Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214e.jpg" align="left" border="0" height="265" width="353">
After rising for five consecutive months, industrial
production fell 0.6% in the Euro Area in October and 0.7% in the entire
European Union. The attached chart shows the index of Industrial
Production (2005=100) for the Euro Area and the European Union. There
is a spurious correlation between the two series due the fact that the
EU series includes the EA series. As with much of the data on the Euro
Area and the European Union it is not possible to derive a non Euro
Area part of the European Union.
Not all of the countries of the European Union have reported
October data. Euro stat's totals for the Euro Area and the European
Union include their estimates of the missing data and these estimates
are not published. The totals are, therefore, preliminary and
frequently revised.
In the Euro Area, the big three--Germany experienced a 1.8%
decline in industrial production, France, a 0.9% decline and Italy, a
0.5% increase. Declines were recorded in Ireland, 2.8%, Greece, 0.8%,
Portugal, 1.4%. The biggest decline in production in the Euro area,
that of Slovenia, was 3.2%. The largest increase in production in the
Euro Area was in Finland at 2.2%.
Of the published data, among the non Euro Area countries,
industrial production in the UK declined 0.1%, and in Sweden, 0.5%.
Industrial Production in Latvia and Lithuania increased 0.1% and 0.4%
respectively. Production in Bulgaria rose 2.1%, the first increase
since September, 2008.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Industrial
Production (2005=100)</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>
<th scope="col">May 08&nbsp;</th>
<th scope="col">Apr 08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">European Area (m/m % change)</td>
<td>-0.73</td>
<td>0.12</td>
<td>0.68</td>
<td>0.18</td>
<td>0.32</td>
<td>0.53</td>
<td>-0.39</td>
</tr>
<tr>
<td class="firstcol">European Union (m/m % change)</td>
<td>-0.61</td>
<td>0.21</td>
<td>1.13</td>
<td>0.26</td>
<td>0.86</td>
<td>1.06</td>
<td>-0.47</td>
</tr>
<tr class="odd">
<td class="firstcol">Bulgaria</td>
<td>2.1</td>
<td>-3.6</td>
<td>-0.21</td>
<td>-0.5</td>
<td>-0.6</td>
<td>-1.4</td>
<td>-0.1</td>
</tr>
<tr>
<td class="firstcol">Slovenia</td>
<td>-3.2</td>
<td>0.7</td>
<td>8.0</td>
<td>-0.6</td>
<td>0.3</td>
<td>2.9</td>
<td>-4.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>-2.8</td>
<td>11.3</td>
<td>-16.0</td>
<td>7.9</td>
<td>7.3</td>
<td>-3.6</td>
<td>-3.5</td>
</tr>
<tr>
<td class="firstcol">Finland</td>
<td>2.2</td>
<td>-1.7</td>
<td>2.4</td>
<td>-1.6</td>
<td>1.5</td>
<td>-0.7</td>
<td>-1.9</td>
</tr>
</tbody>
</table>
</body></html>

After rising for five consecutive months, industrial production fell 0.6% in the Euro Area in October and 0.7% in the entire European Union. The attached chart shows the index of Industrial Production (2005=100) for the Euro Area and [...]

A Pause In Economic Activity In The European Union

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214d.jpg" align="left" border="0" height="265" width="353">
Industrial output in EMU has backtracked. The 0.3% drop in
October flattens out progress in the sector and leaves manufacturing IP
flat in the fourth quarter compared to its level in Q3. Consumer goods
output is off sharply in the new quarter while capital goods output is
strongly higher. Intermediate goods output is up sharply.
Among the five largest EU economics only Spain saw a rise in
IP month-to-month in October. Still three month growth rates are up for
the zone and are strong for the Big Five except for a 1.8% annual rate
drop in the UK and a horrific-looking -20.2% from Spain whose numbers
are notoriously volatile (Spain&#8217;s three month growth rate for IP was UP
by 28% in Sept, just one month ago).
Japan&#8217;s TankanIn Asia Japan has reported
out its Tankan results for December. Its large company index rose by a
solid nine points and exceeded the forecasts of economists. Still at a
raw reading of -24 it clearly says that large corporate respondents are
still more negative than positive in this Tankan diffusion
presentation. Even if they are less negative than they were last
quarter the results are far from satisfying. Firms in Japan are
engaging in deeper spending cuts to stay alive in a still-tough
economy. Japan has slipped back into the grip of deflation something
that tends to make businessmen more defense-minded- that is not the way
to mount a recovery. With the yen still so strong it is hard for Japan
to export itself to prosperity. Paradoxically Japanese firms continue
to engage in outsourcing with Sony making a new announcement to that
effect transferring work to China. While outsourcing may solve the
firm&#8217;s problems it does not help Japan out of its economic difficulties.
The global recoveryOn balance world trade
is making some recovery and that is helping trade-dependent countries
like Japan to do better. But Japan is still beset with problems and
large block of pubic indebtedness that keeps its government from
engaging in too much in the way of pump-priming expenditures. Europe is
having a simple slip but its broader growth rates tell a story of
slowing that transcends one monthly report. When central bankers and
national leaders say that they are still concerned about the economy
and that there is a risk of backsliding and that it is too soon to take
away the special stimulus brought forward in the crisis&#8230; this is the
sort of report that brings those concerns to life.
Treatment of the heroes of the crisisAgainst
this background we have to wonder about the all the flack being
shoveled onto Fed Chairman Ben Bernanke&#8217;s plate. Bernanke&#8217;s efforts
bolstered not just the US, but the world economy. Do the Fed bashers on
the House and Senate banking committees really have any idea what they
are protesting when they go after Gentile Ben? It was the fall in
standards and directions imposed on markets by the law makers who put
political agendas ahead of smart business practices as much as anything
that got us into this mess. Now we can see that despite huge government
and central banker efforts around the world the path to recovery
remains tentative. The US Congress is deeply involved in a witch hunt
for scapegoats. The Fed Chairman is a more convenient a target than he
is to blame. But with an angry electorate in the US and the next
election cycle looming a scapegoat is a prime need for politicians.

