Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117g.jpg" align="left" border="0" height="265" width="353">
The EMU trade surplus continued to grow as exports rebounded
strongly from a lackluster August that saw them fall by 4%. In
September exports are back up, and off to the races.
Exports contribute to growth overallEMU
exports now are off by 17.8% Yr/Yr, better than the 24.8% drop for
imports. To this point the larger relative drop in imports makes the
EMU trade sector a contributor to growth.
Exports are looking solid again Over recent
months the contribution of exports to growth is looking even stronger-
like a real force instead of a bit of subtle arithmetic. Over six
months exports are rising at an 8.3% pace and over 3-months the growth
rate is 25.6%. These metrics compare to import annual &#8216;growth&#8217; rates of
-8.5% over six months and of +3.4% over three months. Obviously
EMU-region domestic demand is lagging in its developing as imports are
still falling rapidly or barely heading higher depending on the period
for that calculation. Meanwhile EMU exports are exploiting demand
revival elsewhere.
Category-wide rebound in exportsAfter
seeing declines across most key categories in August exports showed
strong sharp category-wide improvements in September. Imports had a
less widespread drop in August but are experiencing some revival in
September as well.
D&#233;j&#225; vu all over again?EMU, like China and
like Japan, is seeing a revival of export led growth. While China is
being lauded for its huge domestic stimulus program at the end of the
day it is a net exporter, its surplus is growing, so it is getting
stimulus from overseas. Meanwhile the US trade deficit popped up in the
wake of surging oil imports and auto imports that came on the heels of
its cash for clunkers auto sector stimulus program. Even though the US
consumer is late to revive in this cycle foreigners have been quick to
glean whatever spoils there are in the US market. All this smacks of
business as usual. If the global economy is to be made safer, business
as usual will have to change its stripes. Europe, Japan and China if
they are to hold their exports focus will have to find markets other
than the US to exploit or it will be d&#233;j&#225; vu all over again, as that
sage Yogi Berra once said.

Ezone Trade Trends For Goods
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3M</td>
<td>6M</td>
<td> 12M</td>
<td>12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364; 6,801</td>
<td>&#8364; 2,235</td>
<td>&#8364; (6,433)</td>
<td>&#8364; 2,976</td>
<td>&#8364;(3,092)</td>
<td>&#8364; 1,842</td>
</tr>
<tr>
<td colspan="7">Exports</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exp</td>
<td>5.5%</td>
<td>-4.1%</td>
<td>25.6%</td>
<td>8.3%</td>
<td>-17.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>2.8%</td>
<td>-5.1%</td>
<td>3.9%</td>
<td>0.3%</td>
<td>-10.2%</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>1.7%</td>
<td>-5.0%</td>
<td>12.6%</td>
<td>9.1%</td>
<td>-14.7%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>5.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>9.0%</td>
<td>-18.5%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>2.6%</td>
<td>-6.4%</td>
<td>13.5%</td>
<td>-5.4%</td>
<td>-21.7%</td>
<td>1.6%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">IMPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All IMP</td>
<td>1.1%</td>
<td>-1.0%</td>
<td>3.4%</td>
<td>-8.5%</td>
<td>-24.8%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>1.2%</td>
<td>-2.6%</td>
<td>-1.5%</td>
<td>-17.1%</td>
<td>-10.7%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>-1.2%</td>
<td>3.9%</td>
<td>19.8%</td>
<td>-7.4%</td>
<td>-39.4%</td>
<td>14.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>3.2%</td>
<td>-7.9%</td>
<td>-24.9%</td>
<td>10.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>1.3%</td>
<td>-1.4%</td>
<td>3.3%</td>
<td>-12.7%</td>
<td>-20.4%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">*Eur mlns; mo or period average</td>
</tr>
</tbody>
</table>
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The EMU trade surplus continued to grow as exports rebounded strongly from a lackluster August that saw them fall by 4%. In September exports are back up, and off to the races. Exports contribute to growth overallEMU exports now are [...]

