Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201i.jpg" align="right" border="0" height="265" width="353">
Home sales
continued to rebound in October, spurred by low interest rates and a
tax credit. The National Association of Realtors (NAR) reported that
October pending home sales increased 3.7%. It was the ninth consecutive
monthly gain and sales are up 41.9% from the low. Consensus
expectations had been for a slight m/m sales decline. The index level
of 114.1 was at its highest since March 2006. The base for the index is
2001=100.October sales likely were boosted by the
pending expiration of an $8,000 first-time home buyers tax credit. The
credit has since been extended into next year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201j.jpg" align="right" border="0" height="265" width="353">
Only the Western region
of the country failed to participate in the October sales gain. Sales
reversed the September increase but were still up by nearly one-quarter
from last year. Elsewhere, sales in the Northeast more-than made up a
September decline with a 19.9% jump. Sales in the Midwest rose 11.6% to
the highest level since early-2006. Sales in the South were the
laggards again with just a 5.4% gain but they also were up one-third
from the January trough. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201k.jpg" align="right" border="0" height="265" width="353">
These home sales figures are analogous to
the new home sales data from the Commerce Department in that they
measure existing home sales when the sales contract is signed, not at
the time the sale is closed. The series dates back to
2001.The pending home sales data are available in Haver's PREALTOR
database. The number of homes on the market and prices
are in the REALTOR database.How
Rigid Are Producer Prices? from the Federal Reserve Bank of
New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr407.pdf">here</a>.
<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/WEEKLY/@W5/@W507/@W507.HTM" style="color: white;">Pending Home Sales (2001=100)&nbsp;</a></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>114.1</td>
<td>110.0</td>
<td>103.8</td>
<td>&nbsp;&nbsp; 31.8%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>100.2</td>
<td>83.6</td>
<td>85.3</td>
<td>44.2</td>
<td>73.1</td>
<td>85.9</td>
<td>98.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>109.6</td>
<td>98.2</td>
<td>90.8</td>
<td>36.5</td>
<td>80.6</td>
<td>89.5</td>
<td>101.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>115.4</td>
<td>109.5</td>
<td>104.6</td>
<td>31.6</td>
<td>89.6</td>
<td>107.3</td>
<td>127.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>127.7</td>
<td>143.8</td>
<td>130.5</td>
<td>22.0</td>
<td>99.5</td>
<td>92.3</td>
<td>109.6</td>
</tr>
</tbody>
</table>


</body></html>

Home sales continued to rebound in October, spurred by low interest rates and a tax credit. The National Association of Realtors (NAR) reported that October pending home sales increased 3.7%. It was the ninth consecutive monthly gain [...]

U.S. Pending Home Sales Rise Further

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201g.jpg" align="right" border="0" height="265" width="353">The
Bundesbank announced today that the Registered unemployment rate in
Germany declined in November to 8.1% from 8.2% in the preceding three
months.&nbsp; At the same time, Eurostat reported harmonized
unemployment rates for October.&nbsp; On that basis, the German
unemployment rate began to decline a month earlier, to 7.5% in October
from 7.6% in September.&nbsp; (Germany's national measure of
unemployment is typically greater than that of the harmonized measure
of Eurostat as can be seen in the first chart.&nbsp; Part of the
difference is due to the fact that the national measure includes only
registered workers while the Eurostat measure includes the whole labor
force. In addition there are differences in the unemployment
concept.)
Except for Japan where the
unemployment rate declined to 5.1% in October from 5.3% in September,
most other industrial countries are still experiencing rises in
unemployment.&nbsp; In addition, the rise in the unemployment rate
in Germany during the recession was more muted than that in other
industrial countries--even Japan--as can be seen in the second
chart.&nbsp; (To insure comparability we have used harmonized
unemployment rates.&nbsp; These may be found in Haver's&nbsp;
EUROSTAT data base.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201h.jpg" align="right" border="0" height="265" width="353">

