Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116d.jpg" width="353"><img align="left" quot border="0" height="265&gt;&lt;/td&gt;\r\r\n &lt;/tr&gt;&lt;/table&gt;\r\r\n&lt;table border=" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116e.jpg" width="353"><tbody></tbody>
Perhaps the recent, moderate turnaround in final demand evident in the economy has begun to affect business&#39; inclination to shed inventory. Or maybe there&#39;s nothing left on the lot, in the warehouse or on the shelf to let go. Either way, business inventories slipped just 0.4% during September which was one-third of the monthly decumulation averaged back to October of last year. The decline also fell short of Consensus expectations for a 0.7% drop.
The overall slowdown was caused by a 0.6% increase in retail inventories, the first gain since last July. That increase resulted from a 3.8% (-27.9% y/y) rise in auto inventories which also was the first since July of last year. In contrast, the monthly rate of decline in nonauto inventories continued at 0.6% (-7.5% y/y). Furniture inventories increased 0.1% (-12.5% y/y) but clothing inventories fell a sharp 1.7% (-10.8% y/y). General merchandise inventories fell 0.4% and were off 6.3% y/y while building materials stores slipped just 0.1% (-9.6% y/y). Factory inventories fell a hard 1.0%. Meanwhile, wholesale inventories were off 0.9% and the y/y decline reached a nadir of 15.0%. Excluding oil, wholesale inventories fell 0.9% and the 15.4% rate of decline also was a new low.
Despite a possible interest in slowing the rate of inventory cutbacks, the inventory-to-sales ratio for total business held at the cycle low of 1.32 versus a high of 1.46 in January. The latest was the lowest since last September. In the retail sector the ratio moved higher as a result of the auto inventory rise, but at 1.42 it still was the second lowest of the cycle. For manufacturers and wholesalers, the ratio fell to new cycle lows.
The business sales and inventory data are available in Haver&#39;s USECON database.
The Behavior of Household and Business Investment over the Business Cycle from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/summer/pdf/hatchondo.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">Business Inventories (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</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>-0.4</td>
<td>-1.6</td>
<td>-1.1</td>
<td>-13.4</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6</td>
<td>-2.6</td>
<td>-1.0</td>
<td>-13.9</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>-0.6</td>
<td>-0.7</td>
<td>-0.5</td>
<td>-7.5</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.9</td>
<td>-1.3</td>
<td>-1.6</td>
<td>-15.0</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
</tr>
</tbody>
</table>
</body>
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Perhaps the recent, moderate turnaround in final demand evident in the economy has begun to affect business' inclination to shed inventory. Or maybe there's nothing left on the lot, in the warehouse or on the shelf to let go. Either [...]

U.S. Business Inventory Decumulation Slows

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116a.jpg" align="right" border="0" height="265" width="353">
Consumers
seem to be gaining back the inclination to spend. Retail sales last
month rose 1.4% after a 2.3% September decline that was deeper than
reported initially. A 0.9% October gain was the Consensus expectation.
The increase improved the y/y change in sales to -1.7% from declines of
roughly 10% earlier this 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 last three months and y/y growth
also improved. The retail sales data are available in Haver's USECON
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116b.jpg" align="right" border="0" height="265" width="353">
Auto sales of late have been influenced by Detroit's sales
programs. Last month, retail sales of motor vehicles jumped 7.4% after
a 14.3% decline during September and a 10.2% August jump. Less autos,
sales rose 0.2% versus a 0.4% expected gain. Higher gasoline prices
also have influenced overall sales growth. Without autos &amp;
gasoline, retail sales rose 0.3% last month, about as they did during
the prior two months.&nbsp;These gains raised the y/y change to
-0.8% from -4.4% as of July.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116c.jpg" align="right" border="0" height="265" width="353">
In soft goods, the 0.4%
increase in apparel store sales was the fourth gain in as many months
and the y/y change of 1.5% was improved from -9.7% during December.
Finally, improvement in sales at furniture, electronics &amp;
appliance store sales has been less impressive. Sales fell 0.7% last
month and the y/y change improved only to -7.3% from -14.3% at its
worst. Furniture store sales alone fell 0.8% (-7.6% y/y) after two
months of increase while sales of electronics &amp; appliances
slipped 0.6% (-7.0% y/y), also after two months of increase.Internet
and catalogue purchases were firmer and rose 1.0% (1.6% y/y). The gain
contrasted with a 7.6% y/y decline as of April. Finally, restaurant
sales jumped 1.2% (1.5% y/y) after little change either m/m or y/y as
of September. Finally, building materials sales continued their slump
and fell 2.4% (-15.0% y/y).



