Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118a.jpg" align="right" border="0" height="265" width="353">Pricing
pressure continued under control last month. The overall October CPI
roughly matched Consensus expectations and rose 0.3%, despite energy
prices which rose m/m. Stripping out both energy &amp; food prices,
consumer prices increased 0.2% as they did during September. However,
the y/y increase in "core" prices picked up modestly to 1.7% from its
weakest since early-2004. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118b.jpg" align="right" border="0" height="265" width="353">Energy
prices continued their
recovery with a 1.5% m/m increase, bringing the three-month annual rate
of growth to 30.1%. Fuel oil prices surged 6.0% (-23.5% y/y) after
smaller gains during the prior two months while gasoline prices
increased another 1.6% (-17.9% y/y) following a 1.0% gain during
September. Finally, prices for natural gas &amp; electricity rose
0.9% (-7.2% y/y) after little change during the prior two months.
Food
&amp; beverage prices continued weak last month with a 0.1% uptick.
So far this year, food prices have fallen an unprecedented 0.6%. Recent
weakness has been led by lower dairy prices (-8.2% y/y) and lower fruit
&amp; vegetable (-5.6% y/y) costs. Prices for meats, poultry, fish
&amp; eggs also fell 4.8% y/y while cereals &amp; bakery
product prices were off 0.6%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118c.jpg" align="right" border="0" height="265" width="353">Inflation
in the CPI less food &amp;
energy also remained moderate but, like the previous month, the 0.2%
October increase was slightly firmer than expected. Price gains
accelerated to a 2.0% annual rate since December of last year. That's
only slightly below the 2.3% rates of increase during the last two
years.
Despite the weak economy, the acceleration in core price
inflation this year owes to faster increases in core goods
prices. Their 0.4% increase last month lifted the annualized
rate so far in 2009 to 3.2% from no change during the prior two years.
Higher tobacco prices continued to account for much of that
acceleration. In addition, there has been a firming of prices
elsewhere. Prices for new &amp; used motor vehicles have firmed
despite an aggressive marketing campaign, up 1.7% last month and at a
5.2% rate since December. They rose 0.3% last month and at a 35.0%
annual rate since December. That compares with price deflation during
the last two years. Though apparel prices ticked 0.4% lower last month
they've risen at an accelerated 2.3% rate this year. That follows price
declines which extends back to 1994. Continuing weak were prices for
household furnishings &amp; operation. They fell another 0.5%
leaving them down at a 1.0% rate so far this year. 
The U.S. recession
continued to hold back growth in core services prices.
Again, they ticked up just 0.1% last month and have risen at a 1.5%
annual rate so far this year, half that in 2008 and nearly the weakest
since 1983. Weakness in the housing market accounts for much of that
moderation. Last month, shelter prices were unchanged and they've risen
at a just a 0.6% annual rate so far in 2009. Owners equivalent rent of
primary residences, a measure not equivalent to other house price
measures, again slipped m/m and have risen at a 1.0% rate so far this
year versus a 2.5% 2008 increase. Elsewhere in services, public
transportation prices again were strong and rose 0.9% (-4.5%
y/y).&nbsp;Medical care services prices ticked up 0.2% but at a
3.4% rate this year. That compares to a 4.2% increase last year.
Finally, education costs have been firm and they're up at a 4.9% annual
rate this year after a 5.8% gain during 2008. However, recreation
prices are roughly unchanged this year after a 1.6% 2008 gain. 
The
chained CPI, which adjusts for shifts in consumption patterns, rose
0.1% during October while year-to-year prices fell 0.5%. Conversely,
chained prices less food and energy firmed last month by 0.3%, only the
second material gain in five months. 
 The consumer price data is
available in Haver's USECON database while detailed
figures can be found in the CPIDATA 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/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">October</th>
<th scope="col">Oct. Y/Y&nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</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&nbsp;</td>
<td>0.3</td>
<td>-0.2</td>
<td>0.2</td>
<td>0.4</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>1.7</td>
<td>0.2</td>
<td>0.1</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.4</td>
<td>2.3</td>
<td>0.3</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>1.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>1.5</td>
<td>-14.1</td>
<td>0.6</td>
<td>4.6</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.1</td>
<td>-0.3</td>
<td>-0.1</td>
<td>0.1</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.1</td>
<td>-0.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.3</td>
<td>2.5</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.3</td>
<td>1.3</td>
<td>0.2</td>
<td>0.1</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
 EMU Trade Balance Improves 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 18, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118d.jpg" align="left" border="0" height="265" width="353">The Confederation of British
Industry survey shows
industrial trends continue to make progress and cut their declining
trends. Still the declining trends remain large and the degree of
progress is slow although this month&#8217;s gain in orders is one of the
sharpest. 
Total orders revived to -45 from -51 a still steep negative
reading but a substantial month-to-month gain in November. Export
orders, following the pattern of other EU countries, have made even
grater progress this month improving to -37 from -46.
Overall orders bottomed in the cycle at -59 in July and the
series has only clawed back to -45 by November. This month&#8217;s six point
gain month to month gain is twice the pace of the rise from the cycle
low (approx 3.5 per month). The surge in export orders this month is
even more impressive on that score since those orders had only been
rising by 3 points per month from their cycle low compared to this
month&#8217;s jump of nine points.
The outlook for the volume of output has improved rapidly from
its cycle low of -48 in March of this year. Its rapid increases came in
April, May and in August. In October the outlook index for volume
switched to a positive reading and this month it holds that same
reading of +4. Although the month to month improvement in the volume
outlook index has stagnated this month, the level of the reading
staying in positive territory still marks it as a good result.
The survey evidence is that British industry sees itself
improving and expects that to continue. Overall orders are showing
strong improving profiles and are being spurred substantially by export
orders. While orders have a long way to go to become a truly positive
reading, the outlook of the British industry survey respondents says
they expect it to get there. On balance the survey is a good result.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" colspan="11">UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>Aug 
09</td>
<td>Jul 
09</td>
<td>12MO 
Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-45</td>
<td>-51</td>
<td>-48</td>
<td>-54</td>
<td>-59</td>
<td>-51</td>
<td>21%</td>
<td>9</td>
<td>-59</td>
<td>68</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-37</td>
<td>-46</td>
<td>-46</td>
<td>-48</td>
<td>-45</td>
<td>-43</td>
<td>27%</td>
<td>3</td>
<td>-52</td>
<td>55</td>
</tr>
<tr>
<td class="firstcol">Stocks:FinGds</td>
<td>20</td>
<td>10</td>
<td>13</td>
<td>13</td>
<td>20</td>
<td>23</td>
<td>67%</td>
<td>31</td>
<td>-2</td>
<td>33</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Looking
ahead</td>
</tr>
<tr>
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>4</td>
<td>4</td>
<td>-2</td>
<td>-5</td>
<td>-14</td>
<td>-28</td>
<td>68%</td>
<td>28</td>
<td>-48</td>
<td>76</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4 Nxt 3m</td>
<td>-5</td>
<td>-4</td>
<td>-10</td>
<td>-17</td>
<td>-6</td>
<td>-10</td>
<td>28%</td>
<td>34</td>
<td>-20</td>
<td>54</td>
</tr>
</tbody>
</table>