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol" colspan="11" style="padding-left: 0.25em; padding-right: 0.25em;">EURO-AREA
MFG IP</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar
except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro-Area
Detail</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Q-4</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>1.3%</td>
<td>2.5%</td>
<td>1.4%</td>
<td>0.6%</td>
<td>-12.1%</td>
<td>-13.7%</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer</td>
<td>-1.7%</td>
<td>0.1%</td>
<td>-0.5%</td>
<td>-8.3%</td>
<td>-0.2%</td>
<td>-3.5%</td>
<td>0.6%</td>
<td>-5.4%</td>
<td>-3.7%</td>
<td>-10.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;C-Durables</td>
<td>-1.4%</td>
<td>-5.1%</td>
<td>5.1%</td>
<td>-6.3%</td>
<td>1.3%</td>
<td>-12.9%</td>
<td>-9.2%</td>
<td>-18.0%</td>
<td>-18.2%</td>
<td>--</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;C-Non-durables</td>
<td>-1.6%</td>
<td>0.7%</td>
<td>-1.2%</td>
<td>-8.1%</td>
<td>-0.6%</td>
<td>-2.2%</td>
<td>1.9%</td>
<td>-3.3%</td>
<td>-1.5%</td>
<td>--</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;Intermediate</td>
<td>1.2%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>13.7%</td>
<td>15.4%</td>
<td>15.6%</td>
<td>12.6%</td>
<td>-12.8%</td>
<td>-16.0%</td>
<td>13.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital</td>
<td>0.0%</td>
<td>1.5%</td>
<td>1.6%</td>
<td>12.8%</td>
<td>6.9%</td>
<td>6.2%</td>
<td>3.4%</td>
<td>-16.8%</td>
<td>-18.7%</td>
<td>9.3%</td>
</tr>
<tr class="grey1">
<td colspan="11" class="firstcol">Main
Euro-Area Countries
and UK IP in MFG</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG Only</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Q:4-Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany:</td>
<td>-1.6%</td>
<td>3.7%</td>
<td>2.1%</td>
<td>17.6%</td>
<td>20.8%</td>
<td>19.1%</td>
<td>16.1%</td>
<td>-13.5%</td>
<td>-13.9%</td>
<td>9.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France:IPxConstruct'n</td>
<td>-0.8%</td>
<td>-1.2%</td>
<td>3.0%</td>
<td>3.7%</td>
<td>9.0%</td>
<td>7.9%</td>
<td>6.6%</td>
<td>-8.4%</td>
<td>-10.6%</td>
<td>-3.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>0.8%</td>
<td>-5.4%</td>
<td>6.0%</td>
<td>4.4%</td>
<td>6.0%</td>
<td>4.4%</td>
<td>4.0%</td>
<td>-13.7%</td>
<td>-16.5%</td>
<td>-5.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Spain</td>
<td>-3.0%</td>
<td>0.5%</td>
<td>-3.0%</td>
<td>-20.2%</td>
<td>28.0%</td>
<td>-0.2%</td>
<td>19.0%</td>
<td>-13.0%</td>
<td>-12.6%</td>
<td>-20.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK: EU member</td>
<td>0.0%</td>
<td>1.6%</td>
<td>-2.0%</td>
<td>-1.8%</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>-7.8%</td>
<td>-9.8%</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
</body></html>

Industrial output in EMU has backtracked. The 0.3% drop in October flattens out progress in the sector and leaves manufacturing IP flat in the fourth quarter compared to its level in Q3. Consumer goods output is off sharply in the new [...]