<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">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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail
Sales &amp; Food Services</a> (%)</td>
<td>1.4</td>
<td>-2.3</td>
<td>2.4</td>
<td>-1.7</td>
<td>-0.8</td>
<td>3.3</td>
<td>5.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Autos</td>
<td>0.2</td>
<td>0.4</td>
<td>0.8</td>
<td>-2.6</td>
<td>2.5</td>
<td>3.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Less Gasoline</td>
<td>0.3</td>
<td>0.3</td>
<td>0.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>3.6</td>
<td>5.7</td>
</tr>
</tbody>
</table>
</body></html>

Consumers seem to be gaining back the inclination to spend. Retail sales last month rose 1.4% after a 2.3% September decline that was deeper than reported initially. A 0.9% October gain was the Consensus expectation. The increase [...]

U.S. Retail Sales Rise As Core Sales Improve Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116a.jpg" align="right" border="0" height="265" width="353">Consumers
seem to be gaining back the inclination to spend. Retail sales last
month rose 1.4% after a 2.3% September decline that was deeper than
reported initially. A 0.9% October gain was the Consensus expectation.
The increase improved the y/y change in sales to -1.7% from declines of
roughly 10% earlier this 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 last three months and y/y growth
also improved. The retail sales data are available in Haver's USECON
database.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116b.jpg" align="right" border="0" height="265" width="353">Auto sales of late have been
influenced by Detroit's sales
programs. Last month, retail sales of motor vehicles jumped 7.4% after
a 14.3% decline during September and a 10.2% August jump. Less autos,
sales rose 0.2% versus a 0.4% expected gain. Higher gasoline prices
also have influenced overall sales growth. Without autos &amp;
gasoline, retail sales rose 0.3% last month, about as they did during
the prior two months.&nbsp;These gains raised the y/y change to
-0.8% from -4.4% as of July.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116c.jpg" align="right" border="0" height="265" width="353">In soft goods, the 0.4%
increase in apparel store sales was the fourth gain in as many months
and the y/y change of 1.5% was improved from -9.7% during December.
Finally, improvement in sales at furniture, electronics &amp;
appliance store sales has been less impressive. Sales fell 0.7% last
month and the y/y change improved only to -7.3% from -14.3% at its
worst. Furniture store sales alone fell 0.8% (-7.6% y/y) after two
months of increase while sales of electronics &amp; appliances
slipped 0.6% (-7.0% y/y), also after two months of increase.

Internet
and catalogue purchases were firmer and rose 1.0% (1.6% y/y). The gain
contrasted with a 7.6% y/y decline as of April. Finally, restaurant
sales jumped 1.2% (1.5% y/y) after little change either m/m or y/y as
of September. Finally, building materials sales continued their slump
and fell 2.4% (-15.0% y/y).
<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">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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail
Sales &amp; Food Services</a> (%)</td>
<td>1.4</td>
<td>-2.3</td>
<td>2.4</td>
<td>-1.7</td>
<td>-0.8</td>
<td>3.3</td>
<td>5.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Autos</td>
<td>0.2</td>
<td>0.4</td>
<td>0.8</td>
<td>-2.6</td>
<td>2.5</td>
<td>3.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Less Gasoline</td>
<td>0.3</td>
<td>0.3</td>
<td>0.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>3.6</td>
<td>5.7</td>
</tr>
</tbody>
</table>

 U.S. Business Inventory
Decumulation Slows 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 16, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116d.jpg" align="left" border="0" height="265" width="353"><img quot src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116e.jpg" align="left" border="0" height="265" width="353">
Perhaps the recent, moderate turnaround in final demand
evident in the economy has begun to affect business' inclination to
shed inventory. Or maybe there's nothing left on the lot, in the
warehouse or on the shelf to let go. Either way, business inventories
slipped just 0.4% during September which was one-third of the monthly
decumulation averaged back to October of last year. The decline also
fell short of Consensus expectations for a 0.7% drop.
The overall slowdown was caused by a 0.6% increase in retail
inventories, the first gain since last July. That increase resulted
from a 3.8% (-27.9% y/y) rise in auto inventories which also was the
first since July of last year. In contrast, the monthly rate of decline
in nonauto inventories continued at 0.6% (-7.5% y/y). Furniture
inventories increased 0.1% (-12.5% y/y) but clothing inventories fell a
sharp 1.7% (-10.8% y/y). General merchandise inventories fell 0.4% and
were off 6.3% y/y while building materials stores slipped just 0.1%
(-9.6% y/y). Factory inventories fell a hard 1.0%. Meanwhile, wholesale
inventories were off 0.9% and the y/y decline reached a nadir of 15.0%.
Excluding oil, wholesale inventories fell 0.9% and the 15.4% rate of
decline also was a new low.
Despite a possible interest in slowing the rate of inventory
cutbacks, the inventory-to-sales ratio for total business held at the
cycle low of 1.32 versus a high of 1.46 in January. The latest was the
lowest since last September. In the retail sector the ratio moved
higher as a result of the auto inventory rise, but at 1.42 it still was
the second lowest of the cycle. For manufacturers and wholesalers, the
ratio fell to new cycle lows.
The business sales and inventory data are available in Haver's
USECON database.
The Behavior of Household and Business Investment
over the Business Cycle from the Federal Reserve Bank of
Richmond can be found <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/summer/pdf/hatchondo.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">Business
Inventories (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</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>-0.4</td>
<td>-1.6</td>
<td>-1.1</td>
<td>-13.4</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6</td>
<td>-2.6</td>
<td>-1.0</td>
<td>-13.9</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>-0.6</td>
<td>-0.7</td>
<td>-0.5</td>
<td>-7.5</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.9</td>
<td>-1.3</td>
<td>-1.6</td>
<td>-15.0</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
</tr>
</tbody>
</table>
 Empire State Factory Conditions
Slip From October High 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 16, 2009



