Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027i.jpg" align="left" border="0" height="265" width="353">
Entrepreneurs in France and the Netherlands continue to shed
some of their pessimism concerning economic prospects, but they are by
no means optimistic. From the low point in February, 2009, when
pessimists in the Netherlands outweighed the optimists by 22.9%,
pessimists still outweigh the optimists by 7.8%. In France, the
indicator of business confidence is so created that its long term
average is 100 with a standard deviation of 10. The low point at 68 in
March 2009 was more than three standard deviations below the long term
average. While the indicator has moved up to 86 in October, it is still
more than one standard deviation below average. The first chart shows
the measures of business confidence in the Netherlands and in France.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027j.jpg" align="right" border="0" height="265" width="353">
Consumers in France and in Italy had become disenchanted
earlier than the business community. Confidence among consumers in both
countries reached lows in July, 2008. Since then confidence among
Italian consumers has improved sharply, if erratically. October was
another decline in the upward but erratic path of Italian consumer
confidence. The index fell to 111.7 (1980=100) from 113.6 in September.
It is, however, almost 17% above the low point. The increase in
confidence from the low point among French households has been less
dramatic than that in Italy, as can be seen in the second chart. The
excess of pessimists over optimists has declined from 47% to 35% in
October, an improvement of 12 basis points. In spite of the rise in
confidence, pessimism among consumers in France and Italy still
outweighs optimism concerning the economic outlook.

<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">Oct 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp; 09</th>
<th scope="col">Jul 08</th>
<th scope="col">Low&nbsp;</th>
<th scope="col">Date&nbsp;</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="10">Business Confidence</td>
</tr>
<tr>
<td class="firstcol">Netherlands (% Balance)</td>
<td>-7.8</td>
<td>-9.8</td>
<td>-9.3</td>
<td>-14.8</td>
<td>-22.9</td>
<td>2/09</td>
<td>0.4</td>
<td>7.8</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">France(Synthetic Index: Avg
=100, St Dev =10)</td>
<td>86</td>
<td>83</td>
<td>79</td>
<td>76</td>
<td>68</td>
<td>3/09</td>
<td>96</td>
<td>110</td>
<td>107</td>
</tr>
<tr class="odd">
<td colspan="10">Consumer Confidence</td>
</tr>
<tr>
<td class="firstcol">Italy (1980=100)</td>
<td>111.7</td>
<td>113.6</td>
<td>111.8</td>
<td>107.5</td>
<td>95.8</td>
<td>7/08</td>
<td>100.6</td>
<td>108.5</td>
<td>108.7</td>
</tr>
<tr>
<td class="firstcol">France (% Balance)</td>
<td>-35</td>
<td>-36</td>
<td>-37</td>
<td>-38</td>
<td>-47</td>
<td>7.08</td>
<td>-42</td>
<td>-21</td>
<td>-25</td>
</tr>
</tbody>
</table>
</body></html>

Entrepreneurs in France and the Netherlands continue to shed some of their pessimism concerning economic prospects, but they are by no means optimistic. From the low point in February, 2009, when pessimists in the Netherlands [...]

Signs of Improvement in European Business and Consumer Confidence But No Euphoria

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027g.jpg" width="353">
Gasoline prices rose to nearly their highest level in one year. The pump price for regular gasoline increased last week to $2.67 per gallon which was roughly the highest level since October of last year. Moreover, prices remain up from the December low of $1.61. This week prices rose even further and the wholesale gasoline price moved to $2.07 from an average $2.05 last week. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Higher crude oil prices are behind the rise in gas prices and light sweet crude (WTI) rose to an average $80.35 per barrel last week, up from the December low of $32.37. Yesterday, the spot market price for light sweet crude oil leveled off and slipped to $78.68 per barrel.
Behind the increase in energy prices is an increase in the demand for gasoline. Last week, it posted a 3.4% rise versus one year ago. The gain was nearly the strongest since the fall of 2006. Demand for residual fuel oil also increased 22.8% y/y while distillate demand halved its recent decline to 11.5% y/y. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027h.jpg" width="353">
Finally, an earlier abundance of gasoline has eased somewhat. Gasoline inventories were up 5.3% y/y last week which was one-quarter of the gain last month. The gain in crude oil inventories also halved to 8.9% y/y and inventories of residual fuel oil are down 8.5% versus last year.
Natural gas prices also strengthened last week, ahead of the winter heating season, to an average of $4.70 per mmbtu (-30.2% y/y). Though they remained down by two-thirds from the high reached in early-July of last year of $13.19/mmbtu, they are more than double the low reached early last month. Yesterday prices increased further to $4.55/mmbtu.
What is Driving Energy Prices from the Federal Reserve Bank of Dallas is available <a href="http://www.dallasfed.org/sanantonio/news/events/2009/0906yucel.pdf">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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">10/26/09</th>
<th scope="col">10/19/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.67</td>
<td>2.57</td>
<td>0.7%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>80.35</td>
<td>75.74</td>
<td>17.8%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Gasoline prices rose to nearly their highest level in one year. The pump price for regular gasoline increased last week to $2.67 per gallon which was roughly the highest level since October of last year. Moreover, prices remain up [...]

