Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091119a.jpg" align="right" border="0" height="265" width="353">
The
Philadelphia Federal Reserve Bank indicated that the November index of
factory sector activity in the region continued to expand this month.
Moreover, the index was unexpectedly strong at 16.7 and positive for
the fourth consecutive month. The latest level compared to figures near
-40.0 this past fall and winter. During the last ten years there has
been a 77% correlation between the level of the Philadelphia Fed
Business Conditions Index and the three-month growth in factory sector
industrial production. There has been a 70% correlation with q/q growth
in real GDP. The latest survey from the Philadelphia Federal Reserve
Bank can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos1109.pdf">here.</a>·
Amongst the components new orders and shipments each improved to the
highest since 2007. Also showing improvement was the employment index
which rose to nearly break-even compared with a low of -52.0 during
March. During the last ten years there has been a 79% correlation
between the index level and the m/m change in manufacturing sector
payrolls. The inventory component reversed the October decline and
suggests that any turn towards inventory accumulation will be modest.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091119b.jpg" align="right" border="0" height="265" width="353">
A decline in the prices paid index reversed all of its October
increase. Nevertheless, the positive figure compares to negative
readings this past winter and spring. During the last ten years there
has been a 74% correlation between the prices paid index and the
three-month growth in the intermediate goods PPI. There has been an 83%
correlation with the change in core intermediate goods prices.
Expected business conditions in six months deteriorated for the fifth
straight month. The November index fell to a still-positive reading of
36.8 but that was well-off the recent high. Most of the index
components, especially orders and shipments, were down sharply. The
figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS
database. The exchange rate: what's in it for prices?
from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q3/brq309_exchange-rate.pdf">
here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Activity Index</td>
<td>16.7</td>
<td>11.5</td>
<td>14.1</td>
<td>-39.8</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>14.8</td>
<td>6.2</td>
<td>3.3</td>
<td>-29.3</td>
<td>-14.7</td>
<td>6.9</td>
<td>9.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Number of Employees</td>
<td>-0.5</td>
<td>-6.8</td>
<td>-14.3</td>
<td>-23.8</td>
<td>-8.7</td>
<td>6.8</td>
<td>9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index</td>
<td>14.9</td>
<td>21.3</td>
<td>&nbsp;14.9</td>
<td>&nbsp;-26.6</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body></html>

The Philadelphia Federal Reserve Bank indicated that the November index of factory sector activity in the region continued to expand this month. Moreover, the index was unexpectedly strong at 16.7 and positive for the fourth [...]

Philadelphia Fed Index Improves To Highest Since 2007

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091119a.jpg" align="right" border="0" height="265" width="353">The
Philadelphia Federal Reserve Bank indicated that the November index of
factory sector activity in the region continued to expand this month.
Moreover, the index was unexpectedly strong at 16.7 and positive for
the fourth consecutive month. The latest level compared to figures near
-40.0 this past fall and winter.

 During the last ten years there has
been a 77% correlation between the level of the Philadelphia Fed
Business Conditions Index and the three-month growth in factory sector
industrial production. There has been a 70% correlation with q/q growth
in real GDP. The latest survey from the Philadelphia Federal Reserve
Bank can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos1109.pdf">here.</a>·
Amongst the components new orders and shipments each improved to the
highest since 2007. Also showing improvement was the employment index
which rose to nearly break-even compared with a low of -52.0 during
March. During the last ten years there has been a 79% correlation
between the index level and the m/m change in manufacturing sector
payrolls. The inventory component reversed the October decline and
suggests that any turn towards inventory accumulation will be modest.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091119b.jpg" align="right" border="0" height="265" width="353">A decline
in the prices paid index reversed all of its October
increase. Nevertheless, the positive figure compares to negative
readings this past winter and spring. During the last ten years there
has been a 74% correlation between the prices paid index and the
three-month growth in the intermediate goods PPI. There has been an 83%
correlation with the change in core intermediate goods prices.

Expected business conditions in six months deteriorated for
the fifth
straight month. The November index fell to a still-positive reading of
36.8 but that was well-off the recent high. Most of the index
components, especially orders and shipments, were down sharply.

 The
figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS
database.