 U.S. Housing Starts Fall To Their
Lowest Level Since April 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118e.jpg" align="right" border="0" height="265" width="353">Housing
sector activity continued to moderate after increases this past spring.
Housing starts fell last month to 529,000 (AR) units versus 592,000
during September which was revised up slightly. The latest level was
the lowest since April and down nearly one-third y/y. More sobering was
that since the peak in January of 2006 starts have fallen by more than
three-quarters. In addition, October's figure fell well short of
Consensus expectations for 600,000 starts.
Loss of forward
momentum was evident in the decline in starts of single-family homes.
They fell 3.9% last month to 476,000 units (AR), reversed
all of the prior month's increase and were at the lowest level since
May. Despite these disappointments, however, single-family starts were
one-third higher than the February low. During the last ten years,
there has been an 84% correlation between the q/q change in
single-family starts and their contribution to quarterly GDP growth.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118f.jpg" align="right" border="0" height="265" width="353">A further
loss of momentum was evident in the multi-family sector where
starts starts fell by one-third m/m during October to the record low.
Starts of apartments, condominiums &amp; town houses were down
88.2% from the January 2006 peak.
Starts of single-family
units fell throughout the country last month. Single-family starts in
the Northeast fell 9.6% (-17.5% y/y) while starts in the South fell
7.3% (-4.9% y/y). In the Midwest starts declined 4.8% (-16.8% y/y) and
starts in the West fell 5.9% (-16.5% y/y) to their lowest level since
May.
 Building permits dropped 4.0%, the third decline in four
months,
but remained 10.8% above their record low reached in April. As with
starts, permits to build a single-family home have been relatively
strong. They fell just 0.2% last month and were down 4.0%
y/y.
The housing starts figures can be found in
Haver's USECON database.
How
Rigid Are Producer Prices? from the Federal Reserve Bank of
New York can be found <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">Housing
Starts (000s, SAAR)</th>
<th scope="col">October</th>
<th scope="col">Oct. Y/Y</th>
<th scope="col">September</th>
<th scope="col">August</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>529</td>
<td>-30.7%</td>
<td>592</td>
<td>581</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>476</td>
<td>-10.9</td>
<td>511</td>
<td>481</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>53</td>
<td>-76.9</td>
<td>81</td>
<td>100</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>552</td>
<td>-24.3</td>
<td>575</td>
<td>580</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>

