Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110g.jpg" align="right" border="0" height="265" width="353">
There's
little to suggest that current inflation is a problem for the U.S.
economy as consumer &amp; producer prices remain weak.
Nevertheless, market signals suggest a future problem may be
developing. Higher gold prices are one of the more visible indicators
of pending inflationary power with its rise yesterday to an all-time
high of $1,107 per ounce. That strength has been accompanied by a drop
in the trade-weighted value of the U.S. dollar to its lowest level
since the summer of last year.U.S. monetary &amp; fiscal
stimulus has done much to generate this inflationary scenario. Low
interest rates and the propping up of the banking system have combined
to generate an excessive 60% y/y rise in the monetary base and 12% y/y
growth in the money supply (M1). Fiscal stimulus is more-than-evident
in the budget deficit which ballooned last year to $680 billion and is
projected by OMB to be around $1 trillion for the next ten years. Of
course, monetization of this deficit is the
worry.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110h.jpg" align="right" border="0" height="265" width="353">
The end of the U.S. recession
and of the recessions abroad have given rise to energy prices which
potentially could fuel higher inflation. Though they are down slightly
from the early-October high, crude oil prices at
an average $79.43 per barrel yesterday were up sharply from the
December low of $32.37. For all of last week the spot market price for
light sweet crude oil averaged $79.04 per barrel.Consumers have seen
this pricing strength, and worries abound. The pump price for
regular gasoline slipped last week to $2.67 per gallon which
was slightly below the June high. However, prices remain up from the
December low of $1.61 and this week the wholesale gasoline price
remained firm at $1.97. Though gas prices were down slightly from the
October high of $2.10, worries abound about the future for pricing
power. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110i.jpg" align="right" border="0" height="265" width="353">
The expected rate of inflation for the next year has risen to
3.2%, roughly double the December low according to the University of
Michigan's survey. Finally, higher gasoline prices have prompted a
cutback in driving. Following earlier strength, the demand for motor
gasoline fell slightly last week from one year earlier. The energy
price figures are reported by the U.S. Department of Energy and can be
found in Haver's WEEKLY &amp; DAILY databases.
The gasoline demand figures are in OILWKLY.
Natural gas prices also have strengthened ahead of the winter heating
season. They slipped last week to an average of $4.27 per mmbtu (-36.6%
y/y). Though they remained down by two-thirds from the high of
$13.19/mmbtu reached in early-July of last year, they are more than
double the low reached early last month.&nbsp; A bit of good news
for the pricing outlook occurred yesterday. Prices natural gas slipped
further to $3.87/mmbtu. 
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM" style="color: black;">Weekly Prices</a></th>
<th scope="col">11/09/09</th>
<th scope="col">10/19/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.67</td>
<td>2.69</td>
<td>19.9%</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>79.04</td>
<td>78.51</td>
<td>22.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body></html>

There's little to suggest that current inflation is a problem for the U.S. economy as consumer & producer prices remain weak. Nevertheless, market signals suggest a future problem may be developing. Higher gold prices are one of the [...]