 The exchange rate: what's in it for prices?
from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q3/brq309_exchange-rate.pdf">
here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Activity Index</td>
<td>16.7</td>
<td>11.5</td>
<td>14.1</td>
<td>-39.8</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>14.8</td>
<td>6.2</td>
<td>3.3</td>
<td>-29.3</td>
<td>-14.7</td>
<td>6.9</td>
<td>9.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Number of Employees</td>
<td>-0.5</td>
<td>-6.8</td>
<td>-14.3</td>
<td>-23.8</td>
<td>-8.7</td>
<td>6.8</td>
<td>9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index</td>
<td>14.9</td>
<td>21.3</td>
<td>&nbsp;14.9</td>
<td>&nbsp;-26.6</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>

 U.S. Weekly Initial Claims
Unemployment Insurance Hold Steady Near January Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 19, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091119c.jpg" align="right" border="0" height="265" width="353">
Layoffs from the U.S. workforce held steady last week at the
recent low. That's according to the Labor Department which reported
that initial claims for unemployment insurance equaled the prior week's
upwardly revised level of 505,000. Claims have not been lower since the
first week of January and have fallen sharply from the peak reached in
March of 674,000 claims. The four-week moving average of claims fell to
514,000 and the latest weekly figure about matched Consensus
expectations.
The latest figure covers the survey week for November nonfarm
payrolls and claims fell 26,000 (4.9%) from the October period. During
the last ten years there has been a negative 85% correlation between
level of initial claims for jobless insurance the m/m change in nonfarm
payrolls.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091119d.jpg" align="right" border="0" height="265" width="353">

Continuing claims for unemployment insurance during the latest
week fell 39,000 to their lowest level since mid-March. The decline
reflects the improved job market but may also be a function of the
exhaustion of benefits. Continuing claims provide an indication of
workers' ability to find employment. The four-week average of
continuing claims fell modestly to 5,711,500 and have fallen 18.7% from
their late-June peak. This series dates back to 1966.
Extended benefits for unemployment insurance rose fell
modestly w/w but averaged 543,645 last month versus 456,982 during
September.
The insured rate of unemployment held steady at 4.3% and
matched its lowest since late-March. 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.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091119e.jpg" align="left" border="0" height="265" width="353">

The highest insured unemployment rates in the week ending
October 31 were in Puerto Rico (6.1%), Oregon (5.5), Nevada (5.2),
California (5.0), Alaska (5.0), Arkansas (4.9), Wisconsin (4.9),
Pennsylvania (4.8), Michigan (4.8), North Carolina (4.6), and South
Carolina (4.6). The lowest insured unemployment rates were in North
Dakota (1.1%), South Dakota (1.2), Virginia (2.0), Texas (2.5), Maine
(2.6), Wyoming (2.8), Ohio (3.1), Maryland (3.1), New York (3.4),
Mississippi (3.6) and Florida (3.7).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">11/14/09</th>
<th scope="col">11/07/09</th>
<th scope="col">10/31/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>505</td>
<td>505</td>
<td>514</td>
<td>-5.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,611</td>
<td>5,650</td>
<td>39.5%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>4.3</td>
<td>4.3</td>
<td>3.1(11/2008)</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
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Philadelphia Fed Index Improves ToHighest Since 2007

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118g.jpg" align="right" border="0" height="265" width="353">Since
the spring recovery, housing activity has been roughly flat according
to The National Association of Home Builders. They reported that its
November Composite Housing Market Index held stable with a downwardly
revised October reading. Though the index remained double the low of 8
this past January there's been little, if any, improvement during the
last several months. The index is compiled from survey questions asking
builders to rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very
high&#8221; to &#8220;very low&#8221;. The figure is a
diffusion index, therefore, numerical results over 50 indicate a
predominance of &#8220;good&#8221; readings. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118h.jpg" align="right" border="0" height="265" width="353">
The present sales
index held stable at 17 which equaled the 3Q average. In the West the
index rose slightly and was sharply higher than one year ago. In the
South the index also held stable m/m (+41.7% y/y). In the Northeast the
index fell m/m but remained three-quarters higher than the year-ago
level.&nbsp;In the Midwest the index also fell m/m but remained
double last year. The sub-index of sales during the next six months
rose slightly m/m and offset most of the October decline.
·&nbsp;The Home Builders' Association also reported that traffic of
prospective buyers held stable with October at the lowest level since
July.&lt;/p&gt;&lt;p&gt;The Home Builders' Housing
Opportunity Index,
which is the share of homes sold that could be considered affordable to
a family earning the median income, fell slightly in the second
quarter. It had jumped earlier to a record high of 72.5% buoyed by
lower home prices, lower interest rates and higher income. (There is a
break in the series from 2002 to 2003.)
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118i.jpg" align="right" border="0" height="265" width="353">The NAHB
has compiled the Housing Market Index since 1985. The weights assigned
to the individual index components are .5920 for single family detached
sales, present time; .1358 for single family detached sales, next six
months; and .2722 for traffic of prospective buyers. The results, along
with other housing and remodeling indexes from NAHB Economics, are
included in Haver&#8217;s SURVEYS database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
<a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">&nbsp;November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>17</td>
<td>17</td>
<td>19</td>
<td>9</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>17</td>
<td>17</td>
<td>18</td>
<td>9</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>28</td>
<td>26</td>
<td>29</td>
<td>18</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>13</td>
<td>13</td>
<td>17</td>
<td>7</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</thead>
</table>

