Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127d.jpg" align="left" border="0" height="265" width="353">
Despite great strides made in the improvement in business and
household confidence since the pit of the recession, levels of
confidence for business and households remain at levels that are below
par. Both series, while still climbing, are showing signs of slowing
the pace of that advance.
The industry climate reading stands in the 43rd percentile of
its range well below the mid point and at an index of 92 it stands well
below the mean value of 100 as well. The only reading that stands above
its mean is the RECENT trend for production. Unfortunately the likely
trend is at the 47th percentile of its range, below the midpoint and at
a reading of -7 it is below its mean reading of +5. The orders trends
are improving but they have a very long way to go just to get back to
neutral.
The story for the household sector is much the same as for
business, except weaker. At -29 the confidence reading for households
is below neutral and in fact is much weaker than that standing short of
the one-third mark of its range. The mean reading stands at -19 but
confidence reads -29 in January.
While the strongest reading from the consumer is a positive
reading on the household&#8217;s current financial standing (a reading in the
81st percentile of its range) the next highest reading is a 77th
percentile reading on the prospect for unemployment. These two readings
are diametrically opposed. French consumers fear unemployment yet see
that they are in a relatively strong current financial situation, even
as the economy is putting its worst days behind it. This is surely a
prescription for the consumer to keep his wallet locked up tightly.
Responses show that living standards are thought to have
improved and to be improving. Yet these readings are low in their
respective ranges and well short of historic median values.
Savings is one of the bright spots. While standing in the 59th
and 65th percentiles both the responses for &#8216;favorable to save&#8217; and
&#8216;ability to save&#8217; are near or above historic median values.
Spending, a key parameter for getting recovery in gear is
still rated as subpar. Households&#8217; response to the question &#8216;is it a
favorable time to spend?&#8217; resides just short of the 40th range
percentile and at a raw reading of -19 that is short of its median
value of -14.
In short the business sector and the consumer sector see
ongoing progress
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="11"> INSEE Industry
Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan 
10</td>
<td>Dec 
09</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Percentile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate</td>
<td>92</td>
<td>88</td>
<td>90</td>
<td>89</td>
<td>43.4</td>
<td>186</td>
<td>122</td>
<td>69</td>
<td>53</td>
<td>100</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Production</td>
</tr>
<tr>
<td class="firstcol">Recent
Trend</td>
<td>-4</td>
<td>-10</td>
<td>-8</td>
<td>-8</td>
<td>59.3</td>
<td>111</td>
<td>44</td>
<td>-74</td>
<td>118</td>
<td>-8</td>
</tr>
<tr>
<td class="firstcol">Likely
trend</td>
<td>-7</td>
<td>-5</td>
<td>-1</td>
<td>-1</td>
<td>47.1</td>
<td>211</td>
<td>30</td>
<td>-40</td>
<td>70</td>
<td>5</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Orders/Demand</td>
</tr>
<tr>
<td class="firstcol">Orders&amp;Demand</td>
<td>-45</td>
<td>-52</td>
<td>-52</td>
<td>-52</td>
<td>22.2</td>
<td>215</td>
<td>25</td>
<td>-65</td>
<td>90</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol">Fgn Orders&amp;Demand</td>
<td>-45</td>
<td>-54</td>
<td>-46</td>
<td>-49</td>
<td>25.5</td>
<td>215</td>
<td>31</td>
<td>-71</td>
<td>102</td>
<td>-13</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Prices</td>
</tr>
<tr>
<td class="firstcol">Likely Sales Price
Trend</td>
<td>-11</td>
<td>-18</td>
<td>-13</td>
<td>-9</td>
<td>25.5</td>
<td>205</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>0</td>
</tr>
</tbody>
</table>
 
The consumer is still not solidly underpinned by the notion
that government has stabilized the economic environment. Even though
consumers are feeling relatively financially settled they are fearful
of the future and therefore are not very prone to spend. Spending
proclivity is lagging behind improvements in financial well being. This
is an issue for policymakers. It is not necessarily a call out for any
new program but for leadership to take steps to reassure an
economically frightened public that is better off than it suspects and
whose fear could become a catalyst for backsliding.
As for business its progress is steady and there is no concern
about inflation. But even as current conditions have improved, here
again we see reluctance to extrapolate ongoing improvement into the
future. The orders data manifest this result with still weak (although
improving) readings for orders and demand that seem to get a greater
weight than their improving trend. What is lacking in France is
confidence and more certainty about the future.
That predicament may also be a statement about the e-Zone in
which France is firmly embedded. The whole of the e-zone is still
struggling with several states still battling horrific issues. In this
environment the euro, the strap that binds Europe together may be more
of a corset that restrains optimism since the healthy countries are
more afraid of being pulled down by or made to assist those that are
struggling. Europe seems to have been able to cobble together an
economic structure that has doe it more harm than good. The area is
bound together by a common currency that protects the imprudent from
the consequences of their own actions. Fiscal transgression is not
easily exported since fiscal accounts are kept separate. There is no
sharing of the public expenditure pot in Europe except for certain
consolidated government funding. Still there is a stigma. And you may
recall how the Latin American Debt crisis brought down all of Latin
America despite there being no common currency and no shared fiscal
responsibility of any type &#8211; just proximity and shared culture. Europe
is walking a very shaking tightrope and has not figured out yet how to
remedy its problems. France is but an example.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="8"> INSEE Household
Monthly Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">&nbsp;</td>
<td colspan="3">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan 
10</td>
<td>Dec 
09</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Percentile</td>
<td>Rank %</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Household
Confidence</td>
<td>-29</td>
<td>-30</td>
<td>-30</td>
<td>-34</td>
<td>31.6</td>
<td>21.6</td>
<td>-19</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Living
Standards&nbsp;</td>
</tr>
<tr>
<td class="firstcol">past 12
Mos</td>
<td>-62</td>
<td>-65</td>
<td>-65</td>
<td>-70</td>
<td>18.4</td>
<td>16.2</td>
<td>-40</td>
</tr>
<tr>
<td class="firstcol">Next
12-Mos</td>
<td>-34</td>
<td>-36</td>
<td>-35</td>
<td>-39</td>
<td>33.3</td>
<td>24.9</td>
<td>-21</td>
</tr>
<tr>
<td class="firstcol">Unemployment: Next
12</td>
<td>64</td>
<td>62</td>
<td>63</td>
<td>65</td>
<td>77.7</td>
<td>88.4</td>
<td>33</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Price
Developments</td>
</tr>
<tr>
<td class="firstcol">Past
12Mo</td>
<td>-22</td>
<td>-25</td>
<td>-27</td>
<td>-28</td>
<td>28.9</td>
<td>55.2</td>
<td>-16</td>
</tr>
<tr>
<td class="firstcol">Next
12-Mos</td>
<td>-37</td>
<td>-42</td>
<td>-46</td>
<td>-45</td>
<td>24.7</td>
<td>53.1</td>
<td>-35</td>
</tr>
<tr class="odd">
<td colspan="8">Savings</td>
</tr>
<tr>
<td class="firstcol">
Favorable to save</td>
<td>21</td>
<td>12</td>
<td>13</td>
<td>8</td>
<td>59.1</td>
<td>46.1</td>
<td>22</td>
</tr>
<tr>
<td class="firstcol">Ability
to save Next 12</td>
<td>-4</td>
<td>-6</td>
<td>-7</td>
<td>-11</td>
<td>65.5</td>
<td>83.8</td>
<td>-9</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Spending</td>
</tr>
<tr>
<td class="firstcol">Favorable
for major purchase</td>
<td>-19</td>
<td>-20</td>
<td>-19</td>
<td>-24</td>
<td>39.7</td>
<td>40.2</td>
<td>-14</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Financial
Situation</td>
</tr>
<tr>
<td class="firstcol"> Current</td>
<td>20</td>
<td>18</td>
<td>17</td>
<td>13</td>
<td>81.0</td>
<td>97.5</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">Past 12
MOs</td>
<td>-21</td>
<td>-21</td>
<td>-22</td>
<td>-25</td>
<td>48.4</td>
<td>29.0</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol"> Next
12-Mos</td>
<td>-10</td>
<td>-10</td>
<td>-8</td>
<td>-12</td>
<td>40.0</td>
<td>15.8</td>
<td>-2</td>
</tr>
<tr class="even">
<td colspan="8" class="firstcol">Number of
observations
in the period = 241</td>
</tr>
</tbody>
</table>
</body></html>

