Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020c.jpg" width="353">
Industrial orders for Italy and France show strong signs of having shaken off the worst of the recession as each of them has rebounded sharply into 2009. But in August their paths have diverged. France continues to show signs of progress in leaps and bounds as orders are up by 7.9% m/m and are falling at an annual pace of just 11.6% over 6-months. By comparison Italy&#146;s orders have plunged by 8.6% m/m in August and are declining at an annual rate of 18.8% over six months- and are worse over three months. 
France reports increases in foreign orders and a larger gain in orders overall as it domestic orders are surging. In Italy both foreign and domestic orders are dropping: at -12.8% pace of decline; Italy&#146;s foreign order drop is twice as large as its domestic drop in August. This decline is consistent with a drop-off in foreign orders first reported by Germany in July but German foreign orders snapped back in August. Maybe this foreign order weakness in Italy will prove to be temporary. But Italy still has two months in a row of dropping domestic orders it must deal with. This weakness, unfortunately, does not look like a fluke. 
The starkest contrast may be over three months where French orders are rising at a 43% annual rate compared to Italy where overall orders are off at a 19% annual rate led by a collapse in domestic orders that are dropping at a 25.6% annual rate. 
Divergences like this will create problems for policy in the e-zone. There is only one exchange rate and one monetary policy for all of the e-zone. The French and Italian economies, two of the larger EMU economies, are not on compatible paths. If this continues it could make for some real difficulties in policymaking. For sure the split- if it continues - will put a stop to the rise in the euro. Italy &#150;despite having some special problems - is too-big of an economy to be ignored by markets or by the ECB.
Italy has recently surprised us with a sharp rise in consumer sentiment but this was reported even as industrial sentiment was still eroding. The weak industrial order result gives the drop off in the assessment of Italian businesses more credence. Clearly Italy is an economy with challenges and those problems could spillover into the e-Zone.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Italy Orders
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3">Saar exept m/mAug-</td>
<td> 09</td>
<td> Jul-09</td>
<td> Jun-09</td>
<td> 3-mo6-mo12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-8.6%</td>
<td>2.1%</td>
<td>1.6%</td>
<td>-19.0%</td>
<td>-18.8%</td>
<td>-29.8%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-12.8%</td>
<td>12.8%</td>
<td>0.4%</td>
<td>-5.0%</td>
<td>-20.9%</td>
<td>-29.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-6.1%</td>
<td>-3.2%</td>
<td>2.2%</td>
<td>-25.6%</td>
<td>-17.6%</td>
<td>-29.9%</td>
</tr>
<tr>
<td class="firstcol"> Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Sales</td>
<td>-1.4%</td>
<td>0.7%</td>
<td>-1.7%</td>
<td>-9.5%</td>
<td>-7.8%</td>
<td>-21.7%</td>
</tr>
<tr class="odd">
<td colspan="7"> French Orders</td>
</tr>
<tr class="odd">
<td colspan="3">Saar exept m/mAug-</td>
<td> 09</td>
<td> Jul-09</td>
<td> Jun-09</td>
<td> 3-mo6-mo12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>7.9%</td>
<td>3.8%</td>
<td>-2.3%</td>
<td>43.7%</td>
<td>-11.6%</td>
<td>-21.3%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>0.8%</td>
<td>13.8%</td>
<td>-3.2%</td>
<td>52.0%</td>
<td>35.8%</td>
<td>-14.4%</td>
</tr>
<tr>
<td class="firstcol">IP xConstruct</td>
<td>1.9%</td>
<td>0.8%</td>
<td>0.5%</td>
<td>13.7%</td>
<td>8.6%</td>
<td>-11.5%</td>
</tr>
</tbody>
</table>
</body>
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Industrial orders for Italy and France show strong signs of having shaken off the worst of the recession as each of them has rebounded sharply into 2009. But in August their paths have diverged. France continues to show signs of [...]

e-Schism! Italy and France Orders Show Signs of Past Progress, then Italy Backtracks

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020g.jpg" width="353">
The pump price for regular gasoline increased last week to $2.57 per gallon and the gain reversed most of the decline since early last month. Moreover, prices remain up from the December low of $1.61. In addition, prices recently moved even higher and the wholesale gasoline price broached the $2.00 level for the first time since early-August. This level is nearly the highest in one year. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
The crude oil market certainly has firmed and light sweet crude prices (WTI) rose to $75.74 per barrel last week, up from the December low of $32.37. Yesterday, the spot market price for light sweet crude oil rose even further to $79.61 per barrel.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020h.jpg" width="353">
Behind the increase in energy prices is an increase in the demand for gasoline. Last week, it posted a 4.0% rise versus one year ago. The gain was the strongest since the fall of 2006. Demand for residual fuel oil also increased 12.6% y/y while distillate demand halved its recent decline to 11.3% y/y. Finally, oil remains plentiful as evidenced by a 13.0% y/y rise in inventories of crude oil &amp; petroleum products. The gain in inventories of gasoline has eased sharply, however, to 7.9% versus last year. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Natural gas prices increased again last week, ahead of the winter heating season, to an average of $3.63 per mmbtu (-45.8% y/y) but they remained down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu. Yesterday prices increased further to $4.00/mmbtu.