</body></html>

Since the spring recovery, housing activity has been roughly flat according to The National Association of Home Builders. They reported that its November Composite Housing Market Index held stable with a downwardly revised October [...]

U.S. Home Builders’ Index Recovery Stuttering Again This Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118e.jpg" align="right" border="0" height="265" width="353">Housing
sector activity continued to moderate after increases this past spring.
Housing starts fell last month to 529,000 (AR) units versus 592,000
during September which was revised up slightly. The latest level was
the lowest since April and down nearly one-third y/y. More sobering was
that since the peak in January of 2006 starts have fallen by more than
three-quarters. In addition, October's figure fell well short of
Consensus expectations for 600,000 starts.
Loss of forward
momentum was evident in the decline in starts of single-family homes.
They fell 3.9% last month to 476,000 units (AR), reversed
all of the prior month's increase and were at the lowest level since
May. Despite these disappointments, however, single-family starts were
one-third higher than the February low. During the last ten years,
there has been an 84% correlation between the q/q change in
single-family starts and their contribution to quarterly GDP growth.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118f.jpg" align="right" border="0" height="265" width="353">A further
loss of momentum was evident in the multi-family sector where
starts starts fell by one-third m/m during October to the record low.
Starts of apartments, condominiums &amp; town houses were down
88.2% from the January 2006 peak.
Starts of single-family
units fell throughout the country last month. Single-family starts in
the Northeast fell 9.6% (-17.5% y/y) while starts in the South fell
7.3% (-4.9% y/y). In the Midwest starts declined 4.8% (-16.8% y/y) and
starts in the West fell 5.9% (-16.5% y/y) to their lowest level since
May. Building permits dropped 4.0%, the third decline in four months,
but remained 10.8% above their record low reached in April. As with
starts, permits to build a single-family home have been relatively
strong. They fell just 0.2% last month and were down 4.0%
y/y.
The housing starts figures can be found in
Haver's USECON database.
How
Rigid Are Producer Prices? from the Federal Reserve Bank of
New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr407.pdf">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">October</th>
<th scope="col">Oct. Y/Y</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>529</td>
<td>-30.7%</td>
<td>592</td>
<td>581</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>476</td>
<td>-10.9</td>
<td>511</td>
<td>481</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>53</td>
<td>-76.9</td>
<td>81</td>
<td>100</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>552</td>
<td>-24.3</td>
<td>575</td>
<td>580</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>

</body></html>

Housing sector activity continued to moderate after increases this past spring. Housing starts fell last month to 529,000 (AR) units versus 592,000 during September which was revised up slightly. The latest level was the lowest since [...]

