Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015i.jpg" align="right" border="0">
October
index of factory sector activity from the Philadelphia Federal Reserve
Bank indicated that activity in the region continued to grow this
month. The index slipped as expected to a positive 11.5 from 14.1 in
September and remained near its highest since mid-2007. The latest
level compared to figures near -40.0 this past fall and winter.During
the last ten years there has been a 77% correlation between the level
of the Philadelphia Fed Business Conditions Index and the three-month
growth in factory sector industrial production.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015j.jpg" align="right" border="0">
There has been a 70%
correlation with q/q growth in real GDP. The latest survey from the
Philadelphia Federal Reserve Bank can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos1009.pdf">here.</a>·
Amongst the components, new orders improved to 6.2 from 3.3 and the
latest figure was the highest since 2007. Also showing improvement was
the employment index. It rose to a still negative -6.8 but that
compared with a low of -52.0 during March. During the last ten years
there has been a 79% correlation between the index level and the m/m
change in manufacturing sector payrolls. The inventory component
reversed its earlier improvement and suggests that any turn towards
inventory accumulation will be modest. Improved pricing power
accompanied the gains in real activity. The prices paid index rose to
its highest level since last September and compares to negative
readings this past winter and spring. During the last ten years there
has been a 74% correlation between the prices paid index and the
three-month growth in the intermediate goods PPI.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015k.jpg" align="right" border="0">
There has been an 83%
correlation with the change in core intermediate goods prices.
Expected business conditions in six months fell this month. The October
index fell to a still-positive reading of 39.8 but that was down from
the recent high. Most of the index components fell except anticipated
capital expenditures.· The figures from the Philadelphia Federal
Reserve can be found in Haver's SURVEYS
database.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">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">General Activity Index</td>
<td>11.5</td>
<td>14.1</td>
<td>-38.7</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>6.2</td>
<td>3.3</td>
<td>-30.6</td>
<td>-14.7</td>
<td>6.9</td>
<td>9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Number of Employees</td>
<td>-6.8</td>
<td>-14.3</td>
<td>-19.2</td>
<td>-8.7</td>
<td>6.8</td>
<td>9.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>21.3</td>
<td>&nbsp;14.9</td>
<td>&nbsp;10.2</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body></html>

October index of factory sector activity from the Philadelphia Federal Reserve Bank indicated that activity in the region continued to grow this month. The index slipped as expected to a positive 11.5 from 14.1 in September and [...]

Philadelphia Fed Index Slips Yet Still Indicates Positive Growth

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015e.jpg" align="left" border="0" height="265" width="353">
The EMU HICP fell by 0.1% m/m in September. The 12-month pace
for headline inflation was -0.3%. The headline rate has not increased
Yr/Yr since April. Headline inflation is choppy at a low level. Core
inflation has been very steady at a 1.1% pace; it barely ticked up to
1.2% over three months in Sept. 
 
In EMU goods sector inflation has been falling under the influence of
weak oil prices aided by the impact of a rising euro exchange rate.
Services prices have been steady at 1.8% but over the recent three
months service sector inflation stepped down to a 1.3% pace. 
 
The headline inflation trend across selected large EMU nations shows
subdued rates. Spain and France show a hint of inflation acceleration
in their sequential growth rates. Spain&#8217;s 1.9% 3-month pace is the
highest in this group. 
 
Core inflation is both stable and low across the large EMU countries.
Italy alone shows some hint of acceleration with a core inflation pace
of 1.9% over three months up from what has generally been a 1.5% pace
for core inflation there. 
 
On balance inflation, inflation trends inflation dynamics and inflation
fundamentals appear to be very well contained in the zone. We see the
inflation readings and trends above. The dynamics do not show wages or
prices getting out of control across the economy. The fundamentals show
constrained money and credit growth, lots of economic slack, as well as
a rising exchange rate. There is little ground for the ECB to be
inflation wary. The increases in global commodity prices have been well
blunted by euro strength Vs the dollar. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Trends in HICP</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>-0.3%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>1.1%</td>
<td>1.1%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>0.5%</td>
<td>0.4%</td>
<td>-1.7%</td>
<td>-2.9%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>4.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>1.3%</td>
<td>1.8%</td>
<td>1.8%</td>
<td>2.6%</td>
</tr>
<tr>
<td colspan="8">&nbsp;</td>
</tr>
<tr>
<td colspan="8">HICP</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.3%</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>1.1%</td>
<td>0.7%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.4%</td>
<td>0.5%</td>
<td>-0.6%</td>
<td>1.1%</td>
<td>1.5%</td>
<td>0.4%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-0.3%</td>
<td>0.7%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>-1.0%</td>
<td>4.6%</td>
</tr>
<tr>
<td colspan="8">Core excl Food Energy and
Alcohol</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>0.1%</td>
<td>1.1%</td>
<td>1.3%</td>
<td>1.0%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.8%</td>
<td>1.0%</td>
<td>1.2%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.4%</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>1.5%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.7%</td>
<td>0.7%</td>
<td>0.3%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body></html>

