Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226a.jpg" align="right" border="0" height="265" width="353">
Rebuilding of depleted inventories was more of a factor behind
improvement in 4Q economic than previously estimated. The result
brought 4Q real GDP growth up to 5.9% (AR) from the advance estimate of
5.7%. Last quarter's growth was the strongest since 3Q 2003 and it
raised the y/y change into (slightly) positive territory for the first
time since early-2008. The revision slightly exceeded Consensus
expectations for 5.7% growth. 
 <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226b.jpg" style="width: 353px; height: 265px;" align="right">
Voluntary inventory accumulation now is estimated to have
added 3.9 percentage points to economic growth last quarter. It was
necessitated by vigorous and unprecedented decumulation dating back to
2005. Likely prompted by price deflation and poor demand, decumulation
had reduced desired inventory levels too far.
Improvement in the foreign trade deficit contributed slightly
less to growth than the previously estimated one-half percentage point.
An upwardly revised 22.4% (-0.8% y/y) rise in exports followed a 17.8%
3Q gain as the lower value of the dollar continued to improve the
competitiveness of U.S. products. That revision was offset, however, by
a larger upward revision to growth in real imports to 15.3% (-6.7% y/y).
Growth in domestic final demand was left roughly unchanged at
a moderate 1.6% after a 2.3% 3Q increase. These gains remain the first
back-to-back quarterly increases since 2007. Business investment in
equipment &amp; software led last quarter's growth with an 18.2%
(-7.7% y/y) increase after its 1.5% 3Q rise. Investment in business
construction, however, offset much of this increase with a 13.9%
decline (-24.3% y/y). Residential investment remained strong with a
little-revised 5.0% gain (-12.3% y/y) which was the second consecutive
quarterly increase. Personal consumption growth lagged with a
downwardly revised 1.7% (1.0% y/y) increase. Finally, quarterly
spending by government fell slightly more than initially estimated
(+1.3% y/y), mostly due to a drop in defense spending.
Price inflation was revised slightly downward to a 0.4% gain
as measured by the chained GDP price index after little or no inflation
during the prior two quarters. Diminished price gains for all of last
year pulled the annual increase down to 1.2% which was nearly its
weakest increase since the early 1960s. The personal consumption chain
price index rose a lessened 2.3% in 4Q and increased just 0.2% for the
whole year owing to the yearly decline in energy prices.
The U.S. National Income &amp; Product Account data are
available in Haver's USECON and the USNA
databases.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226d.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" style="color: white;">Chained 2005$, % AR</a></th>
<th scope="col">4Q '09&nbsp; Preliminary</th>
<th scope="col">4Q '09 Advance</th>
<th scope="col">3Q '09</th>
<th scope="col">2Q '09</th>
<th scope="col">4Q Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>5.9</td>
<td>5.7</td>
<td>2.2</td>
<td>-0.7</td>
<td>0.1</td>
<td>-2.4</td>
<td>0.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Inventory
Effect</td>
<td>3.9</td>
<td>3.4</td>
<td>0.7</td>
<td>-1.4</td>
<td>0.1</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.9</td>
<td>2.2</td>
<td>1.5</td>
<td>0.7</td>
<td>-0.0</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Foreign
Trade Effect</td>
<td>0.3</td>
<td>0.5</td>
<td>-0.8</td>
<td>1.7</td>
<td>0.9</td>
<td>1.0</td>
<td>-1.2</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.6</td>
<td>1.7</td>
<td>2.3</td>
<td>-0.9</td>
<td>-0.9</td>
<td>-2.7</td>
<td>-0.4</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.4</td>
<td>0.6</td>
<td>0.4</td>
<td>-0.0</td>
<td>0.7</td>
<td>1.2</td>
<td>2.1</td>
<td>2.9</td>
</tr>
</tbody>
</table>
</body></html>

Rebuilding of depleted inventories was more of a factor behind improvement in 4Q economic than previously estimated. The result brought 4Q real GDP growth up to 5.9% (AR) from the advance estimate of 5.7%. Last quarter's growth was [...]

U.S. GDP 4Q Increase Made Stronger By Inventories

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226a.jpg" align="right" border="0" height="265" width="353">
Rebuilding of depleted inventories was more of a factor behind
improvement in 4Q economic than previously estimated. The result
brought 4Q real GDP growth up to 5.9% (AR) from the advance estimate of
5.7%. Last quarter's growth was the strongest since 3Q 2003 and it
raised the y/y change into (slightly) positive territory for the first
time since early-2008. The revision slightly exceeded Consensus
expectations for 5.7% growth. 
 <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226b.jpg" style="width: 353px; height: 265px;" align="right">
Voluntary inventory accumulation now is estimated to have
added 3.9 percentage points to economic growth last quarter. It was
necessitated by vigorous and unprecedented decumulation dating back to
2005. Likely prompted by price deflation and poor demand, decumulation
had reduced desired inventory levels too far.
Improvement in the foreign trade deficit contributed slightly
less to growth than the previously estimated one-half percentage point.
An upwardly revised 22.4% (-0.8% y/y) rise in exports followed a 17.8%
3Q gain as the lower value of the dollar continued to improve the
competitiveness of U.S. products. That revision was offset, however, by
a larger upward revision to growth in real imports to 15.3% (-6.7% y/y).
Growth in domestic final demand was left roughly unchanged at
a moderate 1.6% after a 2.3% 3Q increase. These gains remain the first
back-to-back quarterly increases since 2007. Business investment in
equipment &amp; software led last quarter's growth with an 18.2%
(-7.7% y/y) increase after its 1.5% 3Q rise. Investment in business
construction, however, offset much of this increase with a 13.9%
decline (-24.3% y/y). Residential investment remained strong with a
little-revised 5.0% gain (-12.3% y/y) which was the second consecutive
quarterly increase. Personal consumption growth lagged with a
downwardly revised 1.7% (1.0% y/y) increase. Finally, quarterly
spending by government fell slightly more than initially estimated
(+1.3% y/y), mostly due to a drop in defense spending.
Price inflation was revised slightly downward to a 0.4% gain
as measured by the chained GDP price index after little or no inflation
during the prior two quarters. Diminished price gains for all of last
year pulled the annual increase down to 1.2% which was nearly its
weakest increase since the early 1960s. The personal consumption chain
price index rose a lessened 2.3% in 4Q and increased just 0.2% for the
whole year owing to the yearly decline in energy prices.
The U.S. National Income &amp; Product Account data are
available in Haver's USECON and the USNA
databases.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226d.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" style="color: white;">Chained 2005$, % AR</a></th>
<th scope="col">4Q '09&nbsp; Preliminary</th>
<th scope="col">4Q '09 Advance</th>
<th scope="col">3Q '09</th>
<th scope="col">2Q '09</th>
<th scope="col">4Q Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>5.9</td>
<td>5.7</td>
<td>2.2</td>
<td>-0.7</td>
<td>0.1</td>
<td>-2.4</td>
<td>0.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Inventory
Effect</td>
<td>3.9</td>
<td>3.4</td>
<td>0.7</td>
<td>-1.4</td>
<td>0.1</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.9</td>
<td>2.2</td>
<td>1.5</td>
<td>0.7</td>
<td>-0.0</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Foreign
Trade Effect</td>
<td>0.3</td>
<td>0.5</td>
<td>-0.8</td>
<td>1.7</td>
<td>0.9</td>
<td>1.0</td>
<td>-1.2</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.6</td>
<td>1.7</td>
<td>2.3</td>
<td>-0.9</td>
<td>-0.9</td>
<td>-2.7</td>
<td>-0.4</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.4</td>
<td>0.6</td>
<td>0.4</td>
<td>-0.0</td>
<td>0.7</td>
<td>1.2</td>
<td>2.1</td>
<td>2.9</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Revised Little And Remains Near High 
by <a href="/comment/Moeller.html">Tom
Moeller</a> 