Inflationary Signals Abound;Gold & Oil Prices Strengthen While Dollar Weakens

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110d.jpg" align="right" border="0" height="265" width="353">The
ZEW measure of confidence among German institutional investors and
analysts in the macroeconomic outlook six months ahead declined in
November to 51.1 from 56.0 in October.&nbsp; While the extent of
the decline was greater than expected, the optimists on the outlook
still outweigh the pessimists by 51.1%.&nbsp; A year ago the
pessimists outweighed the optimists by 53.5%.&nbsp; Moreover, the
current reading is well above the long term average of
26.9%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110e.jpg" align="right" border="0" height="265" width="353">Although
there has been some improvement in the
appraisal of current conditions, the majority of investors and analysts
still view current conditions negatively.&nbsp; The excess of
pessimists over optimists among the respondents declined to 65.6% in
November from 72.2% in October.&nbsp; The first chart shows the two
indicators:&nbsp; the macroeconomic outlook and current
conditions.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110f.jpg" align="right" border="0" height="265" width="353">Some of
the reasons why the respondents have
become more cautious about the outlook&nbsp; may be found in their
appraisal of the profit prospects in the thirteen industries regularly
canvassed.&nbsp; In November, the respondents expected declines in
profits in seven of the industries and increases in six.&nbsp;
Declines in profits are expected in Banking, Insurance, Steel and
Metal, Consumption/Trade, Utilities, Telecommunication and Information
Technology.&nbsp; Increases in profits are expected in
Vehicles/Automotive, Chemicals/Pharmaceuticals, Electronics, Machinery,
Construction and Services.&nbsp; Selected industries where profits
are expected to decline are shown in the second chart and selected
industries where profits are expected to increase are shown in the
third chart.&nbsp; Profit expectations in the Banking and Insurance
industries have been declining since August and appear to have had the
biggest negative reappraisal.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ZEW
INDICATORS (% Bal.)</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Nov 08</th>
<th scope="col">M/M Chg</th>
<th scope="col">Y/Y Chg</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">Macroeconomic Expectations 6
Months Ahead</td>
<td>51.1</td>
<td>56.0</td>
<td>-53.5</td>
<td>-4.9</td>
<td>104.6</td>
<td>-47.5</td>
<td>-3.0</td>
<td>22.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>-65.6</td>
<td>-72.2</td>
<td>-50.5</td>
<td>6.6</td>
<td>-15.2</td>
<td>7.3</td>
<td>75.9</td>
<td>18.3</td>
</tr>
<tr>
<td colspan="9">PROFIT EXPECTATIONS</td>
</tr>
<tr class="odd">
<td class="firstcol">Banking</td>
<td>24.7</td>
<td>31.1</td>
<td>-64.9</td>
<td>-9.4</td>
<td>89.6</td>
<td>-59.5</td>
<td>-3.5</td>
<td>47.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Insurance</td>
<td>16.4</td>
<td>19.8</td>
<td>-70.1</td>
<td>-3.4</td>
<td>86.5</td>
<td>-45.4</td>
<td>9.7</td>
<td>46.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Chemicals/Pharmaceuticals</td>
<td>34.8</td>
<td>31.6</td>
<td>-41.6</td>
<td>3.2</td>
<td>76.4</td>
<td>-8.6</td>
<td>35.3</td>
<td>48.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Vehicles/Automotive</td>
<td>-33.9</td>
<td>-40.9</td>
<td>-94.2</td>
<td>7.0</td>
<td>60.7</td>
<td>-55.6</td>
<td>8.6</td>
<td>16.9</td>
</tr>
</tbody>
</table>

</body></html>

The ZEW measure of confidence among German institutional investors and analysts in the macroeconomic outlook six months ahead declined in November to 51.1 from 56.0 in October. While the extent of the decline was greater than [...]

Inflationary Signals Abound;Gold& Oil Prices Strengthen While Dollar Weakens

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110a.jpg" align="right" border="0" height="265" width="353">Small
business' optimism recently recovered from its recession low, but the
latest readings indicate further, modest upside movement. The National
Federation of Independent Business (NFIB) indicated that their small
business optimism index rose to 89.1 during October, the third
consecutive monthly gain. The latest level was the highest since
September '08.&nbsp;During the last ten years, there has been an
85% correlation between the level of the NFIB index and the two-quarter
change in real GDP.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110b.jpg" align="right" border="0" height="265" width="353">
The percentage of small businesses expecting the
economy to improve bounced back after earlier weakness to 11, the
highest since May. The percentage which thought that now was a good
time to expand the business slipped m/m to a still-improved 7, near the
highest level this year. Moreover, the percent reporting higher
net-earnings this quarter versus last year held at -40 m/m for the
third month, meaning fewer were reporting negative earnings versus last
year. It was the highest level since November. Tight credit conditions
continued as 14% of firms indicated that it was harder to get credit.
That was near the 1981 high of 15%. Perhaps because of these tight
conditions, the recent improvement in business' sentiment has done
little, if anything, to improve hiring intentions. The percentage of
firms planning to raise employment remained in the net-layoff region
and the percentage of firms with one or more job openings held at just
8% during October, the lowest level since 1982. During the last ten
years there has been a 74% correlation between the NFIB employment
percentage and the six-month change in nonfarm payrolls. Also to the
downside, the percentage expecting credit conditions to ease slipped
back to the February low. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110c.jpg" align="right" border="0" height="265" width="353">
Pricing conditions eased. The percentage of
firms actually raising prices improved to -17
(indicating deflation) and remained just above the record low. During
the last ten years there has been a 69% correlation between the
six-month change in the producer price index and the level of the NFIB
price index.&nbsp;The percentage of firms planning
to raise prices gave back the prior two months' improvement and fell to
a net 6, though that remained up from the March low of zero. Worker
compensation fell back to near its recent series' low.· The largest,
single most important problems seen by business were poor sales (33%),
taxes (22%, near the highest level since 2007), government requirements
(11%), insurance cost &amp; availability (8%), competition from
large businesses (6%) and inflation (2%).About 24 million
small businesses exist in the United States. Small business creates 80%
of all new jobs in America and the NFIB figures can be found in Haver's
SURVEYS database.Financial
Regulation: Past and Future is the title of yesterday's
speech by Fed Governor Daniel K. Tarullo and it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091109a.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/@S7/@S7.HTM">Nat'l
Federation of Independent Business</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Small Business Optimism Index
(SA, 1986=100)</td>
<td>89.1</td>
<td>88.8</td>
<td>1.8%</td>
<td>89.8</td>
<td>96.7</td>
<td>98.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent of Firms
Expecting Economic Improvement</td>
<td>11</td>
<td>8</td>
<td>-4</td>
<td>-10</td>
<td>-4</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Percent of Firms
With One or More Job Openings</td>
<td>8</td>
<td>8</td>
<td>14</td>
<td>18</td>
<td>24</td>
<td>25</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent of Firms
Raising Avg. Selling Pric1es (Net)</td>
<td>-17</td>
<td>-21</td>
<td>15</td>
<td>17</td>
<td>15</td>
<td>20</td>
</tr>
</tbody>
</table>
</body></html>

Small business' optimism recently recovered from its recession low, but the latest readings indicate further, modest upside movement. The National Federation of Independent Business (NFIB) indicated that their small business optimism [...]