Germany's lower unemployment rate has
been due largely to the "short-term work program" part of its stimulus
program.&nbsp; To encourage companies to maintain employees when
production falls off, the German government has set up a fund which can
be drawn upon to help pay the wages of the employees who have been kept
on.&nbsp; On November 25, the Cabinet agreed to extend the program
for another year beginning in January.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp; 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun 09&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany:&nbsp; Registered
Unemployment Rate&nbsp; (%)</td>
<td>8.1</td>
<td>8.2</td>
<td>8.2</td>
<td>8.2</td>
<td>8.3</td>
<td>8.3</td>
</tr>
<tr>
<td colspan="7">Harmonized Unemployment
Rates (%) </td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-</td>
<td>7.5</td>
<td>7.6</td>
<td>7.6</td>
<td>7.6</td>
<td>7.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan</td>
<td>-</td>
<td>5.1</td>
<td>5.3</td>
<td>5.5</td>
<td>5.7</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-</td>
<td>10.1</td>
<td>10.0</td>
<td>9.8</td>
<td>9.7</td>
<td>9.5</td>
</tr>
<tr class="odd">
<td class="firstcol">United States</td>
<td>-</td>
<td>10.2</td>
<td>9.8</td>
<td>9.7</td>
<td>9.4</td>
<td>9.5</td>
</tr>
</tbody>
</table>

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The Bundesbank announced today that the Registered unemployment rate in Germany declined in November to 8.1% from 8.2% in the preceding three months. At the same time, Eurostat reported harmonized unemployment rates for October. On [...]

German Unemployment Rate Declines

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201f.jpg" align="left" border="0" height="265" width="353">
German retail sales rose in October, reversing a drop in
September, but sales continue to show negative momentum. The sequential
nominal rates of growth from 12-months to 6-months to 3-months all are
clustered around a minus 3% growth rate. For real retail sales the
sequential growth rates show a move to more weakness despite the bump
up in sales in October. Real retail sales sequential growth rates are
getting to be more severe negative numbers.
Only clothing and footwear sales are showing any kind of
strength. Footwear and clothing sales are now up Yr/Yr along with car
registrations. Government programs have skewed spending toward car
purchases by offering incentives. Clothing and footwear are just
beginning to pick up. Still there is nothing upbeat about the German
consumer in this report. The rise in spending in October sure beats a
drop. But trends are not reversed or even blunted by this rise after
two months of steep drops.

 

<table border="0" cellspacing="0" width="100%">
<colgroup><col></colgroup>
<thead><tr>
<th scope="col" colspan="8"> German
Real and Nominal Retail Sales</th>
<th>QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Nominal</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Retaill Ex auto</td>
<td>0.6%</td>
<td>-0.5%</td>
<td>-0.9%</td>
<td>-3.2%</td>
<td>-3.3%</td>
<td>-2.5%</td>
<td>2.0%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">MV and Parts</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>-1.5%</td>
<td>-4.8%</td>
<td>-3.0%</td>
<td>-1.7%</td>
<td>0.2%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>-1.6%</td>
<td>-3.4%</td>
<td>3.7%</td>
<td>-6.0%</td>
<td>-7.0%</td>
<td>-5.0%</td>
<td>1.4%</td>
<td>-15.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>8.5%</td>
<td>2.9%</td>
<td>-7.4%</td>
<td>14.5%</td>
<td>9.9%</td>
<td>7.1%</td>
<td>1.6%</td>
<td>56.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Car Registrations (units)</td>
<td>-0.1%</td>
<td>-2.7%</td>
<td>-9.5%</td>
<td>-40.1%</td>
<td>-31.4%</td>
<td>24.0%</td>
<td>-8.3%</td>
<td>0.0%</td>
</tr>
<tr>
<td colspan="9">Real</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Ex auto</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>-1.5%</td>
<td>-4.8%</td>
<td>-3.0%</td>
<td>-1.7%</td>
<td>0.2%</td>
<td>-0.8%</td>
</tr>
</tbody>
</table>
</body></html>

German retail sales rose in October, reversing a drop in September, but sales continue to show negative momentum. The sequential nominal rates of growth from 12-months to 6-months to 3-months all are clustered around a minus 3% growth [...]

