Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091104c.jpg" align="right" border="0" height="265" width="353">
Payroll
employment fell again last month, but the rate of decline recently has
eased. The latest report from the payroll processor ADP, in their
National Employment Report, indicated that private nonfarm payrolls
fell 203,000 during October after a revised 227,000 September decline
which was shallower than reported initially. The latest reading was the
twenty-first consecutive monthly decline. The monthly change, however,
was the smallest since July of last year and two-thirds the size of the
worst reading last March. The three-month annualized rate of decline in
payrolls also eased to 2.5% from its March record of 7.1%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091104d.jpg" align="right" border="0" height="265" width="353">
ADP compiled the estimate from its
database of individual companies' payroll information. Macroeconomic
Advisers, LLC, the St. Louis economic consulting firm, developed the
methodology for transforming the raw data into an economic
indicator.The
U.S. Bureau of Labor Statistics will report October payroll employment
this Friday. For comparison, the
September decline of 227,000 in ADP's measure of private nonfarm
payrolls was accompanied by a loss of 210,000 jobs in the BLS measure
of private sector payrolls.
According to ADP and Macro-Advisers, the correlation between the
monthly percentage change in the ADP estimate and that in the BLS data
is 0.90.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091104e.jpg" align="right" border="0" height="265" width="353">
 ADP reported
that the decline in small-sized payrolls moderated to 75,000 (-4.3%).
That matched the 75,000 (-5.5% y/y) decline in medium-sized payrolls.
Large payrolls fell by 53,000 (-5.6% y/y). The steady decline in
service-producing industry employment continued. The October drop of
86,000 (-3.1% y/y), was the twentieth consecutive monthly decline but
in percentage terms the three-month rate of change moderated to -1.3%,
less than two-thirds the worst from December through March. The decline
in medium-sized service payrolls moderated to 30,000 (-3.4% y/y) and
small-sized payrolls declined 34,000 (-2.8% y/y). Large service
producing payrolls dropped by 22,000 and the y/y decline held steady at
3.4%.In the goods
producing sector employment fell 117,000 in October (-13.2% y/y). Here,
the three-month rate of decline eased again but only to -8.4% versus
-17.3% at its worst. Small-sized payrolls fell 41,000 (-12.9% y/y)
followed by a 45,000 (-13.3% y/y) drop in medium-sized payrolls. Large
payrolls fell 31,000 (-13.4% y/y). In the manufacturing sector alone,
payrolls fell 65,000 (-12.5% y/y).The
ADP National Employment Report data is maintained in Haver's USECON
database; historical figures date back to December 2000. The figures in
this report cover only private sector jobs and exclude employment in
the public sector, which rose an average 11,083 during the last twelve
months. The full ADP
National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/FINAL_Report_October_09.pdf">here</a>p
pand the ADP methodology is
explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.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/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Nonfarm Private Payroll
Employment (m/m Chg., 000s)</td>
<td>-203</td>
<td>-227</td>
<td>-5.0%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Small
Payroll (1-49)</td>
<td>-75</td>
<td>-90</td>
<td>-4.3</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Medium
Payroll (50-499)</td>
<td>-75</td>
<td>-81</td>
<td>-5.5</td>
<td>-0.5</td>
<td>1.2</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Large
Payroll (&gt;500)</td>
<td>-53</td>
<td>-56</td>
<td>-5.6</td>
<td>-1.6</td>
<td>-0.1</td>
<td>0.4</td>
</tr>
</tbody>
</table>
</body></html>

Payroll employment fell again last month, but the rate of decline recently has eased. The latest report from the payroll processor ADP, in their National Employment Report, indicated that private nonfarm payrolls fell 203,000 during [...]

