Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091228a.jpg" align="right" border="0" height="265" width="353">
Industrial
production in Japan was reported today to have increased 2.6% in
November to 88.3 (2005=100).&nbsp; This was the ninth month in
which production increased from the low of 69.5 reached in February of
this year.&nbsp;&nbsp; It is, however, still 5.2% below
November, 2008 and 19.8% below the recent peak reached in February,
2008.&nbsp; The increase has been fueled primarily by foreign
demand.&nbsp; Exports were up almost 5% in the month of
November.&nbsp; Domestic demand as represented by retail sales, on
the other hand, increased by only 0.2% in November.&nbsp; Retail
sales have shown little growth over the past several years as can be
seem in the first chart that shows industrial production, exports and
retail sales.*&nbsp;
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091228b.jpg" align="right" border="0" height="265" width="353">The outlook for increased
foreign demand
remains favorable in spite of the high yen. In particular, demand from
China, Japan's largest export customer, is rising together with demand
from other Asian countries.&nbsp; The outlook for domestic demand
is more problematic.&nbsp; Also released today was the year over
year change in cash earnings in industries employing 30 or more
persons. This series, shown in the second chart, is a good indicator of
general&nbsp;&nbsp; employment conditions and hence an
important indicator of domestic demand.&nbsp; Cash earnings in
November were 4.5% below a year ago.&nbsp; This is an improvement
over October's 9.5% shortfall and the -23.4% of March, 2009 but it is
unlikely to mean a significant increase in domestic demand in the
immediate future.&nbsp;&nbsp;*In the first chart the data for
industrial production and retail sales are seasonally adjusted and
indexed to a 2005 base.&nbsp; In order to have a comparable series
for exports, we used the series for exports seasonally adjusted by the
Ministry of Finance (VEATTLA@JAPAN)
and indexed these data to a 2005 base using the specialized function in
DLX.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct&nbsp; 09</th>
<th scope="col">Sep 09</th>
<th scope="col">M/M% Chg </th>
<th scope="col">Y/Y% Chg&nbsp;</th>
<th scope="col">2008 </th>
<th scope="col"> 2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production (SA,
2005=100)</td>
<td>88.3</td>
<td>86.1</td>
<td>93.1</td>
<td>2.56</td>
<td>-5.16</td>
<td>103.8</td>
<td>107.4</td>
<td>104.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales&nbsp; (SA,
2005=100)</td>
<td>99.2</td>
<td>99.0</td>
<td>99.9</td>
<td>0.20</td>
<td>-0.70</td>
<td>100.2</td>
<td>100.1</td>
<td>100.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports&nbsp; (SA, 2005=100)</td>
<td>91.7</td>
<td>87.4</td>
<td>97.1</td>
<td>4.89</td>
<td>-5.57</td>
<td>123.6</td>
<td>128.1</td>
<td>114.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>M/M Pt Chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Y/Y change in Cash Earnings (%)</td>
<td>-4.5</td>
<td>-9.4</td>
<td>-8.5</td>
<td>4.9</td>
<td>4.0</td>
<td>-2.4</td>
<td>0.8</td>
<td>2.4</td>
</tr>
</tbody>
</table>

</body></html>

Industrial production in Japan was reported today to have increased 2.6% in November to 88.3 (2005=100). This was the ninth month in which production increased from the low of 69.5 reached in February of this year. It is, however, [...]