Weekly Gasoline Prices Climb Toward 12-Month High

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027e.jpg" align="right" border="0" height="265" width="353">
Earlier gains in consumer confidence have flagged with the
continued run-up in unemployment. The Conference Board indicated that
consumer confidence during October fell 10.7% from September. The
decline was the fourth in the last five months though confidence
remained nearly double this Winter's low. The Conference Board data can
be found in Haver's CBDB database.
During the last ten years there has been an 86% correlation
between the level of consumer confidence and the y/y change in real
consumer spending.
Consumers' assessment of the current economic conditions fell
again this month and remained near the historic low. It remained off by
almost two-thirds from one year earlier. Jobs were seen as hard to get
by an increased 49.6% of respondents and jobs were seen as plentiful by
3.4% which was near the series' historic low. Business conditions were
seen as good by just 7.7% and that also was near the series' low.
Consumers who thought business conditions were bad rose slightly to
47.1%. While off somewhat from its high the reading still near the
highest since 1983.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027f.jpg" align="right" border="0" height="265" width="353">
The expectations component of confidence fell hard from
September but the index remained near the highest level since
late-2007. The percentage of respondents expecting business conditions
to improve slipped to 20.8% though that remained near the highest level
since 2004. Though down slightly m/m, an improved 16.3% of respondents
expected economic improvement to generate more jobs, more than double
the percentage at the recent low. However, that gain was not expected
to generate much more income.
Expectations for the inflation rate in twelve months held
stable at 5.3%, the lowest level since 2007 and down from last year's
high of 7.7%. Interest rates in twelve months were expected to be
higher by 49.5% of respondents, while 15.8% expected rates to fall. A
greatly increased 32.7% of respondents expected stock prices to rise.
Consumers continued to manage their spending plans cautiously.
Just 2.3% plan to buy a home during the next six months while just
23.3% plan to buy a major appliance. That's versus 30.9% back in 2007.
Only 4.4% plan to buy an automobile versus 6.0% in 2007. Just 1.4% plan
to buy a new one.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>47.7</td>
<td>53.4</td>
<td>22.9</td>
<td>57.9</td>
<td>103.4</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>20.7</td>
<td>23.0</td>
<td>-52.4</td>
<td>69.9</td>
<td>128.8</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>65.7</td>
<td>73.7</td>
<td>84.0</td>
<td>50.0</td>
<td>86.4</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

Earlier gains in consumer confidence have flagged with the continued run-up in unemployment. The Conference Board indicated that consumer confidence during October fell 10.7% from September. The decline was the fourth in the last five [...]

U.S. Consumer Confidence Drops Again

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027d.jpg" align="left" border="0" height="265" width="353">
Over view: Money supply growth in the key economies continues
to erode on a broad front. Japan sports a contrary pattern with
steadily increasing growth in money supply. The UK has been through the
biggest boom/bust in money supply growth; the economy is still
languishing in recession. Money growth in the US and in the e-Zone is
slowing as well. 

Credit growth in EMU has turned negative. Loan growth is
declining even over 12-months. In real terms, credit to residents is
also falling. Over three-months inflation-adjusted loan volume in the
Zone is falling; over six months it&#8217;s flat. 

Real money supplies are declining over six months in the US
and in the UK. In EMU real money balances are growing at a low 2% pace.
Japan&#8217;s inflation-adjusted money supply is accelerating or stabilizing.
 

While it is clear that different regions have different
nominal and real money growth characteristics, only Japan is showing a
steady move back to monetary stimulus. At that it still has the lowest
Yr/Yr nominal money growth in the group. The UK has the biggest drop
off in nominal money growth but still had the strongest Yr/Yr rate of
growth. The US and EMU growth rates are closer together with EMU the
peak coming earlier than in the US. 

