Robert Brusca

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100107d.jpg" align="left" border="0" height="265" width="353"></p>
<p>While governments around the world have taken strides to pump
up expenditures to keep economies going the consumer, largely, is still
not on board, at least not in Europe.</p>
<p>Total Euro-Area consumer spending is down by 0.3% in November
after being down in earlier months&#8230;seventeen down months in a row in
fact. Over three months the pace of contraction in Euro-consumer
spending remains about the same as over six months and only a bit less
than over 12-months.</p>
<p>Even motor vehicle registrations that had bumped up on special
government assistance plans across the various Zone countries fell in
off in November. German retailers continue to be hard-hit and to look
for a return of the consumer there.</p>
<p>Overnight Australia reported a 1.4% kick to November sales,
one of the few places besides the US where the consumer seems to be
aware that he has a wallet in his pocket or a purse over the shoulder.</p>
<p>Sustained recovery will require a return of the consumer. Even
in Europe the consumer is large proportion of GDP. Right now Europe
continues to benefit from export led growth; China pushes export led
growth; Japan pushes export-led growth. But for all that to work, the
European consumer, and Japanese consumer will have join in. The
consumer in the US appears to be back in gear but there is not enough
there to feed the global economy with US retail demand. The world
economy needs balance. Other countries must get their consumers in gear
because &#8216;everyone wants&#8217; to sell to the US but &#8216;everyone also wants&#8217;
the US trade deficit to shrink and these two &#8216;everyone wants&#8217; are in
deep conflict with each other. So if &#8216;anyone wants&#8217; logic and
consistency something will have to change.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="6" scope="col"> <b>Euro-Area Retail Sales</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Zone Total Value</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.6%</td>
<td>-2.4%</td>
<td>-3.9%</td>
</tr>
<tr>
<td class="firstcol">Food,Bev Tobacco</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td colspan="6" class="firstcol">Registrations:</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicle Reg</td>
<td>0.3%</td>
<td>6.7%</td>
<td>9.6%</td>
<td>3.5%</td>
<td>26.9%</td>
</tr>
<tr class="odd">
<td colspan="6" class="firstcol">NonFood Country detail:
Volume</td>
</tr>
<tr>
<td class="firstcol">Germany Value</td>
<td>0.0%</td>
<td>0.6%</td>
<td>-2.1%</td>
<td>-3.6%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">UK(EU) Volume</td>
<td>0.6%</td>
<td>0.4%</td>
<td>2.9%</td>
<td>5.3%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
</body></html>

While governments around the world have taken strides to pump up expenditures to keep economies going the consumer, largely, is still not on board, at least not in Europe. Total Euro-Area consumer spending is down by 0.3% in November [...]