U.S. Small Business Optimism Improves But Credit Remains Tight With Hiring Cautious

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110a.jpg" align="right" border="0" height="265" width="353">Small
business' optimism recently recovered from its recession low, but the
latest readings indicate further, modest upside movement. The National
Federation of Independent Business (NFIB) indicated that their small
business optimism index rose to 89.1 during October, the third
consecutive monthly gain. The latest level was the highest since
September '08.&nbsp;During the last ten years, there has been an
85% correlation between the level of the NFIB index and the two-quarter
change in real GDP.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110b.jpg" align="right" border="0" height="265" width="353">The
percentage of small businesses expecting the
economy to improve bounced back after earlier weakness to 11, the
highest since May. The percentage which thought that now was a good
time to expand the business slipped m/m to a still-improved 7, near the
highest level this year. Moreover, the percent reporting higher
net-earnings this quarter versus last year held at -40 m/m for the
third month, meaning fewer were reporting negative earnings versus last
year. It was the highest level since November.
 Tight credit conditions
continued as 14% of firms indicated that it was harder to get credit.
That was near the 1981 high of 15%. Perhaps because of these tight
conditions, the recent improvement in business' sentiment has done
little, if anything, to improve hiring intentions. The percentage of
firms planning to raise employment remained in the net-layoff region
and the percentage of firms with one or more job openings held at just
8% during October, the lowest level since 1982. During the last ten
years there has been a 74% correlation between the NFIB employment
percentage and the six-month change in nonfarm payrolls. Also to the
downside, the percentage expecting credit conditions to ease slipped
back to the February low. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110c.jpg" align="right" border="0" height="265" width="353">Pricing
conditions eased. The percentage of
firms actually raising prices improved to -17
(indicating deflation) and remained just above the record low. During
the last ten years there has been a 69% correlation between the
six-month change in the producer price index and the level of the NFIB
price index.&nbsp;The percentage of firms planning
to raise prices gave back the prior two months' improvement and fell to
a net 6, though that remained up from the March low of zero. Worker
compensation fell back to near its recent series' low.· The largest,
single most important problems seen by business were poor sales (33%),
taxes (22%, near the highest level since 2007), government requirements
(11%), insurance cost &amp; availability (8%), competition from
large businesses (6%) and inflation (2%).
About 24 million
small businesses exist in the United States. Small business creates 80%
of all new jobs in America and the NFIB figures can be found in Haver's
SURVEYS database.
Financial
Regulation: Past and Future is the title of yesterday's
speech by Fed Governor Daniel K. Tarullo and it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091109a.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/@S7/@S7.HTM">Nat'l
Federation of Independent Business</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Small Business Optimism Index
(SA, 1986=100)</td>
<td>89.1</td>
<td>88.8</td>
<td>1.8%</td>
<td>89.8</td>
<td>96.7</td>
<td>98.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent of Firms
Expecting Economic Improvement</td>
<td>11</td>
<td>8</td>
<td>-4</td>
<td>-10</td>
<td>-4</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Percent of Firms
With One or More Job Openings</td>
<td>8</td>
<td>8</td>
<td>14</td>
<td>18</td>
<td>24</td>
<td>25</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent of Firms
Raising Avg. Selling Pric1es (Net)</td>
<td>-17</td>
<td>-21</td>
<td>15</td>
<td>17</td>
<td>15</td>
<td>20</td>
</tr>
</tbody>
</table>