German Retail Sales Rise But Amass No Momentum

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<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201d.jpg" align="right" border="0" height="265" width="353">
Gasoline
prices continued their sideways movement last week. The pump
price for regular gasoline of $2.63 per gallon equaled the
June average. Moreover, during the six months, prices moved in a tight
range between $2.47 and $2.69. Nevertheless, gasoline prices remain up
from the December low of $1.61. Yesterday, wholesale gasoline prices
began the week roughly equal to last week's average. The figures are
reported by the U.S. Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.Breaking away from the recently
firm pricing pattern, the price for a barrel of light sweet crude (WTI)
oil moved down last week to $76.10 which was the lowest level in one
month. Still, prices were up from the December low of $32.37.
Yesterday, the spot market price for light sweet crude oil moved
slightly higher to $77.28 per barrel.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201e.jpg" align="right" border="0" height="265" width="353">
Behind the stabilization in
gasoline prices is a leveling of past gains in gasoline demand. Last
week, demand posted a 0.2% increase versus one year ago versus a 3.9%
increase at the beginning of last month. Breaking away from earlier y/y
strength, the demand for residual fuel oil fell 0.4% y/y while
distillate demand continued weak and fell 10.7% y/y.· Natural gas
prices remained weak last week at an average $3.62 per mmbtu (-45.7%
y/y). They remained down by two-thirds from the high reached in
early-July of last year of $13.19/mmbtu. The weekly energy price data
can be found in Haver's WEEKLY database while the
daily figures are in DAILY. The gasoline demand
figures are in OILWKLY.Small business
lending is yesterday's House testimony by Jon D. Greenlee,
Associate Director, Division of Banking Supervision and Regulation at
the Federal Reserve Board and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/greenlee20091130a.htm">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM" style="color: rgb(255, 255, 255);">Weekly Prices</a></th>
<th scope="col">11/30/09</th>
<th scope="col">11/23/09</th>
<th scope="col">11/16/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.63</td>
<td>2.64</td>
<td>2.63</td>
<td>45.2%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>76.10</td>
<td>78.36</td>
<td>78.21</td>
<td>45.0%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body></html>

Gasoline prices continued their sideways movement last week. The pump price for regular gasoline of $2.63 per gallon equaled the June average. Moreover, during the six months, prices moved in a tight range between $2.47 and $2.69. [...]

Weekly Gasoline Prices Are Flat Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201a.jpg" align="right" border="0" height="265" width="353">The pace of
this economic recovery has lagged of late as the strength of inventory
rebuilding has disappointed. The National Association of Purchasing
Management reported that the November composite index unexpectedly
slipped to 53.6 from 55.7 during October. A more modest decline to 54.7
had been the Consensus expectation. (Any reading above the break-even
point of 50 suggests rising activity .) Despite the November decline,
the reading was up from the low of 32.9 reached last December. The ISM
data is available in Haver's USECON database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201b.jpg" align="right" border="0" height="265" width="353">While just
above the break-even level of 50, the positive
factory-sector growth rate suggested by the ISM index is in-line with
recoveries accompanying past upturns from severe recessions. To mirror
the strength of those recoveries, however, the index still needs to
rise to a level near or above the level of 60.
Holding back any
improvement in the total index was a decline in the inventory component
to 41.3 from 46.9 in October. The latest was the lowest level since
August. An increased 19% (NSA) of respondents indicated that they were
raising inventory levels versus 16% last November. However, during the
strong 2005 inventory accumulation 26% of firms indicated that they
were raising inventories. A decline in the production component to
59.9 from the cycle high of 63.3 also was part of the decline in the
November composite index. During the last ten years there has been an
84% correlation between the level of the production component of the
composite index and the three-month growth in factory sector industrial
production. It is appropriate to correlate the ISM index level
with factory sector output growth because the ISM
index is a diffusion index. It measures growth by using all of the
positive changes in activity added to one half of the zero change in
activity measures. The pace of supplier deliveries sped up
last month with the easing of production.
Finally, the employment
index fell to 50.8 from 53.1 during October. Still, the level indicated
positive growth in factory-sector payrolls. It has increased from a low
reading of 26.1 this past February. Twenty percent of respondents
indicated higher payrolls versus only seven percent last November. Just
sixteen percent indicated a lower level of hiring versus forty percent
last November. During the last ten years there has been a 90%
correlation between the index level and the three-month change in
manufacturing payrolls.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201c.jpg" align="right" border="0" height="265" width="353">The new
orders index was the only component
series to improve m/m during November. The modest gain to 60.3,
however, left it below the August high. Working the other way, the
export order index improved modestly m/m to 56.0 which was the highest
level since August of last year and up from 35.5 last December. During
the last ten years there has been a 53% correlation between the index
and the q/q change in real exports of goods in the GDP accounts.· The
separate index of prices paid fell ten points to its lowest level since
July. Still, the figure was up from the December low of 18.0. During
the last twenty years there has been a 79% correlation between the
price index and the three-month change in the PPI for intermediate
goods.
 The ISM data are available in Haver's USECON
database.
 Do Alternative Measures of GDP Affect Its
Interpretation? from the Federal Reserve Bank of New York can
be found <a href="http://www.newyorkfed.org/research/current_issues/ci15-7.pdf">here
</a>.
<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/@S2/@S201/@S201.HTM">ISM
Mfg</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">Composite Index</td>
<td>53.6</td>
<td>55.7</td>
<td>52.6</td>
<td>36.6</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>60.3</td>
<td>58.5</td>
<td>60.8</td>
<td>28.1</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>50.8</td>
<td>53.1</td>
<td>46.2</td>
<td>34.3</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Production</td>
<td>59.9</td>
<td>63.3</td>
<td>55.7</td>
<td>32.0</td>
<td>45.2</td>
<td>54.1</td>
<td>55.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Supplier Deliveries</td>
<td>55.7</td>
<td>56.9</td>
<td>58.0</td>
<td>48.6</td>
<td>51.6</td>
<td>51.2</td>
<td>54.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>41.3</td>
<td>46.9</td>
<td>42.5</td>
<td>40.1</td>
<td>45.5</td>
<td>45.4</td>
<td>48.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>55.0</td>
<td>65.0</td>
<td>63.5</td>
<td>25.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>