U.S. Housing Starts Fall To Their Lowest Level Since April

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118d.jpg" align="left" border="0" height="265" width="353">The Confederation of British
Industry survey shows
industrial trends continue to make progress and cut their declining
trends. Still the declining trends remain large and the degree of
progress is slow although this month&#8217;s gain in orders is one of the
sharpest. 
Total orders revived to -45 from -51 a still steep negative
reading but a substantial month-to-month gain in November. Export
orders, following the pattern of other EU countries, have made even
grater progress this month improving to -37 from -46.
Overall orders bottomed in the cycle at -59 in July and the
series has only clawed back to -45 by November. This month&#8217;s six point
gain month to month gain is twice the pace of the rise from the cycle
low (approx 3.5 per month). The surge in export orders this month is
even more impressive on that score since those orders had only been
rising by 3 points per month from their cycle low compared to this
month&#8217;s jump of nine points.
The outlook for the volume of output has improved rapidly from
its cycle low of -48 in March of this year. Its rapid increases came in
April, May and in August. In October the outlook index for volume
switched to a positive reading and this month it holds that same
reading of +4. Although the month to month improvement in the volume
outlook index has stagnated this month, the level of the reading
staying in positive territory still marks it as a good result.
The survey evidence is that British industry sees itself
improving and expects that to continue. Overall orders are showing
strong improving profiles and are being spurred substantially by export
orders. While orders have a long way to go to become a truly positive
reading, the outlook of the British industry survey respondents says
they expect it to get there. On balance the survey is a good result.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" colspan="11">UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Nov 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Jul 09</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-45</td>
<td>-51</td>
<td>-48</td>
<td>-54</td>
<td>-59</td>
<td>-51</td>
<td>21%</td>
<td>9</td>
<td>-59</td>
<td>68</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-37</td>
<td>-46</td>
<td>-46</td>
<td>-48</td>
<td>-45</td>
<td>-43</td>
<td>27%</td>
<td>3</td>
<td>-52</td>
<td>55</td>
</tr>
<tr>
<td class="firstcol">Stocks:FinGds</td>
<td>20</td>
<td>10</td>
<td>13</td>
<td>13</td>
<td>20</td>
<td>23</td>
<td>67%</td>
<td>31</td>
<td>-2</td>
<td>33</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Looking
ahead</td>
</tr>
<tr>
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>4</td>
<td>4</td>
<td>-2</td>
<td>-5</td>
<td>-14</td>
<td>-28</td>
<td>68%</td>
<td>28</td>
<td>-48</td>
<td>76</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4 Nxt 3m</td>
<td>-5</td>
<td>-4</td>
<td>-10</td>
<td>-17</td>
<td>-6</td>
<td>-10</td>
<td>28%</td>
<td>34</td>
<td>-20</td>
<td>54</td>
</tr>
</tbody>
</table>
</body></html>

The Confederation of British Industry survey shows industrial trends continue to make progress and cut their declining trends. Still the declining trends remain large and the degree of progress is slow although this month’s gain in [...]