 U.S. Home Builders&#8217; Index Recovery
Stuttering Again This Month 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118g.jpg" align="right" border="0" height="265" width="353">Since
the spring recovery, housing activity has been roughly flat according
to The National Association of Home Builders. They reported that its
November Composite Housing Market Index held stable with a downwardly
revised October reading. Though the index remained double the low of 8
this past January there's been little, if any, improvement during the
last several months. The index is compiled from survey questions asking
builders to rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very
high&#8221; to &#8220;very low&#8221;. The figure is a
diffusion index, therefore, numerical results over 50 indicate a
predominance of &#8220;good&#8221; readings. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118h.jpg" align="right" border="0" height="265" width="353">
The present sales
index held stable at 17 which equaled the 3Q average. In the West the
index rose slightly and was sharply higher than one year ago. In the
South the index also held stable m/m (+41.7% y/y). In the Northeast the
index fell m/m but remained three-quarters higher than the year-ago
level.&nbsp;In the Midwest the index also fell m/m but remained
double last year. The sub-index of sales during the next six months
rose slightly m/m and offset most of the October decline.
·&nbsp;The Home Builders' Association also reported that traffic of
prospective buyers held stable with October at the lowest level since
July.&lt;/p&gt;&lt;p&gt;The Home Builders' Housing
Opportunity Index,
which is the share of homes sold that could be considered affordable to
a family earning the median income, fell slightly in the second
quarter. It had jumped earlier to a record high of 72.5% buoyed by
lower home prices, lower interest rates and higher income. (There is a
break in the series from 2002 to 2003.)
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118i.jpg" align="right" border="0" height="265" width="353">The NAHB
has compiled the Housing Market Index since 1985. The weights assigned
to the individual index components are .5920 for single family detached
sales, present time; .1358 for single family detached sales, next six
months; and .2722 for traffic of prospective buyers. The results, along
with other housing and remodeling indexes from NAHB Economics, are
included in Haver&#8217;s SURVEYS 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/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">&nbsp;November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>17</td>
<td>17</td>
<td>19</td>
<td>9</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>17</td>
<td>17</td>
<td>18</td>
<td>9</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>28</td>
<td>26</td>
<td>29</td>
<td>18</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>13</td>
<td>13</td>
<td>17</td>
<td>7</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</thead>
</table>

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Pricing pressure continued under control last month. The overall October CPI roughly matched Consensus expectations and rose 0.3%, despite energy prices which rose m/m. Stripping out both energy & food prices, consumer prices [...]