</body></html>

The pace of this economic recovery has lagged of late as the strength of inventory rebuilding has disappointed. The National Association of Purchasing Management reported that the November composite index unexpectedly slipped to 53.6 [...]

ISM Factory Index Disappoints As Inventory Rebuilding Lags

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091130d.jpg" align="left" border="0" height="265" width="353">
Canada's Real Gross Domestic Product rose 0.40% on an annual
rate basis in the third quarter, its first increase after three
quarters of decline. The annual rate of rise was smaller than the 2%
the Bank of Canada had predicted a month or so ago and smaller than
more recent consensus estimate of 1.0%. Canada's annual rate of growth
in the third quarter was also below those of the Mexico and the United
States, its NAFTA partners, as can be seen in the first chart.
The annual rates of change of the major components of real GDP
are shown in the table below. Private consumption showed its first
increase in the second quarter and has continued to increase in the
third quarter. Private fixed investment and exports have had their
first increases in the third quarter. Canada's stimulus programs are
reflected in the increases in Government consumption and fixed
investment over the past several quarters.
The dynamics of the change in Canada's third quarter GDP is
best seen by looking at the contribution (the weighted percent changes)
of the various components of GDP to total growth. The quarterly
increase in GDP in the third quarter was 0.088%. Private consumption
contributed .448 points; private fixed investment,.246; inventories,
.229; government spending on goods and services, .265; government fixed
investment, .218 and government inventories .001. Exports contributed
.998. These positive contributions amounted to 2.405 points. They were,
however, offset by the 2.316 point negative contribution of imports.
Part of the rise in imports was due to the increase in private and
government fixed investment. It has been estimated that Canadian
businesses import more than 70% of their spending on plant and
equipment.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Annual Rates of&nbsp; Change</th>
<th scope="col">Q3 09</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3&nbsp;08</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Real Gross Domestic
Product</td>
<td>0.35</td>
<td>-3.05</td>
<td>-6.19</td>
<td>-3.74</td>
<td>0.41</td>
<td>0.33</td>
<td>-0.75</td>
</tr>
<tr>
<td class="firstcol"> Private Consumption</td>
<td>3.08</td>
<td>1.76</td>
<td>-1.41</td>
<td>-3.13</td>
<td>0.57</td>
<td>1.10</td>
<td>2.54</td>
</tr>
<tr class="odd">
<td class="firstcol">Private Fixed
Investment</td>
<td>5.60</td>
<td>-9.03</td>
<td>-27.00</td>
<td>-18.59</td>
<td>0.45</td>
<td>-2.13</td>
<td>-1.73</td>
</tr>
<tr>
<td class="firstcol">Government Consumption</td>
<td>4.99</td>
<td>3.27</td>
<td>2.15</td>
<td>2.48</td>
<td>0.02</td>
<td>4.56</td>
<td>5.67</td>
</tr>
<tr class="odd">
<td class="firstcol"> Government Fixed
Investment</td>
<td>24.66</td>
<td>16.55</td>
<td>8.60</td>
<td>8.72</td>
<td>7.11</td>
<td>11.81</td>
<td>18.89</td>
</tr>
<tr>
<td class="firstcol"> Exports</td>
<td>15.35</td>
<td>-19.54</td>
<td>-29.81</td>
<td>-17.69</td>
<td>-4.15</td>
<td>-4.11</td>
<td>-2.30</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>36.0</td>
<td>-6.91</td>
<td>-39.24</td>
<td>-23.36</td>
<td>-3.44</td>
<td>2.99</td>
<td>-4.68</td>
</tr>
</tbody>
</table>
</body></html>