<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">10/19/09</th>
<th scope="col">10/12/09</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>2.57</td>
<td>2.49</td>
<td>-11.7%</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>75.74</td>
<td>70.86</td>
<td>0.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
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The pump price for regular gasoline increased last week to $2.57 per gallon and the gain reversed most of the decline since early last month. Moreover, prices remain up from the December low of $1.61. In addition, prices recently [...]

Weekly Gasoline Prices Increase With Stronger Crude Oil Prices

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020e.jpg" align="right" border="0" height="265" width="353">Pricing
power virtually evaporated last month with across-the-board declines in
goods prices. The PPI for finished goods fell 0.6%. It was the second
decline in the last three months and left prices down 4.7% from the
year-ago level. The decline compared to the Consensus expectation for
no change. Moreover, it was broad-based and included lower food
&amp; energy prices as well as the third decline in core prices in
the last five months. The 0.1% decline in the PPI less food &amp;
energy contrasted with expectations for a 0.1% increase and it pulled
the y/y change to 1.8%, the weakest since May 2007.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020d.jpg" align="right" border="0" height="265" width="353">Lower
finished energy prices led the decline in last month's PPI with a 2.4%
drop (-22.2% y/y). Though the decline has been partially reversed here
in October, last month it reflected a 5.4% fall in gasoline prices
(-37.5% y/y). Natural gas prices also fell by 1.9% (-24.5% y/y) and
fuel oil prices fell 24.1% (-40.5% y/y).
The PPI for finished consumer
goods less food &amp; energy slipped 0.1% but gained 2.2% y/y. That
was the weakest annual increase since June 2007. Finished durables
prices slipped 0.2% (+2.0% y/y) and prices of core finished consumer
nondurable goods slipped for the fourth month in the last six. The 2.3%
y/y increase was down from 5.9% as of last November. Capital equipment
prices also reflected economic weakness and slipped 0.1%. That pulled
the y/y increase down to 1.4% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020f.jpg" align="right" border="0" height="265" width="353">Prices for intermediate goods inched 0.2%
higher, paced by a firm 0.9%
increase in core prices. They were led by a 1.3% (-11.3% y/y) increase
in prices for materials for manufacturing. Intermediate food prices
fell 0.5% (-12.9% y/y) and energy prices also slipped 2.1% (-24.2%
y/y).
 The crude materials PPI fell 2.1%
and was led lower by a 5.4% decline (-42.6% y/y) in&nbsp; crude
energy prices. In contrast, core prices showed strength and increased
for the sixth straight month.
The producer price data is available in
Haver's USECON database. More detailed data is in
the PPI and in the PPIR
databases.&nbsp;
<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/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.6</td>
<td>1.7</td>
<td>-4.7</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.1</td>
<td>0.2</td>
<td>1.8</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.2</td>
<td>1.8</td>
<td>-11.6</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.9</td>
<td>0.6</td>
<td>-7.5</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.1</td>
<td>3.8</td>
<td>-31.5</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.6</td>
<td>6.0</td>
<td>&nbsp;-19.6</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>

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Pricing power virtually evaporated last month with across-the-board declines in goods prices. The PPI for finished goods fell 0.6%. It was the second decline in the last three months and left prices down 4.7% from the year-ago level. [...]

U.S. PPI Declines With Lower Energy, Food And Core Prices

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020c.jpg" align="left" border="0" height="265" width="353">
The steep declines in new orders in France and Italy that the
recession exacted are beginning to show some signs of leveling out. New
orders in France and Italy on a three-month moving average basis that
smoothes out some of the month- to- month variation are shown in the
first chart. The turnaround in France appears stronger than that in
Italy. The index of French new orders in Manufacturing actually
increased 3.0% in August from 87.0 (2005=100) to 89.6 but it was still
13.8% below the year ago level. At the same time, the index of Italian
new orders actually declined 8.6% from 88.8 to 81.2 and was 29.8% below
the year ago level.
In general, the index of new orders in Italy has been higher
than that of France; and, in spite of France's better performance
relative to Italy's in August, the index of Italian new orders so far
this year has exceeded that of France. The average level of the index
of new orders over the period January through August was 87.3 for Italy
and 84.6 for France. It should be noted that comparisons of indexes
between countries say nothing about actual levels in the two countries;
they merely indicate that, currently, new orders in Italy compared to
their level in 2005 are higher than the corresponding measures in
France.
Foreign orders accounted for the big decline in the actual
index of Italian orders in August. Foreign orders dropped 12.8% from
96.8 in July to 84.4 in August. In France new foreign orders actually
increased 0.7% from 86.4 in July to 87.0 in August. However, on a three
month average basis, which is shown in the second chart, the July
increase in Italy's foreign orders has been followed by relative
stability in August. In France, the upward trend started in May and has
continued through August.