CPI Increases Remain Moderate

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117h.jpg" align="right" border="0" height="265" width="353">
The news
from Canada continues to raise doubts about the forecast of a 2% rise
in GDP in the third quarter made earlier by Mark Carney, Governor of
the Bank of Canada.&nbsp; Monthly GDP declined in July and August.
The continued strength of the C$ is affecting
exports.Today, data on sales, new and unfilled
orders and inventories were released for the manufacturing sector and
they were mixed.&nbsp; Manufacturing sales were lower than expected
but the pace of new orders and inventories was more
encouraging.&nbsp; New orders increased 8.3% in September after
having declined in July and August.&nbsp; Inventories continue to
decline and the inventory sales ratio is now down to 1.46 from it peak
of 1.63 in January of this year.&nbsp; The ratio is shown in the
first chart and is approaching what looks like a normal ratio of around
1.30.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117i.jpg" align="right" border="0" height="265" width="353">
While there may be some doubts about the
magnitude of the rise in Canada's third quarter GDP, there is no doubt
that the Canadian economy is at a turning point and will show some
growth in the third quarter.&nbsp; Most of the data relating to the
Canadian economy released recently has been erratic--a step forward,
then some retraction.&nbsp; Nevertheless, the forward momentum has
generally overcome the retraction.&nbsp;&nbsp; In addition to
manufacturing sales, the number of building permits authorized and
retail sales are good examples of such data and they are shown in the
second chart.&nbsp; Recent changes in both series are volatile, but
the trend for both is clearly positive. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Manufacturing </th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09&nbsp;</th>
<th scope="col">Apr 09&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Shipments (M/M % Chg)</td>
<td>1.43%</td>
<td>-1.77%</td>
<td>5.17%</td>
<td>3.28%</td>
<td>-4.44%</td>
<td>-0.36%</td>
</tr>
<tr>
<td class="firstcol">New Orders (M/M % Chg)</td>
<td>8.26%</td>
<td>-1.20%</td>
<td>-5.68%</td>
<td>20.38%</td>
<td>-6.29%</td>
<td>-11.16%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders (M/M % Chg)</td>
<td>-0.57%</td>
<td>-5.06%</td>
<td>-5.26%</td>
<td>2.11%</td>
<td>-7.04%</td>
<td>-5.88%</td>
</tr>
<tr>
<td class="firstcol">Inventories (M/M Change in Mil.
C$)</td>
<td>-1166.909</td>
<td>-299.573</td>
<td>-1257.203</td>
<td>-160.873</td>
<td>-1117.464</td>
<td>-719.741</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories/Sales Ratio</td>
<td>1.46</td>
<td>1.50</td>
<td>1.49</td>
<td>1.59</td>
<td>1.62</td>
<td>1.55</td>
</tr>
</tbody>
</table>
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The news from Canada continues to raise doubts about the forecast of a 2% rise in GDP in the third quarter made earlier by Mark Carney, Governor of the Bank of Canada. Monthly GDP declined in July and August. The continued strength of [...]

Canadian Manufacturing Data And Prospects For Q3 GDP

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117g.jpg" align="left" border="0" height="265" width="353">
The EMU trade surplus continued to grow as exports rebounded
strongly from a lackluster August that saw them fall by 4%. In
September exports are back up, and off to the races.
Exports contribute to growth overallEMU
exports now are off by 17.8% Yr/Yr, better than the 24.8% drop for
imports. To this point the larger relative drop in imports makes the
EMU trade sector a contributor to growth.
Exports are looking solid again Over recent
months the contribution of exports to growth is looking even stronger-
like a real force instead of a bit of subtle arithmetic. Over six
months exports are rising at an 8.3% pace and over 3-months the growth
rate is 25.6%. These metrics compare to import annual &#8216;growth&#8217; rates of
-8.5% over six months and of +3.4% over three months. Obviously
EMU-region domestic demand is lagging in its developing as imports are
still falling rapidly or barely heading higher depending on the period
for that calculation. Meanwhile EMU exports are exploiting demand
revival elsewhere.
Category-wide rebound in exportsAfter
seeing declines across most key categories in August exports showed
strong sharp category-wide improvements in September. Imports had a
less widespread drop in August but are experiencing some revival in
September as well.
D&#233;j&#225; vu all over again?EMU, like China and
like Japan, is seeing a revival of export led growth. While China is
being lauded for its huge domestic stimulus program at the end of the
day it is a net exporter, its surplus is growing, so it is getting
stimulus from overseas. Meanwhile the US trade deficit popped up in the
wake of surging oil imports and auto imports that came on the heels of
its cash for clunkers auto sector stimulus program. Even though the US
consumer is late to revive in this cycle foreigners have been quick to
glean whatever spoils there are in the US market. All this smacks of
business as usual. If the global economy is to be made safer, business
as usual will have to change its stripes. Europe, Japan and China if
they are to hold their exports focus will have to find markets other
than the US to exploit or it will be d&#233;j&#225; vu all over again, as that
sage Yogi Berra once said.

