of other developed countries, the continued decline in prices has become malign. Fundamentally, the cause of deflation is decreased demand and its cure, increased demand. But, since the latter half of the nineties, there has been an almost continuous decline in wages accompanied by a decline in expectations of further growth both of which have tended to reduce demand. Governor Shirakawa stressed measures that would improve the economic structure of the economy rather than monetary expansion to increase demand.He urged the Japanese to make the most of global demand, especially from emerging and developing economies by introducing more flexibility in their economic structure, easing entries and exits of businesses and encouraging the development of new products.<br></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>JAPAN GDP (SAAR)</b></th>
<th scope="col"><b>Q4/09&nbsp;</b></th>
<th scope="col"><b>Q3/09</b></th>
<th scope="col"><b>Q2/00</b></th>
<th scope="col"><b>Q1/ 09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>2.7</td>
<td>2.4</td>
<td>4.6</td>
<td>-5.2</td>
<td>1.1</td>
<td>-1.7</td>
<td>1.2</td>
<td>1.1</td>
</tr>
<tr>
<td class="firstcol">Government Consumption</td>
<td>3.3</td>
<td>0.5</td>
<td>1.1</td>
<td>3.4</td>
<td>2.1</td>
<td>-0.5</td>
<td>2.7</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">Gross Capital Formation</td>
<td>n.a</td>
<td>-10.6</td>
<td>-23.2</td>
<td>-26.6</td>
<td>n.a.</td>
<td>-3.1</td>
<td>-3.0</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fixed Capital Formation</td>
<td>-0.6</td>
<td>-11.8</td>
<td>-11.1</td>
<td>-22.7</td>
<td>-11.5</td>
<td>-5.0</td>
<td>-4.6</td>
<td>-2.0</td>
</tr>
<tr>
<td class="firstcol">Exports&nbsp;</td>
<td>21.7</td>
<td>39.8</td>
<td>42.3</td>
<td>-66.3</td>
<td>8.9</td>
<td>-10.1</td>
<td>9.8</td>
<td>6.5</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>5.3</td>
<td>23.3</td>
<td>-14.7</td>
<td>-53.9</td>
<td>-10.0</td>
<td>1.3</td>
<td>2.3</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Total Real GDP&nbsp;</td>
<td>4.6</td>
<td>0.0</td>
<td>5.2</td>
<td>-12.3</td>
<td>-1.6</td>
<td>-1.3</td>
<td>1.7</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">Total Nominal GDP</td>
<td>0.9</td>
<td>-1.8</td>
<td>-0.5</td>
<td>-13.0</td>
<td>-3.6</td>
<td>-3.9</td>
<td>0.5</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">n.a. not available</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>


Japan's fourth quarter real Gross Domestic Product rose more than expected--4.6% at an annual rate. However, the third quarter was revised downward from 1.3% annual rate to no change. The biggest contributor to growth was foreign [...]

Deflation Intensifies in Japan

Tom Moeller

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212e.jpg" style="width: 353px; height: 265px;" align="right">The
Reuters/University of Michigan Index of Consumer Sentiment for
mid-February fell modestly to 73.7 from is two-year high of to 74.4
reached last month. The latest figure fell short of Consensus
expectations for a higher reading of 75.0; however, it compares
favorably to the low of 55.3 in November 2008. During the last ten
years there has been a two-thirds correlation between the level of
sentiment and the three-month change real consumer spending.&nbsp;</p>
<p>Expected economic conditions accounted for the decline with a
4.6% m/m
drop to the lowest level since November. Expectations for business
conditions during the next year and during the next five years fell
moderately but expectations for personal finances fell to the lowest
level in twelve months.</p><p> Sentiment about current economic conditions
increased by another 3.7% to its highest level since March 2008.
Assessments of current financial conditions were unchanged m/m at their
highest since September of 2008. Buying conditions for large household
goods, including furniture, refrigerators, stoves &amp;
televisions, also moved up another 5.3% to the highest level since
January 2008.&nbsp;&nbsp;</p>
<p> Expected price inflation during the
next year slipped m/m to 3.3% but it was up from the December 2008
reading of 1.7%.&nbsp;Respondents' view of government policy, which
may eventually influence economic expectations, slipped. Just sixteen
percent of respondents thought that a good job was being done by
government versus 40% who thought a poor job was being done, a
twelve-month high.&nbsp;&nbsp;</p>
<p>The Reuters/University of
Michigan survey data are not seasonally adjusted. The reading is based
on telephone interviews with about 500 households at month-end. These
results are based on about 320 interviews. The summary indexes are in
Haver's <b>USECON </b>database with details in the
proprietary <b>UMSCA </b>database.&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212f.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM"><b>University of Michigan</b></a></th>
<th scope="col"><b>Mid-February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>Feb. y/y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>73.7</td>
<td>74.4</td>
<td>72.5</td>
<td><span>30.9%</span></td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>84.1</td>
<td>81.1</td>
<td>78.0</td>
<td>28.4</td>
<td>69.6</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>66.9</td>
<td>70.1</td>
<td>68.9</td>
<td>32.5</td>
<td>64.1</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>
</span>
</body></html>