Rising Exports Fuel Rise in Japanese Industrial Production

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091228a.jpg" align="right" border="0" height="265" width="353">Industrial
production in Japan was reported today to have increased 2.6% in
November to 88.3 (2005=100).&nbsp; This was the ninth month in
which production increased from the low of 69.5 reached in February of
this year.&nbsp;&nbsp; It is, however, still 5.2% below
November, 2008 and 19.8% below the recent peak reached in February,
2008.&nbsp; The increase has been fueled primarily by foreign
demand.&nbsp; Exports were up almost 5% in the month of
November.&nbsp; Domestic demand as represented by retail sales, on
the other hand, increased by only 0.2% in November.&nbsp; Retail
sales have shown little growth over the past several years as can be
seem in the first chart that shows industrial production, exports and
retail sales.*&nbsp;
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091228b.jpg" align="right" border="0" height="265" width="353">The
outlook for increased
foreign demand
remains favorable in spite of the high yen. In particular, demand from
China, Japan's largest export customer, is rising together with demand
from other Asian countries.&nbsp; The outlook for domestic demand
is more problematic.&nbsp; Also released today was the year over
year change in cash earnings in industries employing 30 or more
persons. This series, shown in the second chart, is a good indicator of
general&nbsp;&nbsp; employment conditions and hence an
important indicator of domestic demand.&nbsp; Cash earnings in
November were 4.5% below a year ago.&nbsp; This is an improvement
over October's 9.5% shortfall and the -23.4% of March, 2009 but it is
unlikely to mean a significant increase in domestic demand in the
immediate future.&nbsp;&nbsp;*In the first chart the data for
industrial production and retail sales are seasonally adjusted and
indexed to a 2005 base.&nbsp; In order to have a comparable series
for exports, we used the series for exports seasonally adjusted by the
Ministry of Finance (VEATTLA@JAPAN)
and indexed these data to a 2005 base using the specialized function in
DLX.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct&nbsp; 09</th>
<th scope="col">Sep 09</th>
<th scope="col">M/M% Chg </th>
<th scope="col">Y/Y% Chg&nbsp;</th>
<th scope="col">2008 </th>
<th scope="col"> 2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production (SA,
2005=100)</td>
<td>88.3</td>
<td>86.1</td>
<td>93.1</td>
<td>2.56</td>
<td>-5.16</td>
<td>103.8</td>
<td>107.4</td>
<td>104.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales&nbsp; (SA,
2005=100)</td>
<td>99.2</td>
<td>99.0</td>
<td>99.9</td>
<td>0.20</td>
<td>-0.70</td>
<td>100.2</td>
<td>100.1</td>
<td>100.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports&nbsp; (SA, 2005=100)</td>
<td>91.7</td>
<td>87.4</td>
<td>97.1</td>
<td>4.89</td>
<td>-5.57</td>
<td>123.6</td>
<td>128.1</td>
<td>114.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>M/M Pt Chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Y/Y change in Cash Earnings (%)</td>
<td>-4.5</td>
<td>-9.4</td>
<td>-8.5</td>
<td>4.9</td>
<td>4.0</td>
<td>-2.4</td>
<td>0.8</td>
<td>2.4</td>
</tr>
</tbody>
</table>

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Rising Exports Fuel Rise inJapanese Industrial Production

Tom Moeller

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126i.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126j.jpg" style="width: 312px; height: 265px;">

The U.S. House Price Index from the Federal Housing and
Finance Agency (FHFA) continued to show improvement last fall. The
Purchase Only Index for November rose 0.7% after its 0.4% October
increase. Moreover, the year-to-year change turned positive for the
first time since late-2007. Since their peak in early-2007 home prices
nationwide have fallen 10.3%. The FHFA uses data provided by Fannie Mae
and Freddie Mac and is not value-weighted.
The HPI is calculated using a repeat sales index. That means
that the HPI measures changes in the price of the same property over
time but does not measure changes in property types over time. So if,
for example, the price of a larger, new home was not growing very
rapidly, but the number of people transitioning from smaller homes to
larger homes greatly increased, median house prices would go up (people
buying more expensive houses) much more than the HPI. In this way, the
HPI is a better measure of how any particular home is appreciating
while the median house price is a better measure of what the typical
home buyer is paying.
Notable monthly gains in home prices during November were
logged in the Pacific, South Atlantic and Mountain regions of the
country and the y/y declines moderated significantly.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126k.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126l.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">FHFA
U.S. House Price Index Purchase Only (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7</td>
<td>0.4</td>
<td>-0.3</td>
<td>0.5</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-0.3</td>
<td>0.7</td>
<td>0.5</td>
<td>0.3</td>
<td>-4.7</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle
Atlantic</td>
<td>-0.1</td>
<td>1.3</td>
<td>-1.3</td>
<td>-1.6</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North
Central</td>
<td>0.1</td>
<td>-0.9</td>
<td>0.9</td>
<td>0.1</td>
<td>-4.4</td>
<td>-1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West North
Central</td>
<td>-0.0</td>
<td>0.4</td>
<td>-0.0</td>
<td>2.1</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South
Atlantic</td>
<td>2.0</td>
<td>-1.5</td>
<td>0.0</td>
<td>-0.1</td>
<td>-7.3</td>
<td>1.3</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South
Central</td>
<td>-0.4</td>
<td>2.3</td>
<td>-1.6</td>
<td>1.5</td>
<td>-1.5</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South
Central</td>
<td>0.3</td>
<td>0.6</td>
<td>-0.3</td>
<td>2.5</td>
<td>0.6</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.7</td>
<td>0.7</td>
<td>-1.3</td>
<td>-4.9</td>
<td>-6.2</td>
<td>3.9</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>2.3</td>
<td>2.2</td>
<td>-0.8</td>
<td>2.9</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
</body></html>

The U.S. House Price Index from the Federal Housing and Finance Agency (FHFA) continued to show improvement last fall. The Purchase Only Index for November rose 0.7% after its 0.4% October increase. Moreover, the year-to-year change [...]