Despite great strides made in the improvement in business and household confidence since the pit of the recession, levels of confidence for business and households remain at levels that are below par. Both series, while still [...]

French Biz And Household Sectors Continue Process Of Repair

Tom Moeller

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127a.jpg" style="width: 353px; height: 265px;" align="right">For
new or existing home sales, December was a bleak month. Following
Monday's report that existing home sales dropped sharply, the Commerce
Department reported today that new home sales fell 7.6% m/m to 342,000
from an upwardly revised November level. The latest was the fourth
decline in the last five months. December sales were the lowest since
last March and off 75.4% from the 2005 peak. Near term home sales
should be helped by the recent extension of the Federal government's
tax credit which now it is for all home buyers and not just first-time
purchases. The December sales figure fell well short of Consensus
expectations for 370,000 sales.
The
December results capped a dismal year. For 2009 as
a whole new home sales totaled 372,000 which was the lowest level since
the numbers were first tallied in 1963. 
Home
prices firmed during December though the November figure was revised
down. The median price of a new single-family home rose to $221,300
which was the highest level since May. The increase pared the y/y
decline to 3.6% from its worst of -14.5% this past February. For all of
2009 median home prices fell 7.3% after a 5.5% decline during
2008.
Price discounts and lower housing starts drove down the
inventory of unsold homes by more than one-third y/y to its lowest
since early-1971. The months' supply of unsold homes rose modestly to
8.1 months but remained down from the high of 12.4 months in January
'09. Despite the shrinkage of inventory, it still took a record median
13.9 months to sell a new home. 
Inflation: Mind the
Gap from the Federal Reserve Bank of San Francisco is
available <a href="http://www.frbsf.org/publications/economics/letter/2010/el2010-02.html">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127c.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">US
New Homes</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales
(SAAR, 000s)</td>
<td>342</td>
<td>370</td>
<td>408</td>
<td>-8.6%</td>
<td>372</td>
<td>481</td>
<td>769</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>40</td>
<td>28</td>
<td>33</td>
<td>33.3</td>
<td>31</td>
<td>35</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>43</td>
<td>73</td>
<td>56</td>
<td>-27.1</td>
<td>54</td>
<td>69</td>
<td>118</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>178</td>
<td>192</td>
<td>224</td>
<td>-7.8</td>
<td>201</td>
<td>264</td>
<td>409</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>81</td>
<td>77</td>
<td>95</td>
<td>-12.0</td>
<td>87</td>
<td>113</td>
<td>178</td>
</tr>
<tr>
<td class="firstcol">Median Price
(NSA, $)</td>
<td>221,300</td>
<td>210,300</td>
<td>213,700</td>
<td>&nbsp;-3.6</td>
<td>213,567</td>
<td>230,408</td>
<td>243,742</td>
</tr>
</tbody>
</table>

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For new or existing home sales, December was a bleak month. Following Monday's report that existing home sales dropped sharply, the Commerce Department reported today that new home sales fell 7.6% m/m to 342,000 from an upwardly [...]