<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">Year to Date Avg</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Aug 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y&amp;&nbsp;</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"> Total New Orders</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>87.1</td>
<td>81.2</td>
<td>88.8</td>
<td>115.7</td>
<td>-8.56</td>
<td>-29.82</td>
<td>115.8</td>
<td>121.4</td>
<td>114.1</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>84.6</td>
<td>89.6</td>
<td>87.0</td>
<td>103.9</td>
<td>2.99</td>
<td>-13.76</td>
<td>104.0</td>
<td>111.4</td>
<td>103.6</td>
</tr>
<tr>
<td class="firstcol" colspan="10">Foreign New Orders</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>71.4</td>
<td>84.4</td>
<td>96.8</td>
<td>120.1</td>
<td>-12.81</td>
<td>-29.73</td>
<td>121.8</td>
<td>131.3</td>
<td>117.8</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>64.0</td>
<td>87.0</td>
<td>86.4</td>
<td>101.7</td>
<td>-.69</td>
<td>-14.45</td>
<td>104.6</td>
<td>115.8</td>
<td>106.6</td>
</tr>
</tbody>
</table>
</body></html>

The steep declines in new orders in France and Italy that the recession exacted are beginning to show some signs of leveling out. New orders in France and Italy on a three-month moving average basis that smoothes out some of the [...]

Manufacturing New Orders in France and Italy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020a.jpg" width="353">
Continuing to show a loss of forward momentum was the housing sector. Housing starts ticked up slightly last month to 590,000 (AR) units versus 587,000 during August which was revised down slightly. The latest level, however, showed no growth from June. In addition, September&#39;s figure fell short of Consensus expectations for 610,000 starts.
The loss of momentum owes to weakness in the multi-family sector where starts fell 15.2% m/m during September. That decline reversed roughly all of the August increase and left multi-family starts near the postwar low. Starts of apartments, condominiums &amp; town houses remained down by roughly two-thirds from the 2006 peak.
Starts of single-family homes have shown more life recently. Single-family starts rose 3.9% last month to 501,000 units (AR) and reversed most of an August decline. They are now 40% above the low of this past winter. During the last ten years, there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.
By region, starts of single-family units last month were mixed. Single-family starts in the Northeast rose 13.0% to nearly their highest level since October (-8.8% y/y) while starts in the South also rose 14.3% (-5.9% y/y) to their highest level since last September. In the Midwest, starts posted a 5.7% (-4.6% y/y) decline after a dip during August and starts in the West fell 14.4% (-18.8% y/y) to their lowest level since May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020b.jpg" width="353">
Building permits fell 1.2% and gave back much of their increase during August. Permits remained just above their record low and were down by roughly one-half from last May. As with starts, permits to build a single-family home have been relatively strong, despite a moderate 3.0% decline during September. A leading indicator of starts, permits are one-third higher than their winter low.
The housing starts figures can be found 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">Housing Starts (000s, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>590</td>
<td>587</td>
<td>-28.2%</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>501</td>
<td>482</td>
<td>-8.7</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>89</td>
<td>105</td>
<td>-67.4</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>573</td>
<td>580</td>
<td>-28.9</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>
</body>
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Continuing to show a loss of forward momentum was the housing sector. Housing starts ticked up slightly last month to 590,000 (AR) units versus 587,000 during August which was revised down slightly. The latest level, however, showed [...]