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226e.jpg" align="right" border="0" height="265" width="353">
Contrary to yesterday's troubling report of lower consumer
confidence, the Reuters/University of Michigan Index of Consumer
Sentiment for February fell just slightly to 73.6. The figure remained
near its two-year high of 74.4 reached last month and was little
different from the mid-month report. The latest figure fell just short
of Consensus expectations for 74.0 though it compares favorably to the
low of 55.3 in November 2008. During the last ten years there has been
a 61% correlation between the level of sentiment and the three-month
change real consumer spending.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226f.jpg" style="width: 353px; height: 265px;" align="right">
Expected economic conditions accounted for the m/m decline
with a lessened 2.4% m/m drop to the lowest level since November.
Expectations for business conditions during the next year and during
the next five years fell moderately but expectations for personal
finances fell to the lowest level in twelve months.
Sentiment about current economic conditions increased a
lessened 0.9% but that still was to the highest level since March 2008.
Assessments of current financial conditions were unchanged m/m at their
highest since September of 2008. Buying conditions for large household
goods, including furniture, refrigerators, stoves &amp;
televisions, moved up another 2.3% to the highest level since January
2008 but the view of current personal finances slipped (+15.4% y/y)
following two months of strength.
Expected price inflation during the next year was firmer than
indicated earlier at 3.6% and was up from the December 2008 reading of
1.7%.Respondents' view of government policy, which may eventually
influence economic expectations, fell to its lowest level in twelve
months. Just thirteen percent of respondents thought that a good job
was being done by government versus 41% who thought a poor job was
being done, a twelve-month high.
The Reuters/University of Michigan survey data are not
seasonally adjusted. The reading is based on telephone interviews with
about 500 households at month-end. These results are based on about 320
interviews. The summary indexes are in Haver's USECON database
with details in the proprietary UMSCA database.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226g.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226h.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM" style="color: white;">University of Michigan</a></th>
<th scope="col">Final - February</th>
<th scope="col">Mid-February</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Feb. y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>73.6</td>
<td>73.7</td>
<td>74.4</td>
<td>72.5</td>
<td>30.7%</td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>81.8</td>
<td>84.1</td>
<td>81.1</td>
<td>78.0</td>
<td>24.9</td>
<td>69.6</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>68.4</td>
<td>66.9</td>
<td>70.1</td>
<td>68.9</td>
<td>35.4</td>
<td>64.1</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Plummet
As Prices Fall Sharply 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 26, 2010



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226i.jpg" style="width: 353px; height: 265px;" align="right">The
National
Association of Realtors reported that January sales of
existing homes fell another 7.2% to 5.050M units (SAAR) after
a little-revised 16.2% December decline. The decline may have been
again influenced by the timing of a recently-extended home-buyer tax
credit. The fall in January home sales greatly exceeded Consensus
expectations for a decline to 5.90M.
The home-buyer tax credit of up
to $8,000 now runs though April 30. Additionally, a new credit of up to
$6,500 is available to some existing home owners who move. The full
details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.
Sales of single-family homes fell 6.9% but they remained up
8.6% y/y as
home affordability improved with lower prices and low interest rates.
Sales <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226j.jpg" style="width: 353px; height: 265px;" align="right">
of condos and co-ops alone fell 8.1% from December to 620,000 but
were up by one-third from twelve months ago.
 The median
price of all existing homes fell 3.4% last month after a much-reduced
0.3% December rise. The latest level equaled that of 12 months ago and
these were the lowest since May 2002. Some comfort may be taken from
the unchanged level of prices versus one year ago versus the
2.4%-to-12.4% declines during the last three years. These declines have
raised the affordability of a home to near its record high although the
rate of increase has slowed sharply. 
 The number of unsold homes
(single-family &amp; co-ops) fell 0.5% in January (-9.6% y/y) to
the lowest level since March 2006. At the current sales rate there was
a slightly-increased 7.8 months' supply of homes on the market, near
the lowest since late 2006. The latest figure was down from a high of
11.3 months during April of 2008. For single-family homes, the
inventory rose to a 7.6 months' supply.&nbsp;
 The data on existing
home sales, prices and affordability can be found in Haver's USECON
database. The regional price, affordability and inventory data is
available in the REALTOR database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous, SAAR)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,050</td>
<td>5,440</td>
<td>6,590</td>
<td>11.5%</td>
<td>5,160</td>
<td>4,893</td>
<td>5,675</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>820</td>
<td>920</td>
<td>1,150</td>
<td>-22.4</td>
<td>863</td>
<td>847</td>
<td>1,009</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,080</td>
<td>1,160</td>
<td>1,540</td>
<td>8.0</td>
<td>1,166</td>
<td>1,125</td>
<td>1,329</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,870</td>
<td>2,020</td>
<td>2,380</td>
<td>-12.0</td>
<td>1,913</td>
<td>1,858</td>
<td>2,244</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,280</td>
<td>1,350</td>
<td>1,420</td>
<td>7.6</td>
<td>1,216</td>
<td>1,063</td>
<td>1,093</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,430</td>
<td>4,760</td>
<td>5,710</td>
<td>8.6</td>
<td>4,567</td>
<td>4,338</td>
<td>4,959</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $
(NSA)</td>
<td>164,700</td>
<td>170,500</td>
<td>170,000</td>
<td>0.0</td>
<td>172,742</td>
<td>197,233</td>
<td>216,633</td>
</tr>
</tbody>
</table>

EMU Inflation Stays Under Wraps 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 26, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100226k.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The EMU HICP has finalized for January. Headline prices fell
and core prices ( ex energy and unprocessed food) fell by 0.3%. Core
prices continue to drive their Yr/Yr rate lower to juts under 1%. Goods
prices in the Zone are up by 0.7% Yr/Yr while service prices are up
1.4%.over three months goods prices are falling.
EMU inflation among the large countries is fairly tightly
clustered. German inflation is 0.7% over 12-months and marks the low
while Italy at 1.3% over 12-months marks the high. The UK, a non
monetary union country, but an EU member has headline inflation at 3.5%
for 12-months.
Core inflation is clustered in the Union as well. Spain at
0.3% has the lowest Core rate over twelve months. Germany and France
are both at 0.9%. Italy at 1.5% has the highest core rate.
Over three and six months headline inflation in the Zone is
well-behaved while UK inflation continues to bulge, running up by as
much as a 6.2% at an annual rate over three months.
In the Zone core inflation is universally low over three
months; the large country with the lowest core inflation rate is
Germany at -0.7%, over six months Italy has the high at 1.9%
Inflation in the Zone is weak and economic activity has been
weakening. Weather has been severe in the US in Europe and it has hit
the UK hard in a few places. It is hard to know the role of weather in
blunting the forces of growth. For now central banks can take some
breathing room on the inflation front. Growth however has yet to turn
the corner in a strong dependable way.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Trends
in HICP
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">%
mo/mo</td>
<td style="font-weight: bold;" colspan="3">Saar</td>
<td style="font-weight: bold;">&nbsp;</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Jan-10</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3-Mo</td>
<td style="font-weight: bold;">6-Mo</td>
<td style="font-weight: bold;">12-Mo</td>
<td style="font-weight: bold;">Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>2.2%</td>
<td>1.0%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>0.9%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-2.4%</td>
<td>1.4%</td>
<td>0.7%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>1.4%</td>
<td>2.4%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="8" class="firstcol">HICP</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>0.7%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.5%</td>
<td>2.5%</td>
<td>1.2%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.7%</td>
<td>2.0%</td>
<td>1.3%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>0.9%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>6.2%</td>
<td>4.4%</td>
<td>3.5%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.5%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>1.1%</td>
<td>0.8%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="8" class="firstcol">Core:xFE&amp;A</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>0.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.2%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
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U.S. GDP 4Q Increase Made StrongerBy Inventories

Robert Brusca

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Manufacturing orders are up by 0.8% in December but the
sequential growth rates do not show that the growth of orders continues
to accelerate. MFG sales are also slowing as capital goods and
intermediate goods sales rates over three-months are weaker than sales
rates for six months
The overall EU index of confidence rose in February but the
EMU index edged lower. Among the largest EU/EMU nations France and
Italy saw declines. Germany posted a gain of 0.9% in the month while
Spain&#8216;s index advanced by 1.2%. The UK saw confidence edge up by a tiny
0.1%.
The overall EMU confidence measure stands in the 62nd
percentile of its range but if we position it by queue among past
values it stands in the bottom third among all confidence measures
since 1989. Oddly the strongest relative standing of any sector is by
retailing which is in the 64th percentile of its range and in the 57th
percentile of its queue. The industrial sector and consumer confidence
in their respective 50th to 55th range percentiles and in their
respective 29th to 34th queue percentiles. The service sector stands
just below its range mid point in its 49th percentile but sags back to
a 23rd percentile standing in its queue
The difference between the range and queue percentiles tells
us something about the density of the distribution of values for these
readings. The queue percentile gives us a good fix on where the index
stands compared to where it has been historically since a queue
standing of 54% says that the indicator is weaker than this 54 percent
of the time and stronger only 46 percent of the time.
The range standing simply positions the current reading
between the best and worst readings in some historic span (since 1989).
For now the range readings are higher than the queue readings because
the current levels are elevated substantially from recession lows and
the lows skew the range. But compared to the full spectrum of readings
the current levels are not yet higher than they have been on average
except for retailing (in the 57th percentile of its queue). So Europe
is still lagging in its recovery. It is well short of getting back to
neutral even though the recovery has slowed and this month has brought
slippage to the EMU reading.
All the large countries continued to show overall sentiment
readings that are below their queue midpoints, although four exceed
their range midpoints. The highest queue standing is oddly and
surprisingly in Italy with confidence in the 44th percentile of its
queue followed by Germany, France and the UK all of which are in the
37th percentile of their respective queues. Spain is in the 16th
percentile; EMU is in the 26th percentile.
So EMU is better than this nearly 75% of the time and this is
after a 10 straight monthly rises in sentiment. That metric should stop
you in your tracks. Even though the overall EMU reading stands in the
55th percentile between its worst and best readings, the &#8216;queue
standing&#8217; is just above the lower quartile. In addition to this Europe
has big problems with Greece. You can see the dour mood in Spain with
its 19% unemployment rate and then there is beleaguered Portugal. The
ECB is on the cusp of new leadership &#8211; who will that be? Will it
inspire stability? Will it be a tough inflexible guy like Weber from
the Bundesbank or someone else? Europe is just a series of question
marks. And if it backslides who does the US export to? The US has
emerging troubles of its own
Welcome to 2010.