FHFA Home Price Index Ticks Up Both M/M And Y/Y

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126g.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126h.jpg" style="width: 312px; height: 265px;">German
business confidence improved in January in contrast to that of
investors and consumers, but it is still relatively subdued.&nbsp;
The IFO institute, which surveys some 7000 executives in manufacturing,
construction, wholesale and retail trade, reports its results in two
ways: in index form with (2000=100) and as a percent balance between
those who see improvement and those who see deterioration.&nbsp;
The index is useful in tracking the ups and downs in confidence, but
the percent balances give some insight into the degree of confidence of
the&nbsp; participants.&nbsp; For example, in January, the
index of current conditions increased to 91.2 from 90.4 in December and
the percent balance increased to -21.0% from -22.6%.&nbsp; Thus
both measures showed an improvement in the appraisal of current
conditions, but the percent balance also showed that there were still
21% more respondents who appraised current conditions negatively than
those who appraised them positively.
 The IFO's
headline measure of confidence, the Business Climate for all industry,
is a combination of the replies of the participants regarding current
conditions and expectations for the future.&nbsp; The percent
balances for the Business Climate, Current Conditions and Expectations
for the future are shown in the first chart.
 The
Business Climate for all industry has improved steadily since March of
this year when it was -42.8% to -9.0% in January.&nbsp; There has
been little change in construction climate.&nbsp; The pessimists
still exceed the optimists by 21.5%.&nbsp; The climate in retail
trade has fared better than that of construction, but the pessimists
still exceed the optimists by 12.8%.&nbsp; The strongest
improvements in confidence have taken place in manufacturing and
wholesale trade climates, where the pessimists now exceed the optimists
by only 4.7% in wholesale trade and 6.6% in manufacturing. These trends
are shown in the second chart.
 Most of the percent balance data in the
latest survey are still negative indicating that the predominant mood
of most German business executives is still pessimistic, or at best,
skeptical. There is, however, one notable change.&nbsp; The latest
survey shows that, for the first time since August 2007, there is a
small, but significant, excess, 3.7%, of optimists over pessimists
regarding business expectations.&nbsp;&nbsp; In November there
was a balance between optimists and pessimists and in December an
excess of optimists of 0.2%.&nbsp;&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">IFO
Business Survey (% balance)</th>
<th scope="col">Jan 10&nbsp;</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Climate</td>
<td>-9.0</td>
<td>-11.5</td>
<td>-12.9</td>
<td>-16.5</td>
<td>-17.8</td>
<td>-19.2</td>
<td>-25.4</td>
<td>-28.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>-21.0</td>
<td>-22.6</td>
<td>-24.9</td>
<td>-28.4</td>
<td>-29.0</td>
<td>-30.6</td>
<td>-34.1</td>
<td>-38.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>3.7</td>
<td>0.2</td>
<td>0.0</td>
<td>-3.9</td>
<td>-5.9</td>
<td>-7.0</td>
<td>-16.1</td>
<td>-18.1</td>
</tr>
<tr>
<td colspan="9" class="firstcol">Business
Climate</td>

</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-6.6</td>
<td>-9.3</td>
<td>-11.4</td>
<td>-16.5</td>
<td>-19.4</td>
<td>-21.2</td>
<td>-29.0</td>
<td>-33.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-21.5</td>
<td>-26.8</td>
<td>-27.3</td>
<td>-25.2</td>
<td>-25.6</td>
<td>-23.8</td>
<td>-25.2</td>
<td>-23.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>-4.7</td>
<td>-6.9</td>
<td>-8.1</td>
<td>-10.6</td>
<td>-12.0</td>
<td>-14.0</td>
<td>-21.8</td>
<td>-24.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Trade</td>
<td>-12.8</td>
<td>-12.3</td>
<td>-12.9</td>
<td>-17.0</td>
<td>-12.6</td>
<td>-14.9</td>
<td>-17.6</td>
<td>-17.1</td>
</tr>
</tbody>
</table>

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German business confidence improved in January in contrast to that of investors and consumers, but it is still relatively subdued. The IFO institute, which surveys some 7000 executives in manufacturing, construction, wholesale and [...]