U.S. Housing Starts Inch Higher During September But Are Flat Over Last Four Months

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020a.jpg" align="left" border="0" height="265" width="353">
Continuing to show a loss of forward momentum was the housing
sector. Housing starts ticked up slightly last month to 590,000 (AR)
units versus 587,000 during August which was revised down slightly. The
latest level, however, showed no growth from June. In addition,
September's figure fell short of Consensus expectations for 610,000
starts.
The loss of momentum owes to weakness in the multi-family
sector where starts fell 15.2% m/m during September. That decline
reversed roughly all of the August increase and left multi-family
starts near the postwar low. Starts of apartments, condominiums
&amp; town houses remained down by roughly two-thirds from the 2006
peak.
Starts of single-family homes have shown more life recently.
Single-family starts rose 3.9% last month to 501,000 units (AR) and
reversed most of an August decline. They are now 40% above the low of
this past winter. During the last ten years, there has been an 84%
correlation between the q/q change in single-family starts and their
contribution to quarterly GDP growth.
By region, starts of single-family units last month were
mixed. Single-family starts in the Northeast rose 13.0% to nearly their
highest level since October (-8.8% y/y) while starts in the South also
rose 14.3% (-5.9% y/y) to their highest level since last September. In
the Midwest, starts posted a 5.7% (-4.6% y/y) decline after a dip
during August and starts in the West fell 14.4% (-18.8% y/y) to their
lowest level since May. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020b.jpg" align="right" border="0" height="265" width="353">
Building permits fell 1.2% and gave back much of their
increase during August. Permits remained just above their record low
and were down by roughly one-half from last May. As with starts,
permits to build a single-family home have been relatively strong,
despite a moderate 3.0% decline during September. A leading
indicator of starts, permits are one-third higher than their winter low.
The housing starts figures can be found 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">Housing
Starts (000s, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>590</td>
<td>587</td>
<td>-28.2%</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>501</td>
<td>482</td>
<td>-8.7</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>89</td>
<td>105</td>
<td>-67.4</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>573</td>
<td>580</td>
<td>-28.9</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>
 Manufacturing New Orders in France
and Italy 
by <a href="/comment/Curley.html">Louise
Curley</a> October 20, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020c.jpg" align="left" border="0" height="265" width="353">
The steep declines in new orders in France and Italy that the
recession exacted are beginning to show some signs of leveling out. New
orders in France and Italy on a three-month moving average basis that
smoothes out some of the month- to- month variation are shown in the
first chart. The turnaround in France appears stronger than that in
Italy. The index of French new orders in Manufacturing actually
increased 3.0% in August from 87.0 (2005=100) to 89.6 but it was still
13.8% below the year ago level. At the same time, the index of Italian
new orders actually declined 8.6% from 88.8 to 81.2 and was 29.8% below
the year ago level.
In general, the index of new orders in Italy has been higher
than that of France; and, in spite of France's better performance
relative to Italy's in August, the index of Italian new orders so far
this year has exceeded that of France. The average level of the index
of new orders over the period January through August was 87.3 for Italy
and 84.6 for France. It should be noted that comparisons of indexes
between countries say nothing about actual levels in the two countries;
they merely indicate that, currently, new orders in Italy compared to
their level in 2005 are higher than the corresponding measures in
France.
Foreign orders accounted for the big decline in the actual
index of Italian orders in August. Foreign orders dropped 12.8% from
96.8 in July to 84.4 in August. In France new foreign orders actually
increased 0.7% from 86.4 in July to 87.0 in August. However, on a three
month average basis, which is shown in the second chart, the July
increase in Italy's foreign orders has been followed by relative
stability in August. In France, the upward trend started in May and has
continued through August.