EMU Trade Balance Improves

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117d.jpg" align="right" border="0" height="265" width="353">The
earlier
recovery in industrial production stalled last month after smart,
unrevised increases during the summer. The October reading of no change
in output also fell short of Consensus expectations for a 0.4% gain.
The weakening from earlier increases was widespread amongst sectors.
Output of consumer goods was unchanged after strong gains during the
prior three months. A 1.6% (-11.6% y/y) decline in motor vehicle output
led the weakening.&nbsp; Output of computers, video &amp; audio
equipment also sagged by 0.3% (-8.2% y/y) after three months of
increase.


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117e.jpg" align="right" border="0" height="265" width="353">Outside of
the auto &amp;
high-tech sectors production ticked 0.1% higher during October (-6.9%
y/y) following three months of firm gain. The uptick was led&nbsp;
by a 3.6% (-18.8% y/y) jump in primary metals output, a 1.3% (-15.6%
y/y) rise in textile mills production and a 1.4% (-5.5% y/y) rise in
paper output.&nbsp;Working the other way, however, were widespread
declines. Furniture &amp; appliance output continued to slide and
posted a 1.9% (-20.1% y/y) decline. Apparel output reversed two months
of increase with a 0.8% (-15.0% y/y) decline while petroleum &amp;
coal output fell 2.9% (-5.0% y/y). Output of business equipment fell
0.3% (-6.8% y/y) with a 0.9% (-12.4% y/y) drop in electrical equipment
output. Reflecting continued weakness in nonresidential building
activity, output of construction supplies fell 1.2% (-17.0% y/y), about
as it did in September.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117f.jpg" align="right" border="0" height="265" width="353">Despite
the weakening of output,
utilization of capacity ticked higher to 70.7%. The increase was caused
by an estimated 0.1% (-0.8% y/y) decline in industry capacity.
Utilization in the factory sector held steady at 67.9% though it was up
from the June low of 65.2%. Utilization in the primary metals are has
risen sharply to 56.9% with the rebound in output. There's also been a
rise in utilization in the machinery area but it's down most
elsewhere.
The industrial production data are available in
Haver's USECON database.
Policy
Challenges for the Federal Reserve is yesterday's speech by
Fed Vice-Chairman Donald L. Kohn and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20091116a.htm">here
</a>.How Will Unemployment Fare
Following the Recession? from the Federal Reserve Bank
of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3knotek.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">INDUSTRIAL
PRODUCTION (SA,%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output</td>
<td>0.0</td>
<td>0.7</td>
<td>1.2</td>
<td>-7.2</td>
<td>-2.2</td>
<td>1.5</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Manufacturing</td>
<td>-0.1</td>
<td>0.7</td>
<td>1.5</td>
<td>-7.9</td>
<td>-3.2</td>
<td>1.4</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>0.0</td>
<td>1.3</td>
<td>1.6</td>
<td>-2.9</td>
<td>-2.6</td>
<td>0.9</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>-0.3</td>
<td>-0.4</td>
<td>1.1</td>
<td>-6.8</td>
<td>-1.1</td>
<td>2.7</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-1.2</td>
<td>-1.1</td>
<td>0.7</td>
<td>-17.0</td>
<td>-6.3</td>
<td>-2.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>1.6</td>
<td>-0.2</td>
<td>0.8</td>
<td>-2.1</td>
<td>0.3</td>
<td>3.4</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>70.7</td>
<td>70.5</td>
<td>70.0</td>
<td>75.4 (Oct. '08)</td>
<td>77.5</td>
<td>80.6</td>
<td>80.9</td>
</tr>
</tbody>
</table>

</body></html>

The earlier recovery in industrial production stalled last month after smart, unrevised increases during the summer. The October reading of no change in output also fell short of Consensus expectations for a 0.4% gain. The weakening [...]