Euro-Nowhere Man Retail Sales In Europe Are Going Nowhere - But Not Very Fast

Tom Moeller

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<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100107a.jpg" align="right" border="0" height="265" width="353">By the
smallest of margins, the job market deteriorated last week but the
trend continued its recent improvement. The Labor Department reported
that initial claims for jobless insurance ticked up 1,000 to open the
New Year at 434,000. Claims stand at the lowest level since late in
August, 2008 and were down from the recession peak of 674,000 hit last
March. Consensus expectations has been for 440,000. The four-week
moving average of initial claims also fell to a new cycle-low of
450,250.</p>
<p>Continuing claims for unemployment insurance during the
latest week again fell sharply. The 179,000 drop was part of a nearly
one-third decline since late-June. Continuing claims were at the lowest
level since January of last year. The overall decline is a function of
the improved job market but also reflects the exhaustion of 26 weeks of
unemployment benefits. Continuing claims provide an indication of
workers' ability to find employment. The four-week average of
continuing claims fell to 5,005,750. This series dates back to
1966.</p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100107b.jpg" align="right" border="0" height="265" width="353">Extended
benefits for unemployment insurance
dropped sharply to 296,534 during the third week of December. The
latest was down by one-half&nbsp; from the peak reached during
November of 597,688.</p>
<p>The insured rate of unemployment also fell to a
new low of 3.6%. The rate reached a high of 5.2% during late-June.
During the last ten years, there has been a 93% correlation between the
level of the insured unemployment rate and the overall rate of
unemployment published by the Bureau of Labor Statistics.</p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100107c.jpg" align="right" border="0" height="265" width="353">The highest insured
unemployment rates in the week ending December 19
were in Alaska (6.7 percent), Oregon (5.9), Puerto Rico (5.8), Nevada
(5.6), Idaho (5.5), Pennsylvania (5.2), Wisconsin (5.2), Montana (5.1),
Washington (5.1), and Michigan (5.0). The lowest insured unemployment
rates were in Virginia (2.0), North Dakota (2.2%), Texas (2.4), Florida
(3.1), Wyoming (3.3), Maryland (3.4), Ohio (3.4), Maine (3.5), New York
(3.6) and Mississippi (3.7). These data are not seasonally adjusted but
the overall insured unemployment rate is.</p>
<p>The unemployment insurance
claims data is available in Haver's <b>WEEKLY</b> database
and the state data is in the <b>REGIONW</b> database.</p>
<p> The
<b>minutes to the latest meeting of the Federal Open Market
Committee</b> can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20091216.pdf">here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;=";" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></b></th>
<th scope="col"><b>1/1/10</b></th>
<th scope="col"><b>12/25/09</b></th>
<th scope="col"><b>12/18/09</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>434</td>
<td>433</td>
<td>454</td>
<td>-11.1%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,802</td>
<td>4,981</td>
<td>6.0%</td>
<td>5,835</td>
<td>3,345</td>
<td>2,552</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.6</td>
<td>3.8</td>
<td>3.5 (1/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</span>
</body></html>

By the smallest of margins, the job market deteriorated last week but the trend continued its recent improvement. The Labor Department reported that initial claims for jobless insurance ticked up 1,000 to open the New Year at 434,000. [...]