 Inflationary
Signals Abound;Gold&amp; Oil Prices Strengthen While Dollar Weakens
 
by <a href="/comment/Curley.html">Louise
Curley</a> November 10, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110d.jpg" align="right" border="0" height="265" width="353">The
ZEW measure of confidence among German institutional investors and
analysts in the macroeconomic outlook six months ahead declined in
November to 51.1 from 56.0 in October.&nbsp; While the extent of
the decline was greater than expected, the optimists on the outlook
still outweigh the pessimists by 51.1%.&nbsp; A year ago the
pessimists outweighed the optimists by 53.5%.&nbsp; Moreover, the
current reading is well above the long term average of
26.9%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110e.jpg" align="right" border="0" height="265" width="353">Although
there has been some improvement in the
appraisal of current conditions, the majority of investors and analysts
still view current conditions negatively.&nbsp; The excess of
pessimists over optimists among the respondents declined to 65.6% in
November from 72.2% in October.&nbsp; The first chart shows the two
indicators:&nbsp; the macroeconomic outlook and current
conditions.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110f.jpg" align="right" border="0" height="265" width="353">Some of
the reasons why the respondents have
become more cautious about the outlook&nbsp; may be found in their
appraisal of the profit prospects in the thirteen industries regularly
canvassed.&nbsp; In November, the respondents expected declines in
profits in seven of the industries and increases in six.&nbsp;
Declines in profits are expected in Banking, Insurance, Steel and
Metal, Consumption/Trade, Utilities, Telecommunication and Information
Technology.&nbsp; Increases in profits are expected in
Vehicles/Automotive, Chemicals/Pharmaceuticals, Electronics, Machinery,
Construction and Services.&nbsp; Selected industries where profits
are expected to decline are shown in the second chart and selected
industries where profits are expected to increase are shown in the
third chart.&nbsp; Profit expectations in the Banking and Insurance
industries have been declining since August and appear to have had the
biggest negative reappraisal.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ZEW
INDICATORS (% Bal.)</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Nov 08</th>
<th scope="col">M/M Chg</th>
<th scope="col">Y/Y Chg</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">Macroeconomic Expectations 6
Months Ahead</td>
<td>51.1</td>
<td>56.0</td>
<td>-53.5</td>
<td>-4.9</td>
<td>104.6</td>
<td>-47.5</td>
<td>-3.0</td>
<td>22.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>-65.6</td>
<td>-72.2</td>
<td>-50.5</td>
<td>6.6</td>
<td>-15.2</td>
<td>7.3</td>
<td>75.9</td>
<td>18.3</td>
</tr>
<tr>
<td colspan="9">PROFIT EXPECTATIONS</td>
</tr>
<tr class="odd">
<td class="firstcol">Banking</td>
<td>24.7</td>
<td>31.1</td>
<td>-64.9</td>
<td>-9.4</td>
<td>89.6</td>
<td>-59.5</td>
<td>-3.5</td>
<td>47.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Insurance</td>
<td>16.4</td>
<td>19.8</td>
<td>-70.1</td>
<td>-3.4</td>
<td>86.5</td>
<td>-45.4</td>
<td>9.7</td>
<td>46.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Chemicals/Pharmaceuticals</td>
<td>34.8</td>
<td>31.6</td>
<td>-41.6</td>
<td>3.2</td>
<td>76.4</td>
<td>-8.6</td>
<td>35.3</td>
<td>48.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Vehicles/Automotive</td>
<td>-33.9</td>
<td>-40.9</td>
<td>-94.2</td>
<td>7.0</td>
<td>60.7</td>
<td>-55.6</td>
<td>8.6</td>
<td>16.9</td>
</tr>
</tbody>
</table>

 Inflationary Signals Abound;Gold
&amp; Oil Prices Strengthen While Dollar Weakens 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 10, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110g.jpg" align="right" border="0" height="265" width="353">
There's
little to suggest that current inflation is a problem for the U.S.
economy as consumer &amp; producer prices remain weak.
Nevertheless, market signals suggest a future problem may be
developing. Higher gold prices are one of the more visible indicators
of pending inflationary power with its rise yesterday to an all-time
high of $1,107 per ounce. That strength has been accompanied by a drop
in the trade-weighted value of the U.S. dollar to its lowest level
since the summer of last year.
U.S. monetary &amp; fiscal
stimulus has done much to generate this inflationary scenario. Low
interest rates and the propping up of the banking system have combined
to generate an excessive 60% y/y rise in the monetary base and 12% y/y
growth in the money supply (M1). Fiscal stimulus is more-than-evident
in the budget deficit which ballooned last year to $680 billion and is
projected by OMB to be around $1 trillion for the next ten years. Of
course, monetization of this deficit is the
worry.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110h.jpg" align="right" border="0" height="265" width="353">The end of
the U.S. recession
and of the recessions abroad have given rise to energy prices which
potentially could fuel higher inflation. Though they are down slightly
from the early-October high, crude oil prices at
an average $79.43 per barrel yesterday were up sharply from the
December low of $32.37. For all of last week the spot market price for
light sweet crude oil averaged $79.04 per barrel.
Consumers have seen
this pricing strength, and worries abound. The pump price for
regular gasoline slipped last week to $2.67 per gallon which
was slightly below the June high. However, prices remain up from the
December low of $1.61 and this week the wholesale gasoline price
remained firm at $1.97. Though gas prices were down slightly from the
October high of $2.10, worries abound about the future for pricing
power. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091110i.jpg" align="right" border="0" height="265" width="353">
The expected rate of inflation for the next year has risen to
3.2%, roughly double the December low according to the University of
Michigan's survey. Finally, higher gasoline prices have prompted a
cutback in driving. Following earlier strength, the demand for motor
gasoline fell slightly last week from one year earlier. The energy
price figures are reported by the U.S. Department of Energy and can be
found in Haver's WEEKLY &amp; DAILY databases.
The gasoline demand figures are in OILWKLY.
Natural gas prices also have strengthened ahead of the winter
heating
season. They slipped last week to an average of $4.27 per mmbtu (-36.6%
y/y). Though they remained down by two-thirds from the high of
$13.19/mmbtu reached in early-July of last year, they are more than
double the low reached early last month.&nbsp; A bit of good news
for the pricing outlook occurred yesterday. Prices natural gas slipped
further to $3.87/mmbtu. 
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM" style="color: black;">Weekly Prices</a></th>
<th scope="col">11/09/09</th>
<th scope="col">10/19/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.67</td>
<td>2.69</td>
<td>19.9%</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>79.04</td>
<td>78.51</td>
<td>22.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>