EMU Trade Balance Improves

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118a.jpg" align="right" border="0" height="265" width="353">
Pricing
pressure continued under control last month. The overall October CPI
roughly matched Consensus expectations and rose 0.3%, despite energy
prices which rose m/m. Stripping out both energy &amp; food prices,
consumer prices increased 0.2% as they did during September. However,
the y/y increase in "core" prices picked up modestly to 1.7% from its
weakest since early-2004. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118b.jpg" align="right" border="0" height="265" width="353">
Energy prices continued their
recovery with a 1.5% m/m increase, bringing the three-month annual rate
of growth to 30.1%. Fuel oil prices surged 6.0% (-23.5% y/y) after
smaller gains during the prior two months while gasoline prices
increased another 1.6% (-17.9% y/y) following a 1.0% gain during
September. Finally, prices for natural gas &amp; electricity rose
0.9% (-7.2% y/y) after little change during the prior two months.Food
&amp; beverage prices continued weak last month with a 0.1% uptick.
So far this year, food prices have fallen an unprecedented 0.6%. Recent
weakness has been led by lower dairy prices (-8.2% y/y) and lower fruit
&amp; vegetable (-5.6% y/y) costs. Prices for meats, poultry, fish
&amp; eggs also fell 4.8% y/y while cereals &amp; bakery
product prices were off 0.6%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118c.jpg" align="right" border="0" height="265" width="353">
Inflation in the CPI less food &amp;
energy also remained moderate but, like the previous month, the 0.2%
October increase was slightly firmer than expected. Price gains
accelerated to a 2.0% annual rate since December of last year. That's
only slightly below the 2.3% rates of increase during the last two
years.Despite the weak economy, the acceleration in core price
inflation this year owes to faster increases in core goods
prices. Their 0.4% increase last month lifted the annualized
rate so far in 2009 to 3.2% from no change during the prior two years.
Higher tobacco prices continued to account for much of that
acceleration. In addition, there has been a firming of prices
elsewhere. Prices for new &amp; used motor vehicles have firmed
despite an aggressive marketing campaign, up 1.7% last month and at a
5.2% rate since December. They rose 0.3% last month and at a 35.0%
annual rate since December. That compares with price deflation during
the last two years. Though apparel prices ticked 0.4% lower last month
they've risen at an accelerated 2.3% rate this year. That follows price
declines which extends back to 1994. Continuing weak were prices for
household furnishings &amp; operation. They fell another 0.5%
leaving them down at a 1.0% rate so far this year. The U.S. recession
continued to hold back growth in core services prices.
Again, they ticked up just 0.1% last month and have risen at a 1.5%
annual rate so far this year, half that in 2008 and nearly the weakest
since 1983. Weakness in the housing market accounts for much of that
moderation. Last month, shelter prices were unchanged and they've risen
at a just a 0.6% annual rate so far in 2009. Owners equivalent rent of
primary residences, a measure not equivalent to other house price
measures, again slipped m/m and have risen at a 1.0% rate so far this
year versus a 2.5% 2008 increase. Elsewhere in services, public
transportation prices again were strong and rose 0.9% (-4.5%
y/y).&nbsp;Medical care services prices ticked up 0.2% but at a
3.4% rate this year. That compares to a 4.2% increase last year.
Finally, education costs have been firm and they're up at a 4.9% annual
rate this year after a 5.8% gain during 2008. However, recreation
prices are roughly unchanged this year after a 1.6% 2008 gain. The
chained CPI, which adjusts for shifts in consumption patterns, rose
0.1% during October while year-to-year prices fell 0.5%. Conversely,
chained prices less food and energy firmed last month by 0.3%, only the
second material gain in five months. The consumer price data is
available in Haver's USECON database while detailed
figures can be found in the CPIDATA database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">October</th>
<th scope="col">Oct. Y/Y&nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.3</td>
<td>-0.2</td>
<td>0.2</td>
<td>0.4</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>1.7</td>
<td>0.2</td>
<td>0.1</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.4</td>
<td>2.3</td>
<td>0.3</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>1.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>1.5</td>
<td>-14.1</td>
<td>0.6</td>
<td>4.6</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.1</td>
<td>-0.3</td>
<td>-0.1</td>
<td>0.1</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.1</td>
<td>-0.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.3</td>
<td>2.5</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.3</td>
<td>1.3</td>
<td>0.2</td>
<td>0.1</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body></html>

Pricing pressure continued under control last month. The overall October CPI roughly matched Consensus expectations and rose 0.3%, despite energy prices which rose m/m. Stripping out both energy & food prices, consumer prices [...]