<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">Year to Date Avg</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Aug 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y&amp;&nbsp;</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"> Total New Orders</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>87.1</td>
<td>81.2</td>
<td>88.8</td>
<td>115.7</td>
<td>-8.56</td>
<td>-29.82</td>
<td>115.8</td>
<td>121.4</td>
<td>114.1</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>84.6</td>
<td>89.6</td>
<td>87.0</td>
<td>103.9</td>
<td>2.99</td>
<td>-13.76</td>
<td>104.0</td>
<td>111.4</td>
<td>103.6</td>
</tr>
<tr>
<td class="firstcol" colspan="10">Foreign
New Orders</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>71.4</td>
<td>84.4</td>
<td>96.8</td>
<td>120.1</td>
<td>-12.81</td>
<td>-29.73</td>
<td>121.8</td>
<td>131.3</td>
<td>117.8</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>64.0</td>
<td>87.0</td>
<td>86.4</td>
<td>101.7</td>
<td>-.69</td>
<td>-14.45</td>
<td>104.6</td>
<td>115.8</td>
<td>106.6</td>
</tr>
</tbody>
</table>
 U.S. PPI Declines With Lower
Energy, Food And Core Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 20, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020e.jpg" align="right" border="0" height="265" width="353">Pricing
power virtually evaporated last month with across-the-board declines in
goods prices. The PPI for finished goods fell 0.6%. It was the second
decline in the last three months and left prices down 4.7% from the
year-ago level. The decline compared to the Consensus expectation for
no change. Moreover, it was broad-based and included lower food
&amp; energy prices as well as the third decline in core prices in
the last five months. The 0.1% decline in the PPI less food &amp;
energy contrasted with expectations for a 0.1% increase and it pulled
the y/y change to 1.8%, the weakest since May 2007.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020d.jpg" align="right" border="0" height="265" width="353">Lower
finished energy prices led the decline in last month's PPI with a 2.4%
drop (-22.2% y/y). Though the decline has been partially reversed here
in October, last month it reflected a 5.4% fall in gasoline prices
(-37.5% y/y). Natural gas prices also fell by 1.9% (-24.5% y/y) and
fuel oil prices fell 24.1% (-40.5% y/y).
The PPI for finished consumer
goods less food &amp; energy slipped 0.1% but gained 2.2% y/y. That
was the weakest annual increase since June 2007. Finished durables
prices slipped 0.2% (+2.0% y/y) and prices of core finished consumer
nondurable goods slipped for the fourth month in the last six. The 2.3%
y/y increase was down from 5.9% as of last November. Capital equipment
prices also reflected economic weakness and slipped 0.1%. That pulled
the y/y increase down to 1.4% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020f.jpg" align="right" border="0" height="265" width="353">Prices for
intermediate goods inched 0.2%
higher, paced by a firm 0.9%
increase in core prices. They were led by a 1.3% (-11.3% y/y) increase
in prices for materials for manufacturing. Intermediate food prices
fell 0.5% (-12.9% y/y) and energy prices also slipped 2.1% (-24.2%
y/y).
 The crude materials PPI fell 2.1%
and was led lower by a 5.4% decline (-42.6% y/y) in&nbsp; crude
energy prices. In contrast, core prices showed strength and increased
for the sixth straight month.
The producer price data is available in
Haver's USECON database. More detailed data is in
the PPI and in the PPIR
databases.&nbsp;
<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/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.6</td>
<td>1.7</td>
<td>-4.7</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.1</td>
<td>0.2</td>
<td>1.8</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.2</td>
<td>1.8</td>
<td>-11.6</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.9</td>
<td>0.6</td>
<td>-7.5</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.1</td>
<td>3.8</td>
<td>-31.5</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.6</td>
<td>6.0</td>
<td>&nbsp;-19.6</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>
 Weekly Gasoline Prices Increase
With Stronger Crude Oil Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 20, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020g.jpg" align="left" border="0" height="265" width="353">
The pump price for regular gasoline increased
last week to $2.57 per gallon and the gain reversed most of the decline
since early last month. Moreover, prices remain up from the December
low of $1.61. In addition, prices recently moved even higher and the
wholesale gasoline price broached the $2.00 level for the first time
since early-August. This level is nearly the highest in one year. The
figures are reported by the U.S. Department of Energy and can be found
in Haver's WEEKLY &amp; DAILY databases.
The crude oil market certainly has firmed
and light sweet crude prices (WTI) rose to $75.74 per barrel last week,
up from the December low of $32.37. Yesterday, the spot market price
for light sweet crude oil rose even further to $79.61 per barrel.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020h.jpg" align="right" border="0" height="265" width="353">
Behind the increase in energy prices is an increase in the
demand for gasoline. Last week, it posted a 4.0% rise versus one year
ago. The gain was the strongest since the fall of 2006. Demand for
residual fuel oil also increased 12.6% y/y while distillate demand
halved its recent decline to 11.3% y/y. Finally, oil remains plentiful
as evidenced by a 13.0% y/y rise in inventories of crude oil &amp;
petroleum products. The gain in inventories of gasoline has eased
sharply, however, to 7.9% versus last year. The figures on crude oil
production and inventories are available in Haver's OILWKLY database.
Natural gas prices increased again last week, ahead of the
winter heating season, to an average of $3.63 per mmbtu (-45.8% y/y)
but they remained down by three-quarters from the high reached in
early-July of last year of $13.19/mmbtu. Yesterday prices increased
further to $4.00/mmbtu.

<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">10/19/09</th>
<th scope="col">10/12/09</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>2.57</td>
<td>2.49</td>
<td>-11.7%</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>75.74</td>
<td>70.86</td>
<td>0.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>

</body></html>

U.S. Housing Starts Inch HigherDuring September But Are Flat Over Last Four Months