</body></html>

U.S. Small Business OptimismImproves But Credit Remains Tight With Hiring Cautious

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109d.jpg" align="right" border="0" height="265" width="353">In the news
today are reports of French business sentiment and industrial
production in Germany, Romania, Slovakia and Turkey.
 French business
sentiment continues to improve.&nbsp;&nbsp; From the low point
of 66.96 reached in December of last year, the Bank of France's
Business Sentiment Indicator has risen in each subsequent month and in
October was up to 94.80, just 5.20 points below 100, its long term
average.&nbsp; An important factor in the improvement in sentiment
has been the increase in new orders--the total and foreign.&nbsp;
The first chart shows the percent balances between those experiencing
an increase in total and foreign new orders over those experiencing a
decline.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109e.jpg" align="right" border="0" height="265" width="353">
In October, the excess of those experiencing an
increase in foreign new orders over those experiencing a decline was
4.85%, while the excess for total orders was 10.9% as shown in the
first chart.
The most
important report on industrial production
released today is that for Germany and it is encouraging.&nbsp;
Industrial production in Germany is up for the second month. While
developments in Germany, as the largest economy in Europe, overshadow
those in the smaller and less developed economies of Eastern Europe and
the Middle East, it is encouraging to see that the representatives of
the latter groups in today's news are making strong percentage gains in
industrial production.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109f.jpg" align="right" border="0" height="265" width="353">
The month to month changes in
production in the emerging countries tend to be volatile even on a
seasonally adjusted basis.&nbsp; The&nbsp; picture becomes
clearer when we aggregate the date on a quarterly basis as can be seen
in a comparison of the second and third
charts.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Oct 08</th>
<th scope="col">M/M CHG</th>
<th scope="col">Y/Y CHG</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">French Business Sentiment
Indicator&nbsp; (LTA=100)</td>
<td>94.8</td>
<td>90.2</td>
<td>78.0</td>
<td>2.1</td>
<td>26.6</td>
<td>90.6</td>
<td>107</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total New Orders % balance</td>
<td>10.90</td>
<td>-1.54</td>
<td>-35.51</td>
<td>12.44</td>
<td>46.41</td>
<td>-9.18</td>
<td>10.84</td>
<td>12.28</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign New Order % balance</td>
<td>4.78</td>
<td>1.21</td>
<td>-33.48</td>
<td>3.57</td>
<td>38.26</td>
<td>-10.04</td>
<td>11.15</td>
<td>12.59</td>
</tr>
<tr>
<td class="firstcol">Industrial Production (2005=100)</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Sep 08</td>
<td>M/M CHG</td>
<td>Y/Y CHG</td>
<td>2008&nbsp;</td>
<td>2007 </td>
<td> 2006 </td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>97.0</td>
<td>-4.6</td>
<td>111.5</td>
<td>2.75</td>
<td>-12.83</td>
<td>111.5</td>
<td>111.6</td>
<td>105.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Romania</td>
<td>118.4</td>
<td>116.8</td>
<td>123.3</td>
<td>1.37</td>
<td>-3.97</td>
<td>123.5</td>
<td>120.6</td>
<td>109.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovakia</td>
<td>127.7</td>
<td>121.1</td>
<td>135.3</td>
<td>5.15</td>
<td>-5.62</td>
<td>134.1</td>
<td>130.4</td>
<td>112.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Turkey</td>
<td>101.2</td>
<td>106.3</td>
<td>110.3</td>
<td>-4.80</td>
<td>-8.25</td>
<td>114.3</td>
<td>115.3</td>
<td>107.8</td>
</tr>
</tbody>
</table>

</body></html>

In the news today are reports of French business sentiment and industrial production in Germany, Romania, Slovakia and Turkey. French business sentiment continues to improve. From the low point of 66.96 reached in December of last [...]