ADP Report: Payroll Employment Decline Continues But The Pace Moderates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091104a.jpg" width="353">
U.S. unit sales of light vehicles during October recovered from the &quot;payback&quot; month of September following the summer&#39;s &quot;cash-for-clunkers&quot; sales program. Sales rose 13.5% m/m to 10.46M units according to the Autodata Corporation. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). October sales were stronger than the expected 9.8M sales rate.
Sales of domestically made vehicles rose 17.2% to 7.75M units after their one-third m/m September drop. Despite the gain, sales remained 0.7% lower than October 2007. Sales of fuel efficient cars rose 11.9% following their more than one-third September decline. Light truck sales reversed most of the September drop and rose 22.2% m/m. Total sales of domestic vehicles during this year&#39;s first 10 months were down 27.5% from last year&#39;s first ten months.
Imported light vehicles rebounded after the end of the sales program, but the increase was less than for domestic makes. Overall sales rose just 4.1% to 2.71M after September&#39;s 36.5% m/m drop. Sales of imported autos rose 5.2% after the one-third September drop while the gain in imported light truck sales amounted to just 1.6% after the more than one-third September drop. Year-to-date, sales of imported vehicles remained 20.0% below last year&#39;s first ten month&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091104b.jpg" width="353">
Overall, import&#39;s share of the U.S. light vehicle market fell to 25.9% last month from 28.2% in September. It reached 26.5% during all of last year. (Imported vehicles are those produced outside the United States.) Imports&#39; share of the U.S. car market totaled 33.9%, versus 34.3% last year while the share of the light truck market was 16.9%, down from 18.3% last year.
The U.S. vehicle sales figures can be found in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM&quot;" style="color: #000000">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Oct. 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>10.46</td>
<td>9.22</td>
<td>14.09</td>
<td>-3.4%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>5.50</td>
<td>5.02</td>
<td>8.05</td>
<td>-3.7</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>3.64</td>
<td>3.25</td>
<td>5.26</td>
<td>-1.1</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.87</td>
<td>1.77</td>
<td>2.78</td>
<td>-8.4</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>4.96</td>
<td>4.20</td>
<td>6.05</td>
<td>-3.0</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.12</td>
<td>3.37</td>
<td>4.75</td>
<td>-0.4</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>0.84</td>
<td>0.83</td>
<td>1.31</td>
<td>-13.9</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>


</html>

U.S. unit sales of light vehicles during October recovered from the "payback" month of September following the summer's "cash-for-clunkers" sales program. Sales rose 13.5% m/m to 10.46M units according to the Autodata Corporation. [...]

U.S. Vehicle Sales Recover During October

U.S. Vehicle Sales Recover DuringOctober

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103g.jpg" align="left" border="0" height="265" width="353">
Brazilian industrial production increased 0.75% to 119.2
(2002=100) in September from 118.3 in August, a little short of
expectations, but still on the upward trend that began in January. The
three major marketing groups--capital goods, intermediate goods and
consumer goods--have all recovered from their falls in December as can
be seen in the first chart. The decline in capital goods was especially
severe and the recovery equally sharp.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103h.jpg" align="right" border="0" height="265" width="353">
Industrial production is a good proxy for Brazilian GDP.
Brazil reports real GDP on an index basis with 1995=100. We rebased the
Industrial production index to 1995=100 and aggregated the monthly
figures to quarterly. The second chart compares this index with the
index of real GDP. The correlation between the two series is strong at
.97. In the third quarter, industrial production increased 4.1%. A 3.9%
increase in industrial production was associated with a 1.9% increase
in real GDP. If the relationship between industrial production and real
GDP holds, Brazil's real GDP should show another roughly 2% rise in GDP
in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp;09</th>
<th scope="col">Sep 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production&nbsp;
(2002=100) as reported</td>
<td>109.2</td>
<td>118.3</td>
<td>129.7</td>
<td>0.75</td>
<td>-8.1</td>
<td>125.3</td>
<td>121.8</td>
<td>115.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>136.2</td>
<td>135.2</td>
<td>148.3</td>
<td>0.75</td>
<td>-8.1</td>
<td>143.2</td>
<td>139.2</td>
<td>131.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 09</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08</td>
<td>Q2 08</td>
<td>Q1 08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real GDP (1995=100)</td>
<td>&nbsp;</td>
<td>145.3</td>
<td>142.7</td>
<td>146.0</td>
<td>149.0</td>
<td>147.1</td>
<td>144.9</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>135.1</td>
<td>129.8</td>
<td>124.9</td>
<td>133.8</td>
<td>148.2</td>
<td>146.3</td>
<td>144.7</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Brazilian industrial production increased 0.75% to 119.2 (2002=100) in September from 118.3 in August, a little short of expectations, but still on the upward trend that began in January. The three major marketing groups--capital [...]