CPI Increases Remain Moderate

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118a.jpg" align="right" border="0" height="265" width="353">Pricing
pressure continued under control last month. The overall October CPI
roughly matched Consensus expectations and rose 0.3%, despite energy
prices which rose m/m. Stripping out both energy &amp; food prices,
consumer prices increased 0.2% as they did during September. However,
the y/y increase in "core" prices picked up modestly to 1.7% from its
weakest since early-2004. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118b.jpg" align="right" border="0" height="265" width="353">Energy
prices continued their
recovery with a 1.5% m/m increase, bringing the three-month annual rate
of growth to 30.1%. Fuel oil prices surged 6.0% (-23.5% y/y) after
smaller gains during the prior two months while gasoline prices
increased another 1.6% (-17.9% y/y) following a 1.0% gain during
September. Finally, prices for natural gas &amp; electricity rose
0.9% (-7.2% y/y) after little change during the prior two months.
Food
&amp; beverage prices continued weak last month with a 0.1% uptick.
So far this year, food prices have fallen an unprecedented 0.6%. Recent
weakness has been led by lower dairy prices (-8.2% y/y) and lower fruit
&amp; vegetable (-5.6% y/y) costs. Prices for meats, poultry, fish
&amp; eggs also fell 4.8% y/y while cereals &amp; bakery
product prices were off 0.6%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118c.jpg" align="right" border="0" height="265" width="353">Inflation
in the CPI less food &amp;
energy also remained moderate but, like the previous month, the 0.2%
October increase was slightly firmer than expected. Price gains
accelerated to a 2.0% annual rate since December of last year. That's
only slightly below the 2.3% rates of increase during the last two
years.
Despite the weak economy, the acceleration in core price
inflation this year owes to faster increases in core goods
prices. Their 0.4% increase last month lifted the annualized
rate so far in 2009 to 3.2% from no change during the prior two years.
Higher tobacco prices continued to account for much of that
acceleration. In addition, there has been a firming of prices
elsewhere. Prices for new &amp; used motor vehicles have firmed
despite an aggressive marketing campaign, up 1.7% last month and at a
5.2% rate since December. They rose 0.3% last month and at a 35.0%
annual rate since December. That compares with price deflation during
the last two years. Though apparel prices ticked 0.4% lower last month
they've risen at an accelerated 2.3% rate this year. That follows price
declines which extends back to 1994. Continuing weak were prices for
household furnishings &amp; operation. They fell another 0.5%
leaving them down at a 1.0% rate so far this year. 
The U.S. recession
continued to hold back growth in core services prices.
Again, they ticked up just 0.1% last month and have risen at a 1.5%
annual rate so far this year, half that in 2008 and nearly the weakest
since 1983. Weakness in the housing market accounts for much of that
moderation. Last month, shelter prices were unchanged and they've risen
at a just a 0.6% annual rate so far in 2009. Owners equivalent rent of
primary residences, a measure not equivalent to other house price
measures, again slipped m/m and have risen at a 1.0% rate so far this
year versus a 2.5% 2008 increase. Elsewhere in services, public
transportation prices again were strong and rose 0.9% (-4.5%
y/y).&nbsp;Medical care services prices ticked up 0.2% but at a
3.4% rate this year. That compares to a 4.2% increase last year.
Finally, education costs have been firm and they're up at a 4.9% annual
rate this year after a 5.8% gain during 2008. However, recreation
prices are roughly unchanged this year after a 1.6% 2008 gain. 
The
chained CPI, which adjusts for shifts in consumption patterns, rose
0.1% during October while year-to-year prices fell 0.5%. Conversely,
chained prices less food and energy firmed last month by 0.3%, only the
second material gain in five months. 
 The consumer price data is
available in Haver's USECON database while detailed
figures can be found in the CPIDATA database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">October</th>
<th scope="col">Oct. Y/Y&nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.3</td>
<td>-0.2</td>
<td>0.2</td>
<td>0.4</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>1.7</td>
<td>0.2</td>
<td>0.1</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.4</td>
<td>2.3</td>
<td>0.3</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>1.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>1.5</td>
<td>-14.1</td>
<td>0.6</td>
<td>4.6</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.1</td>
<td>-0.3</td>
<td>-0.1</td>
<td>0.1</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.1</td>
<td>-0.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.3</td>
<td>2.5</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.3</td>
<td>1.3</td>
<td>0.2</td>
<td>0.1</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
 EMU Trade Balance Improves 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 18, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118d.jpg" align="left" border="0" height="265" width="353">The Confederation of British
Industry survey shows
industrial trends continue to make progress and cut their declining
trends. Still the declining trends remain large and the degree of
progress is slow although this month&#8217;s gain in orders is one of the
sharpest. 
Total orders revived to -45 from -51 a still steep negative
reading but a substantial month-to-month gain in November. Export
orders, following the pattern of other EU countries, have made even
grater progress this month improving to -37 from -46.
Overall orders bottomed in the cycle at -59 in July and the
series has only clawed back to -45 by November. This month&#8217;s six point
gain month to month gain is twice the pace of the rise from the cycle
low (approx 3.5 per month). The surge in export orders this month is
even more impressive on that score since those orders had only been
rising by 3 points per month from their cycle low compared to this
month&#8217;s jump of nine points.
The outlook for the volume of output has improved rapidly from
its cycle low of -48 in March of this year. Its rapid increases came in
April, May and in August. In October the outlook index for volume
switched to a positive reading and this month it holds that same
reading of +4. Although the month to month improvement in the volume
outlook index has stagnated this month, the level of the reading
staying in positive territory still marks it as a good result.
The survey evidence is that British industry sees itself
improving and expects that to continue. Overall orders are showing
strong improving profiles and are being spurred substantially by export
orders. While orders have a long way to go to become a truly positive
reading, the outlook of the British industry survey respondents says
they expect it to get there. On balance the survey is a good result.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" colspan="11">UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>Aug 
09</td>
<td>Jul 
09</td>
<td>12MO 
Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-45</td>
<td>-51</td>
<td>-48</td>
<td>-54</td>
<td>-59</td>
<td>-51</td>
<td>21%</td>
<td>9</td>
<td>-59</td>
<td>68</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-37</td>
<td>-46</td>
<td>-46</td>
<td>-48</td>
<td>-45</td>
<td>-43</td>
<td>27%</td>
<td>3</td>
<td>-52</td>
<td>55</td>
</tr>
<tr>
<td class="firstcol">Stocks:FinGds</td>
<td>20</td>
<td>10</td>
<td>13</td>
<td>13</td>
<td>20</td>
<td>23</td>
<td>67%</td>
<td>31</td>
<td>-2</td>
<td>33</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Looking
ahead</td>
</tr>
<tr>
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>4</td>
<td>4</td>
<td>-2</td>
<td>-5</td>
<td>-14</td>
<td>-28</td>
<td>68%</td>
<td>28</td>
<td>-48</td>
<td>76</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4 Nxt 3m</td>
<td>-5</td>
<td>-4</td>
<td>-10</td>
<td>-17</td>
<td>-6</td>
<td>-10</td>
<td>28%</td>
<td>34</td>
<td>-20</td>
<td>54</td>
</tr>
</tbody>
</table>