 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead><tr>
<th colspan="13" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Feb 
10</td>
<td>Jan 
10</td>
<td>Dec 
09</td>
<td>Nov 
09</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>By Queue 
Rank%</td>
<td>Average 
Level</td>
</tr>
<tr>
<td class="firstcol">Overall Index</td>
<td>97.4</td>
<td>97.2</td>
<td>95</td>
<td>91.5</td>
<td>62.4</td>
<td>166</td>
<td>115</td>
<td>68</td>
<td>47</td>
<td>100</td>
<td>33.9%</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-13</td>
<td>-13</td>
<td>-16</td>
<td>-19</td>
<td>56.5</td>
<td>178</td>
<td>7</td>
<td>-39</td>
<td>46</td>
<td>-8</td>
<td>29.1%</td>
<td>-7.8</td>
</tr>
<tr>
<td class="firstcol">Consumer Confid</td>
<td>-14</td>
<td>-13</td>
<td>-14</td>
<td>-15</td>
<td>52.9</td>
<td>165</td>
<td>2</td>
<td>-32</td>
<td>34</td>
<td>-11</td>
<td>34.3%</td>
<td>-11.1</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-5</td>
<td>-3</td>
<td>-6</td>
<td>-6</td>
<td>64.5</td>
<td>108</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-6</td>
<td>57.0%</td>
<td>-5.7</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-32</td>
<td>-34</td>
<td>-33</td>
<td>-32</td>
<td>21.7</td>
<td>203</td>
<td>4</td>
<td>-42</td>
<td>46</td>
<td>-17</td>
<td>19.1%</td>
<td>-17.1</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0</td>
<td>-2</td>
<td>-2</td>
<td>-9</td>
<td>49.2</td>
<td>123</td>
<td>32</td>
<td>-31</td>
<td>63</td>
<td>13</td>
<td>23.1%</td>
<td>12.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td>Feb 
10</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td colspan="2">&nbsp;&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; &nbsp;EMU</td>
<td>-0.1%</td>
<td>2.0%</td>
<td>2.4%</td>
<td>95.9</td>
<td>55.4</td>
<td>185</td>
<td>116</td>
<td>71</td>
<td>46</td>
<td>100</td>
<td>26.3%</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Germany</td>
<td>0.9%</td>
<td>0.6%</td>
<td>1.6%</td>
<td>97.0</td>
<td>47.8</td>
<td>158</td>
<td>121</td>
<td>75</td>
<td>46</td>
<td>101</td>
<td>37.1%</td>
<td>100.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France</td>
<td>-1.9%</td>
<td>1.7%</td>
<td>4.1%</td>
<td>98.4</td>
<td>54.4</td>
<td>157</td>
<td>119</td>
<td>74</td>
<td>44</td>
<td>100</td>
<td>37.5%</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy</td>
<td>-1.7%</td>
<td>4.3%</td>
<td>2.6%</td>
<td>99.7</td>
<td>58.6</td>
<td>139</td>
<td>120</td>
<td>71</td>
<td>50</td>
<td>100</td>
<td>44.6%</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Spain</td>
<td>1.2%</td>
<td>0.3%</td>
<td>1.3%</td>
<td>90.1</td>
<td>41.2</td>
<td>210</td>
<td>116</td>
<td>72</td>
<td>44</td>
<td>100</td>
<td>16.3%</td>
<td>100.2</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>0.1%</td>
<td>3.4%</td>
<td>6.9%</td>
<td>98.3</td>
<td>66.1</td>
<td>158</td>
<td>115</td>
<td>65</td>
<td>50</td>
<td>100</td>
<td>37.1%</td>
<td>100.2</td>
</tr>
<tr>
<td colspan="2">All since Feb 1989</td>
<td colspan="2">251</td>
<td colspan="2">-Count</td>
<td colspan="2">Services:</td>
<td></td>
<td>160</td>
<td>-Count</td>
<td></td>
<td></td>
</tr>
<tr>
<td colspan="11" class="firstcol">Sentiment
is an index,
sector readings are net balance diffusion measures</td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
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Manufacturing orders are up by 0.8% in December but the sequential growth rates do not show that the growth of orders continues to accelerate. MFG sales are also slowing as capital goods and intermediate goods sales rates over three- [...]

A Pause And Backtrack In EU/EMU Growth In February

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225d.jpg" style="width: 353px; height: 265px;" align="right">Snowstorms
in the eastern half and the southern regions of the country helped
prompt a jump in unemployment insurance claims. Today's Labor
Department report indicated that initial claims for jobless insurance
increased&nbsp; 22,000 last week to 496,000. The rise followed
strong weekly gains during both January and February which raised the
level to its highest since early-November. Nevertheless claims remained
down from the recession peak of 674,000 hit last March and claims
remained near the lowest level since January 2009. The weekly rise in
claims contrasted with Consensus expectations for a decline to 460,000.
The four-week moving average of initial claims rose to 473,750 and
remained just above the cycle low.Continuing claims for unemployment
insurance during the latest week rose slightly from the cycle-low and
were down by one-third since late-June. Continuing claims were at the
lowest level since early-January of last year. The overall decline is a
function of the improved job market but also reflects the exhaustion of
26 weeks of unemployment benefits. Continuing claims provide an
indication of workers' ability to find employment. The four-week
average of continuing claims fell to a cycle low of 4,585,750. This
series dates back to 1966.&nbsp;&nbsp;Extended benefits for
unemployment insurance fell to another cycle low of 203,612. They were
down by two-thirds from a peak of 597,688 reached in
November.&nbsp;· The insured rate of unemployment remained stable
for the fifth week at a low of 3.5%. The rate reached a high of 5.2%
during late-June. During the last ten years, there has been a 93%
correlation between the level of the insured unemployment rate and the
overall rate of unemployment published by the Bureau of Labor
Statistics.&nbsp; The highest insured unemployment rates in the
week ending February 6 were in Alaska (7.5 percent), Oregon (6.5),
Idaho (6.4), Montana (6.2), Wisconsin (6.2), Michigan (5.9), Puerto
Rico (5.9), Nevada (5.8), Pennsylvania (5.7), and North Carolina (5.5).
The lowest insured unemployment rates were in Virginia (2.3), Texas
(2.5), Florida (3.4), Maryland (3.4), Mississippi (3.6), Wyoming (3.7),
Ohio (3.9), Indiana (4.0), New York (4.1) and Maine (4.5). These data
are not seasonally adjusted but the overall insured unemployment rate
is.The unemployment insurance claims data is available in Haver's WEEKLY
database and the state data is in the REGIONW
database.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225f.jpg" style="width: 312px; height: 265px;">
<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/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></th>
<th scope="col">2/20/10</th>
<th scope="col">2/13/10</th>
<th scope="col">2/6/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>496</td>
<td>474</td>
<td>442</td>
<td>-24.4%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,617</td>
<td>4,611</td>
<td>-8.8%</td>
<td>5,835</td>
<td>3,345</td>
<td>2,552</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.5</td>
<td>3.5</td>
<td>3.8 (2/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
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Snowstorms in the eastern half and the southern regions of the country helped prompt a jump in unemployment insurance claims. Today's Labor Department report indicated that initial claims for jobless insurance increased 22,000 last [...]