The Reuters/University of Michigan Index of Consumer Sentiment for mid-February fell modestly to 73.7 from is two-year high of to 74.4 reached last month. The latest figure fell short of Consensus expectations for a higher reading of [...]

Michigan Consumer Sentiment Dips From Recent High

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212h.jpg" style="width: 353px; height: 265px;" align="right">

A developing
trend towards accumulation of business inventories was cut short in
December. The 0.2% yearend decline partially reversed gains during the
prior two months which were the first in over a year. For the year
business inventories fell a record 9.7% as prices and volumes declined.
Perhaps the earlier accumulation resulted from slower sales growth.
Business sales in December were below the pace during three of the
prior four months. As a result, the inventory/sales ratio fell back to
the cycle low of 1.26 from a January '09 high of 1.46.</p><p>Lower
manufacturing and wholesale inventories led the December decline after
earlier gains which, in the case of wholesalers, was led by higher
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212i.jpg" style="width: 353px; height: 265px;" align="right">
petroleum prices.&nbsp;Total retail inventories were unchanged
after steady declines since August 2008. Cuts last month were led by
food &amp; beverage stores with a 1.5% (-0.6% y/y) decline.
Elsewhere, inventory cutting slowed from earlier strong declines.
Furniture inventories even have risen during three of the last four
months while clothing and general merchandise inventories are falling
at slower rates. Auto dealer inventories slipped m/m and are down by
one-quarter y/y.</p><p>Retailers' inventory/sales ratio fell to a new cycle
low with sales gains and little inventory growth. The I/S ratio for
department stores led the decline with little increase elsewhere.
Wholesalers' ratio also fell to a near-record low while the I/S ratio
in the factory sector fell to the lowest level since July 2008.&nbsp;</p><p> The
business sales and inventory data are available in Haver's <b>USECON</b>
database.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Business
Inventories (%)</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.2</td>
<td>0.5</td>
<td>0.3</td>
<td>-9.7</td>
<td>-9.7</td>
<td>0.4</td>
<td>4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.0</td>
<td>-0.2</td>
<td>-0.0</td>
<td>-10.6</td>
<td>-10.6</td>
<td>-3.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Auto</td>
<td>0.2</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-5.1</td>
<td>-5.1</td>
<td>-1.9</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.8</td>
<td>1.6</td>
<td>0.6</td>
<td>-10.2</td>
<td>-10.2</td>
<td>2.5</td>
<td>6.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.4</td>
<td>-8.6</td>
<td>-8.6</td>
<td>2.2</td>
<td>3.7</td>
</tr>
</tbody>
</table>
</span></body></html>

A developing trend towards accumulation of business inventories was cut short in December. The 0.2% yearend decline partially reversed gains during the prior two months which were the first in over a year. For the year business [...]