The more disturbing news is the lack of credit growth. In EMU
it is contracting. Banks have been stabilized by various policy
actions, but those actions did not translate directly into help for the
nonbank sector as banks have been very careful with new lending. In the
US the President is now trying to jawbone to stimulate small business
lending. Without credit growth, money growth will not be fully
activated. In the US small business is the main source of job growth
which is greatly needed to produce a real recovery. In Germany
Chancellor Merkel is warning of another crisis in 2011 and more
unemployment. There remains a lot of work to be done to get areal
recovery going.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Look at
Global and Euro Liquidity Trends</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar-all</td>
<td colspan="3"> Euro Measures (E13): Money
&amp; Credit</td>
<td colspan="3"> G-10 Major Markets: Money</td>
<td>Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> &#8364;&#8364;-Supply M2</td>
<td> Credit: 
Residential</td>
<td> Loans</td>
<td> $US M2</td>
<td>&#163;&#163;UK M4</td>
<td> &#165; &#165;Jpn M2+Cds</td>
<td> OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">3-MO</td>
<td>2.8%</td>
<td>0.3%</td>
<td> -1.6%</td>
<td> -1.9%</td>
<td>8.7%</td>
<td>3.2%</td>
<td> -0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol"> 6-MO</td>
<td>2.8%</td>
<td>0.8%</td>
<td> -0.9%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>3.3%</td>
<td>112.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>4.1%</td>
<td>2.1%</td>
<td> -0.3%</td>
<td>6.7%</td>
<td>9.8%</td>
<td>3.0%</td>
<td> -32.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>7.0%</td>
<td>6.3%</td>
<td>4.2%</td>
<td>6.5%</td>
<td>10.9%</td>
<td>2.6%</td>
<td> -6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>8.1%</td>
<td>7.9%</td>
<td>6.3%</td>
<td>6.5%</td>
<td>11.6%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">
Real Balances: deflated by
Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol"> 3-MO</td>
<td>2.0%</td>
<td> -0.4%</td>
<td> -2.3%</td>
<td> -4.3%</td>
<td>5.3%</td>
<td>4.0%</td>
<td> -2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">6-MO</td>
<td>2.0%</td>
<td> 0.0%</td>
<td> -1.7%</td>
<td> -2.6%</td>
<td> -1.0%</td>
<td>5.2%</td>
<td>106.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>4.5%</td>
<td>2.5%</td>
<td>0.1%</td>
<td>8.1%</td>
<td>8.6%</td>
<td>5.2%</td>
<td> -31.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>5.3%</td>
<td>4.6%</td>
<td>2.5%</td>
<td>4.7%</td>
<td>7.5%</td>
<td>2.6%</td>
<td>-7.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>6.2%</td>
<td>6.0%</td>
<td>4.4%</td>
<td>4.3%</td>
<td>8.7%</td>
<td>2.4%</td>
<td>0.7%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Japan CPI
for Aug is an estimate; it
uses the July value to produce the real balance figure</td>
</tr>
</tbody>
</table>
</body></html>

Over view: Money supply growth in the key economies continues to erode on a broad front. Japan sports a contrary pattern with steadily increasing growth in money supply. The UK has been through the biggest boom/bust in money supply [...]

Money Supplies Continue to Erode

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027a.jpg" align="right" border="0" height="265" width="353">
Home prices have firmed along with the improvement seen in
home sales. The August S&amp;P/Case-Shiller
Home Price Composite Index of twenty metro-markets rose 1.0% from July
following like gains during the prior two months. The monthly increase
lowered the y/y drop to 11.4% which was
less-than-expected by Consensus. Nevertheless, prices were down by
nearly one-third since the peak in May 2006. Not seasonally adjusted
prices were even stronger m/m and posted a 1.2% increase after a 1.6%
gain during July.
The Case-Shiller composite index of home prices in 10
metropolitan areas, which has a longer history and dates back to 1987,
also firmed last month by 1.0% (-10.7% y/y). This measure also was down
by nearly one-third since the 2006 peak.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027b.jpg" align="right" border="0" height="265" width="353">
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is value-weighted. A greater index weight is assigned to more
expensive homes and the series dates back only to 2001. The
S&amp;P/Case-Shiller home price series can be found in Haver's USECON
database and the city data highlighted below is in the REGIONAL
database. The latest press release is available <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_102706.pdf">here</a>
. An overview of the S&amp;P/Case-Shiller home price series can be
found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
Less Weak Regions:Home prices in some areas
of the country have firmed lately though they remain down year-to-year.
Prices in Denver rose for their sixth month (-2.0% y/y) while
in Dallas prices rose for the fifth consecutive month. That pared the
y/y change to -1.3% from its worst of -5.5% this past March. Boston
prices also were higher during August (-4.2% y/y) while in Chicago home
prices were quite strong m/m, rising 1.2%, but they still were off
12.7% y/y. In the New York region prices ticked up 0.3% m/m (-9.6% y/y)
while in Charlotte, North Carolina prices slipped 0.4% (-8.6% y/y). In
Cleveland, Ohio, though prices fell 1.0% m/m during August, the y/y
decline amounted to just 2.9%. In the Washington, D.C. metro area
prices rose for the fourth straight month. The 1.2% increase left them
off 7.9% y/y.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027c.jpg" align="right" border="0" height="265" width="353">
Weakest Regions: Several other areas of the
country have shown limited improvement. Though home prices in Phoenix,
Arizona rose for the third consecutive month they remained off 25.2%
y/y. Home prices in Las Vegas, Nevada continued their rapid rate of
decline with a 0.8% m/m drop (-29.9% y/y) and were down by roughly
one-half from their peak. Home prices in Miami also rose for the third
straight month but were off 18.9% y/y while home prices in Los Angeles
also firmed m/m (-12.0% y/y). In Tampa, Florida prices also rose for
the third month but remained off 17.7% y/y. In Detroit prices rose for
the first time since early 2006 (-22.7% y/y) yet prices were off by
nearly one-half from the peak.In San Francisco prices firmed for the
fourth straight month and that eased the y/y decline to 12.6%.
The monthly S&amp;P Case Shiller Home Price data can be
found in Haver's USECON database and the regional
data is available in the REGIONAL database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">August m/m</th>
<th scope="col">July m/m</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">20 City Composite
Index</td>
<td>1.0%</td>
<td>1.2%</td>
<td>-11.4%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">&nbsp; Regional
Indicators</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Atlanta</td>
<td>0.5</td>
<td>1.6</td>
<td>-10.6</td>
<td>-8.5</td>
<td>0.7</td>
<td>4.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Boston</td>
<td>1.0</td>
<td>0.6</td>
<td>-4.2</td>
<td>-5.7</td>
<td>-4.0</td>
<td>-1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Chicago</td>
<td>1.2</td>
<td>2.1</td>
<td>-12.7</td>
<td>-10.0</td>
<td>-1.0</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Dallas</td>
<td>0.0</td>
<td>0.8</td>
<td>-1.3</td>
<td>-3.3</td>
<td>0.5</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Denver</td>
<td>1.0</td>
<td>0.7</td>
<td>-2.0</td>
<td>-4.9</td>
<td>-1.7</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Los Angeles</td>
<td>1.3</td>
<td>1.2</td>
<td>-12.0</td>
<td>-24.2</td>
<td>-5.2</td>
<td>11.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
New York</td>
<td>0.3</td>
<td>0.9</td>
<td>-9.6</td>
<td>-7.4</td>
<td>-2.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
San Francisco</td>
<td>2.6</td>
<td>2.8</td>
<td>-12.6</td>
<td>-24.3</td>
<td>-4.5</td>
<td>4.5</td>
</tr>
</tbody>
</table>