U.S. Initial Unemployment Insurance Claims Jump With Poor Weather

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225a.jpg" style="width: 353px; height: 265px;" align="right">Improvement
in the factory sector looked material last month. The overall level of
durable goods orders jumped 3.0%, that followed an upwardly revised
1.9% December increase and it far outpaced Consensus expectations for a
1.5% gain. Unfortunately, the strength was limited. Orders for
nondefense aircraft &amp; parts more than doubled and mostly
recouped sharp declines during the prior two months.&nbsp;
 Regardless of
the January overstatement from the aircraft sector, the durable factory
goods sector appeared on the mend after last year's recession. Less the
transportation sector, orders slipped 0.6% though that followed two
strong 2.0% monthly increases. That was enough to lift the y/y gain in
orders to 8.6%. This strength suggests further improvement in shipments
and industrial output are on the come after the modest y/y gains
already logged.· Transportation sector orders last month were lifted by
the jump in nondefense aircraft as well as by an 11.6% (66.4% y/y) rise
in defense sector bookings. Orders for motor vehicles slipped m/m but
were up modestly from last year. That increase followed annual declines
during each of the last four years which left orders nearly half of
their 2006 level
Improvement in other sectors continued last month.
Primary metals orders increased 1.9% (31.6% y/y) following even
stronger gains during each of the prior four months. Electrical
equipment orders also rose 1.4% (3.8% y/y) while orders for computers
&amp; related equipment jumped 4.6% (16.0% y/y). Only machinery
orders lagged with a 9.7% decline (+8.9% y/y) but that followed sharp
increases during three of the prior four months.&nbsp;
Shipments
of durable goods slipped 0.2% (+1.7% y/y) during January following
increases during the prior four months. The increase was led by an 8.5%
jump (14.0% y/y) in shipments of computers &amp; electronic
products but that was offset by declines in shipments of nondefense
capital goods (-3.2% y/y), machinery (-7.9% y/y) and electrical
equipment (-2.2% y/y). Nevertheless, these negative y/y changes were
much-reduced from those during the recession.
 Perhaps the factory
sector's inventory retrenchment is winding down, but it's not over.
Durable goods inventories slipped just modestly during January (-10.6%
y/y) as they did during the prior two months. However, these followed
very sharp declines through September. Overall, since the December 2008
peak, inventories have fallen 11.7%.
The durable goods figures are
available in Haver's USECON database.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification
</a>(%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>3.0</td>
<td>1.9</td>
<td>-0.4</td>
<td>10.2</td>
<td>-19.8</td>
<td>-6.0</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>-0.6</td>
<td>2.0</td>
<td>2.0</td>
<td>8.6</td>
<td>-17.3</td>
<td>-1.4</td>
<td>-0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>4.7</td>
<td>2.5</td>
<td>-3.0</td>
<td>15.9</td>
<td>-23.9</td>
<td>-7.0</td>
<td>3.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-2.9</td>
<td>3.3</td>
<td>3.2</td>
<td>10.7</td>
<td>-18.2</td>
<td>-0.5</td>
<td>-2.7</td>
</tr>
</tbody>
</table>


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Improvement in the factory sector looked material last month. The overall level of durable goods orders jumped 3.0%, that followed an upwardly revised 1.9% December increase and it far outpaced Consensus expectations for a 1.5% gain. [...]

U.S. Durable Goods Orders Surge Due To Aircraft

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225a.jpg" style="width: 353px; height: 265px;" align="right">Improvement
in the factory sector looked material last month. The overall level of
durable goods orders jumped 3.0%, that followed an upwardly revised
1.9% December increase and it far outpaced Consensus expectations for a
1.5% gain. Unfortunately, the strength was limited. Orders for
nondefense aircraft &amp; parts more than doubled and mostly
recouped sharp declines during the prior two months.&nbsp;
 Regardless of
the January overstatement from the aircraft sector, the durable factory
goods sector appeared on the mend after last year's recession. Less the
transportation sector, orders slipped 0.6% though that followed two
strong 2.0% monthly increases. That was enough to lift the y/y gain in
orders to 8.6%. This strength suggests further improvement in shipments
and industrial output are on the come after the modest y/y gains
already logged.· Transportation sector orders last month were lifted by
the jump in nondefense aircraft as well as by an 11.6% (66.4% y/y) rise
in defense sector bookings. Orders for motor vehicles slipped m/m but
were up modestly from last year. That increase followed annual declines
during each of the last four years which left orders nearly half of
their 2006 level
Improvement in other sectors continued last month.
Primary metals orders increased 1.9% (31.6% y/y) following even
stronger gains during each of the prior four months. Electrical
equipment orders also rose 1.4% (3.8% y/y) while orders for computers
&amp; related equipment jumped 4.6% (16.0% y/y). Only machinery
orders lagged with a 9.7% decline (+8.9% y/y) but that followed sharp
increases during three of the prior four months.&nbsp;
Shipments
of durable goods slipped 0.2% (+1.7% y/y) during January following
increases during the prior four months. The increase was led by an 8.5%
jump (14.0% y/y) in shipments of computers &amp; electronic
products but that was offset by declines in shipments of nondefense
capital goods (-3.2% y/y), machinery (-7.9% y/y) and electrical
equipment (-2.2% y/y). Nevertheless, these negative y/y changes were
much-reduced from those during the recession.
 Perhaps the factory
sector's inventory retrenchment is winding down, but it's not over.
Durable goods inventories slipped just modestly during January (-10.6%
y/y) as they did during the prior two months. However, these followed
very sharp declines through September. Overall, since the December 2008
peak, inventories have fallen 11.7%.
The durable goods figures are
available in Haver's USECON database.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification
</a>(%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>3.0</td>
<td>1.9</td>
<td>-0.4</td>
<td>10.2</td>
<td>-19.8</td>
<td>-6.0</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>-0.6</td>
<td>2.0</td>
<td>2.0</td>
<td>8.6</td>
<td>-17.3</td>
<td>-1.4</td>
<td>-0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>4.7</td>
<td>2.5</td>
<td>-3.0</td>
<td>15.9</td>
<td>-23.9</td>
<td>-7.0</td>
<td>3.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-2.9</td>
<td>3.3</td>
<td>3.2</td>
<td>10.7</td>
<td>-18.2</td>
<td>-0.5</td>
<td>-2.7</td>
</tr>
</tbody>
</table>


U.S. Initial Unemployment
Insurance Claims Jump With Poor Weather 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 25, 2010



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225d.jpg" style="width: 353px; height: 265px;" align="right">Snowstorms
in the eastern half and the southern regions of the country helped
prompt a jump in unemployment insurance claims. Today's Labor
Department report indicated that initial claims for jobless insurance
increased&nbsp; 22,000 last week to 496,000. The rise followed
strong weekly gains during both January and February which raised the
level to its highest since early-November. Nevertheless claims remained
down from the recession peak of 674,000 hit last March and claims
remained near the lowest level since January 2009. The weekly rise in
claims contrasted with Consensus expectations for a decline to 460,000.
The four-week moving average of initial claims rose to 473,750 and
remained just above the cycle low.
Continuing claims for unemployment
insurance during the latest week rose slightly from the cycle-low and
were down by one-third since late-June. Continuing claims were at the
lowest level since early-January of last year. The overall decline is a
function of the improved job market but also reflects the exhaustion of
26 weeks of unemployment benefits. Continuing claims provide an
indication of workers' ability to find employment. The four-week
average of continuing claims fell to a cycle low of 4,585,750. This
series dates back to 1966.&nbsp;
&nbsp;Extended benefits for
unemployment insurance fell to another cycle low of 203,612. They were
down by two-thirds from a peak of 597,688 reached in
November.&nbsp;· The insured rate of unemployment remained stable
for the fifth week at a low of 3.5%. The rate reached a high of 5.2%
during late-June. During the last ten years, there has been a 93%
correlation between the level of the insured unemployment rate and the
overall rate of unemployment published by the Bureau of Labor
Statistics.&nbsp;
 The highest insured unemployment rates in the
week ending February 6 were in Alaska (7.5 percent), Oregon (6.5),
Idaho (6.4), Montana (6.2), Wisconsin (6.2), Michigan (5.9), Puerto
Rico (5.9), Nevada (5.8), Pennsylvania (5.7), and North Carolina (5.5).
The lowest insured unemployment rates were in Virginia (2.3), Texas
(2.5), Florida (3.4), Maryland (3.4), Mississippi (3.6), Wyoming (3.7),
Ohio (3.9), Indiana (4.0), New York (4.1) and Maine (4.5). These data
are not seasonally adjusted but the overall insured unemployment rate
is.
The unemployment insurance claims data is available in Haver's
WEEKLY
database and the state data is in the REGIONW
database.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225f.jpg" style="width: 312px; height: 265px;">
<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/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></th>
<th scope="col">2/20/10</th>
<th scope="col">2/13/10</th>
<th scope="col">2/6/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>496</td>
<td>474</td>
<td>442</td>
<td>-24.4%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,617</td>
<td>4,611</td>
<td>-8.8%</td>
<td>5,835</td>
<td>3,345</td>
<td>2,552</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.5</td>
<td>3.5</td>
<td>3.8 (2/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>

