Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222k.jpg" align="left" border="0" height="265" width="353">
According to the latest GfK* survey, the German Consumer
Climate is cooling, not that it was recently especially warm. Based on
consumers' appraisals of the outlooks for the economy and their
personal situation and their willingness to spend in the current month,
GfK forecasts the Consumer Climate in the month ahead. Currently, they
are forecasting a decline in the Consumer Climate Indicator to 3.3% in
January. This is the third decline in the indicator from the 4.2%
reached in October, 2009. Since it began in January, 2002, the
indicator has been within a fairly narrow range, from a high of 9.1%
recorded in November and December of 2006 to a low of -3.5%, recorded
in March, 2003.
The balance of opinion of German Consumers on Economic
Expectations improved from -1.7% in November to 0.9% in December, but
was still well below the 8.7% of October. The balance of opinion on
Income Expectations more than doubled from 6.2% in November to 15.0% in
December. However, the balance of opinion on the Consumption and Buying
Propensity declined significantly from 26.3% in November to 21.1% in
December and is now well below the recent peak of 36.5% in September.
It appears that the decline in the balance of opinion on the
Consumption and Buying Propensity is the major cause of the decline in
the Consumer Climate.
The component parts of the Climate Indicator have shown much
greater variation than the over all indicator. In contrast to the
narrow range of the Consumer Climate indicator, cited above, the
balance of opinion on Economic Expectations has ranged from a high of
69.5% in May, 2007 to a low of -32/9 in January, 2009. The balance of
opinion for Income Expectations has ranged from 33.6% in May 2007 to
-24.5% in November, 2002 and for Consumption and Buying Propensity,
from a high of 64.4% in October 2006. to a low of -55.4% in November
2002. All four indicators are shown in the attached chart.*GfK
Gesellschaft fur Konsumforschung (Company for Consumer Research)

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GFK
Consumer Climate Survey&nbsp;</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct&nbsp; 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul 09&nbsp;</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Climate (% balance)</td>
<td>3.3</td>
<td>3.6</td>
<td>3.9</td>
<td>4.2</td>
<td>3.8</td>
<td>3.4</td>
<td>3.0</td>
<td>2.7</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Economic Expectations</td>
<td>--</td>
<td>1.7</td>
<td>0.9</td>
<td>8.7</td>
<td>3.4</td>
<td>-7.5</td>
<td>-14.0</td>
<td>-26.6</td>
<td>-28.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Income Expectations</td>
<td>--</td>
<td>15.0</td>
<td>6.2</td>
<td>12.9</td>
<td>16.0</td>
<td>8.8</td>
<td>1.8</td>
<td>-3.3</td>
<td>-9.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumption and
Buying Propensity</td>
<td>--</td>
<td>21.2</td>
<td>26.3</td>
<td>26.1</td>
<td>36.5</td>
<td>31.1</td>
<td>25.1</td>
<td>14.5</td>
<td>12.5</td>
</tr>
</tbody>
</table>
</body></html>

According to the latest GfK* survey, the German Consumer Climate is cooling, not that it was recently especially warm. Based on consumers' appraisals of the outlooks for the economy and their personal situation and their willingness [...]

German Consumer Climate Cooling Slightly

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222g.jpg" align="right" border="0" height="265" width="353">
Improvement in housing prices continued this fall according
the U.S. House Price Index from the Federal Housing and Finance Agency
(FHFA). The Purchase Only Index for October rose 0.6% and reversed its
September. Nevertheless, the year-to-year decline in the nationwide
average of home prices eased to -1.9% from its worst reading of -8.8%
last November. Since their peak in early-2007 home prices nationwide
have fallen 10.7%. The FHFA uses data provided by Fannie Mae and
Freddie Mac and is not value-weighted.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222h.jpg" align="right" border="0" height="265" width="353">
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.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222i.jpg" align="right" border="0" height="265" width="353">
Notable monthly gains in home prices during October were
logged in the Pacific, Middle Atlantic and the East South Central
regions of the country and the y/y declines have moderated
significantly. In the populous East North Central region prices slipped
another 0.6% during October and they were flat year-to-date. Prices
also fell sharply in the South Atlantic region to the lowest level
since 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222j.jpg" align="right" border="0" height="265" width="353">


<table border="0" cellspacing="0" width="100%">
<colgroup><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">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>0.6</td>
<td>-0.4</td>
<td>-1.9</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>0.0</td>
<td>0.3</td>
<td>-1.8</td>
<td>-4.6</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle
Atlantic</td>
<td>1.8</td>
<td>-1.5</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>-0.6</td>
<td>-0.7</td>
<td>-1.9</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>0.2</td>
<td>0.0</td>
<td>-0.7</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South
Atlantic</td>
<td>-1.1</td>
<td>0.2</td>
<td>-4.1</td>
<td>-7.2</td>
<td>1.3</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South
Central</td>
<td>1.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-1.4</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South
Central</td>
<td>0.5</td>
<td>-0.3</td>
<td>0.0</td>
<td>0.6</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.8</td>
<td>-1.4</td>
<td>-7.5</td>
<td>-6.1</td>
<td>3.9</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>3.7</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
</body></html>

Improvement in housing prices continued this fall according the U.S. House Price Index from the Federal Housing and Finance Agency (FHFA). The Purchase Only Index for October rose 0.6% and reversed its September. Nevertheless, the [...]