<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>

 Japanese GDP Growth In Q3
Surprises: Due To Increased Demand Or Inventory Building? 
by <a href="/comment/Curley.html">Louise
Curley</a> November 16, 2009



<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>

U.S. Retail Sales Rise As CoreSales Improve Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113h.jpg" align="right" border="0" height="265" width="353">
The U.S. economy is strengthening, so suggests price pressures
in the foreign trade accounts. Overall import prices rose 0.7%, though
the gain fell short of Consensus expectations for a 1.0% increase. The
rise was led by a 0.9% increase in petroleum prices which reversed a
like decline in September and promises to be followed by another strong
gain this month. The report indicated that non-oil import prices rose
0.7%, which was the strongest monthly increase since June of last year.
Moreover, on a three-month basis, these prices have risen at a 5.7%
annual rate after declining at a 13.6% rate as of last December.
(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/091113i.jpg" align="right" border="0" height="265" width="353">

Import prices break down as follows: Chemical import prices
were quite strong and posted a 2.9% increase but they still were down
16.1% from last year. Iron &amp; steel prices also were strong, up
2.4% m/m, but down by one-third from a year ago. Food prices increased
0.1% and at an 8.0% rate during the last three months. Capital goods
prices similarly posted a modest gain after five months of no change.
Prices for nonauto consumer goods rose 0.3% lifting the three-month
gain to 1.2% versus its weakest reading of -2.6% in January. Durable
consumer goods prices rose 0.4% (-0.9% y/y) but prices of household
goods slipped (-1.9% y/y) and furniture prices fell as well (-1.2%
y/y). Apparel prices were unchanged for the third month (-0.5% y/y).
Petroleum prices reversed their prior month's decline with a 0.9%
increase during October. This month crude oil prices have found further
strength with a rise to $76.94 yesterday from the October average of
$75.82 per barrel.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113j.jpg" align="right" border="0" height="265" width="353">

Total export prices resumed increasing modestly. The 0.3% rise
was led by a 0.3% gain in nonagricultural export prices, down 2.7% y/y.
Agricultural export prices actually fell 1.0% (-10.0% 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">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">Import - All Commodities</td>
<td>0.7</td>
<td>0.2</td>
<td>1.6</td>
<td>-5.7</td>
<td>11.5</td>
<td>4.2</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>0.9</td>
<td>-0.9</td>
<td>7.7</td>
<td>-12.2</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>0.4</td>
<td>0.3</td>
<td>-3.8</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>0.3</td>
<td>-0.2</td>
<td>0.6</td>
<td>-3.4</td>
<td>6.0</td>
<td>4.9</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</body></html>

The U.S. economy is strengthening, so suggests price pressures in the foreign trade accounts. Overall import prices rose 0.7%, though the gain fell short of Consensus expectations for a 1.0% increase. The rise was led by a 0.9% [...]

U.S. Import Prices Rise, Both Oil & Nonoil

Robert Brusca

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113d.jpg" align="left" border="0" height="265" width="353">
European GDP turned higher in Q3 but the results were
generally less than expected. Among the early &#8216;flash&#8217; GDP reporters
France posted a small rise but it was the second rise in a row for
France. Greece with always volatile results posted the strongest rise
followed by Austria. Italy and The Netherlands have the largest Yr/Yr
declines in this group; the EMU Yr/Yr drop is of 4.1%. Greece is lower
Yr/Yr by just 1.6% Austria but just 2.2%. Germany the largest e-Area
economy is off by 4.8% Yr/Yr even though it has two quarters in a row
of solid growth under its belt. 
 

Flash reports do not provide any GDP detail but the various
authorities do offer some account of their results. Both Germany and
France cited the role of exports in pushing growth ahead. In Germany
investment demand was also described as a key factor. 
 