U.S. New Home Sales Drop Again & Remain 75% Below Peak

U.S. New Home Sales Drop Again& Remain 75% Below Peak

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125d.jpg" align="left" border="0" height="265" width="353">
Belgium is a small open EMU economy that tends to lead the way
in the Euro-business cycle. It is headed higher once again in January.
The chart above shows that the Belgium MFG index usually surges early
and peaks ahead of the indices for Germany and EMU. At this point in
the cycle Belgium is doing that again. After leading the parade higher,
the Belgian National Bank index of MFG paused, but has resumed its move
higher. That&#8217;s good news for Europe.
Belgium is a small open economy that sits at the cross roads
of Euro-activity. Its index is usually the first released among the
Zone members so it is a natural as a bellwether from a timing
standpoint. To underscore that point the index reliably tends to lead
the Europe&#8217;s cycle hence paying attention to this small country&#8217;s
economic data makes considerable sense.
Just today Germany sharply revised up its orders in November
that it had released on Friday, leading to upward revisions to November
EMU orders as well. Now in fresh data from January, the Belgian bank
index is continuing to gain momentum. The overall Belgian index has
improved its reading for the 10th month in a row. Manufacturing is back
to improving after a one-month misstep; MFG has improved in eight of
the last ten months.
The Belgian index places MFG in the top two thirds of its
range. Business services stand in the top 40% of its range. Wholesaling
and retailing are near mid-range in the 47th percentile. Construction
is lagging badly in Belgium standing in the eighth percentile of its
range.
For MFG the orders assessment is very up beat with both
domestic and foreign orders in the 60th and 70th percentiles of their
respective ranges. Like Germany and EMU, Belgium shows that foreign
orders are the greater source for growth. Production stands even higher
in the 75th percentile of its range.
On balance the Belgian Bank index is a bit reassuring ahead of
the release of the monthly German reports form Zew and the IFO as well
as the EMU-wide releases from the European Commission. There has been
some sputtering in European and in US data recently. Does the Belgian
index point to a re-emergence of up beat reports for the month ahead?
We shall soon see, but based on historic relationships, the best bet is
that it does point to better euro-reports for the month ahead.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="9"> Belgium National
Bank Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>3Mo Change</td>
<td>6MO Change</td>
<td>12Mo Change</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Total Ind</td>
<td>-7.0</td>
<td>-7.9</td>
<td>-8.8</td>
<td>7.2</td>
<td>15.8</td>
<td>20.6</td>
<td>60.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;MFG</td>
<td>-7.2</td>
<td>-9.3</td>
<td>-8.6</td>
<td>8.6</td>
<td>14.7</td>
<td>21.8</td>
<td>67.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Prod</td>
<td>7.0</td>
<td>4.0</td>
<td>6.0</td>
<td>-2.0</td>
<td>13.0</td>
<td>28.0</td>
<td>75.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Dom Ord</td>
<td>-4.0</td>
<td>-9.0</td>
<td>-9.0</td>
<td>5.0</td>
<td>6.0</td>
<td>13.0</td>
<td>60.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; FGN Ord</td>
<td>8.0</td>
<td>-3.0</td>
<td>-3.0</td>
<td>-1.0</td>
<td>15.0</td>
<td>43.0</td>
<td>70.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Prices</td>
<td>3.0</td>
<td>-9.0</td>
<td>-8.0</td>
<td>11.0</td>
<td>20.0</td>
<td>12.0</td>
<td>66.7%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Current
assess</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Tot Ord</td>
<td>-34.0</td>
<td>-38.0</td>
<td>-36.0</td>
<td>2.0</td>
<td>15.0</td>
<td>15.0</td>
<td>33.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fgn Ord</td>
<td>-34.0</td>
<td>-38.0</td>
<td>-34.0</td>
<td>4.0</td>
<td>15.0</td>
<td>19.0</td>
<td>38.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Inventories</td>
<td>-13.0</td>
<td>-12.0</td>
<td>-10.0</td>
<td>-8.0</td>
<td>-9.0</td>
<td>-11.0</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Wholesale&amp;
Retail</td>
<td>-9.0</td>
<td>-6.3</td>
<td>-10.0</td>
<td>8.1</td>
<td>8.6</td>
<td>18.3</td>
<td>47.5%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-15.7</td>
<td>-9.1</td>
<td>-10.0</td>
<td>-5.0</td>
<td>0.2</td>
<td>-0.2</td>
<td>8.0%</td>
</tr>
<tr>
<td class="firstcol">Business Services</td>
<td>3.1</td>
<td>-1.4</td>
<td>-7.8</td>
<td>13.0</td>
<td>38.6</td>
<td>37.1</td>
<td>59.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Comparisons:</td>
<td colspan="3"></td>
<td colspan="3">Changes lag one month</td>
<td>1-Mo Lag</td>
</tr>
<tr>
<td class="firstcol">EU Index: Industry</td>
<td>#N/A</td>
<td>-16.0</td>
<td>-19.0</td>
<td>8.0</td>
<td>9.0</td>
<td>17.0</td>
<td>48.9%</td>
</tr>
<tr>
<td class="firstcol">Gy Index:Industry</td>
<td>#N/A</td>
<td>-19.0</td>
<td>-21.0</td>
<td>10.0</td>
<td>10.0</td>
<td>15.0</td>
<td>42.3%</td>
</tr>
<tr>
<td class="firstcol">Compare: BNB Index</td>
<td>--&nbsp;</td>
<td>--&nbsp;</td>
<td>&nbsp;--</td>
<td>9.9</td>
<td>10.3</td>
<td>20.9</td>
<td>Since&nbsp;Jan-96</td>
</tr>
</tbody>
</table>
</body></html>

Belgium is a small open EMU economy that tends to lead the way in the Euro-business cycle. It is headed higher once again in January. The chart above shows that the Belgium MFG index usually surges early and peaks ahead of the indices [...]

Belgium Leads The Way, Pauses Then Resumes Its Climb

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 <a href="/comment/110124a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/110124a.png"></a>
 <a href="/comment/110124b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/110124b.png"></a>
NABE indicated in its latest Industry Survey that despite level demand
throughout last year, most other economic conditions firmed. The index of unit
demand improved sharply as 2010 began, but momentum waned as the year
progressed. Nevertheless, as the percent of firms reporting higher demand rose
moderately, the percent reporting lower demand fell sharply. The recovery in
demand from the recession low necessitated more employment. The hiring index
rose to its highest since 2006 as the percent of firms adding to payrolls
surged. Capital spending plans improved in lockstep.
Gains on the product &amp; employment side of firms' ledgers induced higher
costs. By the end of the year, input costs had surged. Nearly half of firms
faced higher and just a few reported falling costs. Despite higher costs,
heightened competitive forces left firms with little ability to pass them along
in the form of&nbsp; higher prices. The prices charged index was roughly stable,
at a low level, with 2009. Encouraging, however, was that despite weak pricing
power, firms' profit margins jumped to nearly the series' high. Government
numbers showing improved worker productivity had a real effect on firms' bottom
lines. Part of the reason costs remained under control was the modest recovery
in wages &amp; salaries.
In just the goods producing sector alone, unit demand weakened more than the
overall figures indicated and profit margins plummeted into negative
territory.&nbsp;&nbsp;

<a href="/comment/110124c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/110124c.png"></a>
 <a href="/comment/110124d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/110124d.png"></a>