Less Pessimism Among German Business Executives

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126d.jpg" style="width: 353px; height: 265px;" align="right">The
consumer's mood regarding the economy has improved, but after the jump
last spring little headway developed. The Conference Board indicated
that consumer confidence during January rose 4.3% from December after
similar gains during the prior two months. Due to earlier declines,
however, these increases left confidence roughly equal to last May. The
Conference Board data can be found in Haver's CBDB
database. Despite the loss of forward momentum confidence remained up
roughly one-half from last January. During the last ten years there has
been an 87% correlation between the level of consumer confidence and
the y/y change in real consumer spending.
 Consumers' assessment of the
current economic conditions jumped by one-quarter this month but only
back to last summer's high. It remained near the historic low. Jobs
were seen as hard to get by 47.4% of respondents and jobs were seen as
plentiful by only 4.3%. That was up just slightly from the series'
historic low. Business conditions were seen as good by only 9.0% and
that also was near the series' low. Consumers who thought business
conditions were bad rose slightly to 46.1%. While off somewhat from its
high the reading was still nearly the highest since 1983.&nbsp;·
The expectations component of confidence improved slightly m/m and the
index remained near the highest level since late-2007. Most expected
business conditions &amp; employment to remain the same and that's
a vast improvement from the deterioration seen last winter.
Expectations for the inflation rate in twelve months held stable at
5.3%, the lowest level since 2007 and down from last year's high of
7.7%. Interest rates in twelve months were expected to be higher by an
increased 52.3% of respondents, while a reduced 12.5% expected rates to
fall. A greatly increased 36.3% of respondents expected stock prices to
rise. 
 Consumers continued to manage their spending plans
cautiously. A reduced 1.8% plan to buy a home during the next six
months while just 24.7% plan to buy a major appliance. That's versus
30.9% back in 2007. Only 5.1% plan to buy an automobile versus 6.0% in
2007. Just 2.0% plan to buy a new one.
 Real Time
Underlying Inflation Gauges for Monetary Policymakers from
the Federal Reserve Bank of New York is available&nbsp; <a href="http://www.newyorkfed.org/research/staff_reports/sr420.pdf">here</a>.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126f.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">Conference
Board&nbsp;(SA, 1985=100)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</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">Consumer
Confidence Index</td>
<td>55.9</td>
<td>53.6</td>
<td>50.6</td>
<td>49.5</td>
<td>45.2</td>
<td>57.9</td>
<td>103.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>25.0</td>
<td>20.2</td>
<td>21.2</td>
<td>-15.8</td>
<td>24.0</td>
<td>69.9</td>
<td>128.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>76.5</td>
<td>75.9</td>
<td>70.3</td>
<td>80.0</td>
<td>59.3</td>
<td>50.0</td>
<td>86.4</td>
</tr>
</tbody>
</table>

</body></html>

The consumer's mood regarding the economy has improved, but after the jump last spring little headway developed. The Conference Board indicated that consumer confidence during January rose 4.3% from December after similar gains during [...]

U.S. Consumer Confidence Improves Modestly

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126a.jpg" style="width: 353px; height: 265px;" align="right">The
housing
market has improved enough to improve pricing power but outright
strength is not at hand. The November S&amp;P/Case Shiller Home
Price Index edged up another 0.2%, about as it did during the prior two
months. The increases in this 20 City Composite index were below those
during the prior three months. However, they were enough to improve the
y/y comparison to -5.3% from its worst of -19.0% last January.
The
narrower 10 City Composite Index also gained 0.2% and the y/y change
improved to -4.5% from -19.4% at its worst. These negative comparisons
by far outpace those during the 1990-91 recession which reached minus
6.3%.· Notable monthly gains in home prices during November were logged
by Los Angeles, San Diego and San Francisco. Positive changes also were
logged in Dallas.
 The Case Shiller home price series are
value-weighted, i.e., a greater index weight is&nbsp; assigned to
more expensive homes. The S&amp;P/Case-Shiller home price series
can be found in Haver's USECON database and the
city data highlighted below is in the REGIONAL
database.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126c.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">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">November m/m</th>
<th scope="col">October&nbsp;&nbsp;
m/m</th>
<th scope="col">September m/m</th>
<th scope="col">Nov. y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">20 City Composite Index</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-5.3%</td>
<td>-15.7%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
<tr>
<td colspan="8">&nbsp; Regional
Indicators</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Atlanta</td>
<td>0.2</td>
<td>-0.4</td>
<td>0.1</td>
<td>-6.2</td>
<td>-8.5</td>
<td>0.7</td>
<td>4.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Boston</td>
<td>0.4</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-0.7</td>
<td>-5.7</td>
<td>-4.0</td>
<td>-1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Chicago</td>
<td>-0.8</td>
<td>-1.0</td>
<td>1.2</td>
<td>-8.5</td>
<td>-10.0</td>
<td>-1.0</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Dallas</td>
<td>0.6</td>
<td>0.2</td>
<td>-0.3</td>
<td>1.4</td>
<td>-3.2</td>
<td>0.5</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Denver</td>
<td>0.3</td>
<td>0.3</td>
<td>0.0</td>
<td>0.5</td>
<td>-4.9</td>
<td>-1.7</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Los Angeles</td>
<td>1.0</td>
<td>0.7</td>
<td>0.7</td>
<td>-3.5</td>
<td>-24.2</td>
<td>-5.2</td>
<td>11.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
New York</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-7.1</td>
<td>-7.4</td>
<td>-2.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
San Francisco</td>
<td>1.5</td>
<td>1.8</td>
<td>1.5</td>
<td>1.0</td>
<td>-24.3</td>
<td>-4.5</td>
<td>4.5</td>
</tr>
</tbody>
</table>

