Robert Brusca

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

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

German Retail Sales Rise But Amass No Momentum

Tom Moeller

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

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

Weekly Gasoline Prices Are Flat Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201a.jpg" align="right" border="0" height="265" width="353">The pace of
this economic recovery has lagged of late as the strength of inventory
rebuilding has disappointed. The National Association of Purchasing
Management reported that the November composite index unexpectedly
slipped to 53.6 from 55.7 during October. A more modest decline to 54.7
had been the Consensus expectation. (Any reading above the break-even
point of 50 suggests rising activity .) Despite the November decline,
the reading was up from the low of 32.9 reached last December. The ISM
data is available in Haver's USECON database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201b.jpg" align="right" border="0" height="265" width="353">While just
above the break-even level of 50, the positive
factory-sector growth rate suggested by the ISM index is in-line with
recoveries accompanying past upturns from severe recessions. To mirror
the strength of those recoveries, however, the index still needs to
rise to a level near or above the level of 60.
Holding back any
improvement in the total index was a decline in the inventory component
to 41.3 from 46.9 in October. The latest was the lowest level since
August. An increased 19% (NSA) of respondents indicated that they were
raising inventory levels versus 16% last November. However, during the
strong 2005 inventory accumulation 26% of firms indicated that they
were raising inventories. A decline in the production component to
59.9 from the cycle high of 63.3 also was part of the decline in the
November composite index. During the last ten years there has been an
84% correlation between the level of the production component of the
composite index and the three-month growth in factory sector industrial
production. It is appropriate to correlate the ISM index level
with factory sector output growth because the ISM
index is a diffusion index. It measures growth by using all of the
positive changes in activity added to one half of the zero change in
activity measures. The pace of supplier deliveries sped up
last month with the easing of production.
Finally, the employment
index fell to 50.8 from 53.1 during October. Still, the level indicated
positive growth in factory-sector payrolls. It has increased from a low
reading of 26.1 this past February. Twenty percent of respondents
indicated higher payrolls versus only seven percent last November. Just
sixteen percent indicated a lower level of hiring versus forty percent
last November. During the last ten years there has been a 90%
correlation between the index level and the three-month change in
manufacturing payrolls.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091201c.jpg" align="right" border="0" height="265" width="353">The new
orders index was the only component
series to improve m/m during November. The modest gain to 60.3,
however, left it below the August high. Working the other way, the
export order index improved modestly m/m to 56.0 which was the highest
level since August of last year and up from 35.5 last December. During
the last ten years there has been a 53% correlation between the index
and the q/q change in real exports of goods in the GDP accounts.· The
separate index of prices paid fell ten points to its lowest level since
July. Still, the figure was up from the December low of 18.0. During
the last twenty years there has been a 79% correlation between the
price index and the three-month change in the PPI for intermediate
goods.
 The ISM data are available in Haver's USECON
database.
 Do Alternative Measures of GDP Affect Its
Interpretation? from the Federal Reserve Bank of New York can
be found <a href="http://www.newyorkfed.org/research/current_issues/ci15-7.pdf">here
</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM
Mfg</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>53.6</td>
<td>55.7</td>
<td>52.6</td>
<td>36.6</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>60.3</td>
<td>58.5</td>
<td>60.8</td>
<td>28.1</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>50.8</td>
<td>53.1</td>
<td>46.2</td>
<td>34.3</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Production</td>
<td>59.9</td>
<td>63.3</td>
<td>55.7</td>
<td>32.0</td>
<td>45.2</td>
<td>54.1</td>
<td>55.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Supplier Deliveries</td>
<td>55.7</td>
<td>56.9</td>
<td>58.0</td>
<td>48.6</td>
<td>51.6</td>
<td>51.2</td>
<td>54.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>41.3</td>
<td>46.9</td>
<td>42.5</td>
<td>40.1</td>
<td>45.5</td>
<td>45.4</td>
<td>48.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>55.0</td>
<td>65.0</td>
<td>63.5</td>
<td>25.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>

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The pace of this economic recovery has lagged of late as the strength of inventory rebuilding has disappointed. The National Association of Purchasing Management reported that the November composite index unexpectedly slipped to 53.6 [...]