 <table class="centered" width="100%" border="0" cellspacing="0">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th scope="col" class="firstcol" >National Association For
 Business Economics Industry Survey</th>
 <th scope="col" >Q4'10</th>
 <th scope="col" >Q3'10</th>
 <th scope="col" >Q2'10</th>
 <th scope="col" >Q1'10</th>
 <th scope="col" >2010</th>
 <th scope="col" >2009</th>
 <th scope="col" >2008</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey3">
 <td colspan=8 >Conditions Over Last Three Months: Net
 Rising Index</td>

 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Unit Demand</td>
 <td >42.7</td>
 <td >46.5</td>
 <td >42.0</td>
 <td >51.5</td>
 <td >45.7</td>
 <td >7.3</td>
 <td >-0.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Employment</td>
 <td >27.7</td>
 <td >17.8</td>
 <td >17.3</td>
 <td >8.8</td>
 <td >17.9</td>
 <td >-22.2</td>
 <td >-3.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Capital Spending</td>
 <td >32.1</td>
 <td >25.4</td>
 <td >10.8</td>
 <td >9.8</td>
 <td >19.5</td>
 <td >-6.5</td>
 <td >7.3</td>
 </tr>

 <tr class="odd">
 <td class="firstcol" >&nbsp; Input Costs</td>
 <td >41.4</td>
 <td >31.3</td>
 <td >20.0</td>
 <td >32.6</td>
 <td >31.3</td>
 <td >5.5</td>
 <td >37.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Prices Charged</td>
 <td >6.3</td>
 <td >-2.9</td>
 <td >13.9</td>
 <td >-1.5</td>
 <td >4.0</td>
 <td >2.8</td>
 <td >16.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Profit Margins</td>
 <td >20.5</td>
 <td >20.3</td>
 <td >3.9</td>
 <td >13.1</td>
 <td >14.4</td>
 <td >-6.8</td>
 <td >-23.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Wages &amp; Salaries</td>
 <td >12.5</td>
 <td >11.4</td>
 <td >14.1</td>
 <td >19.7</td>
 <td >14.4</td>
 <td >-1.5</td>
 <td >14.0</td>
 </tr>
 <tr class="grey3">
 <td colspan=8>Goods Producing Industries</td>

 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Unit Demand</td>
 <td >40.9</td>
 <td >27.8</td>
 <td >69.2</td>
 <td >60.0</td>
 <td >49.5</td>
 <td >-15.0</td>
 <td >-33.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Profit Margins</td>
 <td >-4.8</td>
 <td >23.5</td>
 <td >25.0</td>
 <td >30.8</td>
 <td >18.6</td>
 <td >-18.9</td>
 <td >-31.1</td>
 </tr>
 </tbody>
</table>




</html>

NABE indicated in its latest Industry Survey that despite level demand throughout last year, most other economic conditions firmed. The index of unit demand improved sharply as 2010 began, but momentum waned as the year progressed. [...]