U.S. Initial Jobless Insurance Claims Nudge Higher

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<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100107a.jpg" align="right" border="0" height="265" width="353">By the
smallest of margins, the job market deteriorated last week but the
trend continued its recent improvement. The Labor Department reported
that initial claims for jobless insurance ticked up 1,000 to open the
New Year at 434,000. Claims stand at the lowest level since late in
August, 2008 and were down from the recession peak of 674,000 hit last
March. Consensus expectations has been for 440,000. The four-week
moving average of initial claims also fell to a new cycle-low of
450,250.</p>
<p>Continuing claims for unemployment insurance during the
latest week again fell sharply. The 179,000 drop was part of a nearly
one-third decline since late-June. Continuing claims were at the lowest
level since January of last year. The overall decline is a function of
the improved job market but also reflects the exhaustion of 26 weeks of
unemployment benefits. Continuing claims provide an indication of
workers' ability to find employment. The four-week average of
continuing claims fell to 5,005,750. This series dates back to
1966.</p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100107b.jpg" align="right" border="0" height="265" width="353">Extended
benefits for unemployment insurance
dropped sharply to 296,534 during the third week of December. The
latest was down by one-half&nbsp; from the peak reached during
November of 597,688.</p>
<p>The insured rate of unemployment also fell to a
new low of 3.6%. The rate reached a high of 5.2% during late-June.
During the last ten years, there has been a 93% correlation between the
level of the insured unemployment rate and the overall rate of
unemployment published by the Bureau of Labor Statistics.</p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100107c.jpg" align="right" border="0" height="265" width="353">The
highest insured
unemployment rates in the week ending December 19
were in Alaska (6.7 percent), Oregon (5.9), Puerto Rico (5.8), Nevada
(5.6), Idaho (5.5), Pennsylvania (5.2), Wisconsin (5.2), Montana (5.1),
Washington (5.1), and Michigan (5.0). The lowest insured unemployment
rates were in Virginia (2.0), North Dakota (2.2%), Texas (2.4), Florida
(3.1), Wyoming (3.3), Maryland (3.4), Ohio (3.4), Maine (3.5), New York
(3.6) and Mississippi (3.7). These data are not seasonally adjusted but
the overall insured unemployment rate is.</p>
<p>The unemployment insurance
claims data is available in Haver's <b>WEEKLY</b> database
and the state data is in the <b>REGIONW</b> database.</p>
<p> The
<b>minutes to the latest meeting of the Federal Open Market
Committee</b> can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20091216.pdf">here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;=";" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></b></th>
<th scope="col"><b>1/1/10</b></th>
<th scope="col"><b>12/25/09</b></th>
<th scope="col"><b>12/18/09</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>434</td>
<td>433</td>
<td>454</td>
<td>-11.1%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,802</td>
<td>4,981</td>
<td>6.0%</td>
<td>5,835</td>
<td>3,345</td>
<td>2,552</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.6</td>
<td>3.8</td>
<td>3.5 (1/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Euro-Nowhere Man Retail Sales In
Europe Are Going Nowhere - But Not Very Fast</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> January 7, 2010</span>
<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100107d.jpg" align="left" border="0" height="265" width="353"></p>
<p>While governments around the world have taken strides to pump
up expenditures to keep economies going the consumer, largely, is still
not on board, at least not in Europe.</p>
<p>Total Euro-Area consumer spending is down by 0.3% in November
after being down in earlier months&#8230;seventeen down months in a row in
fact. Over three months the pace of contraction in Euro-consumer
spending remains about the same as over six months and only a bit less
than over 12-months.</p>
<p>Even motor vehicle registrations that had bumped up on special
government assistance plans across the various Zone countries fell in
off in November. German retailers continue to be hard-hit and to look
for a return of the consumer there.</p>
<p>Overnight Australia reported a 1.4% kick to November sales,
one of the few places besides the US where the consumer seems to be
aware that he has a wallet in his pocket or a purse over the shoulder.</p>
<p>Sustained recovery will require a return of the consumer. Even
in Europe the consumer is large proportion of GDP. Right now Europe
continues to benefit from export led growth; China pushes export led
growth; Japan pushes export-led growth. But for all that to work, the
European consumer, and Japanese consumer will have join in. The
consumer in the US appears to be back in gear but there is not enough
there to feed the global economy with US retail demand. The world
economy needs balance. Other countries must get their consumers in gear
because &#8216;everyone wants&#8217; to sell to the US but &#8216;everyone also wants&#8217;
the US trade deficit to shrink and these two &#8216;everyone wants&#8217; are in
deep conflict with each other. So if &#8216;anyone wants&#8217; logic and
consistency something will have to change.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="6" scope="col"> <b>Euro-Area
Retail Sales</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Zone Total Value</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.6%</td>
<td>-2.4%</td>
<td>-3.9%</td>
</tr>
<tr>
<td class="firstcol">Food,Bev Tobacco</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td colspan="6" class="firstcol">Registrations:</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicle Reg</td>
<td>0.3%</td>
<td>6.7%</td>
<td>9.6%</td>
<td>3.5%</td>
<td>26.9%</td>
</tr>
<tr class="odd">
<td colspan="6" class="firstcol">NonFood
Country detail:
Volume</td>
</tr>
<tr>
<td class="firstcol">Germany Value</td>
<td>0.0%</td>
<td>0.6%</td>
<td>-2.1%</td>
<td>-3.6%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">UK(EU) Volume</td>
<td>0.6%</td>
<td>0.4%</td>
<td>2.9%</td>
<td>5.3%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Initial Jobless InsuranceClaims Nudge Higher