EMU MFG Progress Hits The Skids.... More Questions Arise In Japan Despite Improved Tankan

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214a.jpg" align="right" border="0" height="265" width="353">
As the downward momentum in business sales recently slackened,
so too did businesses' attitude toward holding inventories. In constant
dollars, during 3Q '09 inventory cuts turned into accumulation that
added 0.9 percentage points to real GDP growth. In October the turn
continued as business inventories rose 0.2%, the first monthly increase
since last year. The gain followed a slightly revised 0.5% September
drop. Consensus expectations were for a 0.2% decline.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214b.jpg" align="right" border="0" height="265" width="353">
Inventory accumulation last month was apparent in the factory
and wholesale sectors. Wholesale inventories rose 0.3% but the gain was
largely driven by a 4.6% (+24.1% y/y) increase in petroleum
inventories. Elsewhere, accumulation was limited. In the factory
sector, inventories posted a modest 0.4% increase after a 1.4% drop.
However, the increase also was primarily driven by a 6.4% jump in
petroleum inventories.
Retail inventories were unchanged during October as motor
vehicle inventories rose 0.6% (-26.6% y/y) after a 4.1% September
increase. Furniture inventories also increased by 1.0% (-11.1% y/y)
after a 0.2% rise during September. Elsewhere, retail inventories
continued to decline, but at a slower rate. Clothing inventories fell
0.6% (-11.3% y/y) which was less than the 1.8% September drop. General
merchandise inventories fell negligibly (-6.3% y/y) following a 0.5%
September decline. Inventories at building materials and garden supply
stores fell 0.7% (-10.1% y/y) after a reduced 0.4% September decline.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214c.jpg" align="right" border="0" height="265" width="353">
For the fifth straight month, business sales rose and the 1.1%
(-8.2% y/y) increase reflected across-the-board gains. Retail sales
rose 1.3% during October and increased another 1.4% last month. Sales
of merchant wholesalers were quite strong for the third month although
much of the increase reflects higher oil prices. Factory shipments
jumped 3.5% (-1.2% y/y) but again, a 7.0% rise petroleum shipments
accounted for much of the total gain.
Despite a possible interest in slowing the rate of inventory
cutbacks, the inventory-to-sales ratio for total business fell to a
cycle low of 1.30 versus a high of 1.46 in January. The latest was the
lowest since last September. In the retail sector the ratio fell and
reversed the September increase. For manufacturers and wholesalers, the
ratio fell to new cycle lows.
The business sales and inventory data are available in Haver's
USECON database.
Visit the Wall Street Journal's Blog <a href="http://blogs.wsj.com/economics/2009/12/13/remembering-paul-samuelson/">Remembering
Paul Samuelson </a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Business
Inventories (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</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>0.2</td>
<td>-0.5</td>
<td>-1.6</td>
<td>-12.6</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.0</td>
<td>0.5</td>
<td>-2.6</td>
<td>-13.5</td>
<td>-3.1</td>
<td>2.5</td>
<td>3.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Auto</td>
<td>-0.2</td>
<td>-0.7</td>
<td>-0.7</td>
<td>-7.6</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.3</td>
<td>-0.8</td>
<td>-1.3</td>
<td>-13.5</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.4</td>
<td>-1.3</td>
<td>-0.9</td>
<td>-11.2</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
</tr>
</tbody>
</table>
</body></html>

As the downward momentum in business sales recently slackened, so too did businesses' attitude toward holding inventories. In constant dollars, during 3Q '09 inventory cuts turned into accumulation that added 0.9 percentage points to [...]