 U.S. Housing Starts Fall To Their
Lowest Level Since April 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118e.jpg" align="right" border="0" height="265" width="353">Housing
sector activity continued to moderate after increases this past spring.
Housing starts fell last month to 529,000 (AR) units versus 592,000
during September which was revised up slightly. The latest level was
the lowest since April and down nearly one-third y/y. More sobering was
that since the peak in January of 2006 starts have fallen by more than
three-quarters. In addition, October's figure fell well short of
Consensus expectations for 600,000 starts.
Loss of forward
momentum was evident in the decline in starts of single-family homes.
They fell 3.9% last month to 476,000 units (AR), reversed
all of the prior month's increase and were at the lowest level since
May. Despite these disappointments, however, single-family starts were
one-third higher than the February low. During the last ten years,
there has been an 84% correlation between the q/q change in
single-family starts and their contribution to quarterly GDP growth.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118f.jpg" align="right" border="0" height="265" width="353">A further
loss of momentum was evident in the multi-family sector where
starts starts fell by one-third m/m during October to the record low.
Starts of apartments, condominiums &amp; town houses were down
88.2% from the January 2006 peak.
Starts of single-family
units fell throughout the country last month. Single-family starts in
the Northeast fell 9.6% (-17.5% y/y) while starts in the South fell
7.3% (-4.9% y/y). In the Midwest starts declined 4.8% (-16.8% y/y) and
starts in the West fell 5.9% (-16.5% y/y) to their lowest level since
May.
 Building permits dropped 4.0%, the third decline in four
months,
but remained 10.8% above their record low reached in April. As with
starts, permits to build a single-family home have been relatively
strong. They fell just 0.2% last month and were down 4.0%
y/y.
The housing starts figures can be found in
Haver's USECON database.
How
Rigid Are Producer Prices? from the Federal Reserve Bank of
New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr407.pdf">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">October</th>
<th scope="col">Oct. Y/Y</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>529</td>
<td>-30.7%</td>
<td>592</td>
<td>581</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>476</td>
<td>-10.9</td>
<td>511</td>
<td>481</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>53</td>
<td>-76.9</td>
<td>81</td>
<td>100</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>552</td>
<td>-24.3</td>
<td>575</td>
<td>580</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>

 U.S. Home Builders&#8217; Index Recovery
Stuttering Again This Month 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118g.jpg" align="right" border="0" height="265" width="353">Since
the spring recovery, housing activity has been roughly flat according
to The National Association of Home Builders. They reported that its
November Composite Housing Market Index held stable with a downwardly
revised October reading. Though the index remained double the low of 8
this past January there's been little, if any, improvement during the
last several months. The index is compiled from survey questions asking
builders to rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very
high&#8221; to &#8220;very low&#8221;. The figure is a
diffusion index, therefore, numerical results over 50 indicate a
predominance of &#8220;good&#8221; readings. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118h.jpg" align="right" border="0" height="265" width="353">
The present sales
index held stable at 17 which equaled the 3Q average. In the West the
index rose slightly and was sharply higher than one year ago. In the
South the index also held stable m/m (+41.7% y/y). In the Northeast the
index fell m/m but remained three-quarters higher than the year-ago
level.&nbsp;In the Midwest the index also fell m/m but remained
double last year. The sub-index of sales during the next six months
rose slightly m/m and offset most of the October decline.
·&nbsp;The Home Builders' Association also reported that traffic of
prospective buyers held stable with October at the lowest level since
July.&lt;/p&gt;&lt;p&gt;The Home Builders' Housing
Opportunity Index,
which is the share of homes sold that could be considered affordable to
a family earning the median income, fell slightly in the second
quarter. It had jumped earlier to a record high of 72.5% buoyed by
lower home prices, lower interest rates and higher income. (There is a
break in the series from 2002 to 2003.)
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118i.jpg" align="right" border="0" height="265" width="353">The NAHB
has compiled the Housing Market Index since 1985. The weights assigned
to the individual index components are .5920 for single family detached
sales, present time; .1358 for single family detached sales, next six
months; and .2722 for traffic of prospective buyers. The results, along
with other housing and remodeling indexes from NAHB Economics, are
included in Haver&#8217;s SURVEYS database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
<a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">&nbsp;November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>17</td>
<td>17</td>
<td>19</td>
<td>9</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>17</td>
<td>17</td>
<td>18</td>
<td>9</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>28</td>
<td>26</td>
<td>29</td>
<td>18</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>13</td>
<td>13</td>
<td>17</td>
<td>7</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</thead>
</table>