Ezone Trade Trends For Goods
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3M</td>
<td>6M</td>
<td> 12M</td>
<td>12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364; 6,801</td>
<td>&#8364; 2,235</td>
<td>&#8364; (6,433)</td>
<td>&#8364; 2,976</td>
<td>&#8364;(3,092)</td>
<td>&#8364; 1,842</td>
</tr>
<tr>
<td colspan="7">Exports</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exp</td>
<td>5.5%</td>
<td>-4.1%</td>
<td>25.6%</td>
<td>8.3%</td>
<td>-17.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>2.8%</td>
<td>-5.1%</td>
<td>3.9%</td>
<td>0.3%</td>
<td>-10.2%</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>1.7%</td>
<td>-5.0%</td>
<td>12.6%</td>
<td>9.1%</td>
<td>-14.7%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>5.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>9.0%</td>
<td>-18.5%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>2.6%</td>
<td>-6.4%</td>
<td>13.5%</td>
<td>-5.4%</td>
<td>-21.7%</td>
<td>1.6%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">IMPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All IMP</td>
<td>1.1%</td>
<td>-1.0%</td>
<td>3.4%</td>
<td>-8.5%</td>
<td>-24.8%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>1.2%</td>
<td>-2.6%</td>
<td>-1.5%</td>
<td>-17.1%</td>
<td>-10.7%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>-1.2%</td>
<td>3.9%</td>
<td>19.8%</td>
<td>-7.4%</td>
<td>-39.4%</td>
<td>14.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>3.2%</td>
<td>-7.9%</td>
<td>-24.9%</td>
<td>10.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>1.3%</td>
<td>-1.4%</td>
<td>3.3%</td>
<td>-12.7%</td>
<td>-20.4%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">*Eur mlns; mo or period average</td>
</tr>
</tbody>
</table>
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The EMU trade surplus continued to grow as exports rebounded strongly from a lackluster August that saw them fall by 4%. In September exports are back up, and off to the races. Exports contribute to growth overallEMU exports now are [...]

EMU Trade Balance Improves

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117d.jpg" align="right" border="0" height="265" width="353">The
earlier
recovery in industrial production stalled last month after smart,
unrevised increases during the summer. The October reading of no change
in output also fell short of Consensus expectations for a 0.4% gain.
The weakening from earlier increases was widespread amongst sectors.
Output of consumer goods was unchanged after strong gains during the
prior three months. A 1.6% (-11.6% y/y) decline in motor vehicle output
led the weakening.&nbsp; Output of computers, video &amp; audio
equipment also sagged by 0.3% (-8.2% y/y) after three months of
increase.


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117e.jpg" align="right" border="0" height="265" width="353">Outside of
the auto &amp;
high-tech sectors production ticked 0.1% higher during October (-6.9%
y/y) following three months of firm gain. The uptick was led&nbsp;
by a 3.6% (-18.8% y/y) jump in primary metals output, a 1.3% (-15.6%
y/y) rise in textile mills production and a 1.4% (-5.5% y/y) rise in
paper output.&nbsp;Working the other way, however, were widespread
declines. Furniture &amp; appliance output continued to slide and
posted a 1.9% (-20.1% y/y) decline. Apparel output reversed two months
of increase with a 0.8% (-15.0% y/y) decline while petroleum &amp;
coal output fell 2.9% (-5.0% y/y). Output of business equipment fell
0.3% (-6.8% y/y) with a 0.9% (-12.4% y/y) drop in electrical equipment
output. Reflecting continued weakness in nonresidential building
activity, output of construction supplies fell 1.2% (-17.0% y/y), about
as it did in September.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117f.jpg" align="right" border="0" height="265" width="353">Despite
the weakening of output,
utilization of capacity ticked higher to 70.7%. The increase was caused
by an estimated 0.1% (-0.8% y/y) decline in industry capacity.
Utilization in the factory sector held steady at 67.9% though it was up
from the June low of 65.2%. Utilization in the primary metals are has
risen sharply to 56.9% with the rebound in output. There's also been a
rise in utilization in the machinery area but it's down most
elsewhere.
The industrial production data are available in
Haver's USECON database.
Policy
Challenges for the Federal Reserve is yesterday's speech by
Fed Vice-Chairman Donald L. Kohn and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20091116a.htm">here
</a>.How Will Unemployment Fare
Following the Recession? from the Federal Reserve Bank
of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3knotek.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">INDUSTRIAL
PRODUCTION (SA,%)</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 Output</td>
<td>0.0</td>
<td>0.7</td>
<td>1.2</td>
<td>-7.2</td>
<td>-2.2</td>
<td>1.5</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Manufacturing</td>
<td>-0.1</td>
<td>0.7</td>
<td>1.5</td>
<td>-7.9</td>
<td>-3.2</td>
<td>1.4</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>0.0</td>
<td>1.3</td>
<td>1.6</td>
<td>-2.9</td>
<td>-2.6</td>
<td>0.9</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>-0.3</td>
<td>-0.4</td>
<td>1.1</td>
<td>-6.8</td>
<td>-1.1</td>
<td>2.7</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-1.2</td>
<td>-1.1</td>
<td>0.7</td>
<td>-17.0</td>
<td>-6.3</td>
<td>-2.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>1.6</td>
<td>-0.2</td>
<td>0.8</td>
<td>-2.1</td>
<td>0.3</td>
<td>3.4</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>70.7</td>
<td>70.5</td>
<td>70.0</td>
<td>75.4 (Oct. '08)</td>
<td>77.5</td>
<td>80.6</td>
<td>80.9</td>
</tr>
</tbody>
</table>