U.S. Business Inventories' Gain The First Since 2008

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214a.jpg" align="right" border="0" height="265" width="353">
As the downward momentum in business sales recently slackened,
so too did businesses' attitude toward holding inventories. In constant
dollars, during 3Q '09 inventory cuts turned into accumulation that
added 0.9 percentage points to real GDP growth. In October the turn
continued as business inventories rose 0.2%, the first monthly increase
since last year. The gain followed a slightly revised 0.5% September
drop. Consensus expectations were for a 0.2% decline.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214b.jpg" align="right" border="0" height="265" width="353">
Inventory accumulation last month was apparent in the factory
and wholesale sectors. Wholesale inventories rose 0.3% but the gain was
largely driven by a 4.6% (+24.1% y/y) increase in petroleum
inventories. Elsewhere, accumulation was limited. In the factory
sector, inventories posted a modest 0.4% increase after a 1.4% drop.
However, the increase also was primarily driven by a 6.4% jump in
petroleum inventories.
Retail inventories were unchanged during October as motor
vehicle inventories rose 0.6% (-26.6% y/y) after a 4.1% September
increase. Furniture inventories also increased by 1.0% (-11.1% y/y)
after a 0.2% rise during September. Elsewhere, retail inventories
continued to decline, but at a slower rate. Clothing inventories fell
0.6% (-11.3% y/y) which was less than the 1.8% September drop. General
merchandise inventories fell negligibly (-6.3% y/y) following a 0.5%
September decline. Inventories at building materials and garden supply
stores fell 0.7% (-10.1% y/y) after a reduced 0.4% September decline.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214c.jpg" align="right" border="0" height="265" width="353">
For the fifth straight month, business sales rose and the 1.1%
(-8.2% y/y) increase reflected across-the-board gains. Retail sales
rose 1.3% during October and increased another 1.4% last month. Sales
of merchant wholesalers were quite strong for the third month although
much of the increase reflects higher oil prices. Factory shipments
jumped 3.5% (-1.2% y/y) but again, a 7.0% rise petroleum shipments
accounted for much of the total gain.
Despite a possible interest in slowing the rate of inventory
cutbacks, the inventory-to-sales ratio for total business fell to a
cycle low of 1.30 versus a high of 1.46 in January. The latest was the
lowest since last September. In the retail sector the ratio fell and
reversed the September increase. For manufacturers and wholesalers, the
ratio fell to new cycle lows.
The business sales and inventory data are available in Haver's
USECON database.
Visit the Wall Street Journal's Blog <a href="http://blogs.wsj.com/economics/2009/12/13/remembering-paul-samuelson/">Remembering
Paul Samuelson </a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Business
Inventories (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</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>0.2</td>
<td>-0.5</td>
<td>-1.6</td>
<td>-12.6</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.0</td>
<td>0.5</td>
<td>-2.6</td>
<td>-13.5</td>
<td>-3.1</td>
<td>2.5</td>
<td>3.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Auto</td>
<td>-0.2</td>
<td>-0.7</td>
<td>-0.7</td>
<td>-7.6</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.3</td>
<td>-0.8</td>
<td>-1.3</td>
<td>-13.5</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.4</td>
<td>-1.3</td>
<td>-0.9</td>
<td>-11.2</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
</tr>
</tbody>
</table>
 EMU MFG Progress Hits The
Skids.... More Questions Arise In Japan Despite Improved Tankan 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 14, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214d.jpg" align="left" border="0" height="265" width="353">
Industrial output in EMU has backtracked. The 0.3% drop in
October flattens out progress in the sector and leaves manufacturing IP
flat in the fourth quarter compared to its level in Q3. Consumer goods
output is off sharply in the new quarter while capital goods output is
strongly higher. Intermediate goods output is up sharply.
Among the five largest EU economics only Spain saw a rise in
IP month-to-month in October. Still three month growth rates are up for
the zone and are strong for the Big Five except for a 1.8% annual rate
drop in the UK and a horrific-looking -20.2% from Spain whose numbers
are notoriously volatile (Spain&#8217;s three month growth rate for IP was UP
by 28% in Sept, just one month ago).
Japan&#8217;s TankanIn Asia Japan has reported
out its Tankan results for December. Its large company index rose by a
solid nine points and exceeded the forecasts of economists. Still at a
raw reading of -24 it clearly says that large corporate respondents are
still more negative than positive in this Tankan diffusion
presentation. Even if they are less negative than they were last
quarter the results are far from satisfying. Firms in Japan are
engaging in deeper spending cuts to stay alive in a still-tough
economy. Japan has slipped back into the grip of deflation something
that tends to make businessmen more defense-minded- that is not the way
to mount a recovery. With the yen still so strong it is hard for Japan
to export itself to prosperity. Paradoxically Japanese firms continue
to engage in outsourcing with Sony making a new announcement to that
effect transferring work to China. While outsourcing may solve the
firm&#8217;s problems it does not help Japan out of its economic difficulties.
The global recoveryOn balance world trade
is making some recovery and that is helping trade-dependent countries
like Japan to do better. But Japan is still beset with problems and
large block of pubic indebtedness that keeps its government from
engaging in too much in the way of pump-priming expenditures. Europe is
having a simple slip but its broader growth rates tell a story of
slowing that transcends one monthly report. When central bankers and
national leaders say that they are still concerned about the economy
and that there is a risk of backsliding and that it is too soon to take
away the special stimulus brought forward in the crisis&#8230; this is the
sort of report that brings those concerns to life.
Treatment of the heroes of the crisisAgainst
this background we have to wonder about the all the flack being
shoveled onto Fed Chairman Ben Bernanke&#8217;s plate. Bernanke&#8217;s efforts
bolstered not just the US, but the world economy. Do the Fed bashers on
the House and Senate banking committees really have any idea what they
are protesting when they go after Gentile Ben? It was the fall in
standards and directions imposed on markets by the law makers who put
political agendas ahead of smart business practices as much as anything
that got us into this mess. Now we can see that despite huge government
and central banker efforts around the world the path to recovery
remains tentative. The US Congress is deeply involved in a witch hunt
for scapegoats. The Fed Chairman is a more convenient a target than he
is to blame. But with an angry electorate in the US and the next
election cycle looming a scapegoat is a prime need for politicians.