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106g.jpg" align="left" border="0" height="265" width="353"></p>
<p>Total orders in the EMU area have fallen m/m in October after
six straight months of increasing. The Yr/Yr drop in orders is a still
substantial 15.2%. Foreign orders Yr/Yr are off by 13.4% while domestic
orders are off by 16.1%. Over three months the Zone&#8217;s domestic orders
are much weaker, falling at a 15.6% pace compared to foreign orders
that are off by just 3.5%. Over six months domestic orders and foreign
orders are up, and foreign orders are up on that span at a 20% annual
rate.</p>
<p>Country detail shows that Germany leads the EMU parade among
large economies. Its orders are still up by 3.5% over three months
despite a dip in October. Still all large EU countries are showing a
fall off in orders growth over three months compared to six months.</p>
<p>In a December report released today the Markit services
indices showed that despite this MFG order weakness in October the
services sector in EMU continued to improve though year-end. The EMU
services sector diffusion index from Markit moved up to 53.63 in Dec.
from 53.04 in Nov. While down on the month France shows the most
strength in the service sector among large EMU members</p>
<p>Still, the MFG sector is the cyclical one and orders data,
though lagging, show that some softening was occurring in October. The
more up-to-date market MFG diffusion surveys show us that MFG progress
has continued though year end but has slowed. EMU is being pulled along
by demand from outside of the region. Export orders continue to be the
driving the EMU expansion. Yet, the EMU currency, the euro, continues
to be high-valued, even if off peak, giving reason to wonder how long
the e-zone will be able to continue to be pulled ahead by its external
sector.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col"> <b>Euro Area and UK Industrial Orders &amp; Sales Trends</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">% m/m</td>
<td style="font-weight: bold;">Oct<br>09</td>
<td style="font-weight: bold;">Oct<br>09</td>
<td style="font-weight: bold;">Oct<br>09</td>
<td style="font-weight: bold;">Oct<br>08</td>
<td style="font-weight: bold;">Oct<br>07</td>
<td style="font-weight: bold;">Qtr-2<br>Date</td>
</tr>
<tr>
<td class="firstcol">Euro Area Detail</td>
<td>Oct<br>09</td>
<td>Sep<br>09</td>
<td>Aug<br>09</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>0.3%</td>
<td>-0.8%</td>
<td>2.0%</td>
<td>6.0%</td>
<td>4.8%</td>
<td>-14.2%</td>
<td>-3.0%</td>
<td>6.4%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">
Intermediate</td>
<td>-7.1%</td>
<td>6.7%</td>
<td>-3.3%</td>
<td>-15.6%</td>
<td>8.6%</td>
<td>-16.1%</td>
<td>-3.6%</td>
<td>8.6%</td>
<td>9.2%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="10" class="firstcol">MFG Orders</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-2.2%</td>
<td>1.7%</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>18.3%</td>
<td>-12.2%</td>
<td>-15.2%</td>
<td>8.1%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG
orders</td>
<td>-7.1%</td>
<td>6.7%</td>
<td>-3.3%</td>
<td>-15.6%</td>
<td>8.6%</td>
<td>-16.1%</td>
<td>-12.6%</td>
<td>8.8%</td>
<td>-22.3%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG
orders</td>
<td>-2.6%</td>
<td>7.2%</td>
<td>-5.1%</td>
<td>-3.5%</td>
<td>20.1%</td>
<td>-13.4%</td>
<td>-17.6%</td>
<td>14.8%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Countries:</td>
<td style="font-weight: bold;">Oct<br>09</td>
<td style="font-weight: bold;">Sep<br>09</td>
<td style="font-weight: bold;">Aug<br>09</td>
<td style="font-weight: bold;">3Mo</td>
<td style="font-weight: bold;">6mo</td>
<td style="font-weight: bold;">12mo</td>
<td style="font-weight: bold;">12mo</td>
<td style="font-weight: bold;">12mo</td>
<td style="font-weight: bold;">Qtr-2<br>Date</td>
</tr>
<tr>
<td class="firstcol">
Germany:</td>
<td>-2.6%</td>
<td>1.5%</td>
<td>2.5%</td>
<td>5.5%</td>
<td>25.0%</td>
<td>-12.6%</td>
<td>-17.3%</td>
<td>11.3%</td>
<td>-4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
France:</td>
<td>-9.2%</td>
<td>4.9%</td>
<td>2.7%</td>
<td>-8.5%</td>
<td>5.7%</td>
<td>-9.8%</td>
<td>-16.8%</td>
<td>5.7%</td>
<td>-28.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Italy</td>
<td>0.3%</td>
<td>5.5%</td>
<td>-8.7%</td>
<td>-12.6%</td>
<td>5.9%</td>
<td>-15.4%</td>
<td>-14.6%</td>
<td>5.6%</td>
<td>5.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
UK(EU)</td>
<td>11.4%</td>
<td>1.6%</td>
<td>-11.7%</td>
<td>-0.1%</td>
<td>45.3%</td>
<td>1.0%</td>
<td>-9.0%</td>
<td>4.9%</td>
<td>57.4%</td>
</tr>
</tbody>
</table>
</body></html>