</body></html>

Home prices have firmed along with the improvement seen in home sales. The August S&P/Case-Shiller Home Price Composite Index of twenty metro-markets rose 1.0% from July following like gains during the prior two months. The monthly [...]

Case-Shiller Home Price Index Increases For Third Consecutive Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026i.jpg" align="right" border="0" height="265" width="353">South Korean
joins China and Singapore among the emerging economies of the Pacific
Rim to report third quarter GDP.&nbsp; GDP growth in the three
countries is shown in the first chart.&nbsp; The declines in the
economies of Korea and Singapore have been much more severe than those
in China.&nbsp; China has not experienced a year to year decline in
GDP, merely a deceleration of growth.&nbsp; At their low points in
the first quarter of this year, GDP in Singapore was 9.5% below the
year ago figure and GDP in Korea, 4.3% below.Korea reported that GDP
grew 2.9% in the third quarter on a seasonally adjusted basis, compared
with 2.7% in the second quarter.&nbsp; On a seasonally unadjusted
basis, GDP was 0.6% above the year ago figure, the first positive
figure since the third quarter of 2008.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026j.jpg" align="right" border="0" height="265" width="353">
A swing in inventories from a liquidation of 4,506 million won* in the
second quarter to an accumulation of 6,486 won in the third quarter was
the main factor in the third quarter strength.&nbsp; However, this
should not be a cause of concern at this point in the business
cycle.&nbsp; The rise follows three successive quarters of big
liquidations, beginning in the fourth quarter of 2008--7,290 million
won 6,788 million won and 4,506 million wan.&nbsp; The inventory to
shipments ratio for manufacturing at the end of the second quarter was
.97 down from 1.25 at the end of 2008.&nbsp; As can be seen in the
second chart, the I/S ratio for manufacturing was somewhat below normal
at the end of the second quarter so that a build up in the third
quarter is not unexpected. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026k.jpg" align="right" border="0" height="265" width="353">
The performance of the other components of
GDP was generally typical of that seen in the early stages of
recovery--some increases and some retrenchments.&nbsp; The one
notable exception was a greater decline in exports of goods and
services, than that in imports of goods and services, with the result
that the balance on goods and services declined from 20.3 billion won
in the second quarter to 19.1 billion won .&nbsp; In the past,
exports have been a dynamic element in the growth of the Korean economy
and generally quick to respond to improvements in the world economy.
Private consumption increased by 3,524.7 million won in the third
quarter compared with an increase of 1,367.1, this could be an sign
that Korea is beginning to shift away from its policy of export led
growth but it is probably not too wise to base a conclusion on one
quarter's evidence. See the third chart.&nbsp; There were small
declines in construction,&nbsp; fixed investment in intangible
assets and government consumption and the change in business investment
in plant and equipment was essentially unchanged at 1,778 million won
in the third quarter, compared with a rise of 1,846 million won in the
second quarter.*The won in all cases is the 2005
chained won.
<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">
SOUTH KOREA</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">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="10"> GDP </td>
</tr>
<tr>
<td class="firstcol">Q/Q Change (SA)</td>
<td>2.93</td>
<td>2.65</td>
<td>0.12</td>
<td>-5.07</td>
<td>0.22</td>
<td>0.43</td>
<td>1.00</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Y/Y Change&nbsp; (NSA)</td>
<td>0.58</td>
<td>-2.16</td>
<td>-425</td>
<td>-3.40</td>
<td>3.11</td>
<td>4.35</td>
<td>5.46</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Change in New Exports (Mil.
2005 Chained Won)</td>
<td>-1263</td>
<td>3572</td>
<td>3175</td>
<td>4876</td>
<td>-1590</td>
<td>48</td>
<td>756</td>
<td>10019</td>
<td>6577</td>
</tr>
<tr>
<td class="firstcol">Change in Inventory Change "</td>
<td>6487</td>
<td>-4506</td>
<td>-6788</td>
<td>-7290</td>
<td>1396</td>
<td>467</td>
<td>2004</td>
<td>7752</td>
<td>-2815</td>
</tr>
<tr>
<td class="firstcol">Change in Private
Consumption&nbsp; "</td>
<td>3525</td>
<td>1367</td>
<td>-880</td>
<td>-3189</td>
<td>1648</td>
<td>-3364</td>
<td>-25</td>
<td>4703</td>
<td>24655</td>
</tr>
</tbody>
</table>
</body></html>