Factory Production Unchanged As Gains Of Prior Three Months Stall

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117a.jpg" align="right" border="0" height="265" width="353">Inflationary
pressures continued to be diffused last month by the weak economy, but
they increased for those who eat or drive a car. The PPI for finished
goods rose 0.3% during October following declines during two of the
prior three months. The increase fell somewhat short of Consensus
expectations for a 0.5% rise. Though the PPI continued to decline
versus the year-ago level, the 1.9% drop is a moderation from the 6.4%
y/y decline back in July. Much of that moderation is due to notably
sharp price declines during last year's fourth quarter.
The increase
in overall producer prices last month was led by a 1.6% (-2.5% y/y)
rise in food &amp; beverage prices which reflected the third
monthly surge (NSA) in fruit &amp; vegetable prices (15.2% y/y), a
one-quarter spike in fresh &amp; dry vegetable prices (-6.7% y/y)
and higher dairy product prices (-11.3% y/y).&nbsp; A 1.6% increase
in finished energy prices added to that monthly pressure, though prices
still were down 9.4% y/y. Here again, however, the y/y comparisons are
similar to those for food &amp; beverage prices. Though prices
remained 9.4% lower than last year, the twelve-month comparison has
moderated from -29.6% this past July as monthly price declines during
last year's fourth quarter were notably sharp. Despite m/m increases,
gasoline prices remained down 12.5% y/y, fuel oil prices were off by
one-third and natural gas prices were 20.1% lower. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117b.jpg" align="right" border="0" height="265" width="353">Excluding
food
&amp; energy prices the PPI fell 0.6% during October. Not only was
the decline the third in the last four months, the 0.7% y/y increase
was the weakest since early-2004. The m/m decline in the core PPI
contrasted with expectations for a 0.1% increase. The PPI for finished
consumer goods less food &amp; energy fell 0.5% yet gained 1.1%
y/y. That was the weakest annual increase since July 2007. Finished
durables prices cratered by 1.2% (0.0% y/y), and prices of core
finished consumer nondurable goods rose a modest 0.2%. The 2.0% y/y
increase was down from 5.9% as of last November. Capital equipment
prices also reflected economic weakness and fell 0.7%, the third
decline in the last four months. That pulled the y/y increase down to
0.1% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117c.jpg" align="right" border="0" height="265" width="353">Prices for
intermediate
goods rose 0.3% due to higher energy prices. The increase contrasted,
however, with a 0.2% decline in core prices. These were led by declines
in textile, chemical &amp; lumber prices. Intermediate food prices
fell 0.2% (-8.4% y/y).&nbsp; The crude materials PPI increased a
sizable 5.4% due to the increase in energy prices though they still
remained down by nearly one-quarter from last October. In contrast,
core prices showed strength and increased for the seventh straight
month reflecting the steady rise in commodity prices.
The producer
price data is available in Haver's USECON database.
More detailed data is in the PPI and in the PPIR
databases.
 Short-Term Headline-Core Inflation Dynamics
from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/summer/pdf/mehra.pdf">here</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM" style="color: rgb(0, 0, 0);">Producer Price Index</a>(%)</th>
<th scope="col"> October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2008</th>
<th scope="col"> 2007</th>
<th scope="col"> 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Finished Goods</td>
<td>0.3</td>
<td>-0.6</td>
<td>1.7</td>
<td>-1.9</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.6</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.7</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.3</td>
<td>0.2</td>
<td>1.8</td>
<td>-7.5</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.2</td>
<td>0.9</td>
<td>0.6</td>
<td>-5.6</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>5.4</td>
<td>-2.1</td>
<td>3.8</td>
<td>-13.9</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5</td>
<td>3.6</td>
<td>6.0</td>
<td>&nbsp;-1.5</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>

</body></html>

Inflationary pressures continued to be diffused last month by the weak economy, but they increased for those who eat or drive a car. The PPI for finished goods rose 0.3% during October following declines during two of the prior three [...]