Paragon of strength or parasite of growth? 
-- An unfolding theme in the Area is that exports, external demand, is
driving the European recovery. In France domestic demand was flat in
the quarter despite a ton of ongoing stimulus that has left France
unable to get its fiscal budget gap in line as soon as the EU
Commission wants it to. Hungary, in its GDP release today, complained
that exports were weak and that was sapping GDP strength. The largest
industrial economies would seem to be good candidates to spur world
growth with their own domestic demand instead of relying on the demand
increases elsewhere. Chancellor Merkel has defended Germanys &#8216;right&#8217; to
be a leading exporters, Japan always seeks a surplus to &#8216;defend&#8217;
against the country&#8217;s lack of oil and dependence on oil and other
natural resource imports. China&#8217;s trade surplus grew larger last month.
How can &#8216;everyone&#8217; have export led growth? How can the US (whose
current account deficit surged in November) get its deficit in line if
major competitor countries insist on running trade surpluses, spurring
exports and maintaining weak domestic demand at home? This is something
the G-20 has been completely unable to sort out. 
 

These sorts of structural imbalances helped to lead to the
last financial crisis. Such flows underpinned the 1973-78 oil boom-bust
cycle. Factors that put persistent surpluses sand deficits in play are
dangerous and the G-20 has not plan to sort it out. At the weaker
dollar works to mitigate the US imbalance problem even if it is playing
with fire. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> European Growth for Selected Flash GDP Results</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Q/Q Saar</td>
<td colspan="3">Yr/Yr</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td> Q3-09</td>
<td> Q2-09</td>
<td> Q1-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
</tr>
<tr class="even">
<td class="firstcol">Austria</td>
<td>14.0%</td>
<td>-3.7%</td>
<td>-13.8%</td>
<td>-2.2%</td>
<td>-5.4%</td>
<td>-4.8%</td>
</tr>
<tr class="even">
<td class="firstcol">France</td>
<td>1.1%</td>
<td>1.1%</td>
<td>-5.5%</td>
<td>-2.4%</td>
<td>-2.9%</td>
<td>-3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>2.9%</td>
<td>1.8%</td>
<td>-13.4%</td>
<td>-4.8%</td>
<td>-5.8%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>17.6%</td>
<td>32.7%</td>
<td>-29.8%</td>
<td>-1.6%</td>
<td>-1.2%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>2.4%</td>
<td>-1.9%</td>
<td>-10.5%</td>
<td>-4.6%</td>
<td>-5.9%</td>
<td>-6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>1.7%</td>
<td>-4.0%</td>
<td>-9.4%</td>
<td>-4.0%</td>
<td>-5.1%</td>
<td>-4.2%</td>
</tr>
<tr>
<td class="firstcol"> EMU</td>
<td> 1.5%</td>
<td> -0.7%</td>
<td> -9.6%</td>
<td> -4.1%</td>
<td> -4.8%</td>
<td> -4.9%</td>
</tr>
</tbody>
</table>
</body></html>

European GDP turned higher in Q3 but the results were generally less than expected. Among the early ‘flash’ GDP reporters France posted a small rise but it was the second rise in a row for France. Greece with always volatile results [...]

European GDP Turns Higher-But Disappoints

Carol Stone, CBE

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113e.jpg" align="right" border="0" height="265" width="353">Consumer
sentiment declined again in early November, falling from October's 70.6
to 66.0, measured by the Reuters/University of Michigan Index of
Consumer Sentiment.&nbsp; Forecasters had looked for only a
marginal decrease to 70.0. The reading on expectations for
mid-November was down 4.9 points to 63.7 from October's 68.6. The
primary weakness came in survey participants' outlook for business
conditions over the next year.&nbsp; That had leaped to 88 in
September and then fell back in October to 81 and now to 67.&nbsp;
This move seems to show that the nice rise in September was a temporary
blip, reversed last month and again now.&nbsp; Indeed, November's
expectations for "times" to be "good" fell by 7 points and those for
"times" to be "bad" increased by 7 points from October's
amounts.&nbsp; Expected personal finances were also less
optimistic, decreasing by 6 points in this survey round after a 2-point
uptick last month.&nbsp; The latest move was related to a rise in
the number of people who expect their income to fall during the coming
year.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113f.jpg" align="right" border="0" height="265" width="353">The
reading of current economic conditions also fell; it went
down 4.1 points from October to mid-November.&nbsp; People's
assessments of their current financial condition and business
conditions in general both moved adversely.&nbsp; In particular,
more respondents indicated that current "bad times" make this a "bad
time" to buy large consumer items.&nbsp; At 21, this reading was up
3 points in the month and returned to its level back at the beginning
of this year.&nbsp; The record high for this negative indicator is
24, reached in August 2008. Prior to this cycle, the record was 17 in
October 1992.
Expected price inflation during the next year
amounted to 3.3% in this mid-November survey, according to the mean of
participants' estimates, edging up from October's 3.2%.&nbsp; In
contrast, the median of those estimates ticked down from 2.9% to 2.8%,
suggesting that people see little overall change in price pressures
this month.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113g.jpg" align="right" border="0" height="265" width="353">Respondents'
views on government
policy, which may eventually influence economic expectations, showed
mixed developments in this current survey.&nbsp; The number
expressing a favorable opinion rose from 86% in October to 88%,
reflected in a like increase in the number believing government is
doing "a good job" in November.&nbsp; At the same time, the
open-ended query about news reports people have heard gave a negative
spin to their impressions of government; the number hearing favorable
news about government fell from 6% last month to 3% and the number
hearing unfavorable news increased from 7% to 11%.&nbsp; While this
latter "news" reading has hardly ever been positive on a net basis, the
current -8 is well above averages between -3.5 and -4.&nbsp; So
people are clearly uneasy about the news they're getting on government
even though they're feeling marginally better about how government is
working in the economy.
 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.&nbsp; 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.p
<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-November
</th>
<th scope="col">October </th>
<th scope="col">September</th>
<th scope="col">Oct 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">Consumer Sentiment</td>
<td>66.0</td>
<td>70.6</td>
<td>73.5</td>
<td>18.2%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.6</td>
<td>73.7</td>
<td>73.4</td>
<td>21.0</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>63.7</td>
<td>68.6</td>
<td>73.5</td>
<td>20.4</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>