National Association For Business Economics (NABE) Survey Shows Improvement

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122e.jpg" align="left" border="0" height="265" width="353">
EMU orders rise,
but beware the optimism 
EMU orders rose in November more than expected. A lot is being made of
the much smaller Yr/Yr drop which now at -4.1% compares to the -12.1%
reported last month (not shown in the table). But this arithmetic is
tricky. As you can see this rise in orders in November was a relatively
modest +0.6%, while the difference in the Yr/Yr drop is a massive eight
percentage points. It&#8217;s because in November of 2008 orders had been
dropping very rapidly. Orders AVERAGED month-to-month drops of 6.8% in
Sept, Oct, and November of 2008. In December of 2008 orders then
plunged m/m by 10.9%! The upcoming Dec orders figure will be
delightful, as, if the level of orders is unchanged in Dec 2009, the
Yr/Yr orders figure will jump by 7.6% Yr/Yr. But that outcome would not
really signal any change in the pace of recovery, would it?
Perspective 
We include in the table a column to remind you how much these various
series are off from their cycle peaks EVEN if that peak was more than
one year ago. Currently sales are off by 20% from their peak. Orders
are off by 23.6% from their peak. Orders in Germany, France, Italy and
the UK are also clustered around a peak-to-current drop of about 30%
(see table for hairsplitting).
No MFG sector
tooth-fairy 
The point is that yes, there is some rebound in train, but that
industry has not made some magical recovery as if visited overnight (or
over-month) by the tooth-fairy. The industrial sector remains severely
impacted by the recession and is still very much in dig-out mode even
though the yr/yr figures will turn to a sharp positive reading in
December. For now e-zone sales are up from their cycle&#8217;s lowest point
by only 3.8%. Orders are up from their cycle lowest point by 10.9%. At
that foreign orders are leading the rebound with a rise of 12.7% from
their low compared to a rise of 9.3% by domestic orders form their low.
Germany at +19% from its low is showing the most rapid recovery &#8211;even
if its drop from its peak is now only about the same as elsewhere in
EU/EMU. While France at +2% is experiencing the smallest bounced from
its cycle low.
Growth, &#8216;yes&#8217;
but acceleration, &#8216;no&#8217; 
Momentum is still building to the upside but it is not
accelerating. The three-month growth rate of orders is less than the
rate over six months (both annualized, of course). Over three-months
France and the UK have seen drops in orders and that is not good, but
it&#8217;s not decisive either. . Trichet&#8217;s warning that recovery would be
moderate and somewhat irregular is a simple statement of extrapolating
what is already in train: the gospel from the church of what&#8217;s
happening now.
Upbeat
interpretation is exaggerated 
So despite the upbeat tone on the orders report of today, if we put the
data in context, it&#8217;s a slow plodding and irregular recovery in Europe.
Recovery is not gaining momentum despite the month&#8217;s result on orders
growth and despite yr/yr improvement in orders. We are more interested
in yr/yr results that are driven by changes in the front month than by
those driven by the back month which is the case in November and likely
will be the case in the December.
The Obama Plan
meets world opinion and reality 
The recent reports from the e-Zone have become more circumspect. The UK
reported out some poor December retail sales results today (Friday, Jan
22). Japan hit a 21-year low in supermarket sales. President Obama&#8217;s
plan to corral unruly bank practices has sent a pall across the
financial sector and has bushwhacked stocks around the globe. It is
clear that a lot of work still lies ahead for the world&#8217;s key economies
if they are to get recovery in full swing. Attempts to set a new fairer
path for financial institutions may slow down this already slow
recovery. To make matters worse the noises from around the world&#8217;s
policy circles show a lot of disagreement over what President Obama has
announced even among those who like it &#8216;in principle.&#8217; So, are we
doomed to an even weaker recovery?
A rational view
of irrationality 
I urge a different message be distilled from this reluctance by banks
and bankers to modify their post-crisis behavior. Many see it as greed
and simply foment anger about it. I urge that bankers&#8217; behavior be seen
in a broader context. Look at how reluctant bankers are to change even
with all their troubles and failings that were obviously of their own
doing. They do not want to change behavior or alter their
bonus-getting&#8230; why do economists assume that consumers will be so much
more wiling to make changes; to save more and to spend less? It seems
to me that the key to recovery is to get jobs growth going. Once it is
in gear I would expect consumers to spend as they always have. For
those newly back to work the urge to spend will be strong (pent up
demand). Discipline will flag among those who are now thrifty as the
crisis passes and as fear erodes.
 Behavior is
behavior is behavior&#8230; 
Behavior is hard to change and not just for bankers. Try to stop
smoking; try to lose weight; just TRY to stop spending. It is harder to
change when one does not learn from his own lesson; as bankers have not
learned as they were bailed out. Consumers have been put on a
starvation diet by taking their jobs and destroying their wealth. They
have not modified their behavior out of choice &#8211; something economists
don&#8217;t; yet seem to appreciate. They long to go back to their old
spending ways. And the wheels of change are spinning. I think the
potential of the up-swing is being under-valued for these reasons even
with all the obvious problems faced by the world&#8217;s economies. Behavior
is the hardest thing of all to change even if it is not rational
(smoking, overeating, overspending). Give consumers jobs and let them
earn income and they will go back to the &#8216;old normal&#8217;. Forget this
stuff about a &#8216;new normal&#8217; that is more austere; it&#8217;s a positively
abnormal thought.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="11">Euro-Area
and UK Industrial Orders &amp; Sales Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey2">
<td class="firstcol">Saar 
except 
m/m</td>
<td colspan="3">% m/m</td>
<td>Nov 
09</td>
<td>Nov 
09</td>
<td>Nov 
09</td>
<td>Nov 
08</td>
<td>Nov 
07</td>
<td>Qtr 
-2- 
Date</td>
<td>From 
&nbsp;2Y</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Area Detail</td>
<td>Nov 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
<td>max</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>0.6%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>1.1%</td>
<td>6.0%</td>
<td>-10.0%</td>
<td>-7.1%</td>
<td>4.8%</td>
<td>4.4%</td>
<td>-20.6%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>1.0%</td>
<td>-6.7%</td>
<td>6.6%</td>
<td>1.8%</td>
<td>19.4%</td>
<td>-1.2%</td>
<td>-6.2%</td>
<td>4.6%</td>
<td>12.2%</td>
<td>-29.4%</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">MFG Orders</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>1.6%</td>
<td>-1.9%</td>
<td>1.6%</td>
<td>5.0%</td>
<td>19.3%</td>
<td>-4.1%</td>
<td>-23.4%</td>
<td>9.8%</td>
<td>0.3%</td>
<td>-26.5%</td>
</tr>
<tr>
<td class="firstcol">E-13
Domestic MFG orders</td>
<td>1.0%</td>
<td>-6.7%</td>
<td>6.6%</td>
<td>1.8%</td>
<td>19.4%</td>
<td>-1.2%</td>
<td>-25.5%</td>
<td>8.8%</td>
<td>-14.6%</td>
<td>-29.4%</td>
</tr>
<tr>
<td class="firstcol">E-13
Foreign MFG orders</td>
<td>0.6%</td>
<td>-2.2%</td>
<td>7.1%</td>
<td>23.8%</td>
<td>26.7%</td>
<td>-2.1%</td>
<td>-28.3%</td>
<td>11.0%</td>
<td>4.7%</td>
<td>-30.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
Date</td>
<td></td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>3.2%</td>
<td>-2.3%</td>
<td>1.5%</td>
<td>9.9%</td>
<td>24.3%</td>
<td>-2.1%</td>
<td>-25.5%</td>
<td>13.4%</td>
<td>5.4%</td>
<td>-27.1%</td>
</tr>
<tr>
<td class="firstcol">France:</td>
<td>-0.4%</td>
<td>-8.8%</td>
<td>4.7%</td>
<td>-17.9%</td>
<td>4.0%</td>
<td>-4.5%</td>
<td>-23.7%</td>
<td>9.7%</td>
<td>-23.2%</td>
<td>-29.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>2.6%</td>
<td>0.6%</td>
<td>6.0%</td>
<td>42.9%</td>
<td>11.9%</td>
<td>-4.1%</td>
<td>-25.7%</td>
<td>9.6%</td>
<td>12.9%</td>
<td>-30.0%</td>
</tr>
<tr>
<td class="firstcol">UK(EU)</td>
<td>-15.2%</td>
<td>13.9%</td>
<td>2.7%</td>
<td>-3.7%</td>
<td>-9.3%</td>
<td>-3.6%</td>
<td>-20.7%</td>
<td>6.8%</td>
<td>12.4%</td>
<td>-32.1%</td>
</tr>
</tbody>
</table>
</body></html>

EMU orders rise, but beware the optimism EMU orders rose in November more than expected. A lot is being made of the much smaller Yr/Yr drop which now at -4.1% compares to the -12.1% reported last month (not shown in the table). But [...]