A Pause And Backtrack In EU/EMU
Growth In February 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 25, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100225g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Manufacturing orders are up by 0.8% in December but the
sequential growth rates do not show that the growth of orders continues
to accelerate. MFG sales are also slowing as capital goods and
intermediate goods sales rates over three-months are weaker than sales
rates for six months
The overall EU index of confidence rose in February but the
EMU index edged lower. Among the largest EU/EMU nations France and
Italy saw declines. Germany posted a gain of 0.9% in the month while
Spain&#8216;s index advanced by 1.2%. The UK saw confidence edge up by a tiny
0.1%.
The overall EMU confidence measure stands in the 62nd
percentile of its range but if we position it by queue among past
values it stands in the bottom third among all confidence measures
since 1989. Oddly the strongest relative standing of any sector is by
retailing which is in the 64th percentile of its range and in the 57th
percentile of its queue. The industrial sector and consumer confidence
in their respective 50th to 55th range percentiles and in their
respective 29th to 34th queue percentiles. The service sector stands
just below its range mid point in its 49th percentile but sags back to
a 23rd percentile standing in its queue
The difference between the range and queue percentiles tells
us something about the density of the distribution of values for these
readings. The queue percentile gives us a good fix on where the index
stands compared to where it has been historically since a queue
standing of 54% says that the indicator is weaker than this 54 percent
of the time and stronger only 46 percent of the time.
The range standing simply positions the current reading
between the best and worst readings in some historic span (since 1989).
For now the range readings are higher than the queue readings because
the current levels are elevated substantially from recession lows and
the lows skew the range. But compared to the full spectrum of readings
the current levels are not yet higher than they have been on average
except for retailing (in the 57th percentile of its queue). So Europe
is still lagging in its recovery. It is well short of getting back to
neutral even though the recovery has slowed and this month has brought
slippage to the EMU reading.
All the large countries continued to show overall sentiment
readings that are below their queue midpoints, although four exceed
their range midpoints. The highest queue standing is oddly and
surprisingly in Italy with confidence in the 44th percentile of its
queue followed by Germany, France and the UK all of which are in the
37th percentile of their respective queues. Spain is in the 16th
percentile; EMU is in the 26th percentile.
So EMU is better than this nearly 75% of the time and this is
after a 10 straight monthly rises in sentiment. That metric should stop
you in your tracks. Even though the overall EMU reading stands in the
55th percentile between its worst and best readings, the &#8216;queue
standing&#8217; is just above the lower quartile. In addition to this Europe
has big problems with Greece. You can see the dour mood in Spain with
its 19% unemployment rate and then there is beleaguered Portugal. The
ECB is on the cusp of new leadership &#8211; who will that be? Will it
inspire stability? Will it be a tough inflexible guy like Weber from
the Bundesbank or someone else? Europe is just a series of question
marks. And if it backslides who does the US export to? The US has
emerging troubles of its own
Welcome to 2010.

 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead><tr>
<th colspan="13" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Feb 
10</td>
<td>Jan 
10</td>
<td>Dec 
09</td>
<td>Nov 
09</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>By Queue 
Rank%</td>
<td>Average 
Level</td>
</tr>
<tr>
<td class="firstcol">Overall Index</td>
<td>97.4</td>
<td>97.2</td>
<td>95</td>
<td>91.5</td>
<td>62.4</td>
<td>166</td>
<td>115</td>
<td>68</td>
<td>47</td>
<td>100</td>
<td>33.9%</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-13</td>
<td>-13</td>
<td>-16</td>
<td>-19</td>
<td>56.5</td>
<td>178</td>
<td>7</td>
<td>-39</td>
<td>46</td>
<td>-8</td>
<td>29.1%</td>
<td>-7.8</td>
</tr>
<tr>
<td class="firstcol">Consumer Confid</td>
<td>-14</td>
<td>-13</td>
<td>-14</td>
<td>-15</td>
<td>52.9</td>
<td>165</td>
<td>2</td>
<td>-32</td>
<td>34</td>
<td>-11</td>
<td>34.3%</td>
<td>-11.1</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-5</td>
<td>-3</td>
<td>-6</td>
<td>-6</td>
<td>64.5</td>
<td>108</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-6</td>
<td>57.0%</td>
<td>-5.7</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-32</td>
<td>-34</td>
<td>-33</td>
<td>-32</td>
<td>21.7</td>
<td>203</td>
<td>4</td>
<td>-42</td>
<td>46</td>
<td>-17</td>
<td>19.1%</td>
<td>-17.1</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0</td>
<td>-2</td>
<td>-2</td>
<td>-9</td>
<td>49.2</td>
<td>123</td>
<td>32</td>
<td>-31</td>
<td>63</td>
<td>13</td>
<td>23.1%</td>
<td>12.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td>Feb 
10</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td colspan="2">&nbsp;&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; &nbsp;EMU</td>
<td>-0.1%</td>
<td>2.0%</td>
<td>2.4%</td>
<td>95.9</td>
<td>55.4</td>
<td>185</td>
<td>116</td>
<td>71</td>
<td>46</td>
<td>100</td>
<td>26.3%</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Germany</td>
<td>0.9%</td>
<td>0.6%</td>
<td>1.6%</td>
<td>97.0</td>
<td>47.8</td>
<td>158</td>
<td>121</td>
<td>75</td>
<td>46</td>
<td>101</td>
<td>37.1%</td>
<td>100.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France</td>
<td>-1.9%</td>
<td>1.7%</td>
<td>4.1%</td>
<td>98.4</td>
<td>54.4</td>
<td>157</td>
<td>119</td>
<td>74</td>
<td>44</td>
<td>100</td>
<td>37.5%</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy</td>
<td>-1.7%</td>
<td>4.3%</td>
<td>2.6%</td>
<td>99.7</td>
<td>58.6</td>
<td>139</td>
<td>120</td>
<td>71</td>
<td>50</td>
<td>100</td>
<td>44.6%</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Spain</td>
<td>1.2%</td>
<td>0.3%</td>
<td>1.3%</td>
<td>90.1</td>
<td>41.2</td>
<td>210</td>
<td>116</td>
<td>72</td>
<td>44</td>
<td>100</td>
<td>16.3%</td>
<td>100.2</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>0.1%</td>
<td>3.4%</td>
<td>6.9%</td>
<td>98.3</td>
<td>66.1</td>
<td>158</td>
<td>115</td>
<td>65</td>
<td>50</td>
<td>100</td>
<td>37.1%</td>
<td>100.2</td>
</tr>
<tr>
<td colspan="2">All since Feb 1989</td>
<td colspan="2">251</td>
<td colspan="2">-Count</td>
<td colspan="2">Services:</td>
<td></td>
<td>160</td>
<td>-Count</td>
<td></td>
<td></td>
</tr>
<tr>
<td colspan="11" class="firstcol">Sentiment
is an index,
sector readings are net balance diffusion measures</td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
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U.S. Durable Goods Orders SurgeDue To Aircraft