The EMU HICP fell by 0.1% m/m in September. The 12-month pace for headline inflation was -0.3%. The headline rate has not increased Yr/Yr since April. Headline inflation is choppy at a low level. Core inflation has been very steady at [...]

EMU HICP Drops in September Core Rate Remains in Subdued Trend

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015f.jpg" align="right" border="0" height="265" width="353">
A recent
downtrend in initial claims for unemployment insurance continued last
week. They fell slightly and remained near their lowest level since
early-January. The Labor Department indicated that claims fell to
514,000 from an upwardly revised 524,000 during the prior week. Both
figures are down sharply from the peak reached in March of 674,000
claims. The latest figure was lower than Consensus expectations for
525,000 claims.The largest decreases in initial claims during the
week ending October 3 were in Florida (-5,178), California (-3,911),
Tennessee (-683), Illinois (-682), and Arkansas (-589) while the
largest increases in claims were in Pennsylvania (+3,618), Washington
(+1,857), Wisconsin (+1,629), Missouri (+1,441), and Texas (+1,291).
Continuing claims for unemployment insurance during the latest week
fell 75,000 to their lowest level since late-March.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015g.jpg" align="right" border="0" height="265" width="353">
The decline
continues to owe partially to the exhaustion of benefits. Continuing
claims provide an indication of workers' ability to find employment.
The four-week average of continuing claims fell modestly to 6,082,750.
This series dates back to 1966.&nbsp;·&nbsp;Extended benefits
for unemployment insurance rose sharply for the fifth consecutive week.
Through the end of last month, extended benefits averaged 471,031. The
insured rate of unemployment slipped to 4.5% and matched its lowest
since early-April. The rate reached a high of 5.2% during late-June.
During the last ten years, there has been a 93% correlation between the
level of the insured unemployment rate and the overall rate of
unemployment published by the Bureau of Labor Statistics.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015h.jpg" align="right" border="0" height="265" width="353">
The lowest rates were in North Dakota (1.0%), South Dakota (1.1),
Virginia (2.1), Wyoming (2.5), Maine (2.5), Texas (2.6), Colorado
(2.9), Minnesota (3.0), Maryland (3.1), Mississippi (3.5), New York
(3.5), Florida (3.8), and Georgia (3.9). The highest insured
unemployment rates in the week ending Sept. 26 were in Puerto Rico (7.1
percent), Oregon (5.3), Nevada (5.2), Pennsylvania (5.0), California
(4.7), Michigan (4.6), North Carolina (4.6), Wisconsin (4.6), Arkansas
(4.5), and South Carolina (4.5).The unemployment insurance claims
data is available in Haver's WEEKLY database and
the state data is in the REGIONW database.
Yesterday's Senate testimony by Fed Governor Daniel K. Tarullo, State
of the banking industry, can be found <a href="http://www.federalreserve.gov/newsevents/testimony/tarullo20091014a.htm">here</a>.&nbsp;



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">10/09/09</th>
<th scope="col">10/02/09</th>
<th scope="col">09/26/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>514</td>
<td>524</td>
<td>554</td>
<td>9.6%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,992</td>
<td>6,067</td>
<td>59.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>4.5</td>
<td>4.6</td>
<td>2.8 (10/2008)</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

A recent downtrend in initial claims for unemployment insurance continued last week. They fell slightly and remained near their lowest level since early-January. The Labor Department indicated that claims fell to 514,000 from an [...]