U.S. Business Inventories Slip After Two-Month Increase

Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left" height="265" width="353"></p>
<p>Don&#8217;t judge a book by its cover- Please pardon the bad grammar
in the title. But I am hopelessly imprinted with Rod Stewart&#8217;s, &#8220;Every
Picture tells, a story, don&#8217;t it?&#8217; In this case&#8230; I wonder: does it or
as SNL&#8217;s Seth Meyers might ask: &#8216;does it, does it really?&#8217; What I mean
is this: does the picture tell THE story? The story in the picture
above is quite clear that GDP in Europe is getting better and at a fast
rate. The DROP in GDP is cut sharply in its Q4 embodiment compared to
its Q3 embodiment for EMU, Germany and for France.<br>
<br>
</p>
<p>Digging deeper -- Yet read ANY market story on these results
for today. The clear theme is one of disappointment. Why are people
disappointed if the Yr-over-Yr drops in GDP are dissipating so fast?
It&#8217;s because a percentage change is a function of TWO things, the
current value and the past value that forms the base for the percentage
change calculation. And the BIG DROP OFF in the pace of GDP&#8217;s decline
Yr/Yr in Europe is more due to a shift in the base than to the result
in the new quarter. In the new quarter GDP rose by only 0.4% at an
annualized rate (that&#8217;s a thin 0.1% Q/Q). So why did the yr/yr pace
improve so much? It&#8217;s because of the shift in the base to Q4 2008 from
Q3 2008. In Q4 2008 EMU GDP fell by 7.4% at an annualized rate. Compare
that to its 2.7% decline in Q3 of 2008. What this means is that we are
comparing growth in Q4 2009 to a much lower base than we did in
2009-Q3, so even a small amount of growth (like 0.1% in the quarter)
makes the Yr/Yr comparison look much better than it did in Q3. It&#8217;s
base-illusion.<br>
<br>
</p>
<p>Euro-sclerosis strikes again - The simple fact is that
Europe&#8217;s recovery is slowing down. The US is speeding up. Europe&#8217;s
vaunted social welfare system may have helped to mitigate the declines
in GDP in the recession but in recovery it is providing no springboard
for growth. Meanwhile, the US recovery is powering ahead. We are set up
for the usual sort of configuration in global growth where the US
economy becomes the engine of growth for the global economy as the US
current account deficit rips a gaping hole in the US balance of
payments and feeds stimulus to the rest of world like a mother
breastfeeding her helpless infant child.<br>
<br>
</p>
<p>You put the load right one me&#8230;One problem with this emerging
scenario is that the US consumer is not is the shape he/she usually is
in a recovery and may not be able to suckle the global economy. While
US retail sales were better than expected in January the result is
still less that robust. It is not clear how much lift the US consumer
will add to the US recovery let alone to the economies of the rest of
the world. The US does import a lot of consumer goods. So a recovering
US consumer will purchase imports. But how many imports can the US
consumer buy if US growth goes flat as the diverted income and blunted
multiplier from surging foreign exports to the US stunt economic growth
back home?<br>
<br>
</p>
<p>The blame game - Get ready for the rest of the world to start
blaming the US for widening deficits even as the US consumer fuels
recovery in Europe and beyond. The simple fact is that China, Japan and
Europe- especially Germany- all want to have export-led growth. They
act as though it&#8217;s a right. If they do who will import? China and Japan
have amassed huge foreign exchange reserves, an act that clearly has
facilitated their currencies, remaining weaker than otherwise, enabling
their strategy of export-led growth while at he same time undermining
US growth and US finanical health..<br>
<br>
</p>
<p>Europe and the 800 pound gorilla - We do not yet have
consumption figures for Europe&#8217;s flash GDP results. Flash-GDP is
usually just a total and may be accompanied by some descriptive
comments but little or no supporting details on GDP. Be sure that this
paltry performance from GDP in Europe is not good news. The hike in
reserve requirements in China has people worried about in growth there
as well. There is a theme of growth pessimism taking hold again
clobbering global stock markets. But China is a taker- an exporter- not
a giver. It does not provide net domestic demand to the world. Its
growth merely absorbs income from elsewhere transforming it into growth
for&#8230;CHINA! In turn that helps to pressure global input prices
(commodity prices). Strong growth in China is usually not beneficial to
the West. People who profess worry over China growth prospects don&#8217;t
get it. It&#8217;s a big and growing ever more complicated world. Be sure to
know the facts. Markets often react to overall themes and only later
get more sophisticated by sorting out winners and losers. Right now
there is an emerging theme of weakness. Europe is faltering China may
slow. There are still lingering concerns about the status of growth in
the US&#8230;Weakness abroad will have repercussions for the US, but the US
recovery is still on track. So don&#8217;t throw out the baby with bath water
in your haste to dump dropping stocks. Markets will eventually &#8216;get it
right&#8217; and face a truer version of reality. China may be an 800 pound
gorilla but if he is sick and starts eating fewer bananas, there are
more for you.<br>
</p>
</span>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"><b>European Growth for Selected Flash GDP Results</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Q/Q Saar</td>
<td colspan="3">Yr/Yr </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>3.8%</td>
<td>9.9%</td>
<td>-3.1%</td>
<td>-1.4%</td>
<td>-3.1%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>2.4%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>-0.3%</td>
<td>-2.3%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.0%</td>
<td>2.9%</td>
<td>1.8%</td>
<td>-2.4%</td>
<td>-4.8%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>-3.1%</td>
<td>-1.9%</td>
<td>-1.2%</td>
<td>-2.6%</td>
<td>-2.5%</td>
<td>-1.9%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.9%</td>
<td>2.6%</td>
<td>-1.9%</td>
<td>-2.8%</td>
<td>-4.6%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>1.0%</td>
<td>2.1%</td>
<td>-4.2%</td>
<td>-2.6%</td>
<td>-4.0%</td>
<td>-5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>0.4%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-4.0%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Memo:US</td>
<td>5.7%</td>
<td>2.2%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-2.6%</td>
<td>-3.8%</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>0.4%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-4.0%</td>
<td>-4.8%</td>
</tr>
</tbody>
</table>
</body></html>