South Korean joins China and Singapore among the emerging economies of the Pacific Rim to report third quarter GDP. GDP growth in the three countries is shown in the first chart. The declines in the economies of Korea and Singapore [...]

South Korea Reports 3Q GDP

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026h.jpg" align="left" border="0" height="265" width="353">
Germany&#8217;s GFK survey rose in October. It was a month-to-month
rise of 0.4 for the third month in a row. The economic index rose by
5.2 points its smallest rise since May but on the heels of a 10.9 point
spurt in September. Income expectations fell by 3.1 points, the first
drop in five months but after two large gains. The propensity to buy
dropped back by 10.4 points a huge drop and the largest since a drop of
15.7 in May 2008. 

Still the Climate index at +4.2 is above its average of 3.3.
All of these components are above their average values since 2002. The
&#8216;income&#8217; and &#8216;propensity to buy&#8217; percentiles are stronger for the count
percentiles than for the range percentiles; the standing among past
observations is stronger than their range standing between the highs
and lows. This means that while the current readings are still well off
peak they are in the upper part of the distribution of readings and in
the upper region of normal. 

The GFK index shows that confidence is still improving in
Germany. Germans are relatively more worried about the economy in
generally than they are impacted by expectations for income or buying
power problems. Still the fact of the matter is that German consumption
has not been very strong. And Germany&#8217;s Chancellor is out warning that
in 2011 there will be another crisis and that unemployment will rise
from current levels. I guess that Obama&#8217;s pessimistic approach to
assessing the economy is spreading abroad.

 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="5">
 Germany Consumer Climate Survey GFK</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol"></td>
<td> Climate</td>
<td colspan="2"> Expectations</td>
<td> Propensity to</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td> Economic</td>
<td>Income</td>
<td>Buy</td>
</tr>
<tr class="grey3">
<td class="firstcol">Oct-09</td>
<td>4.2</td>
<td>8.7</td>
<td>12.9</td>
<td>26.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Sep-09</td>
<td>3.8</td>
<td>3.4</td>
<td>16.0</td>
<td>36.5</td>
</tr>
<tr class="grey3">
<td class="firstcol">Aug-09</td>
<td>3.4</td>
<td>-7.5</td>
<td>8.8</td>
<td>31.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jul-09</td>
<td>3.0</td>
<td>-14.0</td>
<td>1.8</td>
<td>25.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jun-09</td>
<td>2.7</td>
<td>-22.6</td>
<td>-3.3</td>
<td>14.5</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="5">&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Average</td>
<td>3.3</td>
<td>0.9</td>
<td>-3.8</td>
<td>-9.6</td>
</tr>
<tr class="grey3">
<td class="firstcol">Max</td>
<td>9.1</td>
<td>69.5</td>
<td>33.6</td>
<td>64.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">Min</td>
<td>-3.5</td>
<td>-32.9</td>
<td>-24.5</td>
<td>-55.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">% range</td>
<td>61.1%</td>
<td>40.6%</td>
<td>64.4%</td>
<td>68.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Count%</td>
<td>59.6%</td>
<td>66.0%</td>
<td>92.6%</td>
<td>87.2%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">% range is
current reading as a
percentile of Hi/Low range</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Count % is
current reading ranked as
a %-tile among all readings</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">GFK survey
dates from January 2002</td>
</tr>
</tbody>
</table>
</body></html>

Germany’s GFK survey rose in October. It was a month-to-month rise of 0.4 for the third month in a row. The economic index rose by 5.2 points its smallest rise since May but on the heels of a 10.9 point spurt in September. Income [...]