ISM Factory Index Disappoints As Inventory Rebuilding Lags

Louise Curley

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

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

The Canadian Economy Begins to Show Growth

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

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

EMU Prices Rise - Has The Worm Tuned?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091130a.jpg" align="right" border="0" height="265" width="353">
The
Chicago Purchasing Managers' Association reported that its November
Business Barometer improved to the highest level since August of last
year. The index level of 56.1 was up sharply from the March low of
31.4. The survey covers a sample of over 200 purchasing professionals
in the Chicago area with a monthly response rate of about 50%. During
the last ten years there has been a 72% correlation between the
Business Barometer and the three-month change in factory sector
industrial production. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091130b.jpg" align="right" border="0" height="265" width="353">
The Association indicated that gains in the
index of vendor deliveries (slower speed), order backlogs and
employment contributed greatly to the November rise in the overall
index. The new orders index rose modestly m/m but was more than double
the year-ago level. The production component fell and reversed much of
the prior month's increase. Nevertheless, it remained nearly double the
January low. The index of prices paid increased and made up an
October decline. The latest level was more than double its May low.
During the last ten years there has been a 78% correlation between the
Prices Paid Index and the three-month change in the PPI for
intermediate materials. Why Are Banks Failing?
from the Federal Reserve Bank of St. Louis can be found <a href="http://www.stlouisfed.org/publications/cb/articles/?id=1667">here
</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Purchasing Mgs.</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Business Barometer</td>
<td>56.1</td>
<td>54.2</td>
<td>46.1</td>
<td>33.6</td>
<td>46.8</td>
<td>54.4</td>
<td>56.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production</td>
<td>57.6</td>
<td>63.9</td>
<td>47.2</td>
<td>34.1</td>
<td>48.1</td>
<td>58.3</td>
<td>60.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
New Orders</td>
<td>62.8</td>
<td>61.4</td>
<td>46.3</td>
<td>29.2</td>
<td>46.7</td>
<td>57.7</td>
<td>59.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment</td>
<td>41.9</td>
<td>38.3</td>
<td>38.8</td>
<td>33.4</td>
<td>41.4</td>
<td>51.5</td>
<td>51.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Prices Paid</td>
<td>52.6</td>
<td>48.6</td>
<td>51.3</td>
<td>54.1</td>
<td>73.5</td>
<td>66.5</td>
<td>72.8</td>
</tr>
</tbody>
</table>

</body></html>

The Chicago Purchasing Managers' Association reported that its November Business Barometer improved to the highest level since August of last year. The index level of 56.1 was up sharply from the March low of 31.4. The survey covers a [...]

Chicago Purchasing Managers Index Improves Steadily

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091130a.jpg" align="right" border="0" height="265" width="353">The
Chicago Purchasing Managers' Association reported that its November
Business Barometer improved to the highest level since August of last
year. The index level of 56.1 was up sharply from the March low of
31.4. The survey covers a sample of over 200 purchasing professionals
in the Chicago area with a monthly response rate of about 50%. During
the last ten years there has been a 72% correlation between the
Business Barometer and the three-month change in factory sector
industrial production. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091130b.jpg" align="right" border="0" height="265" width="353">The
Association indicated that gains in the
index of vendor deliveries (slower speed), order backlogs and
employment contributed greatly to the November rise in the overall
index. The new orders index rose modestly m/m but was more than double
the year-ago level. The production component fell and reversed much of
the prior month's increase. Nevertheless, it remained nearly double the
January low. 
 The index of prices paid increased and made up an
October decline. The latest level was more than double its May low.
During the last ten years there has been a 78% correlation between the
Prices Paid Index and the three-month change in the PPI for
intermediate materials. 
 Why Are Banks Failing?
from the Federal Reserve Bank of St. Louis can be found <a href="http://www.stlouisfed.org/publications/cb/articles/?id=1667">here
</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Purchasing Mgs.</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Business Barometer</td>
<td>56.1</td>
<td>54.2</td>
<td>46.1</td>
<td>33.6</td>
<td>46.8</td>
<td>54.4</td>
<td>56.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production</td>
<td>57.6</td>
<td>63.9</td>
<td>47.2</td>
<td>34.1</td>
<td>48.1</td>
<td>58.3</td>
<td>60.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
New Orders</td>
<td>62.8</td>
<td>61.4</td>
<td>46.3</td>
<td>29.2</td>
<td>46.7</td>
<td>57.7</td>
<td>59.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment</td>
<td>41.9</td>
<td>38.3</td>
<td>38.8</td>
<td>33.4</td>
<td>41.4</td>
<td>51.5</td>
<td>51.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Prices Paid</td>
<td>52.6</td>
<td>48.6</td>
<td>51.3</td>
<td>54.1</td>
<td>73.5</td>
<td>66.5</td>
<td>72.8</td>
</tr>
</tbody>
</table>