FHFA Home Price Index Improves Slightly M/M But Greatly Y/Y

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222a.jpg" align="right" border="0" height="265" width="353">The second
revision to 3Q U.S. real GDP lowered growth again, this time to 2.2%
(AR) from last month's report of 2.9% growth. The revised figure
compares to the advance report of 3.5% growth and was contrary to
expectations for an improvement to 2.8%. Still, growth last quarter was
the first positive figure since 4Q 2007. Estimates of economic growth
this quarter recently have been rising to roughly 4.0%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222b.jpg" align="right" border="0" height="265" width="353">The
largest surprise in the revision was that domestic final demand growth
was again revised down, to 2.3% from 2.7%. On the fixed-investment
side, business fixed investment fell at an increased 5.9% (-19.6% y/y)
rate. The quarterly rise in residential spending was reduced to 18.9%
(-18.9% y/y) and government investment grew at a reduced 2.7% rate
(2.0% y/y). Real PCE growth was little changed at 2.8% (-0.2% y/y).

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222c.jpg" align="right" border="0" height="265" width="353">Another
surprise in the figures was
that the 3Q contribution to GDP growth from inventories was revised
lower to 0.7 percentage points. Nevertheless, the 3Q addition followed
subtractions of 1.4 and 2.4 percentage points during the prior two
quarters, and was just the second positive contribution to GDP growth
in two years.
Accompanying the GDP figure was a
little-revised estimate that 3Q corporate profits rose 10.8% versus 2Q.
That was the third consecutive quarterly increase and diminished the
y/y change to -6.6% from -25.1% at its worst in 4Q' 08. Lower market
interest rates lifted earnings in the financial sector by more than
one-third (20.5% y/y) and they tripled from year-end '08. Earnings from
the rest of the world increased 7.3% (-18.6% y/y) while the end of the
recession raised domestic nonfinancial profits by an upwardly revised
4.2% (-10.6% y/y) for the second quarterly increase.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222d.jpg" align="right" border="0" height="265" width="353">Deterioration
in the foreign trade deficit subtracted an unrevised 0.8 percentage
points from 3Q GDP growth following an advance estimate of a&nbsp;
0.5% subtraction. Imports grew 21.3% (-14.0% y/y) and the gain in
exports also was little-revised at 17.8% (-10.7% y/y).
The gain in the GDP price deflator was lowered slightly
to 0.4%. The PCE price index was ticked lower to 2.6% (-0.7% y/y) and
the rise in the overall domestic final sales price index was brought
down to 1.4% (-1.0% y/y).
 The U.S. National Income &amp; Product
Account data are available in Haver's USECON and
the USNA databases.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2005$, % AR</a></th>
<th scope="col">3Q '09 Final</th>
<th scope="col">3Q '09 Preliminary</th>
<th scope="col">3Q '09 Advance</th>
<th scope="col">2Q '09</th>
<th scope="col">1Q '09</th>
<th scope="col">2Q 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">GDP</td>
<td>2.2</td>
<td>2.4</td>
<td>3.5</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-2.6</td>
<td>0.4</td>
<td>2.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Inventory
Effect</td>
<td>0.7</td>
<td>0.9</td>
<td>0.9</td>
<td>-1.4</td>
<td>-2.4</td>
<td>-0.9</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.5</td>
<td>1.9</td>
<td>2.6</td>
<td>0.7</td>
<td>-4.1</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.5</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Foreign
Trade Effect</td>
<td>-0.8</td>
<td>-0.8</td>
<td>-0.5</td>
<td>1.7</td>
<td>2.6</td>
<td>0.8</td>
<td>-1.2</td>
<td>0.8</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>2.3</td>
<td>2.7</td>
<td>3.0</td>
<td>-0.9</td>
<td>-6.4</td>
<td>-2.5</td>
<td>-0.4</td>
<td>1.7</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.4</td>
<td>0.5</td>
<td>0.8</td>
<td>-0.0</td>
<td>1.9</td>
<td>0.6</td>
<td>2.1</td>
<td>2.9</td>
<td>3.3</td>
</tr>
</tbody>
</table>

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The second revision to 3Q U.S. real GDP lowered growth again, this time to 2.2% (AR) from last month's report of 2.9% growth. The revised figure compares to the advance report of 3.5% growth and was contrary to expectations for an [...]

U.S. GDP Revised Downward: Domestic Demand & Inventories Are Shaved

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222a.jpg" align="right" border="0" height="265" width="353">The second
revision to 3Q U.S. real GDP lowered growth again, this time to 2.2%
(AR) from last month's report of 2.9% growth. The revised figure
compares to the advance report of 3.5% growth and was contrary to
expectations for an improvement to 2.8%. Still, growth last quarter was
the first positive figure since 4Q 2007. Estimates of economic growth
this quarter recently have been rising to roughly 4.0%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222b.jpg" align="right" border="0" height="265" width="353">The
largest surprise in the revision was that domestic final demand growth
was again revised down, to 2.3% from 2.7%. On the fixed-investment
side, business fixed investment fell at an increased 5.9% (-19.6% y/y)
rate. The quarterly rise in residential spending was reduced to 18.9%
(-18.9% y/y) and government investment grew at a reduced 2.7% rate
(2.0% y/y). Real PCE growth was little changed at 2.8% (-0.2% y/y).

