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>
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U.S. Business Inventories' GainThe First Since 2008

Robert Brusca

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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

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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>

 Michigan Consumer Sentiment
Recoups Earlier Declines 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 11, 2009


<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>
 U.S. Import Prices Jump As Oil
Prices Surge 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 11, 2009

<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>

 Inflation's acceleration is clear,
so is the policy conundrum 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 11, 2009


<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>

U.S. Retail Sales Revive AsDiscretionary Spending Improves

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background-color:#f0f0f0;
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<body>
 


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091210h.jpg" align="right" border="0" height="265" width="353">The
financial health of U.S. households continued to improve last quarter,
as indicated by the Federal Reserve's latest flow-of-funds figures.
Household net worth increased $2.7 trillion to $53.4 trillion after a
downwardly revised $2.3 trillion 2Q increase. Financial asset holdings
improved by $2.4 trillion as the stock market moved higher after a $1.9
trillion 2Q rise. Lower interest rates raised the value of Treasury
security holdings&nbsp; by $168 billion and tangible asset values
rose by $294 billion following the $391 billion 2Q rise. These gains
were helped, finally, by an improved value of real estate holdings.
Despite the gains, however, the value of households' real estate
holdings remained 27.9% below the late-2006 peak.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091210i.jpg" align="right" border="0" height="265" width="353">Household
financial positions also improved due to the reduction of liabilities,
though that was small when compared to the rise in assets. Total
liabilities fell $12.0 billion. While the decline was the fifth in the
last six quarters, it paled versus recent $30-to-$300 quarterly
reductions. Mortgage debt reduction was the largest, down for the sixth
straight quarter, but consumer credit started to grow again along with
bank loans.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091210j.jpg" align="right" border="0" height="265" width="353">
The Federal Government has shared in none of the balance
sheet improvement. The government's debt outstanding rose by nearly
one-third during last quarter versus 3Q '08 to $7.5 trillion as
spending rose and tax revenues sagged. The Federal Government's debt
outstanding rose to 52.9% of GDP. Elsewhere, there's been a strong
aversion to credit market liabilities with y/y declines posted by the
household and the noncorporate business sectors. Deleveraging in the
financial sector also has been impressive. The 5.2% y/y decline in
liabilities dropped the level to its lowest in a year.&nbsp;

End of Year
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol" rowspan="2">Flow
of Funds (Y/Y % Chg.)</th>
<th scope="col">%
of Total
Outstanding</th>
<th scope="col">3Q
'09</th>
<th scope="col">2Q
'09</th>
<th scope="col" colspan="3">End of Year
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td>2008</td>
<td>2007</td>
<td>2006</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt
Outstanding</td>
<td>--</td>
<td>1.1</td>
<td>2.9</td>
<td>5.0</td>
<td>10.4</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Federal Government</td>
<td>13.6%</td>
<td>30.1</td>
<td>35.9</td>
<td>24.2</td>
<td>4.9</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Households</td>
<td>25.9%</td>
<td>&nbsp;-1.8</td>
<td>-1.2</td>
<td>0.3</td>
<td>6.7</td>
<td>10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfinancial Corporate Business</td>
<td>13.8%</td>
<td>1.8</td>
<td>2.8</td>
<td>5.1</td>
<td>13.2</td>
<td>8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfarm, Noncorporate Business</td>
<td>6.9%</td>
<td>-5.3</td>
<td>-1.7</td>
<td>5.5</td>
<td>14.2</td>
<td>14.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>31.3%</td>
<td>-5.2</td>
<td>-1.0</td>
<td>5.5</td>
<td>13.4</td>
<td>9.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Trillions of
$</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Net Worth: Households &amp;
Nonprofit Organizations</td>
<td>--</td>
<td>$53.423</td>
<td>$50.757</td>
<td>$51,379</td>
<td>$64.507</td>
<td>$64.520</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tangible Assets:
Households</td>
<td>--</td>
<td>$23.069</td>
<td>$22.775</td>
<td>$23.891</td>
<td>$28.036</td>
<td>$29.735</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Financial Assets:
Households</td>
<td>--</td>
<td>$44.415</td>
<td>$42.055</td>
<td>$41.706</td>
<td>$50.788</td>
<td>$48.192</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total Liabilities:
Households</td>
<td>--</td>
<td>$14.061</td>
<td>$14.073</td>
<td>$14.218</td>
<td>$14.318</td>
<td>$13.408</td>
</tr>
</tbody>
</table>

</body></html>

The financial health of U.S. households continued to improve last quarter, as indicated by the Federal Reserve's latest flow-of-funds figures. Household net worth increased $2.7 trillion to $53.4 trillion after a downwardly revised [...]

U.S. Flow of Funds Indicates Expansion In Household Net-Worth To Highest In A Year

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

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**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.