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Manufacturing orders are up by 0.8% in December but the
sequential growth rates do not show that the growth of orders continues
to accelerate. MFG sales are also slowing as capital goods and
intermediate goods sales rates over three-months are weaker than sales
rates for six months
In December domestic orders have been especially strong rising
by 6.1% while foreign orders advanced by 2.2%. But over three months
Domestic orders are up at just a 0.8% rate while foreign orders are up
at an 11.9% pace. The pattern of growth rates in the chart shows us
that domestic and foreign growth rates peaked about six months ago and
have since been slowing down even though they continue to grow. This is
one reason for concern about whether the recovery is building momentum
or not.
Among large EU/EMU countries Italy and the UK are
demonstrating still accelerating orders from 12-months to six months
and again from six months to the three-month horizon. In France orders
accelerated in six months compared to 12-months and have stayed near
that mark for 3-month growth rates. Germany shows a decided
deceleration with growth rates rising in six-months compared to
12-months then submerging and going negative for the recent three-month
period. Still the Yr/Yr growth rates moved sharply higher in December
compared to November everywhere but in the UK. But the sequential
growth rates do give more of an up-close view of growth and on that
basis momentum truly is fading.
Obviously the various EU/EMU countries have some differences.
But the overriding message is that orders growth is slowing. It is
still positive but it is slowing. Europe now will be burdened with the
growing and festering problems of Greece and possibly other debt
ladened e-Zone members. The European consumer does not seem to have
gotten in gear. The recent German IFO survey was weak but it may have
been impacted by weather. We are always on a bit of a weather watch at
this time of year. But apart from weather there are ample trends that
tell us to be cautious about depending on the European recovery being
too strong.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">Selected Euro-Area and UK Industrial Orders </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Dec 09</td>
<td>Nov 09</td>
<td>Dec 09</td>
<td>Nov 09</td>
<td>Dec 09</td>
<td>Nov 09</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Area Detail</td>
<td>Dec 09</td>
<td>Nov 09</td>
<td>Oct 09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
</tr>
<tr>
<td class="firstcol">MFG
Orders</td>
<td>0.8%</td>
<td>2.7%</td>
<td>-2.1%</td>
<td>5.6%</td>
<td>9.2%</td>
<td>16.9%</td>
<td>21.5%</td>
<td>9.5%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>-0.4%</td>
<td>1.4%</td>
<td>0.4%</td>
<td>6.1%</td>
<td>4.3%</td>
<td>8.8%</td>
<td>7.9%</td>
<td>-2.8%</td>
<td>-9.2%</td>
</tr>
<tr>
<td class="firstcol">
Consumer</td>
<td>0.7%</td>
<td>1.0%</td>
<td>-0.2%</td>
<td>6.1%</td>
<td>-3.4%</td>
<td>3.7%</td>
<td>-0.4%</td>
<td>-2.6%</td>
<td>-5.3%</td>
</tr>
<tr>
<td class="firstcol">
Capital</td>
<td>-1.9%</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>-7.2%</td>
<td>6.4%</td>
<td>5.1%</td>
<td>5.8%</td>
<td>-5.7%</td>
<td>-10.3%</td>
</tr>
<tr>
<td class="firstcol">
Intermediate</td>
<td>6.1%</td>
<td>1.3%</td>
<td>-6.8%</td>
<td>0.8%</td>
<td>4.1%</td>
<td>18.6%</td>
<td>20.0%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td colspan="10" class="firstcol">Memo:MFG</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>0.8%</td>
<td>2.7%</td>
<td>-2.1%</td>
<td>5.6%</td>
<td>9.2%</td>
<td>16.9%</td>
<td>21.5%</td>
<td>9.5%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">E-13
Domestic MFG orders</td>
<td>6.1%</td>
<td>1.3%</td>
<td>-6.8%</td>
<td>0.8%</td>
<td>4.1%</td>
<td>18.6%</td>
<td>20.0%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">E-13
Foreign MFG orders</td>
<td>2.2%</td>
<td>3.0%</td>
<td>-2.3%</td>
<td>11.9%</td>
<td>35.2%</td>
<td>20.8%</td>
<td>34.2%</td>
<td>10.0%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Dec09</td>
<td>Nov09</td>
<td>Oct09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
</tr>
<tr>
<td class="firstcol">Germany
(MFG):</td>
<td>-1.8%</td>
<td>3.2%</td>
<td>-2.1%</td>
<td>-3.4%</td>
<td>9.9%</td>
<td>10.3%</td>
<td>23.7%</td>
<td>4.2%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">France(Ind):</td>
<td>17.1%</td>
<td>0.5%</td>
<td>-8.2%</td>
<td>36.4%</td>
<td>-7.3%</td>
<td>40.5%</td>
<td>4.5%</td>
<td>15.5%</td>
<td>-4.2%</td>
</tr>
<tr>
<td class="firstcol">Italy
(Ind):</td>
<td>4.7%</td>
<td>2.9%</td>
<td>0.7%</td>
<td>38.5%</td>
<td>47.6%</td>
<td>18.5%</td>
<td>15.4%</td>
<td>5.3%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">UK
(Engineering Industy):</td>
<td>8.5%</td>
<td>-15.6%</td>
<td>14.1%</td>
<td>19.1%</td>
<td>-18.1%</td>
<td>7.1%</td>
<td>-9.9%</td>
<td>-16.2%</td>
<td>-3.8%</td>
</tr>
</tbody>
</table>
</body></html>

Orders Continue In Their Upswing

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224c.jpg" style="width: 353px; height: 265px;" align="right">
The housing
market's upturn increasingly looks to have lost steam. The Mortgage
Bankers Association reported that mortgage applications slipped 8.5%
last week for the third week consecutive weekly decline. Nevertheless,
it's not all bad news since a late-January jump in applications was not
wholly unwound. The February average of applications still is up 8.8%
from January.&nbsp;&nbsp; &nbsp;For last week,
applications to refinance mortgages fell 8.9% and
applications to purchase a home fell 7.3%, the
third down week. Overall, there has been a downtrend in purchase
applications despite an uplift provided by an up-to $8,000 Federal tax
credit for first-time homebuyers. During the last ten years there has
been a 51% correlation between the y/y change in purchase applications
and the change in new plus existing single family home sales. The
correlation has lessened recently.The effective fixed interest rate
on conventional 15-year mortgages moved higher again to 4.68%. For the
month overall rates have been near the six year low. For 30-year
mortgages the rate also ticked up to 5.30% from a November average of
5.06%. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224d.jpg" style="width: 353px; height: 265px;" align="right">
Rates reached a high of 5.79% in early-June. Interest rates on
fixed 15-year and 30-year mortgages are closely correlated (near-90%)
with the rate on 10-year Treasury securities. Rates on adjustable
one-year mortgages fell to 6.64% last week from a November average of
6.81%.&nbsp;The Mortgage Bankers Association surveys
between 20 to 35 of the top lenders in the U.S. housing industry to
derive its refinance, purchase and market indexes. The weekly survey
covers roughly 50% of all U.S. residential mortgage applications
processed each week by mortgage banks, commercial banks and thrifts.
Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The figures for weekly
mortgage applications are available in Haver's SURVEYW
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM%22" style="color: black;">MBA Mortgage Applications
(SA, 3/16/90=100)</a></th>
<th scope="col">02/19/10</th>
<th scope="col">02/12/10</th>
<th scope="col">02/05/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>549.5</td>
<td>600.5</td>
<td>613.1</td>
<td>-26.1%</td>
<td>736.4</td>
<td>642.9</td>
<td>652.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>196.8</td>
<td>212.3</td>
<td>221.2</td>
<td>-21.4</td>
<td>263.5</td>
<td>345.4</td>
<td>424.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,605.3</td>
<td>2,860.1</td>
<td>2,893.9</td>
<td>-28.0</td>
<td>3,509.2</td>
<td>2,394.1</td>
<td>1,997.9</td>
</tr>
<tr>
<td class="firstcol">15-Year Mortgage Effective
Interest Rate (%)</td>
<td>4.68</td>
<td>4.59</td>
<td>4.57</td>
<td>5.07 (02/09)</td>
<td>4.85</td>
<td>5.9</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</body></html>

The housing market's upturn increasingly looks to have lost steam. The Mortgage Bankers Association reported that mortgage applications slipped 8.5% last week for the third week consecutive weekly decline. Nevertheless, it's not all [...]

U.S. Weekly Mortgage Applications Slip Again

Crude oil price has returned to pre-conflict level but traffic through Hormuz still subpar

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

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

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Andrew Cates

**Tightening Bias Intact, but Unevenly Distributed**
The July Blue Chip Financial Forecasts survey's expectations for policy rate changes over the next twelve months reveal a striking divergence across the major advanced economies, as chart 1 below makes clear. Across the board, the rate outlook is higher than it was in late February, before the US-Iran conflict escalated: the energy price shock and its inflationary consequences have left an imprint on the panel's thinking, even as oil prices have since retreated. Japan tops the list with an expected increase of around 40 basis points, reflecting the building pressure on the Bank of Japan to respond to yen weakness and still-elevated domestic inflation. Canada and the euro area also sit firmly in positive territory, with expected increases of around 30 and 20 basis points respectively. The US and the UK, by contrast, are in negative territory — the US barely so, the UK more distinctly, with the panel pencilling in modest rate reductions over the coming year. This pattern is not simply a reflection of where each economy sits in the inflation cycle. It also encodes a judgement about the current stance of monetary policy: in Japan, the euro area and Canada, policy is likely seen as insufficiently tight relative to the inflation challenge, and the conflict has reinforced that view. In the US and UK, by contrast, policy is judged to be closer to or already beyond neutral, meaning the next move is more likely to be an easing than a further tightening — even if, in the US case, that easing has been pushed well into 2027.

260702Z1.jpg

**When Will the Next Move Come?**
Chart 2 below adds a timing dimension to the rate outlook, showing where the BCFF panel currently places the next policy move for the Fed, ECB, Bank of England and Bank of Japan. For the BoJ, the distribution is concentrated around the near term, with a significant share of respondents expecting action in September or October — consistent with the building pressure illustrated in chart 1 and with the BoJ’s next scheduled decision on 31 July. For the ECB, September or later than November emerge as the most likely timing for the next step. The Bank of England panel is more spread, with a meaningful share expecting action to come later. For the Fed, the dominant view places the next move firmly in the ‘later’ category, consistent with the BCFF consensus that the Fed funds rate will hold through the rest of 2026, with a first cut not expected until Q2 2027. Under chair Kevin Warsh, the June FOMC meeting delivered a hawkish dot plot that shifted some participants toward a hike before year-end, but the panel as a whole has not moved that far.