</body></html>

The housing market has improved enough to improve pricing power but outright strength is not at hand. The November S&P/Case Shiller Home Price Index edged up another 0.2%, about as it did during the prior two months. The increases in [...]

Case-Shiller Home Price Gains Are Modest

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126a.jpg" style="width: 353px; height: 265px;" align="right">The
housing
market has improved enough to improve pricing power but outright
strength is not at hand. The November S&amp;P/Case Shiller Home
Price Index edged up another 0.2%, about as it did during the prior two
months. The increases in this 20 City Composite index were below those
during the prior three months. However, they were enough to improve the
y/y comparison to -5.3% from its worst of -19.0% last January.
The
narrower 10 City Composite Index also gained 0.2% and the y/y change
improved to -4.5% from -19.4% at its worst. These negative comparisons
by far outpace those during the 1990-91 recession which reached minus
6.3%.· Notable monthly gains in home prices during November were logged
by Los Angeles, San Diego and San Francisco. Positive changes also were
logged in Dallas.
 The Case Shiller home price series are
value-weighted, i.e., a greater index weight is&nbsp; assigned to
more expensive homes. The S&amp;P/Case-Shiller home price series
can be found in Haver's USECON database and the
city data highlighted below is in the REGIONAL
database.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126c.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">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">November m/m</th>
<th scope="col">October&nbsp;&nbsp;
m/m</th>
<th scope="col">September m/m</th>
<th scope="col">Nov. y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">20 City Composite Index</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-5.3%</td>
<td>-15.7%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
<tr>
<td colspan="8">&nbsp; Regional
Indicators</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Atlanta</td>
<td>0.2</td>
<td>-0.4</td>
<td>0.1</td>
<td>-6.2</td>
<td>-8.5</td>
<td>0.7</td>
<td>4.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Boston</td>
<td>0.4</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-0.7</td>
<td>-5.7</td>
<td>-4.0</td>
<td>-1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Chicago</td>
<td>-0.8</td>
<td>-1.0</td>
<td>1.2</td>
<td>-8.5</td>
<td>-10.0</td>
<td>-1.0</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Dallas</td>
<td>0.6</td>
<td>0.2</td>
<td>-0.3</td>
<td>1.4</td>
<td>-3.2</td>
<td>0.5</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Denver</td>
<td>0.3</td>
<td>0.3</td>
<td>0.0</td>
<td>0.5</td>
<td>-4.9</td>
<td>-1.7</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Los Angeles</td>
<td>1.0</td>
<td>0.7</td>
<td>0.7</td>
<td>-3.5</td>
<td>-24.2</td>
<td>-5.2</td>
<td>11.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
New York</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-7.1</td>
<td>-7.4</td>
<td>-2.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
San Francisco</td>
<td>1.5</td>
<td>1.8</td>
<td>1.5</td>
<td>1.0</td>
<td>-24.3</td>
<td>-4.5</td>
<td>4.5</td>
</tr>
</tbody>
</table>

U.S. Consumer Confidence Improves
Modestly 
by <a href="/comment/Moeller.html">Tom
Moeller&nbsp;</a> December 26, 2009