Germany’s Consumer Climate Improves

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

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Michael J. Moran

260113L.jpg

260113M.jpg

The consumer price index rose 0.3% in December, while the core index (prices excluding food and energy) rose 0.2%. Both measures were faster than the averages of 0.1 percent in the prior two months. (The Bureau of Labor Statistics did not publish a CPI for October because of the government shutdown. Both the headline and core indexes showed increases of 0.2% for the two-month period from September to November.)

The December results were not pronounced enough to suggest that the restraint in October and November reflected distortions triggered by the government shutdown. At the same time, they were not soft enough to suggest that October and November were signaling faster deceleration in inflation. The past three months seemed to be showing the same degree of random volatility seen in the prior two years, with the underlying trends showing a slight degree of deceleration. The year-over-year increase in headline CPI totaled 2.7%, only slightly slower than 3.0% in mid-2024. The Core has eased a bit more: 2.6% in December versus 3.3% in mid 2024.

260113N.jpg

Prices of core goods and services have been following different paths in the past few years, and they carried different signals in December. Prices of core goods showed no month-to-month change in December, which kept the year-over-year trajectory moving sideways. The flat pattern is encouraging in that it suggests that core goods inflation is perhaps steadying after trending upward since mid-2024. Core service prices rose 0.3 percent in December, in line with the recent average. Core service inflation showed little easing in the early part of 2025, but hints of slowing emerged from September to November. December results, though, raised questions about faster deceleration in service inflation.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

- Not by enough to suggest that restraint in October and November reflected distortions from the government shutdown
- But by enough to suggest that October and November reflected normal volatility rather than the beginning of a slower trend.

December CPI: Price Increases Quickened After Two Slow Months

260112E.jpg

Swiss consumer confidence at end-2025 (in Q4) fell to -34.5 from -32.7 in 2025-Q3. The average level for the confidence reading on data back to 1982 is -16.7 and the current queue standing is 13.9%. The Q4 reading is clearly weak- well below its own average and weaker than this month, less than 15% of the time.

Outlook confidence in Q4 fell to -44.9 from -38.0 in Q3, registering a 15.6 percentile standing. The past confidence reading at -61.2 at end-2025 is down from -43.5 at the end of the third quarter. The standing for this reading is in its 19th percentile. All of these are extremely weak readings.

People provide a job security response in Q4 that eases to -50.1, still well above its historic average of -58.2 for a queue ranking at its 57th percentile.

Personal financial readings are moderate to weak across the board. However, current financial conditions rose to 38.4 in Q4 from 35.2 at the end of Q3 and a queue standing above its median at its 56th percentile. But the outlook for financial conditions is much weaker and also weakened quarter-to-quarter to -31.4 in Q4 from a level of -28.6 in Q3 to a queue ranking in its 8.7 percentile. The evaluation of past financial conditions improved by a very small margin, rising to -38.3 in Q4 from -38.7 in Q3, and to a queue standing at the 11.6 percentile.

The spending environment in Switzerland improved slightly but remained weak, rising to -23.3 in Q4 from -25.5 in Q3 to a standing at their 23.1 percentile standing.

The best part of the report is that the perception of job security is above average, and the current financial situation is above its median. After that, all the individual assessment metrics are weak including overall confidence – everything except assessments for inflation.

On the inflation front, the price outlook is high, rising to a reading of 97.7 in Q4 from 95.8 in Q3 but is still below the second quarter reading at 113.1. The price outlook has a moderately high standing at its 70.5 percentile. This standing is slightly below the standing for prices past which is at 76.3%. The past metric was still rising in the fourth quarter but was weaker than its reading in both Q1 and Q2 of 2025.

260112.jpg

**Summing up**
Inflation fears appear to still linger, but they are not as intense as they once were. Confidence overall is weak, but the most important aspects of job security and assessment of financial conditions have the strongest readings; yet, the environment for major purchases is still at a weak position. In Switzerland, people do not feel threatened or financially unstable, but they are not positive enough to spend freely either. And inflation fears are creeping up again all key trends to watch.

Switzerland

Swiss Confidence Sags at End-2025

Tian Yong Woon

This week, we highlight several pertinent developments that have shaped the start of the year and may carry longer-lasting implications. To begin with, the recent capture of former Venezuelan President Maduro by the US authorities and the subsequent crude oil trade deal could have far-reaching effects—potentially altering China’s imports of Venezuelan crude and broader bilateral trade dynamics (chart 1), as well as global energy supply considerations (chart 2).