Improved Business Sentiment In France,Industrial Production Increases In Germany, Romania And Slovakia Falters In Turkey

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109a.jpg" align="right" border="0" height="265" width="353">Consumers
continue to deleverage as the prospects for employment remain
uncertain. The Federal Reserve reported late Friday that consumer
credit outstanding fell for the eighth consecutive month during
September. It also was the twelfth monthly decline since summer, 2008.
The $14.9B drop from August followed declines during the prior two
months which were revised shallower, but the y/y change amounted to a
record 4.8% drop.&nbsp; With these declines, consumers have reduced
credit outstanding as a percentage of disposable income to 22.6% from
its 2005 high of 24.4%. This compares to the low near 16% in the
early-1990s.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109b.jpg" align="right" border="0" height="265" width="353">
Usage of non-revolving credit (autos &amp;
other consumer durables), which accounts for nearly two-thirds of the
total, fell $4.9B after a slight August increase. The 2.3% y/y decline
was a record. Consumers continued also to cut back on revolving credit
usage. During September it fell a near-record $9.9B for the twelfth
consecutive monthly drop. Year-to-year the 8.8% decline is by far the
record as consumers continued to shy away from liberal spending.
Finance companies (-12.3% y/y), savings institutions (-9.8% y/y),
nonfinancial businesses (-6.4%) and commercial banks (-1.5% y/y have
seen the largest pullbacks in credit extension while credit unions
continue to see positive growth (1.9% y/y). <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109c.jpg" align="right" border="0" height="265" width="353">
The Federal government and
Sallie Mae also continued to lend during September and raised credit
outstanding by 23.9% y/y which was the strongest growth rate since
early-2001.· These figures are the major input to the Fed's quarterly
Flow of Funds accounts for the household sector. Credit data are
available in Haver's USECON database. The Flow of
Funds data are in Haver's FFUNDS database.Monetary
Policy Stance: The View From Consumption Spending from the
Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/es/09/ES0941.pdf">
here</a>&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit Outstanding (m/m Chg, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-14.8B</td>
<td>&nbsp;$-9.9B</td>
<td>-4.8%</td>
<td>1.6%</td>
<td>5.6%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-9.9B</td>
<td>$-10.1B</td>
<td>-8.8%</td>
<td>1.9%</td>
<td>7.8%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-4.9B</td>
<td>$0.2B</td>
<td>-2.3%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body></html>

Consumers continue to deleverage as the prospects for employment remain uncertain. The Federal Reserve reported late Friday that consumer credit outstanding fell for the eighth consecutive month during September. It also was the [...]

U.S. Consumer Credit Outstanding Continues To Fall

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109a.jpg" align="right" border="0" height="265" width="353">Consumers
continue to deleverage as the prospects for employment remain
uncertain. The Federal Reserve reported late Friday that consumer
credit outstanding fell for the eighth consecutive month during
September. It also was the twelfth monthly decline since summer, 2008.
The $14.9B drop from August followed declines during the prior two
months which were revised shallower, but the y/y change amounted to a
record 4.8% drop.&nbsp; With these declines, consumers have reduced
credit outstanding as a percentage of disposable income to 22.6% from
its 2005 high of 24.4%. This compares to the low near 16% in the
early-1990s.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109b.jpg" align="right" border="0" height="265" width="353">Usage of
non-revolving credit (autos &amp;
other consumer durables), which accounts for nearly two-thirds of the
total, fell $4.9B after a slight August increase. The 2.3% y/y decline
was a record. Consumers continued also to cut back on revolving credit
usage. During September it fell a near-record $9.9B for the twelfth
consecutive monthly drop. Year-to-year the 8.8% decline is by far the
record as consumers continued to shy away from liberal spending.
Finance companies (-12.3% y/y), savings institutions (-9.8%
y/y),
nonfinancial businesses (-6.4%) and commercial banks (-1.5% y/y have
seen the largest pullbacks in credit extension while credit unions
continue to see positive growth (1.9% y/y). <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109c.jpg" align="right" border="0" height="265" width="353">
The Federal government and
Sallie Mae also continued to lend during September and raised credit
outstanding by 23.9% y/y which was the strongest growth rate since
early-2001.· These figures are the major input to the Fed's quarterly
Flow of Funds accounts for the household sector.
 Credit data are
available in Haver's USECON database. The Flow of
Funds data are in Haver's FFUNDS database.
Monetary
Policy Stance: The View From Consumption Spending from the
Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/es/09/ES0941.pdf">
here</a>&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit Outstanding (m/m Chg, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-14.8B</td>
<td>&nbsp;$-9.9B</td>
<td>-4.8%</td>
<td>1.6%</td>
<td>5.6%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-9.9B</td>
<td>$-10.1B</td>
<td>-8.8%</td>
<td>1.9%</td>
<td>7.8%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-4.9B</td>
<td>$0.2B</td>
<td>-2.3%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>