</body></html>

Consumer sentiment declined again in early November, falling from October's 70.6 to 66.0, measured by the Reuters/University of Michigan Index of Consumer Sentiment. Forecasters had looked for only a marginal decrease to 70.0. The [...]

Michigan Consumer Sentiment Sags Once Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113a.jpg" align="right" border="0" height="265" width="353">
Following
months of shrinkage due to lower oil prices and a poor economy, the
September U.S. trade deficit widened significantly. The deficit of
$36.5B followed a little-revised August figure of $30.8B and the m/m
deterioration greatly exceeded Consensus expectations for a deficit of
$31.6B.&nbsp;The latest figure was the deepest trade shortfall
since January. The rise in oil prices is evident in the trade deficit
figures adjusted for inflation. The m/m deterioration in the real
deficit was just under half that for nominal. However, offsetting that
was the improved economy which also lifted the inflation-adjusted
deficit as real imports jumped 6.2% m/m and by 10.1% over the last
three months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113b.jpg" align="right" border="0" height="265" width="353">
During September, petroleum imports jumped 20.9% after
having risen by over one-half since February. Higher prices prompted
that increase as crude oil costs rose to a September average of $68.17
per barrel versus the February low of $39.22. Since then crude oil has
risen even further to roughly $75 per barrel. The firmer economy raised
real imports of petroleum products by 6.9% during September and by 7.7%
over the last twelve months. That rise compares to declines of between
one and four percent during each of the last three years.
Economic recovery also was apparent in real nonoil imports which rose
4.2% during September and 11.3% during the last three months. These
gains lessened the y/y decline to 14.8% from its worst of 24.6%. Real
non-auto capital goods imports rose 2.5% (-18.9% y/y) and by 6.7%
during the last three months. Real nonauto consumer goods rose 1.9% and
5.5% since June. Both of these increases are turnarounds from sharp
declines through June. Real automotive vehicles &amp; parts imports
also turned higher by 11.4% (-12.1% y/y) in September and by nearly
one-half since June.&nbsp;Despite the lower value of the dollar,
economic recovery is further suggested by better travel figures.
Imports of services have recently risen, with travel imports strong
during three of the last four months as more U.S. residents went
abroad. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113c.jpg" align="right" border="0" height="265" width="353">
Reflecting the competitive value of the dollar, real
merchandise exports during September rose 4.4% (-9.5% y/y) following
three months of 7.0% increase. That's a turnaround from 20% rates of
decline this summer. The chained dollar value of real capital goods
exports led the September increase with a 5.2% gain (-14.3% y/y) which
reversed an August drop. Non-auto consumer goods exports also rose 3.6%
and the y/y decline eased to 5.6% from the peak of -15.7%. Auto exports
were strong for the fourth straight month and the y/y decline of 26.2%
was half its worst reading. Exports of services also have been strong
of late.The international trade data can be found in
Haver's USECON database. Detailed figures are
available in the USINT database. Trade, Globalization and the
Financial Crisis from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0908.html">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</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">U.S. Trade Deficit</td>
<td>$-36.5</td>
<td>$30.8B</td>
<td>$31.9B</td>
<td>$60.1B (9/08)</td>
<td>$695.9</td>
<td>$701.4</td>
<td>$760.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Exports - Goods
&amp; Services</td>
<td>2.9</td>
<td>0.2%</td>
<td>2.5%</td>
<td>-13.2%</td>
<td>11.2%</td>
<td>13.2%</td>
<td>13.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports - Goods
&amp; Services</td>
<td>5.8</td>
<td>-0.4%</td>
<td>4.9%</td>
<td>-20.6%</td>
<td>7.6</td>
<td>6.0%</td>
<td>10.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>20.9</td>
<td>-5.4%</td>
<td>3.3%</td>
<td>-31.9%</td>
<td>37.0%</td>
<td>9.4%</td>
<td>20.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>4.4</td>
<td>0.3%</td>
<td>6.4%</td>
<td>-19.2%</td>
<td>1.5%</td>
<td>4.8%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>
</body></html>

Following months of shrinkage due to lower oil prices and a poor economy, the September U.S. trade deficit widened significantly. The deficit of $36.5B followed a little-revised August figure of $30.8B and the m/m deterioration [...]