Total orders in the EMU area have fallen m/m in October after six straight months of increasing. The Yr/Yr drop in orders is a still substantial 15.2%. Foreign orders Yr/Yr are off by 13.4% while domestic orders are off by 16.1%. Over [...]

EMU Orders Take A Step Back

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<span id="articletext">
<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106k.jpg" align="right" border="0" height="265" width="353">
Labor market
improvement is counted as fewer jobs lost and more jobs gained. Both
were indicated for December by the outplacement firm of Challenger,
Grey &amp; Christmas Their measure of job cut announcements fell
last month to 45,094, compared to a high of 241,748 in January of last
year. The latest reading was the least number of layoffs since December
2007. Layoffs moderated in the construction, consumer goods, financial,
health care, retail, services and transportation industries. They rose
in the apparel and in the industrial goods industries.</p><p>
Challenger also samples firms' hiring plans. During December plans
recouped the November decline and were more than triple the year-ago
level.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106l.jpg" align="right" border="0" height="265" width="353">
Plans picked up sharply in the financial and aerospace/defense
industries but more moderately in the government and insurance
industries. The net of hires less layoffs was near its least 2007.</p><p>
During the last ten years there has been a 67% (inverse) correlation
between the three-month moving average of announced job cuts and the
three-month change payroll employment<em>.</em> Job cut
announcements differ from layoffs. Many are achieved through attrition,
early retirement or just never occur.</p><p> The Challenger figures are
available in Haver's <b>SURVEYS</b> database.</p><p><b>The
Recession in Perspective</b> from the Federal Reserve Bank of
Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/">here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM" style="color: rgb(0, 0, 0);"><b>Challenger, Gray
&amp; Christmas</b></a></th>
<th scope="col"><strong>December</strong></th>
<th scope="col"><strong>November</strong></th>
<th scope="col"><strong>October</strong></th>
<th scope="col"><strong>Y/Y</strong></th>
<th scope="col"><strong>2009</strong></th>
<th scope="col"><strong>2008</strong></th>
<th scope="col"><strong>2007</strong></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>45,094</td>
<td>50,349</td>
<td>55,679</td>
<td>-72.9%</td>
<td>1,288,030</td>
<td>1,223,993</td>
<td>768,264</td>
</tr>
<tr>
<td class="firstcol">Announced Hiring Plans</td>
<td>35,592</td>
<td>10,076</td>
<td>57,520</td>
<td>253.0</td>
<td>272,573</td>
<td>118,600</td>
<td>365,583</td>
</tr>
</tbody>
</table>
</span></body></html>

Labor market improvement is counted as fewer jobs lost and more jobs gained. Both were indicated for December by the outplacement firm of Challenger, Grey & Christmas Their measure of job cut announcements fell last month to 45,094, [...]