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126d.jpg" style="width: 353px; height: 265px;" align="right">The
consumer's mood regarding the economy has improved, but after the jump
last spring little headway developed. The Conference Board indicated
that consumer confidence during January rose 4.3% from December after
similar gains during the prior two months. Due to earlier declines,
however, these increases left confidence roughly equal to last May. The
Conference Board data can be found in Haver's CBDB
database.
 Despite the loss of forward momentum confidence remained up
roughly one-half from last January. During the last ten years there has
been an 87% correlation between the level of consumer confidence and
the y/y change in real consumer spending.
 Consumers' assessment of the
current economic conditions jumped by one-quarter this month but only
back to last summer's high. It remained near the historic low. Jobs
were seen as hard to get by 47.4% of respondents and jobs were seen as
plentiful by only 4.3%. That was up just slightly from the series'
historic low. Business conditions were seen as good by only 9.0% and
that also was near the series' low. Consumers who thought business
conditions were bad rose slightly to 46.1%. While off somewhat from its
high the reading was still nearly the highest since 1983.&nbsp;·
The expectations component of confidence improved slightly m/m and the
index remained near the highest level since late-2007. Most expected
business conditions &amp; employment to remain the same and that's
a vast improvement from the deterioration seen last winter.
Expectations for the inflation rate in twelve months held stable at
5.3%, the lowest level since 2007 and down from last year's high of
7.7%. Interest rates in twelve months were expected to be higher by an
increased 52.3% of respondents, while a reduced 12.5% expected rates to
fall. A greatly increased 36.3% of respondents expected stock prices to
rise. 
 Consumers continued to manage their spending plans
cautiously. A reduced 1.8% plan to buy a home during the next six
months while just 24.7% plan to buy a major appliance. That's versus
30.9% back in 2007. Only 5.1% plan to buy an automobile versus 6.0% in
2007. Just 2.0% plan to buy a new one.
 Real Time
Underlying Inflation Gauges for Monetary Policymakers from
the Federal Reserve Bank of New York is available&nbsp; <a href="http://www.newyorkfed.org/research/staff_reports/sr420.pdf">here</a>.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126f.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">Conference
Board&nbsp;(SA, 1985=100)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</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">Consumer
Confidence Index</td>
<td>55.9</td>
<td>53.6</td>
<td>50.6</td>
<td>49.5</td>
<td>45.2</td>
<td>57.9</td>
<td>103.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>25.0</td>
<td>20.2</td>
<td>21.2</td>
<td>-15.8</td>
<td>24.0</td>
<td>69.9</td>
<td>128.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>76.5</td>
<td>75.9</td>
<td>70.3</td>
<td>80.0</td>
<td>59.3</td>
<td>50.0</td>
<td>86.4</td>
</tr>
</tbody>
</table>

Less Pessimism Among German
Business Executives 
by <a href="/comment/Curley.html">Louise
Curley</a> December 26, 2009