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019i.jpg" align="left" border="0" height="265" width="353">
Housing continues to turn the corner toward recovery, but of
late that recovery stuttered. The National Association of Home Builders
reported that its October Composite Housing Market Index fell to 18
from 19 in September. Though the index remained double the low of 8
this past January, it's rate of improvement has slowed since the
Spring. The index is compiled from survey questions asking builders to
rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to
&#8220;very low&#8221;. The figure is a diffusion index,
therefore, numerical results over 50 indicate a predominance of &#8220;good&#8221;
readings.
The sub-index of sales during the next six months fell to 27
which was the lowest level since August. The present sales index also
fell to 17 which equaled the 3Q average. Much of easing in the October
composite index was due to a sharp decline in the West (+27.3% y/y). In
the Midwest (+30.5% y/y) and in the South (+12.5% y/y) the index fell
slightly while in the Northeast (+56.3% y/y) there was a continued gain.
The Home Builders' Association also reported that traffic of
prospective buyers slipped during October after firm gains this past
Spring and Summer.
The Home Builders' Housing Opportunity Index, which is the
share of homes sold that could be considered affordable to a family
earning the median income, fell slightly in the second quarter. It had
jumped earlier to a record high of 72.5% buoyed by lower home prices,
lower interest rates and higher income. (There is a break in the series
from 2002 to 2003.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019j.jpg" align="right" border="0" height="265" width="353">
The NAHB has compiled the Housing Market Index
since 1985. The weights assigned to the
individual index components are .5920 for single family detached sales,
present time; .1358 for single family detached sales, next six months;
and .2722 for traffic of prospective buyers. The results, along with
other housing and remodeling indexes from NAHB Economics, are included
in Haver&#8217;s SURVEYS database.
Asia and the Global Financial Crisis is
today's speech by Fed Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20091019a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">&nbsp;October '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>18</td>
<td>19</td>
<td>14</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>17</td>
<td>18</td>
<td>14</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>27</td>
<td>29</td>
<td>19</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>14</td>
<td>17</td>
<td>11</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</tbody>
</table>
</body></html>

Housing continues to turn the corner toward recovery, but of late that recovery stuttered. The National Association of Home Builders reported that its October Composite Housing Market Index fell to 18 from 19 in September. Though the [...]

U.S. Home Builders' Index Recovery Stuttering This Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019h.jpg" align="right" border="0" height="265" width="353">
While
purchasing power parity (PPP) is not a major factor in determining a
country's actual exchange rate, it can be used as a rough guide in
deciding whether a particular currency is under or over
valued.&nbsp;&nbsp; Most developing countries with growing
current account balances, have preferred to pile up foreign exchange
reserves rather than let their currencies appreciate.&nbsp;
Meanwhile, the purchasing power parity of their currencies has
generally increased slowly and steadily as their economies have
prospered. As a result their currencies have continued to be
undervalued.
 Data on the purchasing power parity of currencies can be
derived from data in the Haver data base, The World
Development Indicators.&nbsp;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019f.jpg" align="right" border="0" height="265" width="353">
The data are annual so the
latest data point is 2008.&nbsp; PPP conversion factors for the
world countries are included in the section "Exchange Rates and
Prices".&nbsp; We&nbsp; chose four countries as examples:
China, Korea, Singapore and Brazil and the PPP Conversion
Factor (GDP) to market exchange rate ratio.
The conversion
factor is the ratio of PPP exchange rate to the actual exchange rate.
One minus the conversion factor, therefore is the percentage of under
or over valuation of the particular exchange rate relative to the
dollar.&nbsp; Thus for Korea,&nbsp; the conversion factor of
.684 in 2008 means that the Korea's actual exchange rate was 31.6%
undervalued relative to the dollar.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019g.jpg" align="right" border="0" height="265" width="353">
Since the actual exchange
rate is 1102.09 Won/$, a conversion factor of .684 means that the PPP
exchange rate is 753.98 Won/$ (.684 * 1102.09).&nbsp; The actual
exchange rates, the PPP exchange rates and the percent of
undervaluation of the currencies of the four countries are shown in the
table below.· Brazil has allowed its currency to appreciate
considerably.&nbsp; From an undervaluation of 61.9 in 2002, the
Rial was only 18.4% undervalued in 2008, as shown in the first
chart.&nbsp; By contrast, China has permitted only moderate
appreciation of the yuan as shown in the same chart. The Singapore
dollar has steadily reduced its undervaluation as can be seen in the
second chart.&nbsp; Korea, on the other hand experienced a sharp
increase in its undervaluation in 2008, also shown in the second
chart.
 The third chart brings up to date the actual exchange
rates of the four countries.&nbsp; They have, to varying degrees,
appreciated in 2009.&nbsp; Again, the Chinese Yuan has appreciated
the least and the Brazilian Real, the most. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">2002 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Actual exchange rate
(Yuan/$)</td>
<td>6.95</td>
<td>7.61</td>
<td>7.97</td>
<td>8.19</td>
<td>8.28</td>
<td>8.28</td>
<td>8.28</td>
</tr>
<tr>
<td class="firstcol">PPP exchange rate</td>
<td>3.39</td>
<td>3.38</td>
<td>3.46</td>
<td>3.45</td>
<td>3.43</td>
<td>3.29</td>
<td>3.28</td>
</tr>
<tr>
<td class="firstcol">Undervaluation (%)
(1-Conversion factor)</td>
<td>51.1</td>
<td>55.5</td>
<td>56.6</td>
<td>57.9</td>
<td>58.6</td>
<td>60.1</td>
<td>60.3</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Korea</td>
</tr>
<tr>
<td class="firstcol">Actual exchange rate (Won/$)</td>
<td>1102.1</td>
<td>929.3</td>
<td>954.8</td>
<td>1024.1</td>
<td>1145.3</td>
<td>1191.1</td>
<td>1251.1</td>
</tr>
<tr>
<td class="firstcol">PPP exchange rate</td>
<td>754.0</td>
<td>747.9</td>
<td>760.7</td>
<td>788.9</td>
<td>794.3</td>
<td>795.7</td>
<td>769.8</td>
</tr>
<tr>
<td class="firstcol">Undervaluation (%)
(1-Conversion factor)</td>
<td>31.5</td>
<td>19.3</td>
<td>20.3</td>
<td>23.0</td>
<td>30.7</td>
<td>32.2</td>
<td>38.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Singapore</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Actual exchange rate
(S$/US$)</td>
<td>1.41</td>
<td>1.51</td>
<td>1.59</td>
<td>1.66</td>
<td>1.69</td>
<td>1.74</td>
<td>1.79</td>
</tr>
<tr>
<td class="firstcol">PPP exchange rate</td>
<td>1.08</td>
<td>1.09</td>
<td>1.06</td>
<td>1.08</td>
<td>1.10</td>
<td>1.09</td>
<td>1.12</td>
</tr>
<tr>
<td class="firstcol">Undervaluation (%)
(1-Conversion factor)</td>
<td>&nbsp;23.7</td>
<td>27.7</td>
<td>33.3</td>
<td>35.7</td>
<td>34.9</td>
<td>37.6</td>
<td>37.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Brazil</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Actual exchange rate
(Rial/$)</td>
<td>1.83</td>
<td>1.94</td>
<td>2.18</td>
<td>2.43</td>
<td>2.93</td>
<td>3.08</td>
<td>2.93</td>
</tr>
<tr>
<td class="firstcol">PPP exchange rate</td>
<td>1.50</td>
<td>1.41</td>
<td>1.40</td>
<td>1.36</td>
<td>1.31</td>
<td>1.22</td>
<td>1.11</td>
</tr>
<tr>
<td class="firstcol">Undervaluation (%)
(1Conversion
factor)</td>
<td>&nbsp;18.4</td>
<td>27.6</td>
<td>35.8</td>
<td>44.2</td>
<td>55.3</td>
<td>57.6</td>
<td>61.9</td>
</tr>
</tbody>
</table>