Challenger Indicates Further Improvement in the Labor Market

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<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106h.jpg" align="right" border="0" height="265" width="353">
The
nonmanufacturing sector has improved from its worst condition at
year-end 2008 but it has yet to show much expansion. The December
figure from the Institute for Supply Management (ISM) for the service
&amp; construction sectors improved to 50.1 last month
from&nbsp; below the break-even level of 50 during November. The
latest fell just short of Consensus&nbsp; expectations. For the
year as a whole the index reading of 46.3 was the lowest in the series'
history. Since the series' inception in 1997 there has been a 64%
correlation between the level of the composite index in the
nonmanufacturing sector and the q/q&nbsp; change in real GDP for
the services and the construction sectors.
</p><p>ISM surveys more than 370
purchasing managers in more than 62 industries including law firms,
hospitals, government and retailers. The nonmanufacturing survey dates
back to July 1997. The figures are available in Haver's <b>USECON
</b>database.</p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106i.jpg" align="right" border="0" height="265" width="353">Amongst
the components, the business activity
index for the service sector moved back above break-even at 53.7 and
that was up sharply from one year ago. Also, the employment index
improved for the second month and was up sharply from its low in
November 2008. Since the series' inception in 1997 there has been an
80% correlation between the level of the ISM nonmanufacturing
employment index and the m/m change in payroll employment in the
service-producing plus the construction industries.&nbsp;Countering
these gains were declines in the new orders and the speed of vendor
deliveries indexes. This latter reading indicates that delivery speeds
quickened. </p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106j.jpg" align="right" border="0" height="265" width="353">Pricing
power improved for the third straight month, but
just slightly. The pricing index rose m/m to 58.7 and was up sharply
from one year ago. Since its inception ten years ago, there has been a
73% correlation between the price index and the q/q change in the GDP
services chain price index.</p>
<p> Beginning with the January 2008
Nonmanufacturing <cite>Report On Business</cite>®, the
composite index is calculated as an indicator of the overall economic
condition for the non-manufacturing sector. It is a composite index
based on the diffusion indices of four of the indicators (business
activity, new orders, employment and supplier deliveries) with equal
weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.</p>
<p><b>News About the Future and Economic Fluctuations</b>
from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q4/brq409_future-and-economic-fluctuations.pdf">here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM" style="color: rgb(0, 0, 0);">ISM Nonmanufacturing Survey</a></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>Dec. '08</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>50.1</td>
<td>48.7</td>
<td>50.6</td>
<td>40.1</td>
<td>46.3</td>
<td>47.4</td>
<td>53.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Business
Activity</td>
<td>53.7</td>
<td>49.6</td>
<td>55.2</td>
<td>38.9</td>
<td>48.1</td>
<td>47.4</td>
<td>56.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New
Orders</td>
<td>52.1</td>
<td>55.1</td>
<td>55.6</td>
<td>38.9</td>
<td>48.0</td>
<td>47.0</td>
<td>54.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Employment</td>
<td>44.0</td>
<td>41.6</td>
<td>41.1</td>
<td>34.5</td>
<td>40.0</td>
<td>43.8</td>
<td>52.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Supplier
Deliveries</td>
<td>50.5</td>
<td>48.5</td>
<td>50.5</td>
<td>48.0</td>
<td>49.0</td>
<td>51.1</td>
<td>51.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Index</td>
<td>58.7</td>
<td>57.8</td>
<td>53.0</td>
<td>36.1</td>
<td>49.4</td>
<td>66.0</td>
<td>63.8</td>
</tr>
</tbody>
</table>




<p></p>
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The nonmanufacturing sector has improved from its worst condition at year-end 2008 but it has yet to show much expansion. The December figure from the Institute for Supply Management (ISM) for the service & construction sectors [...]