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126g.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126h.jpg" style="width: 312px; height: 265px;">German
business confidence improved in January in contrast to that of
investors and consumers, but it is still relatively subdued.&nbsp;
The IFO institute, which surveys some 7000 executives in manufacturing,
construction, wholesale and retail trade, reports its results in two
ways: in index form with (2000=100) and as a percent balance between
those who see improvement and those who see deterioration.&nbsp;
The index is useful in tracking the ups and downs in confidence, but
the percent balances give some insight into the degree of confidence of
the&nbsp; participants.&nbsp; For example, in January, the
index of current conditions increased to 91.2 from 90.4 in December and
the percent balance increased to -21.0% from -22.6%.&nbsp; Thus
both measures showed an improvement in the appraisal of current
conditions, but the percent balance also showed that there were still
21% more respondents who appraised current conditions negatively than
those who appraised them positively.
 The IFO's
headline measure of confidence, the Business Climate for all industry,
is a combination of the replies of the participants regarding current
conditions and expectations for the future.&nbsp; The percent
balances for the Business Climate, Current Conditions and Expectations
for the future are shown in the first chart.
 The
Business Climate for all industry has improved steadily since March of
this year when it was -42.8% to -9.0% in January.&nbsp; There has
been little change in construction climate.&nbsp; The pessimists
still exceed the optimists by 21.5%.&nbsp; The climate in retail
trade has fared better than that of construction, but the pessimists
still exceed the optimists by 12.8%.&nbsp; The strongest
improvements in confidence have taken place in manufacturing and
wholesale trade climates, where the pessimists now exceed the optimists
by only 4.7% in wholesale trade and 6.6% in manufacturing. These trends
are shown in the second chart.
 Most of the percent balance data in the
latest survey are still negative indicating that the predominant mood
of most German business executives is still pessimistic, or at best,
skeptical. There is, however, one notable change.&nbsp; The latest
survey shows that, for the first time since August 2007, there is a
small, but significant, excess, 3.7%, of optimists over pessimists
regarding business expectations.&nbsp;&nbsp; In November there
was a balance between optimists and pessimists and in December an
excess of optimists of 0.2%.&nbsp;&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">IFO
Business Survey (% balance)</th>
<th scope="col">Jan 10&nbsp;</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Climate</td>
<td>-9.0</td>
<td>-11.5</td>
<td>-12.9</td>
<td>-16.5</td>
<td>-17.8</td>
<td>-19.2</td>
<td>-25.4</td>
<td>-28.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>-21.0</td>
<td>-22.6</td>
<td>-24.9</td>
<td>-28.4</td>
<td>-29.0</td>
<td>-30.6</td>
<td>-34.1</td>
<td>-38.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>3.7</td>
<td>0.2</td>
<td>0.0</td>
<td>-3.9</td>
<td>-5.9</td>
<td>-7.0</td>
<td>-16.1</td>
<td>-18.1</td>
</tr>
<tr>
<td colspan="9" class="firstcol">Business
Climate</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-6.6</td>
<td>-9.3</td>
<td>-11.4</td>
<td>-16.5</td>
<td>-19.4</td>
<td>-21.2</td>
<td>-29.0</td>
<td>-33.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-21.5</td>
<td>-26.8</td>
<td>-27.3</td>
<td>-25.2</td>
<td>-25.6</td>
<td>-23.8</td>
<td>-25.2</td>
<td>-23.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>-4.7</td>
<td>-6.9</td>
<td>-8.1</td>
<td>-10.6</td>
<td>-12.0</td>
<td>-14.0</td>
<td>-21.8</td>
<td>-24.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Trade</td>
<td>-12.8</td>
<td>-12.3</td>
<td>-12.9</td>
<td>-17.0</td>
<td>-12.6</td>
<td>-14.9</td>
<td>-17.6</td>
<td>-17.1</td>
</tr>
</tbody>
</table>

FHFA Home Price Index Ticks Up
Both M/M And Y/Y 
by <a href="/comment/Moeller.html">Tom
Moeller&nbsp;</a> December 26, 2009



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126i.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126j.jpg" style="width: 312px; height: 265px;">

The U.S. House Price Index from the Federal Housing and
Finance Agency (FHFA) continued to show improvement last fall. The
Purchase Only Index for November rose 0.7% after its 0.4% October
increase. Moreover, the year-to-year change turned positive for the
first time since late-2007. Since their peak in early-2007 home prices
nationwide have fallen 10.3%. The FHFA uses data provided by Fannie Mae
and Freddie Mac and is not value-weighted.

The HPI is calculated using a repeat sales index. That means
that the HPI measures changes in the price of the same property over
time but does not measure changes in property types over time. So if,
for example, the price of a larger, new home was not growing very
rapidly, but the number of people transitioning from smaller homes to
larger homes greatly increased, median house prices would go up (people
buying more expensive houses) much more than the HPI. In this way, the
HPI is a better measure of how any particular home is appreciating
while the median house price is a better measure of what the typical
home buyer is paying.
Notable monthly gains in home prices during November were
logged in the Pacific, South Atlantic and Mountain regions of the
country and the y/y declines moderated significantly.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126k.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126l.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">FHFA
U.S. House Price Index Purchase Only (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7</td>
<td>0.4</td>
<td>-0.3</td>
<td>0.5</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-0.3</td>
<td>0.7</td>
<td>0.5</td>
<td>0.3</td>
<td>-4.7</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle
Atlantic</td>
<td>-0.1</td>
<td>1.3</td>
<td>-1.3</td>
<td>-1.6</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North
Central</td>
<td>0.1</td>
<td>-0.9</td>
<td>0.9</td>
<td>0.1</td>
<td>-4.4</td>
<td>-1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West North
Central</td>
<td>-0.0</td>
<td>0.4</td>
<td>-0.0</td>
<td>2.1</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South
Atlantic</td>
<td>2.0</td>
<td>-1.5</td>
<td>0.0</td>
<td>-0.1</td>
<td>-7.3</td>
<td>1.3</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South
Central</td>
<td>-0.4</td>
<td>2.3</td>
<td>-1.6</td>
<td>1.5</td>
<td>-1.5</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South
Central</td>
<td>0.3</td>
<td>0.6</td>
<td>-0.3</td>
<td>2.5</td>
<td>0.6</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.7</td>
<td>0.7</td>
<td>-1.3</td>
<td>-4.9</td>
<td>-6.2</td>
<td>3.9</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>2.3</td>
<td>2.2</td>
<td>-0.8</td>
<td>2.9</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
</body></html>