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

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

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212a.jpg" style="width: 353px; height: 265px;" align="right">Shoppers are
returning to stores after restraining spending at yearend. January
retail sales increased 0.5% after a 0.1% decline during December which
was less than reported initially. The latest figure was firmer than
Consensus expectations for a 0.3% rise. Moreover, the rebound had
nothing to do with shopping for a motor vehicle. Retail sales less
autos rose 0.6% after a 0.2% slip in December that was slightly less
than reported last month. As apparent in earlier figures, the trend in
retail spending has improved. On a three-month basis retail sales rose
at a 9.7% annual rate through January versus the 15.8% rate of decline
one year ago. Less autos, spending growth also recovered on a
three-month basis to 10.1% from -17.9% one year ago.&nbsp;</p><p>
Internet &amp; catalogue sales continued strong. They posted a 1.6%
rise in January (12.4% y/y) following similarly strong increases during
the prior four months. The three-month rate of gain rose to 28.5% from
-9.7% one year ago.&nbsp;</p><p> "Core" discretionary spending also
improved as general merchandise store sales rose 1.5% (3.2% y/y) and
recovered a 1.1% December decline. Sales of electronics &amp;
appliances were strong as well and posted a 1.2% gain but remained down
7.0% from last January. Earlier weakness in clothing &amp;
accessory stores also stabilized and rose 0.3%, however, price
discounting left the y/y gain at just 0.3%. Furniture &amp; home
furnishing store sales have yet to recover much. A 1.4% January decline
(-4.4% y/y) left the three-month annualized growth rate at a negative
1.3%. That was, however, improved from -21.6% at its worst.&nbsp;</p><p>Motor
vehicle sales were unchanged last month (5.5% y/y) but that was better
than the 4.2% m/m decline in unit sales. Higher gasoline prices played
a part in the retail sales picture. Gasoline purchases, however, ticked
up just 0.4% (29.0% y/y) even though prices rose 4.0% (50.5% y/y).
Sales of building materials fell 1.2% (-6.3% y/y).</p><p>The retail sales
data are available in Haver's <b>USECON</b> database.
&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM" style="color: black;">Total Retail Sales &amp; Food
Services</a> (%)</td>
<td>0.5</td>
<td>-0.1</td>
<td>2.0</td>
<td>4.7</td>
<td>-6.0</td>
<td>-0.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; </b>Excluding
Autos</td>
<td>0.6</td>
<td>-0.2</td>
<td>2.0</td>
<td>4.6</td>
<td>-4.7</td>
<td>2.4</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Non-Auto Less Gasoline</td>
<td>0.6</td>
<td>-0.3</td>
<td>1.1</td>
<td>2.0</td>
<td>-1.9</td>
<td>1.6</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</span></body></html>