U.S. Initial Unemployment Insurance Claims Fall Slightly; Continuing Claims Off As Well

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015a.jpg" align="left" border="0" height="265" width="353">
Despite recent moderate economic improvement, pricing pressure
remained very much under control last month as indicated by weak gains
in consumer prices. Perhaps the economy's improvement owes much to that
weakened pricing power. Nevertheless, the overall September CPI matched
Consensus expectations and rose 0.2%, half the unrevised August
increase. Helped by lower energy prices, the index versus last year
declined 1.3% which was near the record for a twelve-month period.
Stripping out food &amp; energy prices, the monthly gain of 0.2%
was just slightly more than expectations but the y/y increase of 1.5%
was the weakest since early-2004.
Earlier strength in energy prices took a breather last month
and rose 0.6% after a 4.6% August increase. Nevertheless, energy prices
during the last three months have risen at a strong 21.1% annual rate.
Gasoline prices rose just 0.1% (-29.7% y/y) after a 9.1% jump during
August. Fuel oil prices were a bit stronger ahead of the winter heating
season. They rose 1.1% (-32.2% y/y) after a 3.9% August gain. Finally,
prices for natural gas &amp; electricity rose just 0.1% (-8.3% y/y)
after no change during the prior month.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015b.jpg" align="right" border="0" height="265" width="353">

Food &amp; beverage prices also were weak last month and
ticked 0.1% lower, reversing a similar August uptick. That left prices
roughly unchanged versus September '08. It was the lowest nine-month
change since 1967 and down from the peak 6.1% rate of increase last
fall. Recent weakness has been led by lower dairy prices (-9.5% y/y)
and lower fruit &amp; vegetable (-6.5% y/y) prices. Prices for
meats, poultry, fish &amp; eggs also fell by 3.9% y/y while cereals
&amp; bakery product prices ticked up just 0.1%.
Gains in the CPI less food &amp; energy also remained
moderate. However, the 0.2% September increase was slightly firmer than
expected. In addition, price gains accelerated to a 2.0% annual rate
since December of last year. That's only slightly below the 2.3% rates
of increase during the last two years.
The acceleration in core price inflation this year owes to core
goods prices. Their 0.3% increase last month lifted the
annualized rate so far in 2009 to 2.9% from no change during the prior
two years. Higher tobacco prices account for much of that acceleration
as they have risen at a 38.9% rate since December. However, there has
been modest firming of prices elsewhere. Prices for new &amp; used
motor vehicles have firmed this year despite an aggressive marketing
campaign. They rose 0.5% last month and at a 3.3% rate since December.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015c.jpg" align="right" border="0" height="265" width="353">
That compares with price deflation during the last two years. Apparel
prices ticked up 0.1% last month and are up at a 3.1% rate this year.
That follows price declines which extend back to 1994. Continuing weak
were prices for household furnishings &amp; operation. They slipped
last month for the fifth month in the last six and are down at a 0.5%
rate so far this year.
The U.S. recession continued to sap the strength from core
services prices. They ticked up just 0.1% last month and have
risen at just a 1.6% annual rate so far this year; half that in 2008
and nearly the weakest since 1983. Weakness in the housing market
accounts for much of that moderation. Last month, shelter prices
slipped and they've risen at a just a 0.6% annual rate so far in 2009.
Owners equivalent rent of primary residences, a measure not equivalent
to other house price measures, slipped during September and have risen
at a 1.2% rate so far this year versus a 2.5% 2008 increase. Elsewhere,
public transportation prices posted their third consecutive month of
strength and rose 2.1%.Also firming last month were medical care
services prices with a 0.4% increase and a 3.6% YTD gain. In addition,
education costs have been firm and they're up at a 5.0% annual rate
this year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091015d.jpg" align="right" border="0" height="265" width="353">

The chained CPI, which adjusts for shifts in consumption
patterns, rose 0.1% during September while year-to-year prices fell
1.4%. Conversely, chained prices less food and energy firmed last month
by 0.2%, the first material gain in five months and the YTD increase
rose to 2.2%.
The consumer price data is available in Haver's USECON
database while detailed figures can be found in the CPIDATA
database.
The minutes of the latest FOMC meeting can
be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20090923.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/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>0.2</td>
<td>0.4</td>
<td>-1.3</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>1.5</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.3</td>
<td>-0.3</td>
<td>1.6</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>1.5</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>0.6</td>
<td>4.6</td>
<td>-21.9</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.1</td>
<td>0.1</td>
<td>-0.0</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.1</td>
<td>0.2</td>
<td>-1.4 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.2</td>
<td>0.1</td>
<td>1.1</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
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Despite recent moderate economic improvement, pricing pressure remained very much under control last month as indicated by weak gains in consumer prices. Perhaps the economy's improvement owes much to that weakened pricing power. [...]