Canada's Real Gross Domestic Product rose 0.40% on an annual rate basis in the third quarter, its first increase after three quarters of decline. The annual rate of rise was smaller than the 2% the Bank of Canada had predicted a month [...]

The Canadian Economy Begins to Show Growth

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091130c.jpg" align="left" border="0" height="265" width="353">
EMU prices rose in October. Trends are still good but core
inflation is showing a hint of acceleration as three month core prices
are up at a 1.4% annual rate above their six-month and 12-month pace of
increase.
Headline inflation shows a clear acceleration from an annual
pace of -0.1% Yr/Yr to a +1.2% annual rate over six-months and to a
2.3% annualized pace over three- months.
Germany, France, Italy and Spain all show the same
accelerating headline inflation pattern from 12-months to six-months to
three-months. Italy&#8217;s 3-mo inflation rate is up to 3.4% annualized.
Core inflation has much less clear patterns across countries.
Core inflation is not accelerating from 12-months to
six-months to three-months in any of these large EMU countries. It is
accelerating from six-months to three-months in Germany and in Italy.
But that similarity has little breadth. In Italy core inflation is
running at a strong 4.1% pace. In Germany it is at 1.1% only the same
as its Yr/Yr pace but up from its six-month pace. In France the core
rate is still steadily decelerating. Spain&#8217;s core is back down after a
pop-up over six-months.
On balance combined with news that UK consumers are repaying
credit this holiday season and that German firms are having a tough
time getting credit, it hardly seems that inflation is about to take
root. The recent rise in energy prices is the reason for most headline
inflation to be creeping higher. Core inflation is still largely under
wraps. Still it is notable that inflation is starting to show some
traces in the more inflation-prone country of Italy.
We don&#8217;t expect any policy change in EMU but the inflation
worm may be starting its turn. Even so we expect it to be a big slow
turn, even for a worm.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th scpoe="col" colspan="8">Trends in HICP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="3">% saar</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>2.7%</td>
<td>1.2%</td>
<td>-0.1%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>1.0%</td>
<td>1.0%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>0.4%</td>
<td>0.5%</td>
<td>0.4%</td>
<td>5.5%</td>
<td>-0.2%</td>
<td>-1.4%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0.1%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>-1.7%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">HICP</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>-0.3%</td>
<td>0.7%</td>
<td>2.3%</td>
<td>0.7%</td>
<td>-0.1%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>1.3%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.4%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>0.7%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>-0.6%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Core:xFE&amp;A</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>1.1%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.6%</td>
<td>0.9%</td>
<td>1.0%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.1%</td>
<td>1.7%</td>
<td>1.4%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
</body></html>

EMU prices rose in October. Trends are still good but core inflation is showing a hint of acceleration as three month core prices are up at a 1.4% annual rate above their six-month and 12-month pace of increase. Headline inflation [...]

EMU Prices Rise - Has The Worm Tuned?

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

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Michael J. Moran

260109A.jpg

260109B.jpg

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

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

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

260109C.jpg

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

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

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

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

A Soft Tone in the Labor Market

Winnie Tapasanun

260109F17.jpg

260109G17.jpg

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

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

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

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

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

260109H17.jpg

260109I17.jpg

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

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

260109E.jpg

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

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

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

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

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

260109.jpg

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

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

Germany

German Industrial Production Perks Up-Surprise!