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

U.S. Retail Sales Recover From Yearend Blues

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212a.jpg" style="width: 353px; height: 265px;" align="right">Shoppers
are
returning to stores after restraining spending at yearend. January
retail sales increased 0.5% after a 0.1% decline during December which
was less than reported initially. The latest figure was firmer than
Consensus expectations for a 0.3% rise. Moreover, the rebound had
nothing to do with shopping for a motor vehicle. Retail sales less
autos rose 0.6% after a 0.2% slip in December that was slightly less
than reported last month. As apparent in earlier figures, the trend in
retail spending has improved. On a three-month basis retail sales rose
at a 9.7% annual rate through January versus the 15.8% rate of decline
one year ago. Less autos, spending growth also recovered on a
three-month basis to 10.1% from -17.9% one year ago.&nbsp;</p>
<p>Internet &amp; catalogue sales continued strong. They
posted a 1.6%
rise in January (12.4% y/y) following similarly strong increases during
the prior four months. The three-month rate of gain rose to 28.5% from
-9.7% one year ago.&nbsp;</p>
<p> "Core" discretionary spending also
improved as general merchandise store sales rose 1.5% (3.2% y/y) and
recovered a 1.1% December decline. Sales of electronics &amp;
appliances were strong as well and posted a 1.2% gain but remained down
7.0% from last January. Earlier weakness in clothing &amp;
accessory stores also stabilized and rose 0.3%, however, price
discounting left the y/y gain at just 0.3%. Furniture &amp; home
furnishing store sales have yet to recover much. A 1.4% January decline
(-4.4% y/y) left the three-month annualized growth rate at a negative
1.3%. That was, however, improved from -21.6% at its worst.&nbsp;</p>
<p>Motor
vehicle sales were unchanged last month (5.5% y/y) but that was better
than the 4.2% m/m decline in unit sales. Higher gasoline prices played
a part in the retail sales picture. Gasoline purchases, however, ticked
up just 0.4% (29.0% y/y) even though prices rose 4.0% (50.5% y/y).
Sales of building materials fell 1.2% (-6.3% y/y).</p>
<p>The retail sales
data are available in Haver's <b>USECON</b> database.
&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM" style="color: black;">Total Retail Sales &amp; Food
Services</a> (%)</td>
<td>0.5</td>
<td>-0.1</td>
<td>2.0</td>
<td>4.7</td>
<td>-6.0</td>
<td>-0.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; </b>Excluding
Autos</td>
<td>0.6</td>
<td>-0.2</td>
<td>2.0</td>
<td>4.6</td>
<td>-4.7</td>
<td>2.4</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Non-Auto Less Gasoline</td>
<td>0.6</td>
<td>-0.3</td>
<td>1.1</td>
<td>2.0</td>
<td>-1.9</td>
<td>1.6</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Every Picture Tells A Story...Or
Do It?</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> February 12, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left" height="265" width="353"></p>
<p>Don&#8217;t judge a book by its cover- Please pardon the bad grammar
in the title. But I am hopelessly imprinted with Rod Stewart&#8217;s, &#8220;Every
Picture tells, a story, don&#8217;t it?&#8217; In this case&#8230; I wonder: does it or
as SNL&#8217;s Seth Meyers might ask: &#8216;does it, does it really?&#8217; What I mean
is this: does the picture tell THE story? The story in the picture
above is quite clear that GDP in Europe is getting better and at a fast
rate. The DROP in GDP is cut sharply in its Q4 embodiment compared to
its Q3 embodiment for EMU, Germany and for France.<br>
<br>
</p>
<p>Digging deeper -- Yet read ANY market story on these results
for today. The clear theme is one of disappointment. Why are people
disappointed if the Yr-over-Yr drops in GDP are dissipating so fast?
It&#8217;s because a percentage change is a function of TWO things, the
current value and the past value that forms the base for the percentage
change calculation. And the BIG DROP OFF in the pace of GDP&#8217;s decline
Yr/Yr in Europe is more due to a shift in the base than to the result
in the new quarter. In the new quarter GDP rose by only 0.4% at an
annualized rate (that&#8217;s a thin 0.1% Q/Q). So why did the yr/yr pace
improve so much? It&#8217;s because of the shift in the base to Q4 2008 from
Q3 2008. In Q4 2008 EMU GDP fell by 7.4% at an annualized rate. Compare
that to its 2.7% decline in Q3 of 2008. What this means is that we are
comparing growth in Q4 2009 to a much lower base than we did in
2009-Q3, so even a small amount of growth (like 0.1% in the quarter)
makes the Yr/Yr comparison look much better than it did in Q3. It&#8217;s
base-illusion.<br>
<br>
</p>
<p>Euro-sclerosis strikes again - The simple fact is that
Europe&#8217;s recovery is slowing down. The US is speeding up. Europe&#8217;s
vaunted social welfare system may have helped to mitigate the declines
in GDP in the recession but in recovery it is providing no springboard
for growth. Meanwhile, the US recovery is powering ahead. We are set up
for the usual sort of configuration in global growth where the US