Brazil's Industrial Production Points To Good Third Quarter Growth In GDP

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103e.jpg" width="353">
Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications that it is. Factory inventories fell 1.0% during September, about as they did during the prior four months. Despite the strength of these declines, the 4.6% decline during the period is a clear moderation from the 6.5% rate during the five months through April.
The moderation in inventory decumulation rates continues spotty amongst various industries. Inventories of electrical equipment &amp; appliances have fallen at a reduced 6.6% rate during the period but decumulation of machinery inventories continued firm at a 7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate of decumulation of primary metals inventories also slowed as did cuts of motor vehicle &amp; parts inventories. Inventory reductions of computers &amp; electronic products continued firm but it may have bottomed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103f.jpg" width="353">
Factory shipments have started to rise moderately. On a three-month basis they&#39;re up at a 3.5% rate after the 40% plus rates of decline last Winter. Shipments of primary metals have firmed to a 52.5% growth rate over the last three months and computers &amp; electronics shipments rose at a 4.7% rate. Shipments of transportation equipment rose at a 25.1% rate led by a surge in shipments of nondefense aircraft &amp; parts. Shipments of basic chemicals also turned up as did shipments from textile mills. The shipments improvement has caused unfilled orders to fall at a much-reduced 3.9% rate through September.
Overall, the reduction of inventories in the factory sector has succeeded in lowering the inventory-to-sales ratio. The decline to 1.36 was to its lowest level since October of last year and down from the recent peak of 1.46.
Finally, new orders have improved. The 0.9% increase during September raised orders at a 6.0% rate during the last three months. It reflected improvement in orders for transportation equipment, machinery, primary metals and electrical equipment.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON database.

<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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM" style="color:#FFFFFF">Factory Survey</a> (NAICS, %)</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">Inventories</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-14.1</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.9</td>
<td>-0.8</td>
<td>-17.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.8</td>
<td>0.3</td>
<td>-15.7</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.8</td>
<td>-0.2</td>
<td>-15.9</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.1</td>
<td>-0.1</td>
<td>-16.5</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-11.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>0.5</td>
<td>-0.1</td>
<td>-14.2</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications [...]

U.S. Factory Inventory Decumulation Rate Still Strong

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103d.jpg" align="left" border="0" height="265" width="353">
The auto sector is giving Europe a boost as incentive programs
are still helping to stimulate sales. Only Italy and Spain have
reported registrations for October but despite poor growth in both
regions auto sales are growing in strongly. Spain&#8217;s sales are up by
1.7% m/m in October and up at a 99% annual rate over three months even
as unemployment has hit a 10Year high there. Italy backed off in
October after a strong September.
Troubles in the financial sector have banks as less than
wiling lenders. Tough economic times have put consumers on the
sidelines. But government programs to stimulate demand with outright
subsidies linked to the scrappage of old poor-mileage vehicles has been
a way to stimulate demand and to vest theses programs with some sense
of a public purpose.
EMU Italy and Spain all saw sales crater at about the same
time. Despite different auto incentive programs in different countries
we see that Spain and Italy, two of the more challenged EMU economies,
with auto sectors that are very much in sync with the rest of Europe.
Evidence is that the recession in EMU is ending.
The EU Commission today issued a new outlook for the Zone and
confirmed that it sees recovery taking hold. It sees a contraction of
4.1% for the EU area this year followed by growth of 0.7% in 2010 and
of 1.6% in 2011 and roughly similar growth metrics for the Zone. This
outlook is a hike in its forecast from its previous stance than growth
in 2010 would contract by 0.1% in EMU.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E zone
Car Registrations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3Mo Trend From</td>
<td colspan="2">6Mo Trend From</td>
<td colspan="2">12Mo Trend From</td>
</tr>
<tr>
<td class="firstcol">All Seas Adj</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-1.6%</td>
<td>19.3%</td>
<td>-13.6%</td>
<td>5.8%</td>
<td>13.4%</td>
<td>16.1%</td>
<td>44.9%</td>
<td>14.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>1.7%</td>
<td>28.8%</td>
<td>-9.3%</td>
<td>99.0%</td>
<td>158.6%</td>
<td>117.0%</td>
<td>181.5%</td>
<td>25.8%</td>
<td>17.7%</td>
</tr>
<tr>
<td class="firstcol">base Month of Calc</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Oct-08</td>
<td>Sep-08</td>
</tr>
</tbody>
</table>
</body></html>

The auto sector is giving Europe a boost as incentive programs are still helping to stimulate sales. Only Italy and Spain have reported registrations for October but despite poor growth in both regions auto sales are growing in [...]