U.S. Trade Deficit Increases Due To Higher Oil Costs, Improved Economy

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113a.jpg" align="right" border="0" height="265" width="353">Following
months of shrinkage due to lower oil prices and a poor economy, the
September U.S. trade deficit widened significantly. The deficit of
$36.5B followed a little-revised August figure of $30.8B and the m/m
deterioration greatly exceeded Consensus expectations for a deficit of
$31.6B.&nbsp;The latest figure was the deepest trade shortfall
since January. The rise in oil prices is evident in the trade deficit
figures adjusted for inflation. The m/m deterioration in the real
deficit was just under half that for nominal. However, offsetting that
was the improved economy which also lifted the inflation-adjusted
deficit as real imports jumped 6.2% m/m and by 10.1% over the last
three months.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113b.jpg" align="right" border="0" height="265" width="353">During
September, petroleum imports jumped 20.9% after
having risen by over one-half since February. Higher prices prompted
that increase as crude oil costs rose to a September average of $68.17
per barrel versus the February low of $39.22. Since then crude oil has
risen even further to roughly $75 per barrel. The firmer economy raised
real imports of petroleum products by 6.9% during September and by 7.7%
over the last twelve months. That rise compares to declines of between
one and four percent during each of the last three years.
Economic recovery also was apparent in real nonoil imports
which rose
4.2% during September and 11.3% during the last three months. These
gains lessened the y/y decline to 14.8% from its worst of 24.6%. Real
non-auto capital goods imports rose 2.5% (-18.9% y/y) and by 6.7%
during the last three months. Real nonauto consumer goods rose 1.9% and
5.5% since June. Both of these increases are turnarounds from sharp
declines through June. Real automotive vehicles &amp; parts imports
also turned higher by 11.4% (-12.1% y/y) in September and by nearly
one-half since June.&nbsp;Despite the lower value of the dollar,
economic recovery is further suggested by better travel figures.
Imports of services have recently risen, with travel imports strong
during three of the last four months as more U.S. residents went
abroad. 
 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113c.jpg" align="right" border="0" height="265" width="353">Reflecting
the competitive value of the dollar, real
merchandise exports during September rose 4.4% (-9.5% y/y) following
three months of 7.0% increase. That's a turnaround from 20% rates of
decline this summer. The chained dollar value of real capital goods
exports led the September increase with a 5.2% gain (-14.3% y/y) which
reversed an August drop. Non-auto consumer goods exports also rose 3.6%
and the y/y decline eased to 5.6% from the peak of -15.7%. Auto exports
were strong for the fourth straight month and the y/y decline of 26.2%
was half its worst reading. Exports of services also have been strong
of late.
The international trade data can be found in
Haver's USECON database. Detailed figures are
available in the USINT database.
 Trade,
Globalization and the
Financial Crisis from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0908.html">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</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">U.S. Trade Deficit</td>
<td>$-36.5</td>
<td>$30.8B</td>
<td>$31.9B</td>
<td>$60.1B (9/08)</td>
<td>$695.9</td>
<td>$701.4</td>
<td>$760.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Exports - Goods
&amp; Services</td>
<td>2.9</td>
<td>0.2%</td>
<td>2.5%</td>
<td>-13.2%</td>
<td>11.2%</td>
<td>13.2%</td>
<td>13.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports - Goods
&amp; Services</td>
<td>5.8</td>
<td>-0.4%</td>
<td>4.9%</td>
<td>-20.6%</td>
<td>7.6</td>
<td>6.0%</td>
<td>10.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>20.9</td>
<td>-5.4%</td>
<td>3.3%</td>
<td>-31.9%</td>
<td>37.0%</td>
<td>9.4%</td>
<td>20.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>4.4</td>
<td>0.3%</td>
<td>6.4%</td>
<td>-19.2%</td>
<td>1.5%</td>
<td>4.8%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>