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222c.jpg" align="right" border="0" height="265" width="353">Another
surprise in the figures was
that the 3Q contribution to GDP growth from inventories was revised
lower to 0.7 percentage points. Nevertheless, the 3Q addition followed
subtractions of 1.4 and 2.4 percentage points during the prior two
quarters, and was just the second positive contribution to GDP growth
in two years.
Accompanying the GDP figure was a
little-revised estimate that 3Q corporate profits rose 10.8% versus 2Q.
That was the third consecutive quarterly increase and diminished the
y/y change to -6.6% from -25.1% at its worst in 4Q' 08. Lower market
interest rates lifted earnings in the financial sector by more than
one-third (20.5% y/y) and they tripled from year-end '08. Earnings from
the rest of the world increased 7.3% (-18.6% y/y) while the end of the
recession raised domestic nonfinancial profits by an upwardly revised
4.2% (-10.6% y/y) for the second quarterly increase.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222d.jpg" align="right" border="0" height="265" width="353">Deterioration
in the foreign trade deficit subtracted an unrevised 0.8 percentage
points from 3Q GDP growth following an advance estimate of a&nbsp;
0.5% subtraction. Imports grew 21.3% (-14.0% y/y) and the gain in
exports also was little-revised at 17.8% (-10.7% y/y).
The gain in the GDP price deflator was lowered slightly
to 0.4%. The PCE price index was ticked lower to 2.6% (-0.7% y/y) and
the rise in the overall domestic final sales price index was brought
down to 1.4% (-1.0% y/y).
 The U.S. National Income &amp; Product
Account data are available in Haver's USECON and
the USNA databases.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2005$, % AR</a></th>
<th scope="col">3Q '09 Final</th>
<th scope="col">3Q '09 Preliminary</th>
<th scope="col">3Q '09 Advance</th>
<th scope="col">2Q '09</th>
<th scope="col">1Q '09</th>
<th scope="col">2Q 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">GDP</td>
<td>2.2</td>
<td>2.4</td>
<td>3.5</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-2.6</td>
<td>0.4</td>
<td>2.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Inventory
Effect</td>
<td>0.7</td>
<td>0.9</td>
<td>0.9</td>
<td>-1.4</td>
<td>-2.4</td>
<td>-0.9</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.5</td>
<td>1.9</td>
<td>2.6</td>
<td>0.7</td>
<td>-4.1</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.5</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Foreign
Trade Effect</td>
<td>-0.8</td>
<td>-0.8</td>
<td>-0.5</td>
<td>1.7</td>
<td>2.6</td>
<td>0.8</td>
<td>-1.2</td>
<td>0.8</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>2.3</td>
<td>2.7</td>
<td>3.0</td>
<td>-0.9</td>
<td>-6.4</td>
<td>-2.5</td>
<td>-0.4</td>
<td>1.7</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.4</td>
<td>0.5</td>
<td>0.8</td>
<td>-0.0</td>
<td>1.9</td>
<td>0.6</td>
<td>2.1</td>
<td>2.9</td>
<td>3.3</td>
</tr>
</tbody>
</table>

 U.S. Existing Home Sales Improve
Further To Highest Since 2007 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 22, 2009
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222e.jpg" align="right" border="0" height="265" width="353">The
front-end of the economy is improving markedly. The National
Association of Realtors reported that November sales of
existing homes again rose sharply to the highest level since
February 2007. The 7.4% m/m increase to 6.540M units (SAAR) followed a
little-revised 9.9% rise during October. The latest was the fourth
strong gain in five months and it raised sales 45.7% from the January
low. The gain in November home sales greatly exceeded Consensus
expectations for a rise to 6.25M. 
 Total sales include sales of condos
and co-ops. Sales of existing single-family homes alone increased a
sharp 8.5% to 5.770M (42.1% y/y) last month and were up 42.5% from the
January low. (These data have a longer history than the total sales
series). Sales of condos and co-ops were unchanged m/m and were up by
60.1% from last November.
 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 early next year. The full details of the
home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222f.jpg" align="right" border="0" height="265" width="353">The median
price of all existing homes rose
slightly to $172,600 after
four consecutive months of decline. Nevertheless, the y/y
decline&nbsp; moderated to 4.3% from its worst of -17.5% as of
January and prices have risen 4.7% from the low. The median price for a
single-family home alone was little-changed at $171,900 (-4.4% y/y).
Price weakness has sharply raised home affordability; by 7.2% since
July and by roughly two-thirds from the 2006 low.
 The number of unsold
homes (single-family &amp; co-ops) for sale fell 1.3% (-15.5% y/y)
during November and to the lowest level since December 2006. At the
current sales rate there was a 6.5 months' supply of homes on the
market which was the lowest since December 2006. The latest figure was
down from a high of 11.3 months during April of last year. For
single-family homes, the inventory fell to a 6.2 month's supply, also
the lowest since December 2006.
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.&nbsp;
<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">November</th>
<th scope="col">October</th>
<th scope="col">September</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">Total</td>
<td>6,540</td>
<td>6,090</td>
<td>5,540</td>
<td>44.1%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>1,130</td>
<td>1,060</td>
<td>950</td>
<td>52.7</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,550</td>
<td>1,430</td>
<td>1,250</td>
<td>53.5</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>2,390</td>
<td>2,280</td>
<td>2,040</td>
<td>44.8</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,460</td>
<td>1,320</td>
<td>1,290</td>
<td>28.1</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>5,770</td>
<td>5,320</td>
<td>4,860</td>
<td>42.1</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $
(NSA)</td>
<td>172,600</td>
<td>172,200</td>
<td>176,000</td>
<td>-4.3</td>
<td>197,233</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>
FHFA Home Price Index Improves
Slightly M/M But Greatly Y/Y 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 22, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222g.jpg" align="right" border="0" height="265" width="353">
Improvement in housing prices continued this fall according
the U.S. House Price Index from the Federal Housing and Finance Agency
(FHFA). The Purchase Only Index for October rose 0.6% and reversed its
September. Nevertheless, the year-to-year decline in the nationwide
average of home prices eased to -1.9% from its worst reading of -8.8%
last November. Since their peak in early-2007 home prices nationwide
have fallen 10.7%. The FHFA uses data provided by Fannie Mae and
Freddie Mac and is not value-weighted.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222h.jpg" align="right" border="0" height="265" width="353">
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.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222i.jpg" align="right" border="0" height="265" width="353">
Notable monthly gains in home prices during October were
logged in the Pacific, Middle Atlantic and the East South Central
regions of the country and the y/y declines have moderated
significantly. In the populous East North Central region prices slipped
another 0.6% during October and they were flat year-to-date. Prices
also fell sharply in the South Atlantic region to the lowest level
since 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222j.jpg" align="right" border="0" height="265" width="353">