U.S. PPI Increases 0.3% Fueled By Food & Energy Prices

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116i.jpg" align="right" border="0" height="265" width="353">
The Japanese
economy grew more than expected in the third quarter.&nbsp; The
annual rate of increase was 4.79% continuing the recovery that began in
the second quarter with an annual rate of increase of 2.72%.&nbsp;
The annual rates of change in private consumption and fixed investment
and the annual rate of difference in net exports are show in the first
chart. Japan still has a long way to go to recoup the losses from the
recent deep depression.&nbsp; The annual rate of real GDP in the
third quarter was 531.3 trillion yen, compared the 569.1 trillion yen
reached in the first quarter of 2008.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116j.jpg" align="right" border="0" height="265" width="353">
Although both net exports and
private consumption continued to increase in the third quarter, their
annual rates of increase were lower than those in the second
quarter.&nbsp; Even with a lower rate decline in Gross Fixed
Domestic Investment, from 10.5% in the second quarter to 1.3 % in the
third quarter, the net effect of these factors does not appear to
account for the sharp increase reported for total GDP in the third
quarter.&nbsp; It should be noted that the data are preliminary and
some of the components, notably the change in inventories, is only
updated during the 2nd preliminary release.&nbsp; Given the
volatility and the large positive and negative contributions of
inventory changes to total growth, as shown in the second chart, it is
highly likely that the missing element in Japan's third quarter growth
was due to inventory accumulation.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116k.jpg" align="right" border="0" height="265" width="353">
Deflation continues to
characterize the Japanese economy.&nbsp; The third chart shows GDP
in nominal and real terms since 2000 when real GDP began to exceed
nominal, indicating a declining price
level.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q3 09</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp;09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Private Consumption (SAAR)</td>
<td>2.8</td>
<td>3.9</td>
<td>-4.3</td>
<td>-2.8</td>
<td>0.0</td>
<td>-3.7</td>
<td>5.66</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Investment (SAAR)</td>
<td>-1.3</td>
<td>-10.5</td>
<td>-26.6</td>
<td>-14.9</td>
<td>-13.1</td>
<td>-5.9</td>
<td>3.9</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Exports (SAAD) Trillion Yen</td>
<td>9.8</td>
<td>244</td>
<td>-32.7</td>
<td>-52.7</td>
<td>-4.6</td>
<td>-10.3</td>
<td>15.7</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>2008</td>
<td>2007</td>
<td>2006</td>
<td>2005</td>
<td>2004&nbsp;</td>
<td>2003&nbsp;</td>
<td>2002&nbsp;</td>
<td>2001&nbsp;</td>
<td>2000&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real (Trillion 2000Chn Yen)</td>
<td>556.6</td>
<td>560.5</td>
<td>547.7</td>
<td>536.8</td>
<td>526.6</td>
<td>512.5</td>
<td>505.4</td>
<td>504.5</td>
<td>503.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nominal (Trillion Yen)</td>
<td>507.6</td>
<td>515.8</td>
<td>507.4</td>
<td>501.7</td>
<td>515.8</td>
<td>490.3</td>
<td>491.3</td>
<td>497.7</td>
<td>503.0</td>
</tr>
</tbody>
</table>
</body></html>

The Japanese economy grew more than expected in the third quarter. The annual rate of increase was 4.79% continuing the recovery that began in the second quarter with an annual rate of increase of 2.72%. The annual rates of change in [...]