Andrew Cates

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


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.

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**Venezuela, the oil market and implications**
Venezuela’s outsized share of _world crude oil proved reserves_ — nearly one-fifth of the global total — looms large in market narratives even as its _actual production_ has languished well below historic highs. At the start of 2026, dramatic political and strategic events — including the capture of President Nicolás Maduro by U.S. forces and a tightening U.S. oil blockade that has halted Venezuelan exports — have injected fresh uncertainty into oil markets. While immediate impacts on global prices have been modest amid ample global supplies, geopolitical risk premiums have briefly lifted crude benchmarks, reflecting market sensitivity to potential supply disruptions and future policy shifts. In the short run, sustained low exports and production cuts due to storage constraints could tighten crude balances marginally, but most analysts see limited influence on overall market fundamentals this year. Over the longer term, however, any successful revival of Venezuelan output — contingent on massive investment, infrastructure rehabilitation and changes to sanctions policy — could eventually expand heavy crude availability and weigh on prices, with broader implications for OPEC+ dynamics and energy security in the Western Hemisphere.

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**China’s excess capacity and traded goods price disinflation** 
China’s export sector looks set to remain a key swing factor for the global economy in the year ahead, not least because of persistent surplus manufacturing capacity and weak domestic demand. As the chart illustrates, periods of falling relative export prices have tended to coincide with rising export volumes, highlighting China’s ability — and willingness — to clear excess capacity through external markets. With producer prices still under pressure and policy support focused more on supply than demand, the risk is that excess capacity is once again exported via more aggressive price competition, rather than absorbed domestically. If sustained, this dynamic would reinforce global disinflation forces, intensify competitive pressures on manufacturers elsewhere, and heighten trade tensions, particularly in sectors already sensitive to Chinese overcapacity such as autos, machinery and green technologies. In that sense, China’s export pricing behaviour may prove as important for the global inflation and trade outlook in 2026 as any shift in domestic growth momentum.

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**Public sector indebtedness**
This next chart, drawn up by the IMF, underlines a defining feature of the post-pandemic macro landscape: public debt is not only higher than before Covid, but is set to keep rising — and at a faster pace — with the largest economies doing much of the heavy lifting. The clustering of the biggest bubbles in the upper-right quadrant shows that countries accounting for roughly two-thirds of global GDP have already experienced sizeable increases in debt-to-GDP ratios since 2019 and are projected to see further rises through the second half of the decade. This combination of elevated starting points and ongoing fiscal expansion reflects the persistence of structural pressures — higher interest costs, ageing populations, defence spending and climate-related investment — rather than temporary crisis measures. For the global economy, the implication is a world in which fiscal policy remains active but increasingly constrained, raising difficult questions about debt sustainability, the tolerance for higher real interest rates, and the scope for counter-cyclical fiscal support when the next downturn arrives.

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Over the past few weeks, global financial markets have taken comfort from cooling inflation, resilient earnings and continued upside surprises in the dataflow, with equity markets extending gains as confidence in a soft-landing outcome has firmed. While AI-related optimism was questioned toward the end of last year, amid valuation concerns and uncertainty over near-term payoffs, sentiment has improved again in recent days. Latest business surveys suggest little immediate cause for alarm on the global growth front (chart 1), despite clear signs of divergence across regions. At the same time, there are few near-term inflation concerns evident in the data, with global supply-chain pressures remaining subdued (chart 2). Taken together, these developments leave little immediate challenge to the prevailing outlook for monetary policy, with expectations for further gradual easing across several major economies remaining broadly intact (chart 3). At the same time, geopolitical shocks — most notably the upheaval in Venezuela — have reignited focus on energy market risks and sovereign debt uncertainties, adding complexity to oil price expectations and fiscal trajectories (chart 4). Shifting focus, China’s role also continues to remain pivotal: surplus industrial capacity and competitive export pricing continue to shape global trade and exert disinflationary influence (chart 5). Against this backdrop, public debt levels that are both elevated and still rising in many large economies underscore the structural imbalances that could limit policy flexibility and amplify market sensitivities in the immediate months ahead (chart 6).

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Charts of the Week: Cooling Inflation, Diverging Growth

Sandy Batten

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

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

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

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

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

Economy in Brief

Jump to:

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