U.S. ISM Nonmanufacturing Index Improves To Break-Even

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<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106a.jpg" align="right" border="0" height="265" width="353">
<b>U.S.
unit sales of&nbsp; light vehicles</b> during December
recovered slightly, but by hardly enough to salvage losses earlier in
the year. Sales rose 2.9% m/m to 11.25M units according to the Autodata
Corporation and were slightly stronger than Consensus expectations for
11.0M. To the upside, December sales rose 22.7% from the February '09
low. For the year as a whole, however, sales fell 21.6% from the 2008
average. At 10.37M units vehicle purchases last year were at their
lowest level since 1982. (Seasonal adjustment of these figures is
provided by the U.S. Bureau of Economic Analysis).</p><p>Sales of <b>domestically
made vehicles</b> rose 3.1% last month to 8.42M units. They now
have recovered by nearly one-third from the February low but for the
year as a whole fell by nearly one-quarter from 2008. Sales of fuel
efficient cars rose 9.1% for the month and have risen by nearly
one-half from the January low. For the year as a whole sales fell
19.8%. Light truck sales slipped 2.0% m/m during December but were
25.8% above the low. For 2009, sales fell 25.2% as gasoline prices
rose.</p><p><b>Imported light vehicle</b> sales rose 2.4% from
November to 2.82M and were up 12.4% from the recession low in April.
For 2009 sales fell a lesser 18.3% from the 2008 average. Sales of
imported autos inched up another 0.8% m/m and 12.1% from the low. Sales
for 2009 were 18.2% below 2008 while imported light truck sales rose
5.8% during December and by 12.9% from the low. For all of 2009
imported light trick sales fell 18.5%.</p><p> Overall,<b>
import's share </b>of the U.S. light vehicle market during
December was roughly stable m/m at 25.1%. It reached a new high of
27.6% during all of last year versus 26.5% during 2008. (Imported
vehicles are those produced outside the United States.) Imports' share
of the U.S. car market totaled 31.5% versus 34.3% during all of last
year, which was up just slightly from 2008, while the share of the
light truck market was 17.8%, down from 19.6% last year and from 18.3%
in 2008.</p><p>The U.S. vehicle sales figures can be
found in Haver's<b> USECON </b>database.</p><p><b>Automotive
Industry Outlook: Understanding the Impact on Workers and Communities</b>
from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2010/cfljanuary2010_270a.pdf">here</a>.&nbsp;</p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106b.jpg" border="0" height="265" width="312">
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106c.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM%22" style="color: rgb(0, 0, 0);"><b>Light Vehicle Sales
(SAAR, Mil. Units)</b></a></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Dec. 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>11.25</td>
<td>10.93</td>
<td>10.46</td>
<td>8.7%</td>
<td>10.37</td>
<td>13.22</td>
<td>16.16</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>6.01</td>
<td>5.65</td>
<td>5.50</td>
<td>13.9</td>
<td>5.46</td>
<td>6.76</td>
<td>7.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.11</td>
<td>3.77</td>
<td>3.64</td>
<td>15.8</td>
<td>3.56</td>
<td>4.44</td>
<td>5.06</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>1.89</td>
<td>1.88</td>
<td>1.87</td>
<td>10.1</td>
<td>1.90</td>
<td>2.32</td>
<td>2.52</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>5.24</td>
<td>5.28</td>
<td>4.96</td>
<td>0.2</td>
<td>4.91</td>
<td>6.46</td>
<td>8.60</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.31</td>
<td>4.40</td>
<td>4.12</td>
<td>2.6</td>
<td>3.95</td>
<td>5.28</td>
<td>7.10</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>0.93</td>
<td>0.88</td>
<td>0.84</td>
<td>-10.3</td>
<td>0.96</td>
<td>1.18</td>
<td>1.47</td>
</tr>
</tbody>
</table>
</span></body></html>

U.S. unit sales of light vehicles during December recovered slightly, but by hardly enough to salvage losses earlier in the year. Sales rose 2.9% m/m to 11.25M units according to the Autodata Corporation and were slightly stronger [...]

U.S. Vehicle Sales Improve At YearendBut For 2009 Were The Lowest In Twenty Seven Years