Japanese GDP Growth In Q3 Surprises: Due To Increased Demand Or Inventory Building?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116f.jpg" align="right" border="0" height="265" width="353">The
Federal Reserve Bank of New York reported that its November Empire
State Factory Index of General Business Conditions slipped to 23.51
during November. Nevertheless, that level still remained near the
highest level since 2004. The latest reading compares to sharply
negative levels this past winter and suggests positive growth in
factory sector activity. The latest level fell short of Consensus
expectations for a reading of 30.0.
The figure is a diffusion index.
Since the series' inception in 2001, there has been a 75% correlation
between its level and the three-month change in U.S. factory sector
industrial production. Like the Philadelphia Fed Index of General
Business Conditions, the Empire State Business Conditions Index
reflects answers to independent survey questions; it is not a weighted
combination of the components. The series dates back only to 2001.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116g.jpg" align="right" border="0" height="265" width="353">The
new orders component fell to 16.66 from its October high. The shipments
index also fell as did the employment index to a slim 1.32 from its
highest level since 2007. In the history of the NY employment index,
there has been an 87% correlation between the employment index and the
three-month growth in overall U.S. factory sector employment as
reported by the Labor Department. The workweek index also fell m/m but
remained significantly higher than the February low.
The prices paid
index eased to its lowest level since July and remained down sharply
from all of last year. Since inception in 2001, there has been a 77%
correlation between the index of prices paid and the three-month change
in the core intermediate materials PPI.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116h.jpg" align="right" border="0" height="265" width="353">The Empire
State index
of expected business conditions in six months rose during
November rose to its highest level since early-2004. The subseries for
new orders, employment, prices and capital expenditures each rose. The
inventory subseries rose sharply to it highest since early last year.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State. Participants from across the state in
a variety of industries respond to a questionnaire and report the
change in indicators from the previous month. Respondents also state
the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including
methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.
The Empire State data is available in Haver's SURVEYS
database.
Today's speech by Fed Chairman
Ben S. Bernanke On the Outlook for the Economy and Policy can
be found here <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20091116a.htm">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM" style="color: rgb(255, 255, 255);">Empire State
Manufacturing Survey</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">November '08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>23.51</td>
<td>34.57</td>
<td>-24.93</td>
<td>-10.10</td>
<td>17.23</td>
<td>20.24</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>16.66</td>
<td>30.82</td>
<td>-22.29</td>
<td>-6.25</td>
<td>15.71</td>
<td>20.11</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>1.32</td>
<td>10.39</td>
<td>-28.92</td>
<td>-5.36</td>
<td>11.28</td>
<td>12.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>10.53</td>
<td>19.48</td>
<td>20.48</td>
<td>46.99</td>
<td>35.64</td>
<td>41.88</td>
</tr>
</tbody>
</table>


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The Federal Reserve Bank of New York reported that its November Empire State Factory Index of General Business Conditions slipped to 23.51 during November. Nevertheless, that level still remained near the highest level since 2004. The [...]

Empire State Factory Conditions Slip From October High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116d.jpg" width="353"><img align="left" quot border="0" height="265&gt;&lt;/td&gt;\r\r\n &lt;/tr&gt;&lt;/table&gt;\r\r\n&lt;table border=" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116e.jpg" width="353"><tbody></tbody>
Perhaps the recent, moderate turnaround in final demand evident in the economy has begun to affect business&#39; inclination to shed inventory. Or maybe there&#39;s nothing left on the lot, in the warehouse or on the shelf to let go. Either way, business inventories slipped just 0.4% during September which was one-third of the monthly decumulation averaged back to October of last year. The decline also fell short of Consensus expectations for a 0.7% drop.
The overall slowdown was caused by a 0.6% increase in retail inventories, the first gain since last July. That increase resulted from a 3.8% (-27.9% y/y) rise in auto inventories which also was the first since July of last year. In contrast, the monthly rate of decline in nonauto inventories continued at 0.6% (-7.5% y/y). Furniture inventories increased 0.1% (-12.5% y/y) but clothing inventories fell a sharp 1.7% (-10.8% y/y). General merchandise inventories fell 0.4% and were off 6.3% y/y while building materials stores slipped just 0.1% (-9.6% y/y). Factory inventories fell a hard 1.0%. Meanwhile, wholesale inventories were off 0.9% and the y/y decline reached a nadir of 15.0%. Excluding oil, wholesale inventories fell 0.9% and the 15.4% rate of decline also was a new low.
Despite a possible interest in slowing the rate of inventory cutbacks, the inventory-to-sales ratio for total business held at the cycle low of 1.32 versus a high of 1.46 in January. The latest was the lowest since last September. In the retail sector the ratio moved higher as a result of the auto inventory rise, but at 1.42 it still was the second lowest of the cycle. For manufacturers and wholesalers, the ratio fell to new cycle lows.
The business sales and inventory data are available in Haver&#39;s USECON database.
The Behavior of Household and Business Investment over the Business Cycle from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/summer/pdf/hatchondo.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Inventories (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.4</td>
<td>-1.6</td>
<td>-1.1</td>
<td>-13.4</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6</td>
<td>-2.6</td>
<td>-1.0</td>
<td>-13.9</td>
<td>-3.1</td>
<td>2.5</td>
<td>3.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Auto</td>
<td>-0.6</td>
<td>-0.7</td>
<td>-0.5</td>
<td>-7.5</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.9</td>
<td>-1.3</td>
<td>-1.6</td>
<td>-15.0</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
</tr>
</tbody>
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Perhaps the recent, moderate turnaround in final demand evident in the economy has begun to affect business' inclination to shed inventory. Or maybe there's nothing left on the lot, in the warehouse or on the shelf to let go. Either [...]