<table border="0" cellspacing="0" width="100%">
<colgroup><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">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>0.6</td>
<td>-0.4</td>
<td>-1.9</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>0.0</td>
<td>0.3</td>
<td>-1.8</td>
<td>-4.6</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle
Atlantic</td>
<td>1.8</td>
<td>-1.5</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>-0.6</td>
<td>-0.7</td>
<td>-1.9</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>0.2</td>
<td>0.0</td>
<td>-0.7</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South
Atlantic</td>
<td>-1.1</td>
<td>0.2</td>
<td>-4.1</td>
<td>-7.2</td>
<td>1.3</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South
Central</td>
<td>1.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-1.4</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South
Central</td>
<td>0.5</td>
<td>-0.3</td>
<td>0.0</td>
<td>0.6</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.8</td>
<td>-1.4</td>
<td>-7.5</td>
<td>-6.1</td>
<td>3.9</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>3.7</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
 German Consumer Climate Cooling
Slightly 
by <a href="/comment/Curley.html">LouiseCurley</a>
December 22, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091222k.jpg" align="left" border="0" height="265" width="353">
According to the latest GfK* survey, the German Consumer
Climate is cooling, not that it was recently especially warm. Based on
consumers' appraisals of the outlooks for the economy and their
personal situation and their willingness to spend in the current month,
GfK forecasts the Consumer Climate in the month ahead. Currently, they
are forecasting a decline in the Consumer Climate Indicator to 3.3% in
January. This is the third decline in the indicator from the 4.2%
reached in October, 2009. Since it began in January, 2002, the
indicator has been within a fairly narrow range, from a high of 9.1%
recorded in November and December of 2006 to a low of -3.5%, recorded
in March, 2003.
The balance of opinion of German Consumers on Economic
Expectations improved from -1.7% in November to 0.9% in December, but
was still well below the 8.7% of October. The balance of opinion on
Income Expectations more than doubled from 6.2% in November to 15.0% in
December. However, the balance of opinion on the Consumption and Buying
Propensity declined significantly from 26.3% in November to 21.1% in
December and is now well below the recent peak of 36.5% in September.
It appears that the decline in the balance of opinion on the
Consumption and Buying Propensity is the major cause of the decline in
the Consumer Climate.
The component parts of the Climate Indicator have shown much
greater variation than the over all indicator. In contrast to the
narrow range of the Consumer Climate indicator, cited above, the
balance of opinion on Economic Expectations has ranged from a high of
69.5% in May, 2007 to a low of -32/9 in January, 2009. The balance of
opinion for Income Expectations has ranged from 33.6% in May 2007 to
-24.5% in November, 2002 and for Consumption and Buying Propensity,
from a high of 64.4% in October 2006. to a low of -55.4% in November
2002. All four indicators are shown in the attached chart.*GfK
Gesellschaft fur Konsumforschung (Company for Consumer Research)

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GFK
Consumer Climate Survey&nbsp;</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct&nbsp; 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul 09&nbsp;</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Climate (% balance)</td>
<td>3.3</td>
<td>3.6</td>
<td>3.9</td>
<td>4.2</td>
<td>3.8</td>
<td>3.4</td>
<td>3.0</td>
<td>2.7</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Economic Expectations</td>
<td>--</td>
<td>1.7</td>
<td>0.9</td>
<td>8.7</td>
<td>3.4</td>
<td>-7.5</td>
<td>-14.0</td>
<td>-26.6</td>
<td>-28.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Income Expectations</td>
<td>--</td>
<td>15.0</td>
<td>6.2</td>
<td>12.9</td>
<td>16.0</td>
<td>8.8</td>
<td>1.8</td>
<td>-3.3</td>
<td>-9.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumption and
Buying Propensity</td>
<td>--</td>
<td>21.2</td>
<td>26.3</td>
<td>26.1</td>
<td>36.5</td>
<td>31.1</td>
<td>25.1</td>
<td>14.5</td>
<td>12.5</td>
</tr>
</tbody>
</table>
</body></html>

U.S. GDP Revised Downward:Domestic Demand & Inventories Are Shaved

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221g.jpg" align="right" border="0" height="265" width="353">
Japanese balance of trade continues to improve in spite of the
high and rising yen. In November the seasonally adjusted trade balance
was 492.4 billion yen, up from the low point reached in January, 2009
when the balance was a negative 478 billion yen and it is now at the
highest level since April 2008 when the balance was 660 billion yen.
Exports reached a peak of 7,591.4 billion yen in January, 2009
and declined to 3,983.0 in February, 2009. Since then, they have risen
to 4,998.0 billion yen. Imports reached a peak in August, 2008 at 7,
209.l and declined to 4.030.6 billion yen in June, 2009. Imports have
since recovered to 4,506.1 billion yen. The trends of exports, imports
and trade balance are shown in the first chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221h.jpg" align="right" border="0" height="265" width="353">
Data on trade by area are not seasonally adjusted. As a
result, trends in these data are best shown by the year over year
changes. The year to year changes for Japan's trade with Asia, Western
Europe and the United States are shown in the second chart. The year to
year change in the trade balance with Asia is the most striking. It has
been positive and increasing since September of the year. The year to
year change in the trade balance with Western Europe is still negative,
but the magnitude of the difference, -44.5 billion yen, is greatly
lower than the -246.4 billion yen recorded in August. 2009. The year to
year change in the trade balance with the United States has also
improved and, for the first time in over two years, was positive.