Selected Car Registrations In Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103a.jpg" width="353">
Divergent trends within the construction sector haven&#39;t yet added up to any meaningful improvement in the total but it could be on the way. Reported yesterday, September construction spending rose 0.8% following steady monthly declines during the last two years. Consensus estimates had been for yet another decline. Nevertheless, improvement in activity in the residential sector has picked up to a degree which may foreshadow improvement elsewhere.
Residential building activity increased firmly for the second consecutive month. The 3.9% m/m rise followed a similar gain in August and lifted the level of building activity to its highest since February. Single-family construction rose 2.4% (-35.0% y/y) for the fourth consecutive strong monthly increase. Spending on improvements also firmed by 7.2% (-12.5% y/y) in September after a 5.7% August increase. Offsetting the strength here has been a steady decline in multifamily building (-41.2% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103b.jpg" width="353">
Poor corporate profitability and reduced economic activity generally continued to negatively affect nonresidential building activity. It fell 1.8% during September following similar declines during the prior three months. Over the four months combined, nonresidential outlays overall dropped 10.2%. Spending by the food &amp; beverage industries declined 26.2% during those four months as it did in the automotive sector. Hotel &amp; motel spending fell 19.0%; commercial &amp; amusements also fell 19.3% and office building dropped 11.6%. Relatively firm was the four-month spending decline in the education sector which totaled 6.2%. Spending on health care structures was down 3.5% but building activity in the religious sector actually rose 1.3% during the four months.
Public construction overall has been firm, up 6.1% y/y. Spending recouped the August decline with a 1.3% increase. Building activity by state &amp; local governments on power facilities rose 8.6% (32.0% y/y). The transportation area increased 2.7% (23.1% y/y). Public spending on health care facilities 3.4% (4.0% y/y and spending on highways &amp; streets rose 1.0% (2.8% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103c.jpg" width="353">
The construction put-in-place figures are available in Haver&#39;s USECON database.
Incentive Compensation, Risk Management, and Safety and Soundness is yesterday&#39;s speech by Federal Reserve Board Governor Daniel K. Tarullo an it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091102a.htm">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">Construction (%)</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>0.8</td>
<td>-0.1</td>
<td>-1.2</td>
<td>-13.0</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5</td>
<td>0.4</td>
<td>-1.8</td>
<td>-20.6</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>3.9</td>
<td>3.8</td>
<td>0.1</td>
<td>-27.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-15.4</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.3</td>
<td>-1.1</td>
<td>0.1</td>
<td>6.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Divergent trends within the construction sector haven't yet added up to any meaningful improvement in the total but it could be on the way. Reported yesterday, September construction spending rose 0.8% following steady monthly [...]