 Michigan Consumer Sentiment Sags
Once Again 
by <a href="/comment/Stone.html">Carol
Stone</a> November 13, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113e.jpg" align="right" border="0" height="265" width="353">Consumer
sentiment declined again in early November, falling from October's 70.6
to 66.0, measured by the Reuters/University of Michigan Index of
Consumer Sentiment.&nbsp; Forecasters had looked for only a
marginal decrease to 70.0.
 The reading on expectations for
mid-November was down 4.9 points to 63.7 from October's 68.6. The
primary weakness came in survey participants' outlook for business
conditions over the next year.&nbsp; That had leaped to 88 in
September and then fell back in October to 81 and now to 67.&nbsp;
This move seems to show that the nice rise in September was a temporary
blip, reversed last month and again now.&nbsp; Indeed, November's
expectations for "times" to be "good" fell by 7 points and those for
"times" to be "bad" increased by 7 points from October's
amounts.&nbsp; Expected personal finances were also less
optimistic, decreasing by 6 points in this survey round after a 2-point
uptick last month.&nbsp; The latest move was related to a rise in
the number of people who expect their income to fall during the coming
year.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113f.jpg" align="right" border="0" height="265" width="353">The
reading of current economic conditions also fell; it went
down 4.1 points from October to mid-November.&nbsp; People's
assessments of their current financial condition and business
conditions in general both moved adversely.&nbsp; In particular,
more respondents indicated that current "bad times" make this a "bad
time" to buy large consumer items.&nbsp; At 21, this reading was up
3 points in the month and returned to its level back at the beginning
of this year.&nbsp; The record high for this negative indicator is
24, reached in August 2008. Prior to this cycle, the record was 17 in
October 1992.
Expected price inflation during the next year
amounted to 3.3% in this mid-November survey, according to the mean of
participants' estimates, edging up from October's 3.2%.&nbsp; In
contrast, the median of those estimates ticked down from 2.9% to 2.8%,
suggesting that people see little overall change in price pressures
this month.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113g.jpg" align="right" border="0" height="265" width="353">Respondents'
views on government
policy, which may eventually influence economic expectations, showed
mixed developments in this current survey.&nbsp; The number
expressing a favorable opinion rose from 86% in October to 88%,
reflected in a like increase in the number believing government is
doing "a good job" in November.&nbsp; At the same time, the
open-ended query about news reports people have heard gave a negative
spin to their impressions of government; the number hearing favorable
news about government fell from 6% last month to 3% and the number
hearing unfavorable news increased from 7% to 11%.&nbsp; While this
latter "news" reading has hardly ever been positive on a net basis, the
current -8 is well above averages between -3.5 and -4.&nbsp; So
people are clearly uneasy about the news they're getting on government
even though they're feeling marginally better about how government is
working in the economy.
 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.&nbsp; 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.p
<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-November
</th>
<th scope="col">October </th>
<th scope="col">September</th>
<th scope="col">Oct 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">Consumer Sentiment</td>
<td>66.0</td>
<td>70.6</td>
<td>73.5</td>
<td>18.2%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.6</td>
<td>73.7</td>
<td>73.4</td>
<td>21.0</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>63.7</td>
<td>68.6</td>
<td>73.5</td>
<td>20.4</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>

 European GDP Turns Higher-But
Disappoints 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 13, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113d.jpg" align="left" border="0" height="265" width="353">
European GDP turned higher in Q3 but the results were
generally less than expected. Among the early &#8216;flash&#8217; GDP reporters
France posted a small rise but it was the second rise in a row for
France. Greece with always volatile results posted the strongest rise
followed by Austria. Italy and The Netherlands have the largest Yr/Yr
declines in this group; the EMU Yr/Yr drop is of 4.1%. Greece is lower
Yr/Yr by just 1.6% Austria but just 2.2%. Germany the largest e-Area
economy is off by 4.8% Yr/Yr even though it has two quarters in a row
of solid growth under its belt. 
 

Flash reports do not provide any GDP detail but the various
authorities do offer some account of their results. Both Germany and
France cited the role of exports in pushing growth ahead. In Germany
investment demand was also described as a key factor. 
 

Paragon of strength or parasite of growth? 
-- An unfolding theme in the Area is that exports, external demand, is
driving the European recovery. In France domestic demand was flat in
the quarter despite a ton of ongoing stimulus that has left France
unable to get its fiscal budget gap in line as soon as the EU
Commission wants it to. Hungary, in its GDP release today, complained
that exports were weak and that was sapping GDP strength. The largest
industrial economies would seem to be good candidates to spur world
growth with their own domestic demand instead of relying on the demand
increases elsewhere. Chancellor Merkel has defended Germanys &#8216;right&#8217; to
be a leading exporters, Japan always seeks a surplus to &#8216;defend&#8217;
against the country&#8217;s lack of oil and dependence on oil and other
natural resource imports. China&#8217;s trade surplus grew larger last month.
How can &#8216;everyone&#8217; have export led growth? How can the US (whose
current account deficit surged in November) get its deficit in line if
major competitor countries insist on running trade surpluses, spurring
exports and maintaining weak domestic demand at home? This is something
the G-20 has been completely unable to sort out. 
 