<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 TRADE IN GOODS</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Nov&nbsp; 08</th>
<th scope="col">M/M CHG</th>
<th scope="col">Y/Y CHG </th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Balance (SA bil
yen)</td>
<td>492.4</td>
<td>460.8</td>
<td>368.6</td>
<td>31.6</td>
<td>861.0</td>
<td>2244.5</td>
<td>10854.4</td>
<td>7762.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>4998.9</td>
<td>4765.3</td>
<td>5293.6</td>
<td>233.2</td>
<td>-295.1</td>
<td>80916.2</td>
<td>83856.4</td>
<td>75144.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>4506.1</td>
<td>4304.6</td>
<td>5662.2</td>
<td>201.6</td>
<td>-1156.1</td>
<td>78671.7</td>
<td>73002.0</td>
<td>67382.0</td>
</tr>
<tr>
<td class="firstcol">Year to Year Change
(bil yen)</td>
<td>Nov 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Jul 09 </td>
<td>Jun 09&nbsp;</td>
<td>May 09 </td>
<td> Apr 09 </td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance with Asia</td>
<td>460.8</td>
<td>372.1</td>
<td>53.1</td>
<td>-303.0</td>
<td>-224.9</td>
<td>-221.1</td>
<td>-298.2</td>
<td>-388.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance with Western
Europe</td>
<td>-44.5</td>
<td>-119.6</td>
<td>-194.8</td>
<td>-246.4</td>
<td>-237.3</td>
<td>-182.8</td>
<td>-227.4</td>
<td>-241.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance with U.S.A</td>
<td>59.7</td>
<td>-132.4</td>
<td>-155.2</td>
<td>-86.5</td>
<td>-232.8</td>
<td>-129.2</td>
<td>-234.7</td>
<td>-398.8</td>
</tr>
</tbody>
</table>
</body></html>

Japanese balance of trade continues to improve in spite of the high and rising yen. In November the seasonally adjusted trade balance was 492.4 billion yen, up from the low point reached in January, 2009 when the balance was a [...]

Japanese Trade Balance Improves

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221e.jpg" align="right" border="0" height="265" width="353">The
U.S. economy seems to be regaining forward momentum. That is the
indication from the Chicago Fed National Activity Index (CFNAI) from
the Federal Reserve Bank of Chicago. The index improved during November
to a reading of -0.32. That gained back the declines during the prior
three months and pulled the index level to its highest since November
2007, up from the series' low of -4.13 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP but during the last ten years that
correlation has risen to 80%.


 The three-month moving average
which smoothes out some of the volatility of the index also improved to
near its highest level since February of 2008.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221f.jpg" align="right" border="0" height="265" width="353">An index
level at or below -0.70 typically has indicated negative U.S. economic
growth. A zero value of the CFNAI indicates that the economy is
expanding at its historical trend rate of growth of roughly 3%. The
complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2009/cfnai_december2009.pdf">here</a>.·
The Chicago Fed indicated that 36 of the series' individual indicators
made positive contributions to the November index while 49 made
negative contributions. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders. 
In a separate survey, the
Chicago Fed indicated that its Midwest manufacturing index improved
modestly during October to its highest level since the June low.
Indicators for the auto, steel, machinery and resource sectors each
improved. The Chicago Federal Reserve figures are available in Haver's SURVEYS
database.&nbsp;&nbsp;
<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/@S5/@S503/@S503.HTM" style="color: black;">Chicago Fed</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November '08</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">CFNAI</td>
<td>-0.32</td>
<td>-1.02</td>
<td>-0.95</td>
<td>-2.99</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.77</td>
<td>-0.87</td>
<td>-0.61</td>
<td>-2.63</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.48</td>
<td>-0.48</td>
<td>-0.64</td>
<td>-0.43</td>
<td>-0.33</td>
<td>-0.10</td>
<td>0.06</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment Unemployment &amp; Hours</td>
<td>-0.12</td>
<td>-0.42</td>
<td>-0.53</td>
<td>-1.06</td>
<td>-0.62</td>
<td>-0.15</td>
<td>0.01</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>0.35</td>
<td>-0.09</td>
<td>0.19</td>
<td>-0.95</td>
<td>-0.55</td>
<td>-0.05</td>
<td>-0.01</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>-0.07</td>
<td>-0.02</td>
<td>0.03</td>
<td>-0.53</td>
<td>-0.24</td>
<td>-0.06</td>
<td>-0.01</td>
</tr>
</tbody>
</table>

</body></html>

The U.S. economy seems to be regaining forward momentum. That is the indication from the Chicago Fed National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago. The index improved during November to a reading of -0.32. [...]