</body></html>

Louise Curley

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
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background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
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background-color:#f0f0f0;
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<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117h.jpg" align="right" border="0" height="265" width="353">
The news
from Canada continues to raise doubts about the forecast of a 2% rise
in GDP in the third quarter made earlier by Mark Carney, Governor of
the Bank of Canada.&nbsp; Monthly GDP declined in July and August.
The continued strength of the C$ is affecting
exports.Today, data on sales, new and unfilled
orders and inventories were released for the manufacturing sector and
they were mixed.&nbsp; Manufacturing sales were lower than expected
but the pace of new orders and inventories was more
encouraging.&nbsp; New orders increased 8.3% in September after
having declined in July and August.&nbsp; Inventories continue to
decline and the inventory sales ratio is now down to 1.46 from it peak
of 1.63 in January of this year.&nbsp; The ratio is shown in the
first chart and is approaching what looks like a normal ratio of around
1.30.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117i.jpg" align="right" border="0" height="265" width="353">
While there may be some doubts about the
magnitude of the rise in Canada's third quarter GDP, there is no doubt
that the Canadian economy is at a turning point and will show some
growth in the third quarter.&nbsp; Most of the data relating to the
Canadian economy released recently has been erratic--a step forward,
then some retraction.&nbsp; Nevertheless, the forward momentum has
generally overcome the retraction.&nbsp;&nbsp; In addition to
manufacturing sales, the number of building permits authorized and
retail sales are good examples of such data and they are shown in the
second chart.&nbsp; Recent changes in both series are volatile, but
the trend for both is clearly positive. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Manufacturing </th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09&nbsp;</th>
<th scope="col">Apr 09&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Shipments (M/M % Chg)</td>
<td>1.43%</td>
<td>-1.77%</td>
<td>5.17%</td>
<td>3.28%</td>
<td>-4.44%</td>
<td>-0.36%</td>
</tr>
<tr>
<td class="firstcol">New Orders (M/M % Chg)</td>
<td>8.26%</td>
<td>-1.20%</td>
<td>-5.68%</td>
<td>20.38%</td>
<td>-6.29%</td>
<td>-11.16%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders (M/M % Chg)</td>
<td>-0.57%</td>
<td>-5.06%</td>
<td>-5.26%</td>
<td>2.11%</td>
<td>-7.04%</td>
<td>-5.88%</td>
</tr>
<tr>
<td class="firstcol">Inventories (M/M Change in Mil.
C$)</td>
<td>-1166.909</td>
<td>-299.573</td>
<td>-1257.203</td>
<td>-160.873</td>
<td>-1117.464</td>
<td>-719.741</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories/Sales Ratio</td>
<td>1.46</td>
<td>1.50</td>
<td>1.49</td>
<td>1.59</td>
<td>1.62</td>
<td>1.55</td>
</tr>
</tbody>
</table>
</body></html>

The news from Canada continues to raise doubts about the forecast of a 2% rise in GDP in the third quarter made earlier by Mark Carney, Governor of the Bank of Canada. Monthly GDP declined in July and August. The continued strength of [...]

Canadian Manufacturing Data And Prospects For Q3 GDP

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

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

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

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

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

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

260205C15.jpg

260205D15.jpg

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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