260702Z2.jpg

**Headline Up, Core Contained: The Inflation Picture Across Advanced Economies**
One of the more reassuring features of the current inflation episode has been the limited pass-through from energy prices to underlying price dynamics. Across the advanced economies, headline CPI inflation has risen materially since the conflict escalated in March, driven overwhelmingly by consumer energy costs. Core inflation — stripping out food and energy — has edged higher, but only modestly, suggesting that second-round effects remain contained for now. In the United States, the pressures are arguably more alarming, with core PCE rising sharply between February and May to its highest level since October 2023. In the euro area, the focus this week has been firmly on Eurostat's June flash CPI estimate, published yesterday. Headline inflation fell back to 2.8% from a peak of 3.2% in May, as energy costs — the main driver of the surge since the conflict began — eased meaningfully. Crucially, core inflation also ticked down, and services inflation retreated as well. The June data therefore tell a broadly reassuring story: the energy shock is unwinding without leaving a lasting imprint on underlying price dynamics — precisely what the ECB will have been hoping for.

260702Z3.jpg

**Consumer Price Expectations: Are Households Convinced?**
The aggregate inflation picture looks relatively contained at the macro level, but whether households are similarly reassured is a separate question. Chart 4 below draws on the European Commission's consumer survey data on price expectations — one of the more timely and widely watched indicators of inflation psychology in the euro area. The survey captures whether consumers expect prices to rise, stay the same or fall over the coming twelve months, and its relationship with actual inflation outturns has historically been close. A sustained elevation in consumer price expectations risks becoming self-fulfilling, feeding into wage demands and pricing behaviour in ways that complicate the ECB's task considerably. The June survey, however, brought an encouraging development: expectations fell steeply, suggesting that households have begun to register the reversal in energy prices and the broader easing of the inflationary impulse. That said, the absolute level of expectations remains elevated relative to the pre-conflict period, and one month's decline does not constitute a trend. Whether the June reading marks the beginning of a sustained normalisation — or proves a temporary dip before expectations re-anchor at a higher level — will be one of the key variables shaping the ECB's decision calculus in the months ahead.

260702Z4.jpg

**Japan: A Weak Yen at the Worst Possible Time**
Japan occupies a particularly uncomfortable position in the current global conjuncture. The yen has depreciated to levels not seen since December 1986, with USD/JPY touching 162 this week. The move reflects the persistence of a large interest rate differential: even as the Bank of Japan has continued its gradual tightening, the Fed’s hawkish pivot under chair Kevin Warsh — with the mid-June FOMC dot plot signalling a possible hike before year-end — has reinforced the carry trade dynamics weighing on the currency. For Japan, which imports virtually all of its energy, yen weakness at a time of still-elevated global oil prices is a double burden, amplifying domestic inflation and squeezing real incomes. Verbal warnings from Japan’s Finance Ministry have had only a modest and short-lived effect on the exchange rate. The Bank of Japan’s next policy decision is on 31 July, and the pressure to act more decisively is building. The BCFF panel’s July survey revised upward its expectation for a stronger US dollar against the yen over the coming year — consistent with the fundamental picture that chart 5 below describes.

260702Z5.jpg

**AI: Optimism on the Technology, Scepticism on the Price**
Returning to the BCFF survey, its special questions reveal a panel that continues to look beyond the current cyclical turbulence toward a longer-horizon structural narrative. On artificial intelligence, respondents are broadly optimistic: 45% expect a noticeable impact on US productivity and growth within one to three years, with a further 45% believing those effects are already becoming evident. That is a striking degree of conviction about a technology whose macro-level productivity impact remains, by most empirical measures, still to fully materialise. Yet the same panellists are considerably more cautious about financial markets than about the technology itself. Nearly all respondents believe that expected AI gains are already fully reflected — or even over-reflected — in current asset prices. Chart 6 below captures this tension. It is a combination — high conviction on transformative potential, high scepticism on current valuations — that has historically been associated with stretched risk premia and vulnerability to disappointment, even where the underlying technology story ultimately proves correct.

260702Z6.jpg

Global financial markets have had a more settled feel this week, reflecting the continued unwinding of the geopolitical risk premium that had built up during the worst of the US-Iran conflict. Oil prices have fallen further, equity markets have been broadly supported, and incoming inflation data — notably the euro area’s June flash CPI estimate — have come in below expectations. The US holiday-shortened week ahead, with Independence Day on Friday, is likely to keep volumes thin and activity subdued. The bigger picture, however, remains one of tension between a more benign near-term inflation trajectory and central banks that may not yet be ready to stand down. In the charts below we look first at what the latest Blue Chip Financial Forecasts (BCFF) survey reveals about the expected change in and timing of policy rates across the major economies (charts 1 and 2), then at the divergence between headline and core inflation across the advanced economies (chart 3), and at what euro area consumers are more specifically expecting about inflation in the period ahead (chart 4). We turn next to Japan and the yen’s slide this week to 40-year lows (chart 5), and finally to the BCFF survey’s special questions on artificial intelligence and asset valuations (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/6WAWvuhdCIiVMfa7lArFBI?utm_source=generator&si=a00a7c7e625c4035" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Forecasters Hold Firm

Sandy Batten

260702A4.jpg

260702B4.jpg

The luster fell a bit off the employment rose in June with nonfarm payrolls rising 57,000 against expectations of a 115,000 increase, according to today’s report from the Bureau of Labor Statistics. Moreover, the increases previously reported for April and May were revised down by a total of 74,000. Upon revision, payrolls increased 148,000 in April versus 179,000 previously reported and rose 129,000 in May versus 172,000 previously reported. The average increase over the past three months fell to 111,000 from 164,000 in May while the average increase over the past six months rose to 92,000 in June, its highest reading since February 2025, from 80,000 in May. Both remain on a modest uptrend and much stronger than payroll gains last year. In 2025, monthly payroll gains averaged only 10,000.

The weaker-than-expected payroll report was reinforced by a weak report from the **household survey**. While the number of unemployed fell 213,000 and the unemployment rate edged down to 4.2% from 4.3% in May, the number of employed slumped 507,000 in June, the largest monthly decline since May 2025 (with population adjustment to January 2026). The labor force plunged 720,000 with the labor force participation rate falling to 61.5%, its lowest level since March 2021.

Growth of average hourly earnings (AHE), a key variable for the Federal Reserve, was relatively well behaved in June. AHE increased 0.3% m/m, the same monthly gain as in May, in line with expectations. The y/y rate of advance edged up to 3.5% in June from 3.4% in May. Wage growth in private services-producing firms picked up in June, rising 0.4% m/m (3.4% y/y) versus 0.2% m/m (3.2% y/y) in May. Goods-producing wages increased 0.2% m/m in June after 0.3% monthly gains in both April and May with the y/y rate holding at 4.1%.

260702C4.jpg

260702D4.jpg

In the **establishment survey**, private-sector employment was also weaker than expected in June, increasing only 49,000 against an expected 115,000 increase. Moreover, April and May figures were also revised down by a total of 50,000. Government employment rose 8,000 following a 32,000 increase in May. Private goods-producing employment increased 10,000, its largest monthly gain in three months with an 11,000 gain in construction and a 3,000 rise in manufacturing jobs, the first increase in three months. In contrast, services-producing employment increased only 39,000 in June, its weakest monthly performance in four months. Private education and health services jobs posted another solid gain of 69,000, up from 45,000 in May. However, retail jobs fell 7,500, their first monthly decline in four months, and leisure and hospitality jobs slumped 61,000, their largest monthly decline since December 2020, after increasing 40,000 in May. There had been speculation in the market that the World Cup would generate additional leisure and hospitality jobs, but this obviously failed to pan out. On a brighter note, although the one-month payroll diffusion index, a measure of the breadth of job gains, slipped to 54.4 in June from 56.0 in May, it remained well above the key 50 level that indicates that more industries were adding jobs than losing them.

The length of the workweek was unchanged at 34.3 hours in June with the aggregate weekly hours index edging up 0.1% m/m, the same monthly gain as in May. The aggregate hours index rose 1.3% q/q saar in Q2, the fastest quarterly gain in four quarters, providing a solid base for Q2 real GDP growth. The goods-producing workweek was unchanged at 40.1 hours, the highest since January 2023, while the private service-producing workweek edged down to 33.2 hours from 33.3 hours in May.

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.

260702X4.jpg

260702F4.jpg

- U.S. nonfarm payrolls increased 57,000 in June with meaningful downward revisions to both April and May.
- The market consensus looked for a 115,000 increase.
- The unemployment rate edged down to 4.2% from 4.3%, due mostly to a large decrease in the labor force.
- Average hourly earnings rose 0.3% m/m (3.5% y/y), in line with expectations.