Chicago Fed Index Recovered Recent Declines To Best In Two Years

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221a.jpg" align="right" border="0" height="265" width="353">
Recent signs of stability in home sales and construction hold
promise that deflation in home prices is abating. Of course, that
depends on whether the only reason for pricing improvement is due to
the increased affordability of housing created by past price declines.
Positive growth in jobs and income would support a more lasting bottom
in pricing power ... then growth in housing sector activity. States'
home price data in the table below is arranged by highest-to-lowest y/y
change during all of last year. The difference between the state with
the best performance (Texas) and the worst performance (Nevada) is a
huge twenty percentage points. Versus 2007, the rate of price change
slowed throughout the country, but nowhere was it more pronounced than
in California; to a 17.2% rate of decline from negative 4.7%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221b.jpg" align="right" border="0" height="265" width="353">
Through the third quarter of this year, home price declines
occurred in all but a few states. For the country as a whole home
prices fell another 4.1% y/y during 3Q after the 2.7% decline during
2008. So far this year, however, the rate of price decline has
stabilized. The good news was that the rate of price deflation both in
Florida and California slowed versus 2008. In fact, the rate of home
price decline halved in California. Alabama, North Carolina and Indiana
are three states where earlier stability in home prices gave way to
deflation. Past stability was, however, tenuous as price appreciation
already had slowed appreciably. In Texas, Nebraska and Louisiana home
price gains all but disappeared.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221c.jpg" align="right" border="0" height="265" width="353">
Where home prices go from here clearly is a hard call. And as
individual states' recent performance indicates, much of the story may
be local. Is there a heavy concentration of certain industries in the
state such as finance or defense, or were a state's home prices
inordinately influenced by speculative forces. Home Prices: A
Case for Cautious Optimism from the Federal Reserve Bank of
St. Louis is available <a href="http://research.stlouisfed.org/publications/es/09/ES0942.pdf">here</a>.
The latest report from the Federal Housing Finance Agency can
be found <a href="http://www.fhfa.gov/webfiles/15235/3q09HPI.pdf">here</a>.
The states' home price figures can be found in Haver's REGIONAL
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Median
Price of Single-family Homes&nbsp; (y/y % Chg.)</th>
<th scope="col">3Q '09</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Texas</td>
<td>0.5</td>
<td>3.2</td>
<td>5.7</td>
<td>5.9</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Alabama&nbsp;</td>
<td>-1.1</td>
<td>2.5</td>
<td>5.1</td>
<td>8.1</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; North Carolina</td>
<td>-2.1</td>
<td>2.2</td>
<td>6.0</td>
<td>7.7</td>
<td>6.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tennessee</td>
<td>-1.1</td>
<td>1.7</td>
<td>5.2</td>
<td>7.4</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Louisiana</td>
<td>0.4</td>
<td>1.6</td>
<td>5.5</td>
<td>11.2</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Colorado</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.0</td>
<td>3.2</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Indiana</td>
<td>-1.3</td>
<td>0.7</td>
<td>1.9</td>
<td>1.9</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Arkansas</td>
<td>-0.8</td>
<td>0.6</td>
<td>3.7</td>
<td>6.5</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nebraska</td>
<td>0.7</td>
<td>0.4</td>
<td>1.7</td>
<td>2.3</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Missouri</td>
<td>-1.8</td>
<td>-0.1</td>
<td>2.5</td>
<td>4.3</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Wisconsin</td>
<td>-1.9</td>
<td>-0.3</td>
<td>1.8</td>
<td>3.8</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Maine</td>
<td>-3.2</td>
<td>-0.4</td>
<td>2.0</td>
<td>4.8</td>
<td>11.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Washington</td>
<td>-8.3</td>
<td>-1.3</td>
<td>7.5</td>
<td>15.7</td>
<td>15.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New York</td>
<td>-4.0</td>
<td>-1.8</td>
<td>1.4</td>
<td>7.3</td>
<td>13.1</td>
</tr>
<tr>
<td class="firstcol">U.S. Total</td>
<td>-4.1</td>
<td>-2.7</td>
<td>1.9</td>
<td>7.3</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Connecticut</td>
<td>-4.8</td>
<td>-3.0</td>
<td>0.9</td>
<td>5.9</td>
<td>12.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Virginia</td>
<td>-4.2</td>
<td>-3.2</td>
<td>2.3</td>
<td>10.8</td>
<td>19.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Hawaii</td>
<td>-8.2</td>
<td>-3.8</td>
<td>2.5</td>
<td>14.4</td>
<td>24.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Massachusetts</td>
<td>-3.4</td>
<td>-3.9</td>
<td>-2.7</td>
<td>1.0</td>
<td>9.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New Jersey</td>
<td>-6.0</td>
<td>-4.1</td>
<td>0.6</td>
<td>9.1</td>
<td>15.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; District of Columbia</td>
<td>-3.9</td>
<td>-4.8</td>
<td>3.1</td>
<td>12.1</td>
<td>23.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Michigan</td>
<td>-5.9</td>
<td>-5.3</td>
<td>-3.1</td>
<td>-1.0</td>
<td>3.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Maryland</td>
<td>-7.4</td>
<td>-5.8</td>
<td>2.3</td>
<td>13.2</td>
<td>21.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Rhode Island</td>
<td>-6.8</td>
<td>-6.6</td>
<td>-2.0</td>
<td>4.5</td>
<td>13.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Arizona</td>
<td>-13.6</td>
<td>-11.9</td>
<td>-0.2</td>
<td>19.0</td>
<td>29.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Florida</td>
<td>-12.4</td>
<td>-14.6</td>
<td>-1.5</td>
<td>16.5</td>
<td>25.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; California</td>
<td>-8.4</td>
<td>-17.2</td>
<td>-4.7</td>
<td>10.2</td>
<td>22.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nevada</td>
<td>-16.7</td>
<td>-17.8</td>
<td>-3.5</td>
<td>9.0</td>
<td>23.5</td>
</tr>
</tbody>
</table>
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Recent signs of stability in home sales and construction hold promise that deflation in home prices is abating. Of course, that depends on whether the only reason for pricing improvement is due to the increased affordability of [...]