economy becomes the engine of growth for the global economy as the US
current account deficit rips a gaping hole in the US balance of
payments and feeds stimulus to the rest of world like a mother
breastfeeding her helpless infant child.<br>
<br>
</p>
<p>You put the load right one me&#8230;One problem with this emerging
scenario is that the US consumer is not is the shape he/she usually is
in a recovery and may not be able to suckle the global economy. While
US retail sales were better than expected in January the result is
still less that robust. It is not clear how much lift the US consumer
will add to the US recovery let alone to the economies of the rest of
the world. The US does import a lot of consumer goods. So a recovering
US consumer will purchase imports. But how many imports can the US
consumer buy if US growth goes flat as the diverted income and blunted
multiplier from surging foreign exports to the US stunt economic growth
back home?<br>
<br>
</p>
<p>The blame game - Get ready for the rest of the world to start
blaming the US for widening deficits even as the US consumer fuels
recovery in Europe and beyond. The simple fact is that China, Japan and
Europe- especially Germany- all want to have export-led growth. They
act as though it&#8217;s a right. If they do who will import? China and Japan
have amassed huge foreign exchange reserves, an act that clearly has
facilitated their currencies, remaining weaker than otherwise, enabling
their strategy of export-led growth while at he same time undermining
US growth and US finanical health..<br>
<br>
</p>
<p>Europe and the 800 pound gorilla - We do not yet have
consumption figures for Europe&#8217;s flash GDP results. Flash-GDP is
usually just a total and may be accompanied by some descriptive
comments but little or no supporting details on GDP. Be sure that this
paltry performance from GDP in Europe is not good news. The hike in
reserve requirements in China has people worried about in growth there
as well. There is a theme of growth pessimism taking hold again
clobbering global stock markets. But China is a taker- an exporter- not
a giver. It does not provide net domestic demand to the world. Its
growth merely absorbs income from elsewhere transforming it into growth
for&#8230;CHINA! In turn that helps to pressure global input prices
(commodity prices). Strong growth in China is usually not beneficial to
the West. People who profess worry over China growth prospects don&#8217;t
get it. It&#8217;s a big and growing ever more complicated world. Be sure to
know the facts. Markets often react to overall themes and only later
get more sophisticated by sorting out winners and losers. Right now
there is an emerging theme of weakness. Europe is faltering China may
slow. There are still lingering concerns about the status of growth in
the US&#8230;Weakness abroad will have repercussions for the US, but the US
recovery is still on track. So don&#8217;t throw out the baby with bath water
in your haste to dump dropping stocks. Markets will eventually &#8216;get it
right&#8217; and face a truer version of reality. China may be an 800 pound
gorilla but if he is sick and starts eating fewer bananas, there are
more for you.<br>
</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"><b>European
Growth for Selected Flash GDP Results</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Q/Q Saar</td>
<td colspan="3">Yr/Yr </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>3.8%</td>
<td>9.9%</td>
<td>-3.1%</td>
<td>-1.4%</td>
<td>-3.1%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>2.4%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>-0.3%</td>
<td>-2.3%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.0%</td>
<td>2.9%</td>
<td>1.8%</td>
<td>-2.4%</td>
<td>-4.8%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>-3.1%</td>
<td>-1.9%</td>
<td>-1.2%</td>
<td>-2.6%</td>
<td>-2.5%</td>
<td>-1.9%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.9%</td>
<td>2.6%</td>
<td>-1.9%</td>
<td>-2.8%</td>
<td>-4.6%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>1.0%</td>
<td>2.1%</td>
<td>-4.2%</td>
<td>-2.6%</td>
<td>-4.0%</td>
<td>-5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>0.4%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-4.0%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Memo:US</td>
<td>5.7%</td>
<td>2.2%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-2.6%</td>
<td>-3.8%</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>0.4%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-4.0%</td>
<td>-4.8%</td>
</tr>
</tbody>
</table>
<span id="articletitle">U.S. Business Inventories Slip
After Two-Month Increase</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> February 12, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212h.jpg" style="width: 353px; height: 265px;" align="right">A
developing
trend towards accumulation of business inventories was cut short in
December. The 0.2% yearend decline partially reversed gains during the
prior two months which were the first in over a year. For the year
business inventories fell a record 9.7% as prices and volumes declined.