 EMU Prices Rise - Has The Worm
Tuned? 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 30, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091130c.jpg" align="left" border="0" height="265" width="353">
EMU prices rose in October. Trends are still good but core
inflation is showing a hint of acceleration as three month core prices
are up at a 1.4% annual rate above their six-month and 12-month pace of
increase.
Headline inflation shows a clear acceleration from an annual
pace of -0.1% Yr/Yr to a +1.2% annual rate over six-months and to a
2.3% annualized pace over three- months.
Germany, France, Italy and Spain all show the same
accelerating headline inflation pattern from 12-months to six-months to
three-months. Italy&#8217;s 3-mo inflation rate is up to 3.4% annualized.
Core inflation has much less clear patterns across countries.
Core inflation is not accelerating from 12-months to
six-months to three-months in any of these large EMU countries. It is
accelerating from six-months to three-months in Germany and in Italy.
But that similarity has little breadth. In Italy core inflation is
running at a strong 4.1% pace. In Germany it is at 1.1% only the same
as its Yr/Yr pace but up from its six-month pace. In France the core
rate is still steadily decelerating. Spain&#8217;s core is back down after a
pop-up over six-months.
On balance combined with news that UK consumers are repaying
credit this holiday season and that German firms are having a tough
time getting credit, it hardly seems that inflation is about to take
root. The recent rise in energy prices is the reason for most headline
inflation to be creeping higher. Core inflation is still largely under
wraps. Still it is notable that inflation is starting to show some
traces in the more inflation-prone country of Italy.
We don&#8217;t expect any policy change in EMU but the inflation
worm may be starting its turn. Even so we expect it to be a big slow
turn, even for a worm.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scpoe="col" colspan="8">Trends in
HICP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="3">% saar</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>2.7%</td>
<td>1.2%</td>
<td>-0.1%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>1.0%</td>
<td>1.0%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>0.4%</td>
<td>0.5%</td>
<td>0.4%</td>
<td>5.5%</td>
<td>-0.2%</td>
<td>-1.4%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0.1%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>-1.7%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">HICP</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>-0.3%</td>
<td>0.7%</td>
<td>2.3%</td>
<td>0.7%</td>
<td>-0.1%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>1.3%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.4%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>0.7%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>-0.6%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Core:xFE&amp;A</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>1.1%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.6%</td>
<td>0.9%</td>
<td>1.0%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.1%</td>
<td>1.7%</td>
<td>1.4%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
 The Canadian Economy Begins to
Show Growth 
by <a href="/comment/Curley.html">Louise
Curley</a> November 30, 2009

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091130d.jpg" align="left" border="0" height="265" width="353">
Canada's Real Gross Domestic Product rose 0.40% on an annual
rate basis in the third quarter, its first increase after three
quarters of decline. The annual rate of rise was smaller than the 2%
the Bank of Canada had predicted a month or so ago and smaller than
more recent consensus estimate of 1.0%. Canada's annual rate of growth
in the third quarter was also below those of the Mexico and the United
States, its NAFTA partners, as can be seen in the first chart.
The annual rates of change of the major components of real GDP
are shown in the table below. Private consumption showed its first
increase in the second quarter and has continued to increase in the
third quarter. Private fixed investment and exports have had their
first increases in the third quarter. Canada's stimulus programs are
reflected in the increases in Government consumption and fixed
investment over the past several quarters.
The dynamics of the change in Canada's third quarter GDP is
best seen by looking at the contribution (the weighted percent changes)
of the various components of GDP to total growth. The quarterly
increase in GDP in the third quarter was 0.088%. Private consumption
contributed .448 points; private fixed investment,.246; inventories,
.229; government spending on goods and services, .265; government fixed
investment, .218 and government inventories .001. Exports contributed
.998. These positive contributions amounted to 2.405 points. They were,
however, offset by the 2.316 point negative contribution of imports.
Part of the rise in imports was due to the increase in private and
government fixed investment. It has been estimated that Canadian
businesses import more than 70% of their spending on plant and
equipment.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Annual Rates of&nbsp; Change</th>
<th scope="col">Q3 09</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3&nbsp;08</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Real Gross Domestic
Product</td>
<td>0.35</td>
<td>-3.05</td>
<td>-6.19</td>
<td>-3.74</td>
<td>0.41</td>
<td>0.33</td>
<td>-0.75</td>
</tr>
<tr>
<td class="firstcol"> Private Consumption</td>
<td>3.08</td>
<td>1.76</td>
<td>-1.41</td>
<td>-3.13</td>
<td>0.57</td>
<td>1.10</td>
<td>2.54</td>
</tr>
<tr class="odd">
<td class="firstcol">Private Fixed
Investment</td>
<td>5.60</td>
<td>-9.03</td>
<td>-27.00</td>
<td>-18.59</td>
<td>0.45</td>
<td>-2.13</td>
<td>-1.73</td>
</tr>
<tr>
<td class="firstcol">Government Consumption</td>
<td>4.99</td>
<td>3.27</td>
<td>2.15</td>
<td>2.48</td>
<td>0.02</td>
<td>4.56</td>
<td>5.67</td>
</tr>
<tr class="odd">
<td class="firstcol"> Government Fixed
Investment</td>
<td>24.66</td>
<td>16.55</td>
<td>8.60</td>
<td>8.72</td>
<td>7.11</td>
<td>11.81</td>
<td>18.89</td>
</tr>
<tr>
<td class="firstcol"> Exports</td>
<td>15.35</td>
<td>-19.54</td>
<td>-29.81</td>
<td>-17.69</td>
<td>-4.15</td>
<td>-4.11</td>
<td>-2.30</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>36.0</td>
<td>-6.91</td>
<td>-39.24</td>
<td>-23.36</td>
<td>-3.44</td>
<td>2.99</td>
<td>-4.68</td>
</tr>
</tbody>
</table>
</body></html>

Chicago Purchasing Managers IndexImproves Steadily

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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