United States' Home Price Performance All Over The Map

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221a.jpg" align="right" border="0" height="265" width="353">
Recent signs of stability in home sales and construction hold
promise that deflation in home prices is abating. Of course, that
depends on whether the only reason for pricing improvement is due to
the increased affordability of housing created by past price declines.
Positive growth in jobs and income would support a more lasting bottom
in pricing power ... then growth in housing sector activity. States'
home price data in the table below is arranged by highest-to-lowest y/y
change during all of last year. The difference between the state with
the best performance (Texas) and the worst performance (Nevada) is a
huge twenty percentage points. Versus 2007, the rate of price change
slowed throughout the country, but nowhere was it more pronounced than
in California; to a 17.2% rate of decline from negative 4.7%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221b.jpg" align="right" border="0" height="265" width="353">
Through the third quarter of this year, home price declines
occurred in all but a few states. For the country as a whole home
prices fell another 4.1% y/y during 3Q after the 2.7% decline during
2008. So far this year, however, the rate of price decline has
stabilized. The good news was that the rate of price deflation both in
Florida and California slowed versus 2008. In fact, the rate of home
price decline halved in California. Alabama, North Carolina and Indiana
are three states where earlier stability in home prices gave way to
deflation. Past stability was, however, tenuous as price appreciation
already had slowed appreciably. In Texas, Nebraska and Louisiana home
price gains all but disappeared.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221c.jpg" align="right" border="0" height="265" width="353">
Where home prices go from here clearly is a hard call. And as
individual states' recent performance indicates, much of the story may
be local. Is there a heavy concentration of certain industries in the
state such as finance or defense, or were a state's home prices
inordinately influenced by speculative forces. Home Prices: A
Case for Cautious Optimism from the Federal Reserve Bank of
St. Louis is available <a href="http://research.stlouisfed.org/publications/es/09/ES0942.pdf">here</a>.
The latest report from the Federal Housing Finance Agency can
be found <a href="http://www.fhfa.gov/webfiles/15235/3q09HPI.pdf">here</a>.
The states' home price figures can be found in Haver's REGIONAL
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Median
Price of Single-family Homes&nbsp; (y/y % Chg.)</th>
<th scope="col">3Q '09</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Texas</td>
<td>0.5</td>
<td>3.2</td>
<td>5.7</td>
<td>5.9</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Alabama&nbsp;</td>
<td>-1.1</td>
<td>2.5</td>
<td>5.1</td>
<td>8.1</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; North Carolina</td>
<td>-2.1</td>
<td>2.2</td>
<td>6.0</td>
<td>7.7</td>
<td>6.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tennessee</td>
<td>-1.1</td>
<td>1.7</td>
<td>5.2</td>
<td>7.4</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Louisiana</td>
<td>0.4</td>
<td>1.6</td>
<td>5.5</td>
<td>11.2</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Colorado</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.0</td>
<td>3.2</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Indiana</td>
<td>-1.3</td>
<td>0.7</td>
<td>1.9</td>
<td>1.9</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Arkansas</td>
<td>-0.8</td>
<td>0.6</td>
<td>3.7</td>
<td>6.5</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nebraska</td>
<td>0.7</td>
<td>0.4</td>
<td>1.7</td>
<td>2.3</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Missouri</td>
<td>-1.8</td>
<td>-0.1</td>
<td>2.5</td>
<td>4.3</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Wisconsin</td>
<td>-1.9</td>
<td>-0.3</td>
<td>1.8</td>
<td>3.8</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Maine</td>
<td>-3.2</td>
<td>-0.4</td>
<td>2.0</td>
<td>4.8</td>
<td>11.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Washington</td>
<td>-8.3</td>
<td>-1.3</td>
<td>7.5</td>
<td>15.7</td>
<td>15.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New York</td>
<td>-4.0</td>
<td>-1.8</td>
<td>1.4</td>
<td>7.3</td>
<td>13.1</td>
</tr>
<tr>
<td class="firstcol">U.S. Total</td>
<td>-4.1</td>
<td>-2.7</td>
<td>1.9</td>
<td>7.3</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Connecticut</td>
<td>-4.8</td>
<td>-3.0</td>
<td>0.9</td>
<td>5.9</td>
<td>12.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Virginia</td>
<td>-4.2</td>
<td>-3.2</td>
<td>2.3</td>
<td>10.8</td>
<td>19.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Hawaii</td>
<td>-8.2</td>
<td>-3.8</td>
<td>2.5</td>
<td>14.4</td>
<td>24.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Massachusetts</td>
<td>-3.4</td>
<td>-3.9</td>
<td>-2.7</td>
<td>1.0</td>
<td>9.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New Jersey</td>
<td>-6.0</td>
<td>-4.1</td>
<td>0.6</td>
<td>9.1</td>
<td>15.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; District of Columbia</td>
<td>-3.9</td>
<td>-4.8</td>
<td>3.1</td>
<td>12.1</td>
<td>23.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Michigan</td>
<td>-5.9</td>
<td>-5.3</td>
<td>-3.1</td>
<td>-1.0</td>
<td>3.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Maryland</td>
<td>-7.4</td>
<td>-5.8</td>
<td>2.3</td>
<td>13.2</td>
<td>21.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Rhode Island</td>
<td>-6.8</td>
<td>-6.6</td>
<td>-2.0</td>
<td>4.5</td>
<td>13.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Arizona</td>
<td>-13.6</td>
<td>-11.9</td>
<td>-0.2</td>
<td>19.0</td>
<td>29.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Florida</td>
<td>-12.4</td>
<td>-14.6</td>
<td>-1.5</td>
<td>16.5</td>
<td>25.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; California</td>
<td>-8.4</td>
<td>-17.2</td>
<td>-4.7</td>
<td>10.2</td>
<td>22.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nevada</td>
<td>-16.7</td>
<td>-17.8</td>
<td>-3.5</td>
<td>9.0</td>
<td>23.5</td>
</tr>
</tbody>
</table>
 Chicago Fed Index Recovered
Recent Declines To Best In Two Years 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 21, 2009

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221e.jpg" align="right" border="0" height="265" width="353">The
U.S. economy seems to be regaining forward momentum. That is the
indication from the Chicago Fed National Activity Index (CFNAI) from
the Federal Reserve Bank of Chicago. The index improved during November
to a reading of -0.32. That gained back the declines during the prior
three months and pulled the index level to its highest since November
2007, up from the series' low of -4.13 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP but during the last ten years that
correlation has risen to 80%.