</body></html>

While purchasing power parity (PPP) is not a major factor in determining a country's actual exchange rate, it can be used as a rough guide in deciding whether a particular currency is under or over valued. Most developing countries [...]

Actual Exchange Rates in the Developing World and Purchasing Power Parity

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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Winnie Tapasanun

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New single-family home sales dipped 0.1% m/m (+18.7% y/y) to a seasonally adjusted annual rate of 737,000 units in October following rises of 3.8% to 738,000 in September and 11.3% to 711,000 in August (+20.5%, 800,000 previously), data from the U.S. Census Bureau showed. The Action Economics Forecast Survey had expected sales of 710,000 for October. The October figure was the first m/m decline since July, though sales remained 42.0% up from the July 2022 low of 519,000. The sales dip occurred alongside a drop in the average 30-year fixed mortgage rate to 6.25% in October, the lowest since September 2024, after declining to 6.35% in September; it had subsequently continued trending downward, according to Freddie Mac.

By region, October new home sales fell m/m in all major regions except the South. Sales in the West plunged 36.3% (-24.8% y/y) to 109,000 in October, the lowest level since July 2022, after a 9.6% increase in September. Sales in the Northeast dropped 14.3% (-40.0% y/y) to 24,000 after holding steady at 28,000 in September and August. Sales in the Midwest fell 9.0% (+21.3% y/y) to 91,000 following a strong 25.0% September gain. For these three regions, October marked the first m/m decline since July. In contrast, sales in the South surged 16.9% (42.1% y/y) to 513,000, the highest level since March 2021, after a 1.8% September decline. The South remained the dominant region, accounting for 69.6% of total U.S. new home sales.