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The earlier recovery in industrial production stalled last month after smart, unrevised increases during the summer. The October reading of no change in output also fell short of Consensus expectations for a 0.4% gain. The weakening [...]

Factory Production Unchanged As Gains Of Prior Three Months Stall

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117a.jpg" align="right" border="0" height="265" width="353">Inflationary
pressures continued to be diffused last month by the weak economy, but
they increased for those who eat or drive a car. The PPI for finished
goods rose 0.3% during October following declines during two of the
prior three months. The increase fell somewhat short of Consensus
expectations for a 0.5% rise. Though the PPI continued to decline
versus the year-ago level, the 1.9% drop is a moderation from the 6.4%
y/y decline back in July. Much of that moderation is due to notably
sharp price declines during last year's fourth quarter.
The increase
in overall producer prices last month was led by a 1.6% (-2.5% y/y)
rise in food &amp; beverage prices which reflected the third
monthly surge (NSA) in fruit &amp; vegetable prices (15.2% y/y), a
one-quarter spike in fresh &amp; dry vegetable prices (-6.7% y/y)
and higher dairy product prices (-11.3% y/y).&nbsp; A 1.6% increase
in finished energy prices added to that monthly pressure, though prices
still were down 9.4% y/y. Here again, however, the y/y comparisons are
similar to those for food &amp; beverage prices. Though prices
remained 9.4% lower than last year, the twelve-month comparison has
moderated from -29.6% this past July as monthly price declines during
last year's fourth quarter were notably sharp. Despite m/m increases,
gasoline prices remained down 12.5% y/y, fuel oil prices were off by
one-third and natural gas prices were 20.1% lower. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117b.jpg" align="right" border="0" height="265" width="353">Excluding
food
&amp; energy prices the PPI fell 0.6% during October. Not only was
the decline the third in the last four months, the 0.7% y/y increase
was the weakest since early-2004. The m/m decline in the core PPI
contrasted with expectations for a 0.1% increase. The PPI for finished
consumer goods less food &amp; energy fell 0.5% yet gained 1.1%
y/y. That was the weakest annual increase since July 2007. Finished
durables prices cratered by 1.2% (0.0% y/y), and prices of core
finished consumer nondurable goods rose a modest 0.2%. The 2.0% y/y
increase was down from 5.9% as of last November. Capital equipment
prices also reflected economic weakness and fell 0.7%, the third
decline in the last four months. That pulled the y/y increase down to
0.1% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117c.jpg" align="right" border="0" height="265" width="353">Prices for
intermediate
goods rose 0.3% due to higher energy prices. The increase contrasted,
however, with a 0.2% decline in core prices. These were led by declines
in textile, chemical &amp; lumber prices. Intermediate food prices
fell 0.2% (-8.4% y/y).&nbsp; The crude materials PPI increased a
sizable 5.4% due to the increase in energy prices though they still
remained down by nearly one-quarter from last October. In contrast,
core prices showed strength and increased for the seventh straight
month reflecting the steady rise in commodity prices.
The producer
price data is available in Haver's USECON database.
More detailed data is in the PPI and in the PPIR
databases.
 Short-Term Headline-Core Inflation Dynamics
from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/summer/pdf/mehra.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/USECON/@E8/@E802/@E80201/@E80201.HTM" style="color: rgb(0, 0, 0);">Producer Price Index</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"> Finished Goods</td>
<td>0.3</td>
<td>-0.6</td>
<td>1.7</td>
<td>-1.9</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.6</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.7</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.3</td>
<td>0.2</td>
<td>1.8</td>
<td>-7.5</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.2</td>
<td>0.9</td>
<td>0.6</td>
<td>-5.6</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>5.4</td>
<td>-2.1</td>
<td>3.8</td>
<td>-13.9</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5</td>
<td>3.6</td>
<td>6.0</td>
<td>&nbsp;-1.5</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>