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<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106d.jpg" align="right" border="0" height="265" width="353">
Though
private sector payrolls fell again last month, the 84,000 worker
decline was the least since March 2008. The latest report from the
payroll processor ADP, in their National Employment Report, indicated
that the December decline in private nonfarm payrolls followed a
145,000 November drop that was less than initially reported. The latest
reading was the twenty-third consecutive monthly decline. For 2009 as a
whole payrolls fell by 4.4% which was the sharpest in the series' brief
eight year history.<span class="style1"></span></p><p><span class="style1">ADP
compiled the estimate from its database of individual companies'
payroll information. Macroeconomic Advisers, LLC, the St. Louis
economic consulting firm, developed the methodology for transforming
the raw data into an economic indicator.
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106e.jpg" align="right" border="0" height="265" width="353">The U.S.
Bureau of Labor
Statistics will report December payroll employment this Friday<span class="style1">. For comparison, the November decline of
145,000 in ADP's measure of private nonfarm payrolls was accompanied by
a loss of 18,000 jobs in the BLS measure of private sector payrolls.</span>
According to ADP and Macro-Advisers, the
correlation between the monthly percentage change in the ADP estimate
and that in the BLS data is 0.90.</p>
<p>ADP reported that the decline in service-producing
industry employment
ended last month with a gain of 12,000 (-2.5% y/y). It was the first
rise since March of 2008. Small-sized payrolls grew 11,000 (-2.1% y/y)
while medium-sized payrolls rose 10,000 (-2.7% y/y). These increases
were offset by a 9,000 decline (-2.8% y/y) in large service producing
payrolls.</p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100106f.jpg" align="right" border="0" height="265" width="353">In the
goods
producing sector employment fell 96,000 during December (-12.0% y/y)
and that was deeper than the November drop. Nevertheless, the
three-month annual rate of decline eased again to -6.4% versus -17.3%
at its worst last March. Small-sized payrolls fell 36,000 (-11.9% y/y),
about the same as a 35,000 drop (-11.7% y/y) in medium-sized payrolls.
Large payrolls fell 25,000 (-12.7% y/y). In the manufacturing sector
alone, payrolls fell 43,000 (-11.0% y/y). That was about the same as
the November decline but the three-month change moderated to -4.9% from
-17.4% last March.</p>
</span><span class="style1">&nbsp;The
ADP National Employment Report data is maintained in Haver's </span><strong>USECON</strong><span class="style1" style="font-family: Verdana; font-size: 10pt;">
database; historical figures date back to December 2000. The figures in
this report cover only private sector jobs and exclude employment in
the public sector.</span><span class="style1">&nbsp;The
full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/FINAL_Report_December_09.pdf">here
</a></span><span class="style1">and the
ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.</span><span class="style1">·&nbsp;<b>Earnings Losses of Job
Losers During the 2001 Economic Downturn</b> from the Federal
Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q4/brq409_earnings-losses-of-job-losers.pdf">here</a>.</span>&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><strong><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM" style="color: rgb(255, 255, 255);">ADP National Employment
Report</a></strong></th>
<th scope="col"><strong>December</strong></th>
<th scope="col"><strong>November</strong></th>
<th scope="col"><strong>October</strong></th>
<th scope="col"><strong>Y/Y</strong></th>
<th scope="col"><strong>2009</strong></th>
<th scope="col"><strong>2008</strong></th>
<th scope="col"><strong>2007</strong></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Nonfarm Private
Payroll
Employment (m/m Chg., 000s)</td>
<td>-84</td>
<td>-145</td>
<td>-178</td>
<td>-4.2%</td>
<td>-4.4%</td>
<td>-0.5%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Small
Payroll (1-49)</td>
<td>-25</td>
<td>-59</td>
<td>-69</td>
<td>-3.6</td>
<td>-3.8</td>
<td>-0.0</td>
<td>1.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Medium
Payroll (50-499)</td>
<td>-25</td>
<td>-44</td>
<td>-65</td>
<td>-4.5</td>
<td>-5.0</td>
<td>-0.5</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Large
Payroll (&gt;500)</td>
<td>-34</td>
<td>-42</td>
<td>-44</td>
<td>-5.0</td>
<td>-5.1</td>
<td>-1.6</td>
<td>-0.1</td>
</tr>
</tbody>
</table>




</p>
</span>
</body></html>

Though private sector payrolls fell again last month, the 84,000 worker decline was the least since March 2008. The latest report from the payroll processor ADP, in their National Employment Report, indicated that the December decline [...]

ADP Report:U.S. December Payroll Employment Decline Is Smallest Since March 2008

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

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

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

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

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

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

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

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

A Soft Tone in the Labor Market

Winnie Tapasanun

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/1jXNsSMGpl60LzAx0fmibN?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

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.