Perhaps the earlier accumulation resulted from slower sales growth.
Business sales in December were below the pace during three of the
prior four months. As a result, the inventory/sales ratio fell back to
the cycle low of 1.26 from a January '09 high of 1.46.</p>
<p>Lower
manufacturing and wholesale inventories led the December decline after
earlier gains which, in the case of wholesalers, was led by higher
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212i.jpg" style="width: 353px; height: 265px;" align="right">petroleum
prices.&nbsp;Total retail inventories were unchanged
after steady declines since August 2008. Cuts last month were led by
food &amp; beverage stores with a 1.5% (-0.6% y/y) decline.
Elsewhere, inventory cutting slowed from earlier strong declines.
Furniture inventories even have risen during three of the last four
months while clothing and general merchandise inventories are falling
at slower rates. Auto dealer inventories slipped m/m and are down by
one-quarter y/y.</p>
<p>Retailers' inventory/sales ratio fell to a new cycle
low with sales gains and little inventory growth. The I/S ratio for
department stores led the decline with little increase elsewhere.
Wholesalers' ratio also fell to a near-record low while the I/S ratio
in the factory sector fell to the lowest level since July
2008.&nbsp;</p>
<p> The
business sales and inventory data are available in Haver's <b>USECON</b>
database.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Business
Inventories (%)</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.2</td>
<td>0.5</td>
<td>0.3</td>
<td>-9.7</td>
<td>-9.7</td>
<td>0.4</td>
<td>4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.0</td>
<td>-0.2</td>
<td>-0.0</td>
<td>-10.6</td>
<td>-10.6</td>
<td>-3.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Auto</td>
<td>0.2</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-5.1</td>
<td>-5.1</td>
<td>-1.9</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.8</td>
<td>1.6</td>
<td>0.6</td>
<td>-10.2</td>
<td>-10.2</td>
<td>2.5</td>
<td>6.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.4</td>
<td>-8.6</td>
<td>-8.6</td>
<td>2.2</td>
<td>3.7</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Michigan Consumer Sentiment Dips
From Recent High</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> February 12, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212e.jpg" style="width: 353px; height: 265px;" align="right">The
Reuters/University of Michigan Index of Consumer Sentiment for
mid-February fell modestly to 73.7 from is two-year high of to 74.4
reached last month. The latest figure fell short of Consensus
expectations for a higher reading of 75.0; however, it compares
favorably to the low of 55.3 in November 2008. During the last ten
years there has been a two-thirds correlation between the level of
sentiment and the three-month change real consumer spending.&nbsp;</p>
<p>Expected economic conditions accounted for the decline with a
4.6% m/m
drop to the lowest level since November. Expectations for business
conditions during the next year and during the next five years fell
moderately but expectations for personal finances fell to the lowest
level in twelve months.</p>
<p> Sentiment about current economic conditions
increased by another 3.7% to its highest level since March 2008.
Assessments of current financial conditions were unchanged m/m at their
highest since September of 2008. Buying conditions for large household
goods, including furniture, refrigerators, stoves &amp;
televisions, also moved up another 5.3% to the highest level since
January 2008.&nbsp;&nbsp;</p>
<p> Expected price inflation during the
next year slipped m/m to 3.3% but it was up from the December 2008
reading of 1.7%.&nbsp;Respondents' view of government policy, which
may eventually influence economic expectations, slipped. Just sixteen
percent of respondents thought that a good job was being done by
government versus 40% who thought a poor job was being done, a
twelve-month high.&nbsp;&nbsp;</p>
<p>The Reuters/University of
Michigan survey data are not seasonally adjusted. The reading is based
on telephone interviews with about 500 households at month-end. These
results are based on about 320 interviews. The summary indexes are in
Haver's <b>USECON </b>database with details in the
proprietary <b>UMSCA </b>database.&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212f.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100212g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM"><b>University
of Michigan</b></a></th>
<th scope="col"><b>Mid-February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>Feb. y/y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>73.7</td>
<td>74.4</td>
<td>72.5</td>
<td><span>30.9%</span></td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>84.1</td>
<td>81.1</td>
<td>78.0</td>
<td>28.4</td>
<td>69.6</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>66.9</td>
<td>70.1</td>
<td>68.9</td>
<td>32.5</td>
<td>64.1</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>
</span>
</body></html>