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Inflationary pressures continued to be diffused last month by the weak economy, but they increased for those who eat or drive a car. The PPI for finished goods rose 0.3% during October following declines during two of the prior three [...]

U.S. PPI Increases 0.3% Fueled By Food & Energy Prices

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116i.jpg" align="right" border="0" height="265" width="353">
The Japanese
economy grew more than expected in the third quarter.&nbsp; The
annual rate of increase was 4.79% continuing the recovery that began in
the second quarter with an annual rate of increase of 2.72%.&nbsp;
The annual rates of change in private consumption and fixed investment
and the annual rate of difference in net exports are show in the first
chart. Japan still has a long way to go to recoup the losses from the
recent deep depression.&nbsp; The annual rate of real GDP in the
third quarter was 531.3 trillion yen, compared the 569.1 trillion yen
reached in the first quarter of 2008.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116j.jpg" align="right" border="0" height="265" width="353">
Although both net exports and
private consumption continued to increase in the third quarter, their
annual rates of increase were lower than those in the second
quarter.&nbsp; Even with a lower rate decline in Gross Fixed
Domestic Investment, from 10.5% in the second quarter to 1.3 % in the
third quarter, the net effect of these factors does not appear to
account for the sharp increase reported for total GDP in the third
quarter.&nbsp; It should be noted that the data are preliminary and
some of the components, notably the change in inventories, is only
updated during the 2nd preliminary release.&nbsp; Given the
volatility and the large positive and negative contributions of
inventory changes to total growth, as shown in the second chart, it is
highly likely that the missing element in Japan's third quarter growth
was due to inventory accumulation.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116k.jpg" align="right" border="0" height="265" width="353">
Deflation continues to
characterize the Japanese economy.&nbsp; The third chart shows GDP
in nominal and real terms since 2000 when real GDP began to exceed
nominal, indicating a declining price
level.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</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 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Private Consumption (SAAR)</td>
<td>2.8</td>
<td>3.9</td>
<td>-4.3</td>
<td>-2.8</td>
<td>0.0</td>
<td>-3.7</td>
<td>5.66</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Investment (SAAR)</td>
<td>-1.3</td>
<td>-10.5</td>
<td>-26.6</td>
<td>-14.9</td>
<td>-13.1</td>
<td>-5.9</td>
<td>3.9</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Exports (SAAD) Trillion Yen</td>
<td>9.8</td>
<td>244</td>
<td>-32.7</td>
<td>-52.7</td>
<td>-4.6</td>
<td>-10.3</td>
<td>15.7</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>2008</td>
<td>2007</td>
<td>2006</td>
<td>2005</td>
<td>2004&nbsp;</td>
<td>2003&nbsp;</td>
<td>2002&nbsp;</td>
<td>2001&nbsp;</td>
<td>2000&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real (Trillion 2000Chn Yen)</td>
<td>556.6</td>
<td>560.5</td>
<td>547.7</td>
<td>536.8</td>
<td>526.6</td>
<td>512.5</td>
<td>505.4</td>
<td>504.5</td>
<td>503.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nominal (Trillion Yen)</td>
<td>507.6</td>
<td>515.8</td>
<td>507.4</td>
<td>501.7</td>
<td>515.8</td>
<td>490.3</td>
<td>491.3</td>
<td>497.7</td>
<td>503.0</td>
</tr>
</tbody>
</table>
</body></html>

The Japanese economy grew more than expected in the third quarter. The annual rate of increase was 4.79% continuing the recovery that began in the second quarter with an annual rate of increase of 2.72%. The annual rates of change in [...]