EMU Orders Surprise But Really Do Not Delight

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122a.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122b.jpg" style="width: 312px; height: 265px;">
The firm uptrend in the Conference Board's Index of Leading
Economic Indicators continued last month with a rise of 1.1% following
an upwardly revised like gain in November. It was the ninth consecutive
monthly increase and the 10.8% (centered) rate of increase during the
last six months remained nearly the strongest since early-1983. The
leading index is based on actual reports for eight economic data
series. The Conference Board initially estimates two series, consumer
and capital goods orders.
The leaders' increase supports widespread forecasts for a 4.5%
(AR) gain in 4Q 2009 real GDP. The preliminary figures will be released
this coming Friday.
The breadth of increase amongst the component series improved
last month back to the strongest percentage of the cycle. Nine out of
the ten components rose during December versus 70% during the prior two
months. During the most recent six months, however, just 80% of the
series rose. Prominent in last month's increase was a steeper interest
rate yield curve, higher building permits and lower initial claims for
unemployment insurance.
Continuing to suggest economic improvement was the coincident
indicator series which rose for the fifth month in the last six. The
0.1% December gain followed a 0.1% November increase that was revised
down slightly. During the last six months the 1.2% rate of increase in
the coincident series compares to a -7.9% reading at its worst in
January. Increases in industrial production, real personal income and
business sales have been modest but compare to sharp declines late in
2008. Declines in payroll employment also have eased considerably.
In a continued sign that excesses in the U.S. economy are
still falling, the lagging index has been falling since January.
Leading the decline have been lower commercial &amp; industrial
loans outstanding, slower growth in labor costs, less consumer credit
and slower service price inflation. The ratio of coincident-to-lagging
indicators (another leading indicator) also continued higher for the
ninth straight month to the highest level since August of 2008.
The Conference Board figures are available in Haver's BCI
database. Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world. The latest
U.S. Leading Indicators release can be found here <a href="http://www.conference-board.org/pdf_free/economics/bci/sweetp.pdf">here</a>.



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122d.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/BCI/BCI.HTM" style="color: black;">Business Cycle Indicators</a>
(%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 6-Month % (AR)</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">Leading</td>
<td>1.1</td>
<td>1.0</td>
<td>0.3</td>
<td>10.8</td>
<td>0.4</td>
<td>-2.8</td>
<td>-0.4</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1</td>
<td>0.1</td>
<td>0.1</td>
<td>1.2</td>
<td>-5.1</td>
<td>-1.2</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-0.2</td>
<td>-4.8</td>
<td>-1.6</td>
<td>3.2</td>
<td>3.0</td>
</tr>
</tbody>
</table>
</body></html>

The firm uptrend in the Conference Board's Index of Leading Economic Indicators continued last month with a rise of 1.1% following an upwardly revised like gain in November. It was the ninth consecutive monthly increase and the 10.8% [...]