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol" colspan="11" style="padding-left: 0.25em; padding-right: 0.25em;">EURO-AREA
MFG IP</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar
except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro-Area
Detail</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Q-4</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>1.3%</td>
<td>2.5%</td>
<td>1.4%</td>
<td>0.6%</td>
<td>-12.1%</td>
<td>-13.7%</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer</td>
<td>-1.7%</td>
<td>0.1%</td>
<td>-0.5%</td>
<td>-8.3%</td>
<td>-0.2%</td>
<td>-3.5%</td>
<td>0.6%</td>
<td>-5.4%</td>
<td>-3.7%</td>
<td>-10.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;C-Durables</td>
<td>-1.4%</td>
<td>-5.1%</td>
<td>5.1%</td>
<td>-6.3%</td>
<td>1.3%</td>
<td>-12.9%</td>
<td>-9.2%</td>
<td>-18.0%</td>
<td>-18.2%</td>
<td>--</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;C-Non-durables</td>
<td>-1.6%</td>
<td>0.7%</td>
<td>-1.2%</td>
<td>-8.1%</td>
<td>-0.6%</td>
<td>-2.2%</td>
<td>1.9%</td>
<td>-3.3%</td>
<td>-1.5%</td>
<td>--</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;Intermediate</td>
<td>1.2%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>13.7%</td>
<td>15.4%</td>
<td>15.6%</td>
<td>12.6%</td>
<td>-12.8%</td>
<td>-16.0%</td>
<td>13.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital</td>
<td>0.0%</td>
<td>1.5%</td>
<td>1.6%</td>
<td>12.8%</td>
<td>6.9%</td>
<td>6.2%</td>
<td>3.4%</td>
<td>-16.8%</td>
<td>-18.7%</td>
<td>9.3%</td>
</tr>
<tr class="grey1">
<td colspan="11" class="firstcol">Main
Euro-Area Countries
and UK IP in MFG</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG Only</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Q:4-Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany:</td>
<td>-1.6%</td>
<td>3.7%</td>
<td>2.1%</td>
<td>17.6%</td>
<td>20.8%</td>
<td>19.1%</td>
<td>16.1%</td>
<td>-13.5%</td>
<td>-13.9%</td>
<td>9.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France:IPxConstruct'n</td>
<td>-0.8%</td>
<td>-1.2%</td>
<td>3.0%</td>
<td>3.7%</td>
<td>9.0%</td>
<td>7.9%</td>
<td>6.6%</td>
<td>-8.4%</td>
<td>-10.6%</td>
<td>-3.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>0.8%</td>
<td>-5.4%</td>
<td>6.0%</td>
<td>4.4%</td>
<td>6.0%</td>
<td>4.4%</td>
<td>4.0%</td>
<td>-13.7%</td>
<td>-16.5%</td>
<td>-5.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Spain</td>
<td>-3.0%</td>
<td>0.5%</td>
<td>-3.0%</td>
<td>-20.2%</td>
<td>28.0%</td>
<td>-0.2%</td>
<td>19.0%</td>
<td>-13.0%</td>
<td>-12.6%</td>
<td>-20.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK: EU member</td>
<td>0.0%</td>
<td>1.6%</td>
<td>-2.0%</td>
<td>-1.8%</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>-7.8%</td>
<td>-9.8%</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
 A Pause In Economic Activity In
The European Union 
by <a href="/comment/Curley.html">Louise
Curley</a> December 14, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091214e.jpg" align="left" border="0" height="265" width="353">
After rising for five consecutive months, industrial
production fell 0.6% in the Euro Area in October and 0.7% in the entire
European Union. The attached chart shows the index of Industrial
Production (2005=100) for the Euro Area and the European Union. There
is a spurious correlation between the two series due the fact that the
EU series includes the EA series. As with much of the data on the Euro
Area and the European Union it is not possible to derive a non Euro
Area part of the European Union.
Not all of the countries of the European Union have reported
October data. Euro stat's totals for the Euro Area and the European
Union include their estimates of the missing data and these estimates
are not published. The totals are, therefore, preliminary and
frequently revised.
In the Euro Area, the big three--Germany experienced a 1.8%
decline in industrial production, France, a 0.9% decline and Italy, a
0.5% increase. Declines were recorded in Ireland, 2.8%, Greece, 0.8%,
Portugal, 1.4%. The biggest decline in production in the Euro area,
that of Slovenia, was 3.2%. The largest increase in production in the
Euro Area was in Finland at 2.2%.
Of the published data, among the non Euro Area countries,
industrial production in the UK declined 0.1%, and in Sweden, 0.5%.
Industrial Production in Latvia and Lithuania increased 0.1% and 0.4%
respectively. Production in Bulgaria rose 2.1%, the first increase
since September, 2008.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Industrial
Production (2005=100)</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>
<th scope="col">May 08&nbsp;</th>
<th scope="col">Apr 08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">European Area (m/m % change)</td>
<td>-0.73</td>
<td>0.12</td>
<td>0.68</td>
<td>0.18</td>
<td>0.32</td>
<td>0.53</td>
<td>-0.39</td>
</tr>
<tr>
<td class="firstcol">European Union (m/m % change)</td>
<td>-0.61</td>
<td>0.21</td>
<td>1.13</td>
<td>0.26</td>
<td>0.86</td>
<td>1.06</td>
<td>-0.47</td>
</tr>
<tr class="odd">
<td class="firstcol">Bulgaria</td>
<td>2.1</td>
<td>-3.6</td>
<td>-0.21</td>
<td>-0.5</td>
<td>-0.6</td>
<td>-1.4</td>
<td>-0.1</td>
</tr>
<tr>
<td class="firstcol">Slovenia</td>
<td>-3.2</td>
<td>0.7</td>
<td>8.0</td>
<td>-0.6</td>
<td>0.3</td>
<td>2.9</td>
<td>-4.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>-2.8</td>
<td>11.3</td>
<td>-16.0</td>
<td>7.9</td>
<td>7.3</td>
<td>-3.6</td>
<td>-3.5</td>
</tr>
<tr>
<td class="firstcol">Finland</td>
<td>2.2</td>
<td>-1.7</td>
<td>2.4</td>
<td>-1.6</td>
<td>1.5</td>
<td>-0.7</td>
<td>-1.9</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Business Inventories' GainThe First Since 2008