U.S. Retail Sales Recover FromYearend Blues

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style></head>
<body>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211e.jpg" style="width: 353px; height: 265px;" align="right">Injection of
liquidity by the Federal Reserve into the banking system typically
raises inflationary concerns in the credit markets. And this time is no
different. Long-term interest rates have remained fairly stable as the
Fed funds rate has lingered near zero for over one year. The steepened
yield curve thus suggests a future inflationary problem.</p><p>Not only has
the Fed held interest rates low, it's provided liquidity to the banks,
particularly through its Term Auction Facility (TAF). Through last year
this provision fell as banks re-liquefied. But so far, it has not
stimulated bank lending and money supply growth has decelerated
sharply. Instead, the liquidity has been used to shore up balance
sheets.</p><p> Indeed, money supply growth (M2) has decelerated as demand
deposit balances have been flat since the middle of last year.
Precaution remains the operative word for banks as they lend and also
for individuals who remain cautious about job prospects.</p><p>The data
referenced above can be found in Haver's <b>WEEKLY</b>
database.</p><p> <b>Interest on Required Balances and Excess Balances </b>from
the Federal Reserve Board is available&nbsp; <a href="http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm">here</a>.&nbsp;
Earlier this week, Chairman Bernanke indicated in Congressional
testimony that the interest rate shown here would become a key tool in
the Fed's liquidity management going forward.&nbsp; These data are
also in Haver's <b>WEEKLY</b> database.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211f.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100211g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Liquidity Measures</a></b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reserve Bank Assets - Term
Auction Facility</td>
<td>$3,8531M</td>
<td>$7,518</td>
<td>$450,319</td>
</tr>
<tr>
<td class="firstcol">Yield Curve (10 Yr. Treas. less
Fed Funds)</td>
<td>3.62%</td>
<td>3.10%</td>
<td>1.74%</td>
</tr>
<tr class="odd">
<td class="firstcol">Money Supply - Demand Deposits</td>
<td>-0.5% y/y</td>
<td>24.4 % y/y</td>
<td>11.3</td>
</tr>
</tbody>
</table>
</span></body></html>

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

Federal Reserve Injects Liquidity Into Banks

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

260205C15.jpg

260205D15.jpg

- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

260205A2.jpg

260205B2.jpg

Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

260205C2.jpg

260205D2.jpg

- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief

Jump to:

Deflation Intensifies in Japan

Deflation Intensifies in Japan

Michigan Consumer Sentiment Dips From Recent High

U.S. Business Inventories Slip After Two-Month Increase

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

U.S. Retail Sales Recover From Yearend Blues

U.S. Retail Sales Recover FromYearend Blues

Federal Reserve Injects Liquidity Into Banks