U.S. Leading Economic Indicators Suggest Continued Recovery

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122a.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122b.jpg" style="width: 312px; height: 265px;">
The firm uptrend in the Conference Board's Index of Leading
Economic Indicators continued last month with a rise of 1.1% following
an upwardly revised like gain in November. It was the ninth consecutive
monthly increase and the 10.8% (centered) rate of increase during the
last six months remained nearly the strongest since early-1983. The
leading index is based on actual reports for eight economic data
series. The Conference Board initially estimates two series, consumer
and capital goods orders.
The leaders' increase supports widespread forecasts for a 4.5%
(AR) gain in 4Q 2009 real GDP. The preliminary figures will be released
this coming Friday.
The breadth of increase amongst the component series improved
last month back to the strongest percentage of the cycle. Nine out of
the ten components rose during December versus 70% during the prior two
months. During the most recent six months, however, just 80% of the
series rose. Prominent in last month's increase was a steeper interest
rate yield curve, higher building permits and lower initial claims for
unemployment insurance.
Continuing to suggest economic improvement was the coincident
indicator series which rose for the fifth month in the last six. The
0.1% December gain followed a 0.1% November increase that was revised
down slightly. During the last six months the 1.2% rate of increase in
the coincident series compares to a -7.9% reading at its worst in
January. Increases in industrial production, real personal income and
business sales have been modest but compare to sharp declines late in
2008. Declines in payroll employment also have eased considerably.
In a continued sign that excesses in the U.S. economy are
still falling, the lagging index has been falling since January.
Leading the decline have been lower commercial &amp; industrial
loans outstanding, slower growth in labor costs, less consumer credit
and slower service price inflation. The ratio of coincident-to-lagging
indicators (another leading indicator) also continued higher for the
ninth straight month to the highest level since August of 2008.
The Conference Board figures are available in Haver's BCI
database. Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world. The latest
U.S. Leading Indicators release can be found here <a href="http://www.conference-board.org/pdf_free/economics/bci/sweetp.pdf">here</a>.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122d.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/BCI/BCI.HTM" style="color: black;">Business Cycle Indicators</a>
(%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 6-Month % (AR)</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">Leading</td>
<td>1.1</td>
<td>1.0</td>
<td>0.3</td>
<td>10.8</td>
<td>0.4</td>
<td>-2.8</td>
<td>-0.4</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1</td>
<td>0.1</td>
<td>0.1</td>
<td>1.2</td>
<td>-5.1</td>
<td>-1.2</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-0.2</td>
<td>-4.8</td>
<td>-1.6</td>
<td>3.2</td>
<td>3.0</td>
</tr>
</tbody>
</table>
EMU Orders Surprise But Really Do
Not Delight 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 22, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100122e.jpg" align="left" border="0" height="265" width="353">
EMU orders rise,
but beware the optimism 
EMU orders rose in November more than expected. A lot is being made of
the much smaller Yr/Yr drop which now at -4.1% compares to the -12.1%
reported last month (not shown in the table). But this arithmetic is
tricky. As you can see this rise in orders in November was a relatively
modest +0.6%, while the difference in the Yr/Yr drop is a massive eight
percentage points. It&#8217;s because in November of 2008 orders had been
dropping very rapidly. Orders AVERAGED month-to-month drops of 6.8% in
Sept, Oct, and November of 2008. In December of 2008 orders then
plunged m/m by 10.9%! The upcoming Dec orders figure will be
delightful, as, if the level of orders is unchanged in Dec 2009, the
Yr/Yr orders figure will jump by 7.6% Yr/Yr. But that outcome would not
really signal any change in the pace of recovery, would it?
Perspective 
We include in the table a column to remind you how much these various
series are off from their cycle peaks EVEN if that peak was more than
one year ago. Currently sales are off by 20% from their peak. Orders
are off by 23.6% from their peak. Orders in Germany, France, Italy and
the UK are also clustered around a peak-to-current drop of about 30%
(see table for hairsplitting).
No MFG sector
tooth-fairy 
The point is that yes, there is some rebound in train, but that
industry has not made some magical recovery as if visited overnight (or
over-month) by the tooth-fairy. The industrial sector remains severely
impacted by the recession and is still very much in dig-out mode even
though the yr/yr figures will turn to a sharp positive reading in
December. For now e-zone sales are up from their cycle&#8217;s lowest point
by only 3.8%. Orders are up from their cycle lowest point by 10.9%. At
that foreign orders are leading the rebound with a rise of 12.7% from
their low compared to a rise of 9.3% by domestic orders form their low.
Germany at +19% from its low is showing the most rapid recovery &#8211;even
if its drop from its peak is now only about the same as elsewhere in
EU/EMU. While France at +2% is experiencing the smallest bounced from
its cycle low.
Growth, &#8216;yes&#8217;
but acceleration, &#8216;no&#8217; 
Momentum is still building to the upside but it is not
accelerating. The three-month growth rate of orders is less than the
rate over six months (both annualized, of course). Over three-months
France and the UK have seen drops in orders and that is not good, but
it&#8217;s not decisive either. . Trichet&#8217;s warning that recovery would be
moderate and somewhat irregular is a simple statement of extrapolating
what is already in train: the gospel from the church of what&#8217;s
happening now.
Upbeat
interpretation is exaggerated 
So despite the upbeat tone on the orders report of today, if we put the
data in context, it&#8217;s a slow plodding and irregular recovery in Europe.
Recovery is not gaining momentum despite the month&#8217;s result on orders
growth and despite yr/yr improvement in orders. We are more interested
in yr/yr results that are driven by changes in the front month than by
those driven by the back month which is the case in November and likely
will be the case in the December.
The Obama Plan
meets world opinion and reality 
The recent reports from the e-Zone have become more circumspect. The UK
reported out some poor December retail sales results today (Friday, Jan
22). Japan hit a 21-year low in supermarket sales. President Obama&#8217;s
plan to corral unruly bank practices has sent a pall across the
financial sector and has bushwhacked stocks around the globe. It is
clear that a lot of work still lies ahead for the world&#8217;s key economies
if they are to get recovery in full swing. Attempts to set a new fairer
path for financial institutions may slow down this already slow
recovery. To make matters worse the noises from around the world&#8217;s
policy circles show a lot of disagreement over what President Obama has
announced even among those who like it &#8216;in principle.&#8217; So, are we
doomed to an even weaker recovery?
A rational view
of irrationality 
I urge a different message be distilled from this reluctance by banks
and bankers to modify their post-crisis behavior. Many see it as greed
and simply foment anger about it. I urge that bankers&#8217; behavior be seen
in a broader context. Look at how reluctant bankers are to change even
with all their troubles and failings that were obviously of their own
doing. They do not want to change behavior or alter their
bonus-getting&#8230; why do economists assume that consumers will be so much
more wiling to make changes; to save more and to spend less? It seems
to me that the key to recovery is to get jobs growth going. Once it is
in gear I would expect consumers to spend as they always have. For
those newly back to work the urge to spend will be strong (pent up
demand). Discipline will flag among those who are now thrifty as the
crisis passes and as fear erodes.
 Behavior is
behavior is behavior&#8230; 
Behavior is hard to change and not just for bankers. Try to stop
smoking; try to lose weight; just TRY to stop spending. It is harder to
change when one does not learn from his own lesson; as bankers have not
learned as they were bailed out. Consumers have been put on a
starvation diet by taking their jobs and destroying their wealth. They
have not modified their behavior out of choice &#8211; something economists
don&#8217;t; yet seem to appreciate. They long to go back to their old
spending ways. And the wheels of change are spinning. I think the
potential of the up-swing is being under-valued for these reasons even
with all the obvious problems faced by the world&#8217;s economies. Behavior
is the hardest thing of all to change even if it is not rational
(smoking, overeating, overspending). Give consumers jobs and let them
earn income and they will go back to the &#8216;old normal&#8217;. Forget this
stuff about a &#8216;new normal&#8217; that is more austere; it&#8217;s a positively
abnormal thought.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="11">Euro-Area
and UK Industrial Orders &amp; Sales Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey2">
<td class="firstcol">Saar 
except 
m/m</td>
<td colspan="3">% m/m</td>
<td>Nov 
09</td>
<td>Nov 
09</td>
<td>Nov 
09</td>
<td>Nov 
08</td>
<td>Nov 
07</td>
<td>Qtr 
-2- 
Date</td>
<td>From 
&nbsp;2Y</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Area Detail</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
<td>max</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>0.6%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>1.1%</td>
<td>6.0%</td>
<td>-10.0%</td>
<td>-7.1%</td>
<td>4.8%</td>
<td>4.4%</td>
<td>-20.6%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>1.0%</td>
<td>-6.7%</td>
<td>6.6%</td>
<td>1.8%</td>
<td>19.4%</td>
<td>-1.2%</td>
<td>-6.2%</td>
<td>4.6%</td>
<td>12.2%</td>
<td>-29.4%</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">MFG Orders</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>1.6%</td>
<td>-1.9%</td>
<td>1.6%</td>
<td>5.0%</td>
<td>19.3%</td>
<td>-4.1%</td>
<td>-23.4%</td>
<td>9.8%</td>
<td>0.3%</td>
<td>-26.5%</td>
</tr>
<tr>
<td class="firstcol">E-13
Domestic MFG orders</td>
<td>1.0%</td>
<td>-6.7%</td>
<td>6.6%</td>
<td>1.8%</td>
<td>19.4%</td>
<td>-1.2%</td>
<td>-25.5%</td>
<td>8.8%</td>
<td>-14.6%</td>
<td>-29.4%</td>
</tr>
<tr>
<td class="firstcol">E-13
Foreign MFG orders</td>
<td>0.6%</td>
<td>-2.2%</td>
<td>7.1%</td>
<td>23.8%</td>
<td>26.7%</td>
<td>-2.1%</td>
<td>-28.3%</td>
<td>11.0%</td>
<td>4.7%</td>
<td>-30.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
Date</td>
<td></td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>3.2%</td>
<td>-2.3%</td>
<td>1.5%</td>
<td>9.9%</td>
<td>24.3%</td>
<td>-2.1%</td>
<td>-25.5%</td>
<td>13.4%</td>
<td>5.4%</td>
<td>-27.1%</td>
</tr>
<tr>
<td class="firstcol">France:</td>
<td>-0.4%</td>
<td>-8.8%</td>
<td>4.7%</td>
<td>-17.9%</td>
<td>4.0%</td>
<td>-4.5%</td>
<td>-23.7%</td>
<td>9.7%</td>
<td>-23.2%</td>
<td>-29.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>2.6%</td>
<td>0.6%</td>
<td>6.0%</td>
<td>42.9%</td>
<td>11.9%</td>
<td>-4.1%</td>
<td>-25.7%</td>
<td>9.6%</td>
<td>12.9%</td>
<td>-30.0%</td>
</tr>
<tr>
<td class="firstcol">UK(EU)</td>
<td>-15.2%</td>
<td>13.9%</td>
<td>2.7%</td>
<td>-3.7%</td>
<td>-9.3%</td>
<td>-3.6%</td>
<td>-20.7%</td>
<td>6.8%</td>
<td>12.4%</td>
<td>-32.1%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Leading Economic IndicatorsSuggest Continued Recovery