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211d.jpg" align="left" border="0" height="265" width="353">
While it would seem to pose a conundrum for the Bank of
England, few are expecting any monetary response to the rising
inflation trends that are developing in the UK. Both core and headline
factory gate prices are showing the same sort of pressure building.
Yr/Yr inflation at the producer level already is at 2.9% for the
headline and at 2% for the core, levels that would be at or above the
ceiling rate were this the CPI (HICP; actually the HICP itself is
running at a 2% pace as of September). PPI price trends took a bit of a
break in November with the headline rate below its pace of the previous
three months; the core showed its smallest rise in four months.
The UK economy is still struggling and getting recovery going
is still job-one. So it is not expected that the BOE will react to the
rising inflation rate. Indeed, it is hoped that the weakness in the
economy will keep these pressures from building and that the current
rise proves to be a rogue wave of inflation that is not followed by any
others and that dissipates harmlessly on the shores of discretion. That
prognosis may prove be correct, but for the moment it seems a bit of
wishful thinking. Still, if I were a BOE governor I doubt I would have
the stomach to attack inflation now under the circumstances. Even so
that does not make it the right thing to do. It is a conundrum of the
first order.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" class="firstcol" colspan="8">UK
PPI MFG net output prices</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>NOV-09</td>
<td>OCT-09</td>
<td>SEP-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG</td>
<td>0.3%</td>
<td>0.6%</td>
<td>0.7%</td>
<td>6.5%</td>
<td>5.0%</td>
<td>2.9%</td>
<td>5.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Core</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>4.8%</td>
<td>2.7%</td>
<td>2.0%</td>
<td>5.1%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Core: ex food beverages,
tobacco &amp; Petroleum</td>
</tr>
</tbody>
</table>
</body></html>

While it would seem to pose a conundrum for the Bank of England, few are expecting any monetary response to the rising inflation trends that are developing in the UK. Both core and headline factory gate prices are showing the same [...]

Inflation's acceleration is clear, so is the policy conundrum

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211i.jpg" align="right" border="0" height="265" width="353">Strength
in
oil prices was the culprit in the 1.7% jump in overall import prices
last month. It exceeded Consensus expectations for a 1.2%
increase.&nbsp;
Petroleum prices climbed 6.2% to their
highest level since October of last year and have more-than-doubled
since the January trough. This month, Brent crude oil prices
have moved lower to roughly $71 per barrel from $77 last month. In
addition, the latest report from the U.S. Bureau of Labor Statistics
indicated that non-oil import prices rose 0.7% after the strong 0.6%
October gain. The lower value of the dollar has now helped lift these
prices at a 6.5% annual rate during the last three months following a
6.5% y/y decline as of August. (During the last ten years, there has
been a negative 81% correlation between the nominal trade-weighted
exchange value of the US dollar vs. major currencies and the y/y change
in non-oil import prices.)
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211j.jpg" align="right" border="0" height="265" width="353">Import
prices break down as
follows: Chemical import prices have been strong during the last three
months, rising at a 26.5% annual rate. Iron &amp; steel prices also
have been strong rising at a 42.6% rate since August. Food prices
increased at a 5.2% rate during the last three months while capital
goods prices posted a modest 1.3% increase (AR) after having been
little-changed from March through August. Prices for nonauto consumer
goods remained weak, down 0.1% last month and up at a 0.4% during the
last three. Durable consumer goods prices rose rose at a 1.4% annual
rate over the last three months, though that is improved from a 6.5%
rate of decline early this year. Furniture prices continued down to the
lowest level since April of last year (-1.5% y/y). Apparel prices have
been flat since July (-0.5% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211k.jpg" align="right" border="0" height="265" width="353">Total
export prices rose a firm 0.8% and at a 3.4% annual rate during the
last three months. The gain was led by a 0.7% rise in nonagricultural
export prices which have turned up versus last year after a 6.6% y/y
decline as of July. Agricultural export prices jumped 3.7% (0.6% y/y).