 Improved Business Sentiment In
France,Industrial Production Increases In Germany,
Romania And Slovakia Falters In Turkey
 
by <a href="/comment/Curley.html">Louise
Curley</a> November 09, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109d.jpg" align="right" border="0" height="265" width="353">In the news
today are reports of French business sentiment and industrial
production in Germany, Romania, Slovakia and Turkey.
 French business
sentiment continues to improve.&nbsp;&nbsp; From the low point
of 66.96 reached in December of last year, the Bank of France's
Business Sentiment Indicator has risen in each subsequent month and in
October was up to 94.80, just 5.20 points below 100, its long term
average.&nbsp; An important factor in the improvement in sentiment
has been the increase in new orders--the total and foreign.&nbsp;
The first chart shows the percent balances between those experiencing
an increase in total and foreign new orders over those experiencing a
decline.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109e.jpg" align="right" border="0" height="265" width="353">
In October, the excess of those experiencing an
increase in foreign new orders over those experiencing a decline was
4.85%, while the excess for total orders was 10.9% as shown in the
first chart.
The most
important report on industrial production
released today is that for Germany and it is encouraging.&nbsp;
Industrial production in Germany is up for the second month. While
developments in Germany, as the largest economy in Europe, overshadow
those in the smaller and less developed economies of Eastern Europe and
the Middle East, it is encouraging to see that the representatives of
the latter groups in today's news are making strong percentage gains in
industrial production.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091109f.jpg" align="right" border="0" height="265" width="353">
The month to month changes in
production in the emerging countries tend to be volatile even on a
seasonally adjusted basis.&nbsp; The&nbsp; picture becomes
clearer when we aggregate the date on a quarterly basis as can be seen
in a comparison of the second and third
charts.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Oct 08</th>
<th scope="col">M/M CHG</th>
<th scope="col">Y/Y CHG</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">French Business Sentiment
Indicator&nbsp; (LTA=100)</td>
<td>94.8</td>
<td>90.2</td>
<td>78.0</td>
<td>2.1</td>
<td>26.6</td>
<td>90.6</td>
<td>107</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total New Orders % balance</td>
<td>10.90</td>
<td>-1.54</td>
<td>-35.51</td>
<td>12.44</td>
<td>46.41</td>
<td>-9.18</td>
<td>10.84</td>
<td>12.28</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign New Order % balance</td>
<td>4.78</td>
<td>1.21</td>
<td>-33.48</td>
<td>3.57</td>
<td>38.26</td>
<td>-10.04</td>
<td>11.15</td>
<td>12.59</td>
</tr>
<tr>
<td class="firstcol">Industrial Production (2005=100)</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Sep 08</td>
<td>M/M CHG</td>
<td>Y/Y CHG</td>
<td>2008&nbsp;</td>
<td>2007 </td>
<td> 2006 </td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>97.0</td>
<td>-4.6</td>
<td>111.5</td>
<td>2.75</td>
<td>-12.83</td>
<td>111.5</td>
<td>111.6</td>
<td>105.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Romania</td>
<td>118.4</td>
<td>116.8</td>
<td>123.3</td>
<td>1.37</td>
<td>-3.97</td>
<td>123.5</td>
<td>120.6</td>
<td>109.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovakia</td>
<td>127.7</td>
<td>121.1</td>
<td>135.3</td>
<td>5.15</td>
<td>-5.62</td>
<td>134.1</td>
<td>130.4</td>
<td>112.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Turkey</td>
<td>101.2</td>
<td>106.3</td>
<td>110.3</td>
<td>-4.80</td>
<td>-8.25</td>
<td>114.3</td>
<td>115.3</td>
<td>107.8</td>
</tr>
</tbody>
</table>

</body></html>

U.S. Consumer Credit OutstandingContinues To Fall

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091106e.jpg" align="left" border="0" height="265" width="353">
In the OECD area everything is coming up roses. Some are more
in bloom than others and some have more thorns than others but the OECD
gave a very upbeat assessment to activity in the OECD areas. 
 

OECD leading indicators ... &#8220;point strongly to growth in
Italy, France, the United Kingdom and China, while tentative signals of
expansion have emerged in Canada and Germany," the OECD said. "A
recovery is clearly visible in the United States, Japan and all other
OECD economies and major non-OECD economies," it added. 
 

The OECD indicators selected in the table above all show
strong (double digit) increases over the recent six months expressed as
annual rates of growth. Simple three-, six- and twelve-month growth
rates are positive across all these countries/groups with the exception
of 12 month growth in Japan (see top panel of the table above). The
OECD data are up-to-date though September. 
 

Echoing this sentiment are the new industrial orders for
September released today by Germany that find orders on the growth path
for the seventh month in row. The problem for Germany is that now
domestic orders have dropped for the second month in a row. The two
month drop which amounts to a bit more than a 3% set back comes on the
heels of a 9.5% monthly rate super spike in domestic orders for July.
Still foreign orders continue to expand and Germany&#8217;s domestic orders
are not along for the ride. 
 