In Japan, Prime Minister Takaichi’s reported consideration of early snap elections, if enacted, would likely inject near-term political uncertainty (chart 3). However, should her gambit succeed, it could reduce  policy uncertainty and pave the way for more fiscal policy activism. Against this backdrop, it is unsurprising that investors remain divided over the timing of the Bank of Japan’s next policy tightening, although the upcoming Spring wage negotiations (chart 4) ought to provide clearer signals for the monetary policy outlook.

Turning to investor expectations from the latest Blue Chip survey, India is once again seen as the growth leader among major Asian economies, while also poised to record the highest inflation (chart 5). China, by contrast, is expected to deliver sub-5% growth this year alongside muted inflation. Lastly, in Southeast Asia, pockets of geopolitical tension persist—notably between Thailand and Cambodia (chart 6)—as Thailand prepares for snap elections next month.

**The US, Venezuela, and China**
2026 got off to a turbulent start following a recent US military operation in Venezuela that resulted in the capture of former President Maduro and his transfer to the US to face drug-related charges. In the aftermath, Venezuela’s former vice president (Delcy Rodriguez) was sworn in as interim leader, while US and Venezuelan authorities have reportedly already reached a new crude oil deal. Under the agreement, Venezuela would sell 30–50 million barrels of crude to the US at market prices, with the proceeds controlled by the US. These developments have several potential implications. First, some Venezuelan crude initially destined for China would likely be diverted to the US. China has been the main buyer of Venezuelan oil in recent years, although this is likely underreported in official data (chart 1), which would tighten conditions for the crude-import-dependent country. Second, an eventual increase in Venezuelan crude supply—previously constrained by heavy US sanctions—would likely exert downward pressure on global oil prices, all else equal, although significant challenges remain, as discussed below.

260112T1.jpg

To illustrate the potential significance of Venezuela’s crude oil industry, chart 2 shows that the country holds nearly a fifth of the world’s proved crude oil reserves. However, output remains disproportionately low relative to reserves, possibly reflecting years of US sanctions as well as mismanagement and chronic underinvestment. Given the current state of the industry, substantial investment will likely be required for Venezuela to restore production to historically high levels and to more fully tap its deep proved reserves. As a result, any meaningful surge in Venezuelan crude output is likely to take time, which may help explain the muted market response to recent US–Venezuelan developments. Also of note, China has been a major lender to Venezuela, including through “oil-for-loan” arrangements in which repayments are made in crude oil. It remains to be seen how these existing and future agreements may be affected by recent developments.

260112T2.jpg

**Japan**
Setting aside the interplay between the US, Venezuela, and China, another economy worth watching early this year is Japan. Developments continue to unfold following renewed China–Japan tensions after Prime Minister Takaichi assumed office. With her approval ratings having remained consistently high since taking the helm, Takaichi is reportedly considering snap elections as early as next month to strengthen her ruling coalition’s parliamentary position. While a stronger mandate could reduce policy uncertainty, near-term political uncertainty would be the likely case. This interim uncertainty may be weighing on the yen. It is being compounded by expectations of upcoming pro-growth measures, including the $118 million supplementary budget passed last December and the prospect of additional fiscal stimulus next fiscal year, contingent on an electoral win (chart 3).

260112T3.jpg

Turning back to Japan and the monetary policy outlook, investors remain divided over the timing of the Bank of Japan’s (BoJ) next policy move following its December rate hike. This uncertainty is understandable given the multiple moving parts shaping the BoJ’s path, including the factors discussed above. Looking ahead, the upcoming annual wage negotiations and broader trends in wage growth (chart 4) will be closely watched by the BoJ as key preconditions for further rate hikes. Reflecting this uncertainty, our latest Blue Chip Economic Indicators survey shows investors split between expectations for a hike in March and views that the next move will only come after April.

260112T4.jpg

**Blue Chip Economic Indicators**
Delving into the latest Blue Chip survey results, chart 5 summarizes panellists’ expectations for growth and inflation this year. Focusing on major Asian economies, and as in 2025, India is seen to be leading the pack in terms of both real GDP growth and CPI inflation. That said, the inflation outlook may be subject to further revisions should India’s currently muted inflation—driven by falling food prices—persist for longer. For China, panellists currently expect sub-5% growth this year, implying a likely miss should a 5% growth target again be pursued. Inflation in China is once again expected to remain subdued. Japan, meanwhile, is forecast to post sub-1% real GDP growth, while CPI inflation is expected to hover around the authorities’ preferred 2% level. Looking ahead, attention will also turn to the IMF’s upcoming World Economic Outlook forecasts, due later this month.