Case-Shiller Home Price Gains AreModest

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125a.jpg" style="width: 353px; height: 265px;" align="right">
The National
Association of Realtors reported that sales of existing homes
fell 16.7% from November as a since-extended tax credit for first home
buyers was due to expire. The decline to 5.450M units (SAAR) followed a
little-revised 7.4% rise and similarly strong gains back through July.
The fall in December home sales greatly exceeded Consensus expectations
for decline to 5.90M. For all of last year, the tax credit, along with
improved affordability, raised home sales by 5.5% from 2008. However,
that recovery made up only a piece of larger declines during the prior
three years. As a result, total sales last year remained 27.0% below
the 2005 peak. Total sales include sales of condos and co-ops. Sales
of existing single-family homes alone fell 16.8% from November to
4.790M but remained up 18.3% from the January low. For all of 2009,
sales rose 5.4% after sharp declines during the prior three years.
(These data have a longer history than the total sales series). Sales
of condos and co-ops fell 15.4% m/m but were up by one-third from the
November '08 low. Sales have been helped by a recently
extended tax credit for first-time home buyers. The credit of up to
$8,000 now runs though April 30. Additionally, a new credit of up to
$6,500 is available to some existing home owners who move. The full
details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.&nbsp; The median price of all existing homes jumped 4.9% last month to the
highest level since July. The median price for a single-family home
alone was strong, rising 4.8% to $177,500 (1.4% y/y). For the year as a
whole, however, weakness in home sales pulled prices lower. The 11.6%
decline from 2007 was the third consecutive year of decline. Prices
remained down 22% from the 2007 monthly peak. Price weakness sharply
raised home affordability; by 7.8% since July and by two-thirds from
the 2006 low. The median family income for existing home buyers was
$60,034 and mortgage payments amounted to 14.9% of that total.&nbsp; The
number of unsold homes (single-family &amp; co-ops) for sale fell a
sharp 6.6% (-11.1% y/y) during December to the lowest level since
March&nbsp; 2006. At the current sales rate there was a 7.2 months'
supply of homes on the market, near the lowest since late 2006. The
latest figure was down from a high of 11.3 months during April of 2008.
For single-family homes, the inventory fell to a 6.9 months' supply,
the lowest since March 2007.&nbsp;The data on existing home
sales, prices and affordability can be found in Haver's USECON
database. The regional price, affordability and inventory data is
available in the REALTOR database.Alt-A:
The Forgotten Segment of the Mortgage Market from the
Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/10/01/Sengupta.pdf">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125c.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">Existing
Home Sales (Thous, SAAR)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Dec. 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</td>
<td>5,450</td>
<td>6,540</td>
<td>6,090</td>
<td>15.0%</td>
<td>5,164</td>
<td>4,893</td>
<td>5,674</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>910</td>
<td>1,130</td>
<td>1,060</td>
<td>21.3</td>
<td>863</td>
<td>845</td>
<td>1,010</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,150</td>
<td>1,550</td>
<td>1,430</td>
<td>8.5</td>
<td>1,168</td>
<td>1,130</td>
<td>1,331</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>2,010</td>
<td>2,400</td>
<td>2,280</td>
<td>15.5</td>
<td>1,913</td>
<td>1,860</td>
<td>2,243</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,380</td>
<td>1,450</td>
<td>1,320</td>
<td>15.0</td>
<td>1,216</td>
<td>1,064</td>
<td>1,095</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,790</td>
<td>5,760</td>
<td>5,320</td>
<td>12.7</td>
<td>4,573</td>
<td>4,341</td>
<td>4,960</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $
(NSA)</td>
<td>178,300</td>
<td>170,000</td>
<td>172,200</td>
<td>1.5</td>
<td>173,458</td>
<td>197,233</td>
<td>216,633</td>
</tr>
</tbody>
</table>


</body></html>

The National Association of Realtors reported that sales of existing homes fell 16.7% from November as a since-extended tax credit for first home buyers was due to expire. The decline to 5.450M units (SAAR) followed a little-revised [...]

U.S. Existing Home Sales Sink But Prices Firm

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

Robert Brusca

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.


260108Z1.jpg

**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.

260108Z2.jpg

**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.

260108Z3.jpg

**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.

260108Z4.jpg

**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.

260108Z5.jpg

**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.