The import
and export price series can be found in Haver's USECON database.
Detailed figures are available in the USINT
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export
Prices (NSA, %)</a></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">Import - All Commodities</td>
<td>1.7</td>
<td>0.8</td>
<td>0.2</td>
<td>3 .7</td>
<td>11.5</td>
<td>4.2</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>6.2</td>
<td>2.9</td>
<td>-0.6</td>
<td>35.5</td>
<td>37.7</td>
<td>11.6</td>
<td>20.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.7</td>
<td>0.6</td>
<td>0.3</td>
<td>-1.6</td>
<td>5.3</td>
<td>2.7</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>0.8</td>
<td>0.2</td>
<td>-0.2</td>
<td>0.6</td>
<td>6.0</td>
<td>4.9</td>
<td>3.6</td>
</tr>
</tbody>
</table>

</body></html>

Strength in oil prices was the culprit in the 1.7% jump in overall import prices last month. It exceeded Consensus expectations for a 1.2% increase. Petroleum prices climbed 6.2% to their highest level since October of last year and [...]

U.S. Import Prices Jump As Oil Prices Surge

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211e.jpg" align="right" border="0" height="265" width="353">
Consumer sentiment began this month by retracing the declines
of October and November. The 8.9% m/m rise in sentiment to a reading of
73.4, as measured by the Reuters/University of Michigan Index of
Consumer Sentiment, also was near the highest since January of last
year. The latest figure surpassed Consensus expectations for a level of
69.0. Sentiment was up by one-third from the low of last fall. During
the last ten years there has been a two-thirds correlation between the
level of sentiment and the three-month change real consumer spending.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211f.jpg" align="right" border="0" height="265" width="353">
Sentiment about current economic conditions jumped 15.0% from
November to the highest level since March of last year. Assessments of
current financial conditions were quite strong and rose to the highest
since last September. Buying conditions for large household goods,
including furniture, refrigerators, stoves &amp; televisions, also
moved up by 15.8% to the highest level since January 2008.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211g.jpg" align="right" border="0" height="265" width="353">
The mid-December reading on expected economic conditions also
jumped, but by a lesser 4.8% m/m to the highest level since September.
The outlook for business conditions during the next twelve months
improved sharply and recovered November's decline but the expected
change in personal finances and expected business conditions during the
next five years advanced just modestly. All three of these readings
recently have been flat after sharp improvement early this year.
Expected price inflation during the next year held steady m/m
at 3.1% but it was up from last December's reading of 1.7%.Respondents'
view of government policy, which may eventually influence economic
expectations, fell sharply m/m to the lowest level since March.
Seventeen percent of respondent thought that a good job was being done
by government versus 36% who thought a poor job was being done.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211h.jpg" align="right" border="0" height="265" width="353">
The Reuters/University of Michigan survey data are not
seasonally adjusted. The reading is based on telephone interviews with
about 500 households at month-end. These mid-month results are based on
about 320 interviews. The summary indexes are in Haver's USECON
database with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">Mid-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">Consumer Sentiment</td>
<td>73.4</td>
<td>67.4</td>
<td>70.6</td>
<td>22.1%</td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>79.1</td>
<td>68.8</td>
<td>73.7</td>
<td>13.8</td>
<td>79.1</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>69.7</td>
<td>66.5</td>
<td>68.6</td>
<td>29.1</td>
<td>64.2</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>
</body></html>

Consumer sentiment began this month by retracing the declines of October and November. The 8.9% m/m rise in sentiment to a reading of 73.4, as measured by the Reuters/University of Michigan Index of Consumer Sentiment, also was near [...]