The median sales price of a new home fell 3.3% (-8.0% y/y) to $392,300 in October on top of a 3.4% decline to $405,800 in September, marking the fourth m/m fall in five months and the lowest level since July 2021. The median sales price had fallen 14.8% since its record high of $460,300 in October 2022. Meanwhile, the average sales price of a new home rose 3.0% (-4.6% y/y) to $498,000 in October after an 8.1% drop to $483,500. The average price was 8.0% below a high of $541,200 in July 2022. These sales price data are not seasonally adjusted.

The number of unsold new homes on the market held steady at 488,000 (+1.7% y/y) in October after four straight m/m declines. The latest figure was 14.6% above a low of 426,000 in July 2023. The seasonally adjusted months' supply of new homes for sale remained at 7.9 months in October and September—the lowest reading since September 2024—after falling to 8.3 months in August. The latest reading, while above a low of 6.9 months in May 2023, remained below a high of 10.6 months in July 2022.

The median number of months a new home stayed on the market rose to 2.7 months in October, the highest since March 2025, after registering at 2.4 months in September and August. The latest number was above its record low of 1.5 months in both September and October of 2022 but well below a peak of 5.1 months in March 2021. These figures date back to January 1975.

New home sales are recorded when the sales contract is signed. New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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- October sales -0.1% (+18.7% y/y) to 737,000; still 42.0% above the July ’22 low.
- Sales fall m/m in all major regions except the South (+16.9%).
- Median sales price down to $392,300, lowest since July ’21; avg. price up to $498,000.
- Months' supply of new homes for sale holds steady at 7.9 mths., lowest since Sept. '24.

U.S. New Home Sales Ease in October After Two Straight M/M Increases

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

260113E.jpg

Japan’s economy watchers index at year-end weakened slightly, but the future index strengthened slightly to counterbalance the drop-off. The December current index is weaker than it was in October as well, as is the headline for the future index. But the queue, or rank, standings of these indexes show the current index at a 60th percentile standing and a queue standing for the future index at its 70th percentile. Despite the end of year give back, the index headline readings are still, for the most part, firm-to-solid.

**The Current Index**
That is an assessment about the rankings of the December data compared to their respective histories back to end 2004- a twenty-year period. However, in terms of the diffusion values of the index per se, the current index has only two readings above the 50 mark indicating actual expansion. Expansion is the rule in current services industries and in nonmanufacturing, a broader sector dominated by services. Employment and readings for corporations overall both show readings close to neutral with diffusion at 49.2 or better, but still short of 50. Current retail at 46.5 is the weakest sector and shows the second weakest diffusion reading.  

The current index standings on employment has a reading below 50%- and that is despite having a diffusion reading near 50 -nearly  unchanged employment month-to-month. That diffusion reading for December is a low relative to its own history. The strongest two sectors on rankings are services and eating & drinking places with standings in the 70-percentile range. Apart from the weak employment standing, the weakest rankings are in the range of the lower sixty percentiles with only retailing lower, in its 56.5 percentile, manufacturing at its 61.7 percentile. 

**The Future Index**
The Future index has a slightly higher queue standing than the current index as noted above, but it is not vastly different. No future components rankings are below their 50%, but again, employment is weakest with a ranking in its 50th-percentile and with housing in its 53rd percentile. Nonmanufacturing and services have the highest queue standings.

In terms of diffusion readings as opposed to standings, the future index headline is above 50 unlike for the current headline. Six of nine observations in December have future readings in their respective 50.6 percentiles. The weakest future reading, housing, with a 46.2 reading, is followed by retailing and eating & drinking places, each at 49.6. But the above-50 readings ae not strong per-se either. The strongest is the services sector at 52.4, then nonmanufacturing at 51.7, followed by employment at 51.4 (and it has the weakest queue standing among future readings). Corporations have a diffusion reading at 50.9, households at 50.3, and manufacturers at 50.2. And that 50.2 reading for manufacturers has a 70.4 percentile standing.

Always remember that diffusion and the rank standings are different things and very different concepts even though they are both measured as percentages; they can be quite different. Various series have different histories and tendencies. Not too surprisingly the current and future diffusion readings are highly correlated (0.96) while the standings are not so well correlated in December between the current and future (0.37). The correlation I speak about above between diffusion and standing is at 0.20 for the current readings in December but is higher at 0.53 for the December future components.

260113.jpg

**Summing up**
The differences in the diffusion values tell us that retailing, households and employment are expected to pick up over the next six months. But housing is expected to weaken.

Japan is still in a fragile state with a relatively new PM still getting adjusted (but rumored to be considering an early snap-election). And with the economy generating excess inflation even with a shrinking population, addressing inflation in Japan is trickier since the Bank of Japan does not want to slay inflation at the cost of bringing back deflation. So, policy is Japan walks on eggshells.

Japan

Japan’s Economy Watchers Survey in December 2025

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.

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**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.

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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).

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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.