U.S. Payroll Employment Gains Smaller than Expected in June

260702E.jpg

Unemployment rates in the European Monetary Union (EMU) were steady in May at 6.2%, the same level as in April, after April had fallen to 6.2% from 6.3%. The 6.2% reading is the lowest for the community since it was formed. Meanwhile, for the larger community, the EU, the unemployment rate has stabilized at 5.9%, the same as in April, again, a tick lower than it was in March. This 5.9% reading is a tick above the historic low for the European Union (EU). In both cases, the performance of these two economic conglomerations is quite excellent.

**Monthly**
The table looks at 12 of the most senior members of the monetary union, including an observation for the United Kingdom based on its claimant-count unemployment rate, presented at the bottom of the table. In May, the monetary union saw 4 of 12 members in the table with lower unemployment rates than they had in April. In April, five members had lower unemployment rates than in March. In March, seven members had lower unemployment rates than they posted in February. The progression to lower unemployment rates has slowed based on monthly data.

**Sequentially**
Looking at changes in the unemployment rates over broader sequential periods—three months, six months, and 12 months—6 out of 12 reporters have lower unemployment rates over three months; 7 have lower unemployment rates over six months; only 4 report unemployment rates that are lower over 12 months. The broader periods for comparison show changes in the unemployment rates that report more declines over the shorter and more recent periods compared to the longer/older periods. This is not the same trend leaning that we get from the last three months of data. It'll be good to watch these developments in the coming months to see if the tendency to lower unemployment rates is slowing or whether dropping unemployment is continuing in force.

**Rankings**
The ranking of unemployment rates since 1990 finds only three of these 12 monetary union members with unemployment rates above their medians. Those are Luxembourg, with a 98.2 percentile standing, Finland with an 81.9 percentile standing, and Austria with a 76.6 percentile standing. Italy, on the other hand, is reporting the lowest unemployment rate that it has seen during this period. The Greek unemployment rate has been this low or lower only about 3% of the time, while in Spain the unemployment rate has been this low or lower 11% of the time. For Portugal, the unemployment ranking figure has been weaker 13% of the time. The monetary union continues to report excellent labor market results even though economic growth has been relatively disappointing.

260702.jpg

**Summing up and central bankers**
In the wake of the monetary conference in the Sintra this past week, central banks featuring contributions from the European Central Bank, the Bank of England, the Federal Reserve, and the Bank of Canada, saw central bank heads talking about getting back to basics and stopping the use of some of the newer tools that had been pressed into service after the great financial crisis and during COVID. Bankers are getting back to basics to focus on short-term interest rates and say they will stop fiddling with the size of the balance sheet and to largely set aside the use of forward guidance. It will take time to determine what these changes are going to mean in terms of how policy performs and how markets will react. While there was a lot of discussion, and in some places concerns about the loss of forward guidance, what is clear is that, with forward guidance gone, there will be more volatility; however, the markets will be freer to price economic events themselves and will not be so stuck to the outlook of the central bank.  That could turn out to be a gigantic win for both markets and central bankers.

Europe

Unemployment Remains Quite Low in Europe

Winnie Tapasanun

260701A23.jpg

260701B23.jpg

The ISM U.S. manufacturing PMI fell to a lower-than-expected 53.3 in June, the first m/m fall since February, following a 1.3-point increase to 54.0 in May, according to data from the Institute for Supply Management. The June reading, above the 50 expansion-contraction threshold, indicated the U.S. manufacturing sector expanded for the sixth straight month, albeit at a slightly slower pace. A reading of 53.8 for June had been expected in the Action Economics Forecast Survey. The June manufacturing PMI, while above a contraction-level 49.0 in June 2025 and a low of 47.0 in October 2024, remained below a peak of 63.8 in March 2021.

The production index declined to 52.2 in June from 54.3 in May, indicating production expanded for the eighth consecutive month but at the slowest pace since December. The index was above a low of 44.8 in April 2025 but below a peak of 66.5 in March 2021. In June, 19.0% (NSA) of respondents reported higher production while 13.0% reported lower production. The new orders index slipped to 56.0 in June from 56.8 in May, signaling new orders grew for the sixth straight month following four successive months of contraction. The index remained well above a low of 41.8 in January 2023 but below a high of 67.0 in May 2021. In June, 22.3% (NSA) of respondents reported higher new orders while 13.4% reported declines. The inventories index climbed to 51.4 in June from 49.9 in May, marking the first expansion since April 2025. The index was slightly below a high of 52.7 in March 2025 but above a low of 43.8 in October 2024. Meanwhile, the supplier deliveries index fell to 57.4 in June from 60.6 in May and April, indicating slowing delivery performance for the seventh consecutive month after faster deliveries in November. In June, 18.1% (NSA) of respondents reported slower delivery speeds while 3.4% reported faster speeds.

On the labor front, the employment index improved to 49.7 in June from 48.6 in May, showing employment contracted for the 33rd straight month but at the slowest contraction pace since January 2025. The index was above a low of 44.1 in November 2025 but below a high of 56.5 in March 2022. In June, 16.2% (NSA) of respondents reported higher employment while 13.8% reported lower hiring.

On the pricing front, the prices paid index fell to a still-high 73.0 (NSA) in June, a 9.1-point drop—the largest decline since July 2022—from 82.1 in May, indicating raw materials prices rose for the 21st straight month but at the slowest rising pace since February. The index remained well above a low of 39.4 in December 2022 but below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. In June, 55.1% (NSA) of respondents reported higher prices while 9.2% reported price declines.

In other ISM series not included in the composite index, the new export orders index fell to 48.5 in June from 50.6 in May, indicating new export orders contracted for the third time in four months. The index was up from a low of 40.1 in May 2025 but down from a high of 52.4 in January 2025 and a peak of 57.1 in February 2022. The imports index edged down to 52.9 in June from 53.0 in May, suggesting imports expanded for the fifth successive month. The index was below its recent high of 54.9 in February but above a low of 39.9 in May 2025. The order backlog index decreased to 50.5 (NSA) in June from 52.2 in May, showing backlog levels grew at the slowest pace in six months. The index was below a high of 56.6 in February and a peak of 70.6 in May 2021 but well above a low of 37.5 in May 2023.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- ISM Mfg. PMI down slightly to 53.3 in June; sixth straight month above 50.
- Production (52.2) expands for the eighth consecutive mth.; new orders (56.0) for the sixth successive mth.
- Employment (49.7) contracts for the 33rd straight mth.; at the slowest contraction pace since Jan. ’25.
- Prices Index (73.0) at a four-month low, still indicating prices rising for the 21st consecutive mth.
- Exports (48.5) contract for the third time in four mths.; imports (52.9) continue to grow.

U.S. ISM Manufacturing PMI Still Expansionary in June; New Orders and Production Growing at a Slower Pace; Employment Contracting

Michael J. Moran

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The monthly report on construction activity receives scant attention in the financial press, and investors and traders in financial markets typically pay little heed. However, it is a valuable report for economists, as it provides a broad-based view of building activity, covering private residential and business construction, as well as government-related activity. The figures feed into the calculation of GDP. Unfortunately, results have been soft since early 2025.

Total construction activity rose 0.1 percent in May, marking the third consecutive increase. However, the gains have not been especially large, averaging 0.3%, and they have barely dented the string of weak readings in the preceding 17 months. The year-over-year change in May totaled -1.5%.

Private residential construction, the largest component of the total (41% share), rose 0.3% in May, adding to an average gain of 1.1% in the prior two months and leaving a year-over-year increase of 1.8% (chart, upper left). Most of the advance in the past year was the result of improvements to existing homes (up 8.1%). Construction of new multi-family units has shown little net change in the past year or so, while new single-family building has traced a mild downward trend (off 4.0% in the past year). Public construction has been flat in the past year, with both the federal government and state and local governments showing little net change (chart, upper right).

Private nonresidential construction (34% of the total) has received considerable press attention in the past few years because of explosive growth in the building of data centers. Growth has indeed been vigorous. Building started in 2020 and grew moderately at first, but this sector took off in 2022, about the time when artificial intelligence models became publicly available (chart, lower left, in levels to show the strong trend more clearly). Average annual growth for the three years ended 2025 totaled 48%.

Interestingly, despite the rapid growth in the building of data centers, the private nonresidential sector has been the weakest area of the construction report, with activity trending lower since early 2025 (chart, lower right). Some components of private nonresidential construction have held steady or improved (e.g. amusement & recreation, electric power), but three areas stand out on the soft side: general office, commercial, and manufacturing.

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- Building activity in the US was firm in 2023 and 2024, but it has lost ground since then.
- Government-related construction and private residential building have been little changed in the past year or so.
- Private nonresidential construction has been notably weak, despite robust activity in the building of data centers.