260112T5.jpg

**Southeast Asia**
Last but not least, turning to Southeast Asia, promising AI- and tech-related growth continues in economies such as Malaysia and Vietnam. However, pockets of geopolitical tension persist, notably between Thailand and Cambodia, where border clashes have occurred despite previous attempts at peace, including one co-brokered by US President Trump. Against this backdrop, Thailand’s Prime Minister Anutin is preparing for snap elections in early February, amid a reported rise in nationalist sentiment linked to the ongoing clashes. These developments create latent risks for both Thailand and Cambodia (chart 6), while the uncertainty surrounding the elections also clouds the implementation of longer-term policies aimed at addressing Thailand’s deeper structural challenges.

260112T6.jpg

Asia

Economic Letter from Asia: A Bumpy Start

260109A.jpg

260109B.jpg

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

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

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

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Although the payroll numbers were soft, the unemployment rate dipped 0.1 percentage point to 4.4%. The drop reflected a jump of 232,000 in employment as measured by the survey of households. This employment measure is more volatile than the payroll figures from the survey of business establishments, and thus the gain might contain a healthy dose of random volatility. Still, it offered encouragement in that December marked the fifth consecutive gain, perhaps signaling that the bottom was not falling out of the labor market. 

Average hourly earnings also suggested that the labor market still had a pulse. December showed an increase of 0.3% in average hourly earnings, and results in the prior month were firmer than previously estimated (0.2% growth rather than 0.1%). The underlying trend is still cooling, but the year-over-year advance of 3.8% still represents a gain in real earnings.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

- Modest job growth in December, and downward revisions in October & November.
- The unemployment rate, though, inched lower.

A Soft Tone in the Labor Market

Winnie Tapasanun

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Total housing starts fell 4.6% m/m in October to a seasonally adjusted annual rate of 1.246 million units—below expectations—following a 1.2% increase to 1.306 million in September and a 9.1% drop to 1.291 million in August (-8.5% m/m, 1.307 million previously), data from the U.S. Census Bureau showed. The Action Economics Forecast Survey had expected 1.321 million starts for October. The October figure marked the lowest level since May 2020 and represented the second m/m decline in three months after m/m increases in July and June. The year-on-year rate was at -7.8% in October, the steepest y/y drop since November 2024, following -3.8% in September and -1.2% in October 2024. Overall, starts remained 31.5% below the April 2022 peak of 1.820 million.

Single-family starts rebounded 5.4% (-7.8% y/y) to 874,000 in October, the highest level since July, after declines of 4.6% to 829,000 in September and 8.6% to 869,000 in August (890,000 previously). They reached a high of 1.218 million in November 2021 and a high of 1.273 in December 2020. Multi-family starts plunged 22.0% (-7.9% y/y) to 372,000, the lowest level since May, following a 13.0% September gain to 477,000 and a 10.0% August drop to 422,000 (417,000 previously). They reached a high of 629,000 units in November 2022 and a high of 616,000 units in April 2022.

By region, housing starts delivered a mixed performance. Starts in the West slumped 21.9% (-25.9% y/y) to 243,000 in October, the lowest level since July, after a 1.6% increase in September. Starts in the Northeast slid 0.6% (+41.3% y/y) to 154,000, the third m/m slide in four months, after a 58.2% September surge. To the upside, starts in the South rebounded 1.2% (-2.1% y/y) to 650,000 in October after a 3.6% decline in September and starts in the Midwest rose 0.5% (-20.7% y/y) to 199,000 after a 10.4% September decrease; for both regions, October represented the first m/m increase since July. Notably, the South continued to lead all regions with 650,000 starts, accounting for 52.2% of total U.S. housing starts; the region previously peaked at 1.044 million in April 2022.

Building permits fell 0.2% (-1.1% y/y) to 1.412 million in October, the sixth m/m fall in seven months, following a 6.4% rise to 1.415 million in September and a 2.3% decline to 1.330 million in August. They remained well below a high of 1.920 million in January 2022 and a high of 1.855 million in January 2021. Single-family permits fell 0.5% (-9.4% y/y) to 876,000, the second m/m fall in three months, after a 2.6% September increase to 880,000. They reached highs of 1.243 million in both January 2022 and January 2021. In contrast, multi-family permits rose 0.2% (16.3% y/y) to 536,000, the highest level since February 2024, after a 13.3% September gain to 535,000. They reached a peak of 817,000 units in February 2023 and a high of 787,000 units in June 2022. Regionally, permits fell m/m in the South (-3.3%; -3.9% y/y), the Midwest (-2.0%; -0.5% y/y), and the Northeast (-1.4%; +5.8% y/y), but increased m/m in the West (+9.1%; +2.1% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Housing starts -4.6% (-7.8% y/y) to 1.246 mil. in Oct.; second m/m fall in three months.
- Single-family starts up to a three-month high; multi-family starts down to a five-month low.
- Housing starts m/m down the West and Northeast but up in the South and Midwest.
- Building permits fall for the sixth time in seven months, led by a drop in single-family permits.

Economy in Brief

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