 The three-month moving average
which smoothes out some of the volatility of the index also improved to
near its highest level since February of 2008.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221f.jpg" align="right" border="0" height="265" width="353">An index
level at or below -0.70 typically has indicated negative U.S. economic
growth. A zero value of the CFNAI indicates that the economy is
expanding at its historical trend rate of growth of roughly 3%. The
complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2009/cfnai_december2009.pdf">here</a>.·
The Chicago Fed indicated that 36 of the series' individual indicators
made positive contributions to the November index while 49 made
negative contributions. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders. 
In a separate survey, the
Chicago Fed indicated that its Midwest manufacturing index improved
modestly during October to its highest level since the June low.
Indicators for the auto, steel, machinery and resource sectors each
improved. The Chicago Federal Reserve figures are available in Haver's SURVEYS
database.&nbsp;&nbsp;
<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/@S5/@S503/@S503.HTM" style="color: black;">Chicago Fed</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November '08</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">CFNAI</td>
<td>-0.32</td>
<td>-1.02</td>
<td>-0.95</td>
<td>-2.99</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.77</td>
<td>-0.87</td>
<td>-0.61</td>
<td>-2.63</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.48</td>
<td>-0.48</td>
<td>-0.64</td>
<td>-0.43</td>
<td>-0.33</td>
<td>-0.10</td>
<td>0.06</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment Unemployment &amp; Hours</td>
<td>-0.12</td>
<td>-0.42</td>
<td>-0.53</td>
<td>-1.06</td>
<td>-0.62</td>
<td>-0.15</td>
<td>0.01</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>0.35</td>
<td>-0.09</td>
<td>0.19</td>
<td>-0.95</td>
<td>-0.55</td>
<td>-0.05</td>
<td>-0.01</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>-0.07</td>
<td>-0.02</td>
<td>0.03</td>
<td>-0.53</td>
<td>-0.24</td>
<td>-0.06</td>
<td>-0.01</td>
</tr>
</tbody>
</table>

Japanese Trade Balance Improves 
by <a href="/comment/Curley.html">Louise
Curley</a> December 21, 2009

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221g.jpg" align="right" border="0" height="265" width="353">Japanese
balance of trade continues to improve in spite of the
high and rising yen. In November the seasonally adjusted trade balance
was 492.4 billion yen, up from the low point reached in January, 2009
when the balance was a negative 478 billion yen and it is now at the
highest level since April 2008 when the balance was 660 billion yen.
Exports reached a peak of 7,591.4 billion yen in January, 2009
and declined to 3,983.0 in February, 2009. Since then, they have risen
to 4,998.0 billion yen. Imports reached a peak in August, 2008 at 7,
209.l and declined to 4.030.6 billion yen in June, 2009. Imports have
since recovered to 4,506.1 billion yen. The trends of exports, imports
and trade balance are shown in the first chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091221h.jpg" align="right" border="0" height="265" width="353">
Data on trade by area are not seasonally adjusted. As a
result, trends in these data are best shown by the year over year
changes. The year to year changes for Japan's trade with Asia, Western
Europe and the United States are shown in the second chart. The year to
year change in the trade balance with Asia is the most striking. It has
been positive and increasing since September of the year. The year to
year change in the trade balance with Western Europe is still negative,
but the magnitude of the difference, -44.5 billion yen, is greatly
lower than the -246.4 billion yen recorded in August. 2009. The year to
year change in the trade balance with the United States has also
improved and, for the first time in over two years, was positive.

<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 TRADE IN GOODS</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Nov&nbsp; 08</th>
<th scope="col">M/M CHG</th>
<th scope="col">Y/Y CHG </th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Balance (SA bil
yen)</td>
<td>492.4</td>
<td>460.8</td>
<td>368.6</td>
<td>31.6</td>
<td>861.0</td>
<td>2244.5</td>
<td>10854.4</td>
<td>7762.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>4998.9</td>
<td>4765.3</td>
<td>5293.6</td>
<td>233.2</td>
<td>-295.1</td>
<td>80916.2</td>
<td>83856.4</td>
<td>75144.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>4506.1</td>
<td>4304.6</td>
<td>5662.2</td>
<td>201.6</td>
<td>-1156.1</td>
<td>78671.7</td>
<td>73002.0</td>
<td>67382.0</td>
</tr>
<tr>
<td class="firstcol">Year to Year Change
(bil yen)</td>
<td>Nov 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Jul 09 </td>
<td>Jun 09&nbsp;</td>
<td>May 09 </td>
<td> Apr 09 </td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance with Asia</td>
<td>460.8</td>
<td>372.1</td>
<td>53.1</td>
<td>-303.0</td>
<td>-224.9</td>
<td>-221.1</td>
<td>-298.2</td>
<td>-388.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance with Western
Europe</td>
<td>-44.5</td>
<td>-119.6</td>
<td>-194.8</td>
<td>-246.4</td>
<td>-237.3</td>
<td>-182.8</td>
<td>-227.4</td>
<td>-241.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance with U.S.A</td>
<td>59.7</td>
<td>-132.4</td>
<td>-155.2</td>
<td>-86.5</td>
<td>-232.8</td>
<td>-129.2</td>
<td>-234.7</td>
<td>-398.8</td>
</tr>
</tbody>
</table>
</body></html>

United States' Home PricePerformance All Over The Map

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.

260108Z6.jpg

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

260108N1.jpg

260108O1.jpg

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.

260108P1.jpg

260108Q1.jpg

- 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.