U.S. Construction Spending Increases Moderately But Residential Recovery Firms

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103a.jpg" align="left" border="0" height="265" width="353">
Divergent trends within the construction sector haven't yet
added up to any meaningful improvement in the total but it could be on
the way. Reported yesterday, September construction spending rose 0.8%
following steady monthly declines during the last two years. Consensus
estimates had been for yet another decline. Nevertheless, improvement
in activity in the residential sector has picked up to a degree which
may foreshadow improvement elsewhere.
Residential building activity increased firmly for the second
consecutive month. The 3.9% m/m rise followed a similar gain in August
and lifted the level of building activity to its highest since
February. Single-family construction rose 2.4% (-35.0% y/y) for the
fourth consecutive strong monthly increase. Spending on improvements
also firmed by 7.2% (-12.5% y/y) in September after a 5.7% August
increase. Offsetting the strength here has been a steady decline in
multifamily building (-41.2% y/y). <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103b.jpg" align="right" border="0" height="265" width="353">
Poor corporate profitability and reduced economic activity
generally continued to negatively affect nonresidential building
activity. It fell 1.8% during September following similar declines
during the prior three months. Over the four months combined,
nonresidential outlays overall dropped 10.2%. Spending by the food
&amp; beverage industries declined 26.2% during those four months
as it did in the automotive sector. Hotel &amp; motel spending fell
19.0%; commercial &amp; amusements also fell 19.3% and office
building dropped 11.6%. Relatively firm was the four-month spending
decline in the education sector which totaled 6.2%. Spending on health
care structures was down 3.5% but building activity in the religious
sector actually rose 1.3% during the four months.
Public construction overall has been firm, up 6.1% y/y.
Spending recouped the August decline with a 1.3% increase. Building
activity by state &amp; local governments on power facilities rose
8.6% (32.0% y/y). The transportation area increased 2.7% (23.1% y/y).
Public spending on health care facilities 3.4% (4.0% y/y and spending
on highways &amp; streets rose 1.0% (2.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103c.jpg" align="left" border="0" height="265" width="353">
The construction put-in-place figures are available in Haver's
USECON database.
Incentive Compensation, Risk Management, and Safety
and Soundness is yesterday's speech by Federal Reserve Board
Governor Daniel K. Tarullo an it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091102a.htm">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">Construction
(%)</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>0.8</td>
<td>-0.1</td>
<td>-1.2</td>
<td>-13.0</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5</td>
<td>0.4</td>
<td>-1.8</td>
<td>-20.6</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>3.9</td>
<td>3.8</td>
<td>0.1</td>
<td>-27.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-15.4</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.3</td>
<td>-1.1</td>
<td>0.1</td>
<td>6.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
 Selected Car Registrations In
Europe 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 03, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103d.jpg" align="left" border="0" height="265" width="353">
The auto sector is giving Europe a boost as incentive programs
are still helping to stimulate sales. Only Italy and Spain have
reported registrations for October but despite poor growth in both
regions auto sales are growing in strongly. Spain&#8217;s sales are up by
1.7% m/m in October and up at a 99% annual rate over three months even
as unemployment has hit a 10Year high there. Italy backed off in
October after a strong September.
Troubles in the financial sector have banks as less than
wiling lenders. Tough economic times have put consumers on the
sidelines. But government programs to stimulate demand with outright
subsidies linked to the scrappage of old poor-mileage vehicles has been
a way to stimulate demand and to vest theses programs with some sense
of a public purpose.
EMU Italy and Spain all saw sales crater at about the same
time. Despite different auto incentive programs in different countries
we see that Spain and Italy, two of the more challenged EMU economies,
with auto sectors that are very much in sync with the rest of Europe.
Evidence is that the recession in EMU is ending.
The EU Commission today issued a new outlook for the Zone and
confirmed that it sees recovery taking hold. It sees a contraction of
4.1% for the EU area this year followed by growth of 0.7% in 2010 and
of 1.6% in 2011 and roughly similar growth metrics for the Zone. This
outlook is a hike in its forecast from its previous stance than growth
in 2010 would contract by 0.1% in EMU.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E zone
Car Registrations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3Mo Trend From</td>
<td colspan="2">6Mo Trend From</td>
<td colspan="2">12Mo Trend From</td>
</tr>
<tr>
<td class="firstcol">All Seas Adj</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-1.6%</td>
<td>19.3%</td>
<td>-13.6%</td>
<td>5.8%</td>
<td>13.4%</td>
<td>16.1%</td>
<td>44.9%</td>
<td>14.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>1.7%</td>
<td>28.8%</td>
<td>-9.3%</td>
<td>99.0%</td>
<td>158.6%</td>
<td>117.0%</td>
<td>181.5%</td>
<td>25.8%</td>
<td>17.7%</td>
</tr>
<tr>
<td class="firstcol">base Month of Calc</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Oct-08</td>
<td>Sep-08</td>
</tr>
</tbody>
</table>
 U.S. Factory Inventory
Decumulation Rate Still Strong 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 03, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103e.jpg" align="left" border="0" height="265" width="353">
Factory inventories continued lower during September as the
stage continued to be set for a firm rebound in manufacturing activity.
Of course that rebound is dependant on whether demand improves, and
there are tentative indications that it is. Factory inventories fell
1.0% during September, about as they did during the prior four months.
Despite the strength of these declines, the 4.6% decline during the
period is a clear moderation from the 6.5% rate during the five months
through April.
The moderation in inventory decumulation rates continues
spotty amongst various industries. Inventories of electrical equipment
&amp; appliances have fallen at a reduced 6.6% rate during the
period but decumulation of machinery inventories continued firm at a
7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate
of decumulation of primary metals inventories also slowed as did cuts
of motor vehicle &amp; parts inventories. Inventory reductions of
computers &amp; electronic products continued firm but it may have
bottomed.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103f.jpg" align="right" border="0" height="265" width="353">
Factory shipments have started to rise moderately. On a
three-month basis they're up at a 3.5% rate after the 40% plus rates of
decline last Winter. Shipments of primary metals have firmed to a 52.5%
growth rate over the last three months and computers &amp;
electronics shipments rose at a 4.7% rate. Shipments of transportation
equipment rose at a 25.1% rate led by a surge in shipments of
nondefense aircraft &amp; parts. Shipments of basic chemicals also
turned up as did shipments from textile mills. The shipments
improvement has caused unfilled orders to fall at a much-reduced 3.9%
rate through September.
Overall, the reduction of inventories in the factory sector
has succeeded in lowering the inventory-to-sales ratio. The decline to
1.36 was to its lowest level since October of last year and down from
the recent peak of 1.46.
Finally, new orders have improved. The 0.9% increase during
September raised orders at a 6.0% rate during the last three months. It
reflected improvement in orders for transportation equipment,
machinery, primary metals and electrical equipment.
The Manufacturers' Shipments, Inventories and Orders (MSIO)
data is available in Haver's USECON database.