Japanese GDP Growth In Q3 Surprises: Due To Increased Demand Or Inventory Building?

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background-color:#b8b8b8; Empire State Factory Conditions Slip From October High
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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116f.jpg" align="right" border="0" height="265" width="353">The
Federal Reserve Bank of New York reported that its November Empire
State Factory Index of General Business Conditions slipped to 23.51
during November. Nevertheless, that level still remained near the
highest level since 2004. The latest reading compares to sharply
negative levels this past winter and suggests positive growth in
factory sector activity. The latest level fell short of Consensus
expectations for a reading of 30.0.
The figure is a diffusion index.
Since the series' inception in 2001, there has been a 75% correlation
between its level and the three-month change in U.S. factory sector
industrial production. Like the Philadelphia Fed Index of General
Business Conditions, the Empire State Business Conditions Index
reflects answers to independent survey questions; it is not a weighted
combination of the components. The series dates back only to 2001.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116g.jpg" align="right" border="0" height="265" width="353">The
new orders component fell to 16.66 from its October high. The shipments
index also fell as did the employment index to a slim 1.32 from its
highest level since 2007. In the history of the NY employment index,
there has been an 87% correlation between the employment index and the
three-month growth in overall U.S. factory sector employment as
reported by the Labor Department. The workweek index also fell m/m but
remained significantly higher than the February low.
The prices paid
index eased to its lowest level since July and remained down sharply
from all of last year. Since inception in 2001, there has been a 77%
correlation between the index of prices paid and the three-month change
in the core intermediate materials PPI.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116h.jpg" align="right" border="0" height="265" width="353">The Empire
State index
of expected business conditions in six months rose during
November rose to its highest level since early-2004. The subseries for
new orders, employment, prices and capital expenditures each rose. The
inventory subseries rose sharply to it highest since early last year.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State. Participants from across the state in
a variety of industries respond to a questionnaire and report the
change in indicators from the previous month. Respondents also state
the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including
methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.
The Empire State data is available in Haver's SURVEYS
database.
Today's speech by Fed Chairman
Ben S. Bernanke On the Outlook for the Economy and Policy can
be found here <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20091116a.htm">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM" style="color: rgb(255, 255, 255);">Empire State
Manufacturing Survey</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">November '08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>23.51</td>
<td>34.57</td>
<td>-24.93</td>
<td>-10.10</td>
<td>17.23</td>
<td>20.24</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>16.66</td>
<td>30.82</td>
<td>-22.29</td>
<td>-6.25</td>
<td>15.71</td>
<td>20.11</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>1.32</td>
<td>10.39</td>
<td>-28.92</td>
<td>-5.36</td>
<td>11.28</td>
<td>12.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>10.53</td>
<td>19.48</td>
<td>20.48</td>
<td>46.99</td>
<td>35.64</td>
<td>41.88</td>
</tr>
</tbody>
</table>


</body></html>

The Federal Reserve Bank of New York reported that its November Empire State Factory Index of General Business Conditions slipped to 23.51 during November. Nevertheless, that level still remained near the highest level since 2004. The [...]

Empire State Factory Conditions Slip From October High

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

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Michael J. Moran

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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.

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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

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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.

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- 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.


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**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.

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**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.

260108Z5.jpg

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

260108Z6.jpg

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

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/1jXNsSMGpl60LzAx0fmibN?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Cooling Inflation, Diverging Growth

Sandy Batten

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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:

CPI Increases Remain Moderate

Canadian Manufacturing Data And Prospects For Q3 GDP

EMU Trade Balance Improves

Factory Production Unchanged As Gains Of Prior Three Months Stall

U.S. PPI Increases 0.3% Fueled By Food & Energy Prices

U.S. PPI Increases 0.3% Fueled By Food & Energy Prices

Japanese GDP Growth In Q3 Surprises: Due To Increased Demand Or Inventory Building?

Empire State Factory Conditions Slip From October High