U.S. Business Inventory Decumulation Slows

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116a.jpg" align="right" border="0" height="265" width="353">
Consumers
seem to be gaining back the inclination to spend. Retail sales last
month rose 1.4% after a 2.3% September decline that was deeper than
reported initially. A 0.9% October gain was the Consensus expectation.
The increase improved the y/y change in sales to -1.7% from declines of
roughly 10% earlier this year. Moreover, spending on "core" retail
sales has improved. Month-to-month changes in overall sales in recent
months have been quite volatile due to auto sales promotions and rising
gasoline prices. Aside from these distortions, gains in consumer
spending have been steady during the last three months and y/y growth
also improved. The retail sales data are available in Haver's USECON
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116b.jpg" align="right" border="0" height="265" width="353">
Auto sales of late have been influenced by Detroit's sales
programs. Last month, retail sales of motor vehicles jumped 7.4% after
a 14.3% decline during September and a 10.2% August jump. Less autos,
sales rose 0.2% versus a 0.4% expected gain. Higher gasoline prices
also have influenced overall sales growth. Without autos &amp;
gasoline, retail sales rose 0.3% last month, about as they did during
the prior two months.&nbsp;These gains raised the y/y change to
-0.8% from -4.4% as of July.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091116c.jpg" align="right" border="0" height="265" width="353">
In soft goods, the 0.4%
increase in apparel store sales was the fourth gain in as many months
and the y/y change of 1.5% was improved from -9.7% during December.
Finally, improvement in sales at furniture, electronics &amp;
appliance store sales has been less impressive. Sales fell 0.7% last
month and the y/y change improved only to -7.3% from -14.3% at its
worst. Furniture store sales alone fell 0.8% (-7.6% y/y) after two
months of increase while sales of electronics &amp; appliances
slipped 0.6% (-7.0% y/y), also after two months of increase.Internet
and catalogue purchases were firmer and rose 1.0% (1.6% y/y). The gain
contrasted with a 7.6% y/y decline as of April. Finally, restaurant
sales jumped 1.2% (1.5% y/y) after little change either m/m or y/y as
of September. Finally, building materials sales continued their slump
and fell 2.4% (-15.0% y/y).



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail
Sales &amp; Food Services</a> (%)</td>
<td>1.4</td>
<td>-2.3</td>
<td>2.4</td>
<td>-1.7</td>
<td>-0.8</td>
<td>3.3</td>
<td>5.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Autos</td>
<td>0.2</td>
<td>0.4</td>
<td>0.8</td>
<td>-2.6</td>
<td>2.5</td>
<td>3.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Less Gasoline</td>
<td>0.3</td>
<td>0.3</td>
<td>0.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>3.6</td>
<td>5.7</td>
</tr>
</tbody>
</table>
</body></html>

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

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

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

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

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