<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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM" style="color: rgb(255, 255, 255);">Factory Survey</a>
(NAICS, %)</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">Inventories</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-14.1</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.9</td>
<td>-0.8</td>
<td>-17.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.8</td>
<td>0.3</td>
<td>-15.7</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.8</td>
<td>-0.2</td>
<td>-15.9</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.1</td>
<td>-0.1</td>
<td>-16.5</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-11.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>0.5</td>
<td>-0.1</td>
<td>-14.2</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
 Brazil's Industrial Production
Points To Good Third Quarter Growth In GDP 
by <a href="/comment/Curley.html">Louise
Curley</a> November 3, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103g.jpg" align="left" border="0" height="265" width="353">
Brazilian industrial production increased 0.75% to 119.2
(2002=100) in September from 118.3 in August, a little short of
expectations, but still on the upward trend that began in January. The
three major marketing groups--capital goods, intermediate goods and
consumer goods--have all recovered from their falls in December as can
be seen in the first chart. The decline in capital goods was especially
severe and the recovery equally sharp.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103h.jpg" align="right" border="0" height="265" width="353">
Industrial production is a good proxy for Brazilian GDP.
Brazil reports real GDP on an index basis with 1995=100. We rebased the
Industrial production index to 1995=100 and aggregated the monthly
figures to quarterly. The second chart compares this index with the
index of real GDP. The correlation between the two series is strong at
.97. In the third quarter, industrial production increased 4.1%. A 3.9%
increase in industrial production was associated with a 1.9% increase
in real GDP. If the relationship between industrial production and real
GDP holds, Brazil's real GDP should show another roughly 2% rise in GDP
in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp;09</th>
<th scope="col">Sep 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production&nbsp;
(2002=100) as reported</td>
<td>109.2</td>
<td>118.3</td>
<td>129.7</td>
<td>0.75</td>
<td>-8.1</td>
<td>125.3</td>
<td>121.8</td>
<td>115.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>136.2</td>
<td>135.2</td>
<td>148.3</td>
<td>0.75</td>
<td>-8.1</td>
<td>143.2</td>
<td>139.2</td>
<td>131.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 09</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08</td>
<td>Q2 08</td>
<td>Q1 08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real GDP (1995=100)</td>
<td>&nbsp;</td>
<td>145.3</td>
<td>142.7</td>
<td>146.0</td>
<td>149.0</td>
<td>147.1</td>
<td>144.9</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>135.1</td>
<td>129.8</td>
<td>124.9</td>
<td>133.8</td>
<td>148.2</td>
<td>146.3</td>
<td>144.7</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Construction SpendingIncreases Moderately But Residential Recovery Firms

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.

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**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.

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**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.

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**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.

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**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.

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**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.

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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

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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.

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**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.