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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Michael J. Moran

260109A.jpg

260109B.jpg

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

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

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

260109C.jpg

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

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

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

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

A Soft Tone in the Labor Market

Winnie Tapasanun

260109F17.jpg

260109G17.jpg

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

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

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

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

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

260109H17.jpg

260109I17.jpg

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

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

260109E.jpg

German industrial production advanced by 0.8% month-to-month in November performing better than had been expected. Consumer goods output fell by 0.3% month-to-month, capital goods output soared with a 4.9% gain, while intermediate goods output fell back by 0.8%.  

On the whole, manufacturing output had been expected to be weak. But looking at manufacturing alone, rather than total industrial production, the gain was even stronger at 2.1% month-to-month. Real manufacturing orders in November rose by 5.6%, real sales in manufacturing rose by 2.7%. This is solid performance.

**Survey data have been weak and listless**
However, apart from anecdotal evidence, as monthly data unfold, the kinds of numbers that we have to look at first are various economic surveys that come from diffusion data. The ZEW’s current index was slightly stronger month-to-month at a still very weak -78.7 (net) reading compared to -80 in October although both of those were weaker than the ZEW net September reading of -76.4. IFO manufacturing weakened month-to-month in November at 87.1 compared to 88.1 in October and it was slightly weaker than its September value as well. IFO manufacturing expectations slipped to 94.1 in November from 96.9 in October although expectations were slightly higher than their level in September. The EU Commission index weakened in November to -18.9 from -18.1 in October although there was an improvement from -20.1 in September.

These comparisons show us that the survey data which we had in hand before getting the industrial production reading from Germany had given us a lot of weak readings and a lot of very weak momentum.

**Compare survey data to IP data using ranking technique**
We can compare industrial production data to survey data using two different columns in this table. The first is the queue standing column where we see the industrial production data with rankings mostly in their 50th percentile: intermediate goods have a ranking of 37.7% with construction at 33.4%; they are the weaker exceptions. We rank IP data by sector according to their annual growth rates compared to past growth rates.  However, by comparison the survey data (that we rank on levels) range between 12.1% and 29.8%; all of those are very weak readings. No wonder a focus on survey data leads to a weak upcoming assessment of production data. We can also look at a slightly more up-to-date, but shorter ranking, from January 2021. There we see that the industrial production data average rankings from the mid-60th percentile up to the 81.4 percentile for total industrial production. Surveys generally have rankings in the 20th and 30th percentile with the exception of IFO manufacturing expectations which reaches 67.8%, which is a solid reading.

260109.jpg

**Survey data signals should be downgraded?**
These comparisons show us that while it's hard to compare industrial output directly to the diffusion readings if we take those two metrics over the same timeline and compare the level of the diffusion index to the growth rate of the manufacturing index we get the capability to compare the two on more even footing. When we do that, we see that manufacturing data are doing better than the survey data very broadly speaking. So, while there's some surprise on the strength of manufacturing data, maybe we should place a greater emphasis on it because those data come from a real accounting process rather than from a survey process that is much less closely linked to magnitudes. And, essentially, we are really much more interested in magnitudes than just if something is higher and lower.

**Other Europe doing ‘well’, too**
Not so incidentally the industrial production readings for France, Spain, Portugal, and Norway, all of whom are fairly early reporters of industrial production data, rank well on the queue standing column as well as in the shorter rank standing column from January 2021. In fact, for these countries the difference in ranking between the two periods is not markedly different, certainly not as markedly different as it is for Germany. On the whole, it may be that Europe has been doing better than we thought because we've been spending too much time looking at the more up-to-date survey data on a PMI basis, rather than waiting for the more traditional and lagging industrial production reports that are accounting-based data and more thorough.

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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Charts of the Week: Cooling Inflation, Diverging Growth

Sandy Batten

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Nonfarm business labor productivity (output per hour) exhibited further robust growth in Q3, increasing 4.9% q/q SAAR following an upwardly revised 4.1% quarterly increase in Q2 (previously +3.3%). A quarterly gain of 4.1% was expected by the Action Economics Forecast Survey. Compared to a year ago, productivity rose 1.9% in Q3 versus 1.5% in Q2. Since productivity growth began to accelerate at the beginning of 2023, it has grown at a well above trend 2.7% annual rate. Strong productivity is a key factor for boosting real incomes and restraining inflation pressures going forward.

Nonfarm business output increased 5.4% q/q in Q3 on top of a 5.2% quarterly rise in Q2 while hours worked edged up just 0.5% q/q, down from 1.0% in Q2. Compensation growth picked up to 2.9% q/q in Q3 from a downwardly revised 1.1% q/q in Q2 (previously +4.3%) although compensation growth from a year ago slowed to 3.2% in Q3 from 3.5%. As a result, unit labor costs declined 1.9% q/q in Q3 following a downwardly revised 2.9% quarterly decline in Q2 (previously +1.0%). On a y/y basis, unit labor costs advanced only 1.2% y/y in Q2, the smallest annual gain since Q3 2023.

Growth of factory output slowed to 2.6% q/q in Q3 from 2.9% in Q2. However, hours worked fell 0.7% in Q3 after having been unchanged in Q2. Consequently, factory productivity growth accelerated to 3.3% from 2.9% in Q2. Factory compensation growth picked up to 4.8% q/q in Q3 from 4.0% in Q2, resulting in a pickup in unit labor cost growth to 1.5% from 1.1% in Q2.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Nonfarm business output per hour rose 4.9% q/q SAAR in Q3 on top of an upward revision to Q2.
- Compensation increased 2.9% in Q3 resulting in a 1.9% quarterly decline in unit labor costs.