The OECD data show us why German export orders are rising:
that export oriented economy exports goods globally and the whole OECD
area is having a nice snap back. But Germany is still an important
country in EMU, the largest economy there. Having the German domestic
factory sector so weak on top of previously-reported weakness in German
retail sales, is a clear warning sign to not get too carried away by
optimism. 
 

The OECD area is snapping back from a very ugly recession. But
the recession was so ugly that the snap back can look strong but still
fail to bring growth to a strong enough point to spur a drop in
unemployment. That&#8217;s exactly what we seeing in the US. Despite a US MFG
sector that has been posting good results, increases in industrial
production and a rise to strong level for the MFG ISM, the US is not
seeing job growth. Europe is finding some growth deficiencies as well.
Today the UK got an unexpected visit from a higher PPI. The OECD area
is not strong enough to be abele to cope with any inflation signals
just yet. Let&#8217;s hope the UK PPI is just a rogue signal. Meanwhile, we
need enough economy strengthening to create job, income and spending
growth while allowing savings to make some headway as well. It&#8217;s a tall
order that we are falling short on despite the growth path endorsed by
the OECD. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="5">OECD
Trend-restored leading Indicators</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td colspan="5" class="firstcol">Growth progression-SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>15.8%</td>
<td>14.9%</td>
<td>1.5%</td>
<td>-6.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>16.8%</td>
<td>15.3%</td>
<td>0.5%</td>
<td>-6.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Ezone</td>
<td>16.9%</td>
<td>16.6%</td>
<td>4.0%</td>
<td>-7.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Japan</td>
<td>13.1%</td>
<td>10.9%</td>
<td>-4.7%</td>
<td>-4.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>16.8%</td>
<td>15.0%</td>
<td>-0.6%</td>
<td>-6.7%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Six month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>14.9%</td>
<td>-10.3%</td>
<td>-10.5%</td>
<td>-2.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>15.3%</td>
<td>-12.3%</td>
<td>-10.7%</td>
<td>-3.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Eur</td>
<td>16.6%</td>
<td>-7.3%</td>
<td>-12.3%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Japan</td>
<td>10.9%</td>
<td>-18.1%</td>
<td>-9.2%</td>
<td>0.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>15.0%</td>
<td>-14.2%</td>
<td>-9.8%</td>
<td>-3.5%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Slowdowns indicated by BOLD
RED</td>
</tr>
</tbody>
</table>
</body></html>

In the OECD area everything is coming up roses. Some are more in bloom than others and some have more thorns than others but the OECD gave a very upbeat assessment to activity in the OECD areas. OECD leading indicators ... “point [...]

Everybody Is Turning Higher Say OECD LEIs

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

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Michael J. Moran

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

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

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

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

260109E.jpg

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

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

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

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

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

260109.jpg

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

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

Germany

German Industrial Production Perks Up-Surprise!

Andrew Cates

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


260108Z1.jpg

**Supply chain pressures and inflation surprises**
The NY Fed’s Global Supply Chain Pressure Index has remained subdued in recent months, reinforcing the view that supply-side frictions are no longer a material source of inflation risk. After the extreme dislocations of 2021–22, the index has settled close to, and at times below, its long-run average, consistent with largely normalised delivery times, inventories and transportation costs. The latest reading for December 2025, however, does point to some marginal tightening in supply-chain conditions, though from very low levels and still well within historical norms. Still, this modest firming has so far coincided with a broadly benign profile for inflation surprises across the G10. While geopolitical risks and trade fragmentation remain medium-term considerations, the current signal from global supply chains continues to point to limited immediate upside pressure on inflation.

260108Z2.jpg

**Policy rate expectations**
In the meantime, policy-rate expectations across the major economies continue to diverge, reflecting differences in inflation dynamics and where central banks sit in their respective cycles. The latest Blue Chip survey of Financial Forecasts points to further easing over the next 12 months in the UK and the US. By contrast, expectations for the euro area and Canada are more subdued, in part because both central banks are already at a more advanced stage of their easing campaigns, leaving less scope for additional near-term adjustment. Australia stands apart, with lingering inflation pressures tempering expectations for rate cuts despite softer growth momentum. Japan, meanwhile, remains at a very different point in the cycle: having only recently begun a less accommodative campaign from ultra-loose policy, it is the sole major economy where forecasters still anticipate modest further policy tightening rather than easing.

260108Z3.jpg

**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.

260108Z4.jpg

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

260108Z5.jpg

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

260108Z6.jpg

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

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

Charts of the Week: Cooling Inflation, Diverging Growth

Sandy Batten

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

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

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

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

260108P1.jpg

260108Q1.jpg

- 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.