These sorts of structural imbalances helped to lead to the
last financial crisis. Such flows underpinned the 1973-78 oil boom-bust
cycle. Factors that put persistent surpluses sand deficits in play are
dangerous and the G-20 has not plan to sort it out. At the weaker
dollar works to mitigate the US imbalance problem even if it is playing
with fire. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> European
Growth for Selected Flash GDP Results</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Q/Q Saar</td>
<td colspan="3">Yr/Yr</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td> Q3-09</td>
<td> Q2-09</td>
<td> Q1-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
</tr>
<tr class="even">
<td class="firstcol">Austria</td>
<td>14.0%</td>
<td>-3.7%</td>
<td>-13.8%</td>
<td>-2.2%</td>
<td>-5.4%</td>
<td>-4.8%</td>
</tr>
<tr class="even">
<td class="firstcol">France</td>
<td>1.1%</td>
<td>1.1%</td>
<td>-5.5%</td>
<td>-2.4%</td>
<td>-2.9%</td>
<td>-3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>2.9%</td>
<td>1.8%</td>
<td>-13.4%</td>
<td>-4.8%</td>
<td>-5.8%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>17.6%</td>
<td>32.7%</td>
<td>-29.8%</td>
<td>-1.6%</td>
<td>-1.2%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>2.4%</td>
<td>-1.9%</td>
<td>-10.5%</td>
<td>-4.6%</td>
<td>-5.9%</td>
<td>-6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>1.7%</td>
<td>-4.0%</td>
<td>-9.4%</td>
<td>-4.0%</td>
<td>-5.1%</td>
<td>-4.2%</td>
</tr>
<tr>
<td class="firstcol"> EMU</td>
<td> 1.5%</td>
<td> -0.7%</td>
<td> -9.6%</td>
<td> -4.1%</td>
<td> -4.8%</td>
<td> -4.9%</td>
</tr>
</tbody>
</table>
 U.S. Import Prices Rise, Both Oil
&amp; Nonoil 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 13, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113h.jpg" align="right" border="0" height="265" width="353">
The U.S. economy is strengthening, so suggests price pressures
in the foreign trade accounts. Overall import prices rose 0.7%, though
the gain fell short of Consensus expectations for a 1.0% increase. The
rise was led by a 0.9% increase in petroleum prices which reversed a
like decline in September and promises to be followed by another strong
gain this month. The report indicated that non-oil import prices rose
0.7%, which was the strongest monthly increase since June of last year.
Moreover, on a three-month basis, these prices have risen at a 5.7%
annual rate after declining at a 13.6% rate as of last December.
(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/091113i.jpg" align="right" border="0" height="265" width="353">

Import prices break down as follows: Chemical import prices
were quite strong and posted a 2.9% increase but they still were down
16.1% from last year. Iron &amp; steel prices also were strong, up
2.4% m/m, but down by one-third from a year ago. Food prices increased
0.1% and at an 8.0% rate during the last three months. Capital goods
prices similarly posted a modest gain after five months of no change.
Prices for nonauto consumer goods rose 0.3% lifting the three-month
gain to 1.2% versus its weakest reading of -2.6% in January. Durable
consumer goods prices rose 0.4% (-0.9% y/y) but prices of household
goods slipped (-1.9% y/y) and furniture prices fell as well (-1.2%
y/y). Apparel prices were unchanged for the third month (-0.5% y/y).
Petroleum prices reversed their prior month's decline with a 0.9%
increase during October. This month crude oil prices have found further
strength with a rise to $76.94 yesterday from the October average of
$75.82 per barrel.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091113j.jpg" align="right" border="0" height="265" width="353">

Total export prices resumed increasing modestly. The 0.3% rise
was led by a 0.3% gain in nonagricultural export prices, down 2.7% y/y.
Agricultural export prices actually fell 1.0% (-10.0% 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">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">Import - All Commodities</td>
<td>0.7</td>
<td>0.2</td>
<td>1.6</td>
<td>-5.7</td>
<td>11.5</td>
<td>4.2</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>0.9</td>
<td>-0.9</td>
<td>7.7</td>
<td>-12.2</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>0.4</td>
<td>0.3</td>
<td>-3.8</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>0.3</td>
<td>-0.2</td>
<td>0.6</td>
<td>-3.4</td>
<td>6.0</td>
<td>4.9</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Trade Deficit Increases DueTo Higher Oil Costs, Improved Economy

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

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Michael J. Moran

260109A.jpg

260109B.jpg

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

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

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

260109C.jpg

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

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

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

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

A Soft Tone in the Labor Market

Winnie Tapasanun

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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

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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.

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**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.

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

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

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Charts of the Week: Cooling Inflation, Diverging Growth

Sandy Batten

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

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

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

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

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