Michigan Consumer Sentiment Recoups Earlier Declines

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211a.jpg" align="right" border="0" height="265" width="353">
The consumer
looks to be gaining strength after earlier torpor. Retail sales last
month rose 1.3% after a downwardly revised 1.1% increase during
October. The latest increase was stronger than the 0.7% Consensus
expectation and it moved the y/y change in sales into positive
territory for the first time since August of last year. Moreover,
spending on "core" retail sales has improved. Month-to-month changes in
overall sales in recent months have been quite volatile due to auto
sales promotions and rising gasoline prices. Aside from these
distortions, gains in consumer spending have been steady during the
past several months. The retail sales data are available in Haver's USECON
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211b.jpg" align="right" border="0" height="265" width="353">
Auto sales recently firmed after earlier weakness. Last
month, motor vehicle sales rose 1.6% after the 7.1% jump during
October. Though the y/y change improved further into positive
territory, sales were still 23% below the 2007 high. Less autos, sales
jumped 1.2% aided by higher gasoline prices. That increase compares to
an expected 0.4% increase. Higher gasoline prices lifted November fuel
expenditures by 6.0% m/m and by more than one-quarter since December.
Nevertheless, without autos &amp; gasoline retail sales still rose
by 0.6% last month, the third firm gain in the last four
months.&nbsp;These gains raised the y/y change to 0.4% from -4.5%
as of July.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091211c.jpg" align="right" border="0" height="265" width="353">
Improvement in discretionary "core" spending was evident
in the latest data. Sales at general merchandise stores rose 0.8% (1.8%
y/y) during November and roughly matched the firm gains during the
prior three months. The worst of spending in this area was reached
during July when sales were down 3.6% y/y. Sales of electronics also
increased 2.8% (-3.4% y/y) last month following three months of firm
increase. Elsewhere last month, discretionary retail sales were weak.
Furniture store sales fell 0.7% (-7.9% y/y) and have fallen steadily
since early 2007. In soft goods, apparel store sales fell 0.7% after a
revised 0.2% October downtick that previously was reported as an
increase. Nevertheless, the y/y change improved to 0.9% from the 9.7%
decline at the end of last year.&nbsp; Internet and catalogue
purchases were quite firm last month. The 1.2% (8.1% y/y) increase was
the fifth strong monthly increase in the last six and the y/y gain
contrasted with a 7.6% decline as of April. Restaurant sales rose 0.5%
(-0.2% y/y) after falling slightly during the prior five months.
Finally, building materials sales reversed the prior months decline and
rose 1.5% (-9.3% y/y). Employment Projections:
2008-2018&nbsp; from the Bureau of Labor Statistics can
be found <a href="http://www.bls.gov/news.release/pdf/ecopro.pdf">
here</a>&nbsp;



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Total
Retail Sales &amp; Food Services</a> (%)</td>
<td>1.3</td>
<td>1.1</td>
<td>-2.0</td>
<td>1.9</td>
<td>-0.8</td>
<td>3.3</td>
<td>5.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Autos</td>
<td>1.2</td>
<td>0.0</td>
<td>0.7</td>
<td>1.3</td>
<td>2.5</td>
<td>3.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Non-Auto Less Gasoline</td>
<td>0.6</td>
<td>0.1</td>
<td>0.6</td>
<td>0.4</td>
<td>1.6</td>
<td>3.6</td>
<td>5.7</td>
</tr>
</tbody>
</table>
</body></html>

The consumer looks to be gaining strength after earlier torpor. Retail sales last month rose 1.3% after a downwardly revised 1.1% increase during October. The latest increase was stronger than the 0.7% Consensus expectation and it [...]

U.S. Retail Sales Revive As Discretionary Spending Improves

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

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Michael J. Moran

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260109B.jpg

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

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

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

260109C.jpg

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

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

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

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

A Soft Tone in the Labor Market

Winnie Tapasanun

260109F17.jpg

260109G17.jpg

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

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

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

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

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

260109H17.jpg

260109I17.jpg

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

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

260109E.jpg

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

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

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

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

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

260109.jpg

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

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

Germany

German Industrial Production Perks Up-Surprise!

Andrew Cates

**Global growth**
This first chart below highlights a still-fragmented global growth picture, with momentum and current activity levels varying markedly across economies. India stands out at the top-left of the chart, combining a very strong composite PMI reading with some recent cooling in momentum, suggesting activity remains robust even as growth rates moderate. Brazil and Spain sit at another end of the spectrum, pairing solid expansionary PMI levels with strong positive three-month momentum, signalling accelerating activity into year-end. By contrast, much of continental Europe — including France, Germany and Italy — remains clustered close to the 50 threshold, with modest (or no) improvements in momentum and only tentative signs of underlying expansion, underscoring the euro area’s sluggish growth backdrop. The US occupies a middle ground by remaining in expansionary territory, but recent momentum has softened, consistent with a gradual cooling rather than a downturn. Overall, the chart reinforces the message that while global growth remains positive, it is neither synchronised nor particularly strong.


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).

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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.