CPI Total & Core Increase Just Modestly Despite Economic Improvement

CPI Total & Core IncreaseJust Modestly Despite Economic Improvement

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<th scope="col" class="firstcol">&middot; Without the healthy incentive to buy a new motor vehicle, retail sales last month gave back their August gain. Retail Sales fell 1.5% during September after a 2.2% August increase that was slightly less than reported initially. The retail sales data are available in Haver&#39;s USECON database.&middot; The end of the &quot;Cash-For-Clunkers&quot; auto sales program led to a 10.4% drop in retail sales of motor vehicles last month which more than reversed the 7.8% August jump. These dollar figures accompanied the 34.6% m/m drop in unit vehicle sales reported earlier this month which followed a 25.4% August increase.&middot; After accounting for this extreme volatility, sales during the last two months posted fairly steady increases. Without the auto sector, retail sales rose 0.5% after a 1.0% increase during August. Moreover, these gains have suffered little from the recent jump in gasoline prices. Without autos and gasoline, retail sales rose 0.4% (-1.6% y/y) after a 0.6% August increase. These were the first two consecutive monthly increase since January/February &#39;09. The y/y change of -1.5% compares to -4.5% y/y during July.&nbsp;&middot; Discretionary spending firmed last month as sales at general merchandise stores rose 0.9% (1.1% y/y) after a firm 1.2% August increase. In the soft goods area, apparel store sales increased 0.5% (-1.3% y/y) following even firmer increases during the prior two months. Finally, furniture, electronics &amp; appliance store sales rose 0.7% (-8.2% y/y). Furniture store sales alone more-than-reversed an August drop with a 1.4% (-6.5% y/y) jump while sales of electronics &amp; appliances were unchanged (-9.7% y/y).&middot; Internet and catalogue purchases slipped 0.1% (-2.3% y/y) following a 0.1% August uptick. Finally, restaurant sales gained 0.2% (0.6% y/y) after a 0.6% August gain.&middot; Building materials sales continued their slump and fell 0.2% (-13.0% y/y) after larger declines during the prior three months.&middot; Yesterday&#39;s speech by Fed Vice chairman Donald L. Kohn on The Economic Outlook can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20091013a.htm">here</a>.&nbsp;</th>
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<th scope="col" class="firstcol">&nbsp;</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>
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<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a> (%)</td>
<td>-1.5</td>
<td>2.2</td>
<td>-0.1</td>
<td>-5.7</td>
<td>-0.7</td>
<td>3.3</td>
<td>5.3</td>
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<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.5</td>
<td>1.0</td>
<td>-0.5</td>
<td>-8.5</td>
<td>2.5</td>
<td>3.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Less Gasoline</td>
<td>0.4</td>
<td>0.6</td>
<td>-0.3</td>
<td>-1.6</td>
<td>1.6</td>
<td>3.6</td>
<td>5.7</td>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014d.jpg" width="353">
The DIHK survey, a poling of over 25000 firms by the German chambers of industry and commerce, is not conducted in Q3. So the fourth quarter&#146;s -10 reading compares to the -17 reading from Q2. It is a net balance of opinion diffusion index. A strong improvement in existing conditions is indicated, but declines persist. DIHK itself pointed to the role in temporary government stimulus in boosting the survey and muted its optimism with expectations for more modest improvements in the index for the quarter ahead 
The index has climbed up from the 14th percentile of its range in 2009-Q2 to stand in the 25th percentile in Q4. Business expectations are sharply higher at a raw reading of zero up from -27 in Q2. The range standing for that reading is up to a respectable 58th percent of the range from a low 13th percentile in Q2. Export expectations are up even more strongly to a raw reading of +7 from a Q2 reading of -37, pushing the percentile standing up to its 55th percentile from 1.3% in 2009 Q2. These sorts of progressions are in line with much of the data that have been reported that have showed foreign orders to be picking up, although some recent German export figures were more disappointing; that slowdown is not corroborated here. 
As to investment, the Q2 percentile standing was the worst in the history of the survey, a history that extends back to Q4 1991. The improved standing to a still-weak 27th percentile on a raw reading of -17 nonetheless is sharply up from -30 in Q2. Still we can see that investment demands are lagging. Hiring intentions occupy a sort of middle ground at a raw reading of -15; conditions are much improved from Q2&#146;s reading at -25. Still more cutting is indicated. The percentile standing has been boosted to its 38th percentile, but that is still weak. Clearly much more improvement will bee needed to stoke job growth and just to keep the prospect of more cuts at bay. 

<table border="0" cellspacing="0" width="100%">
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DIHK-Balance of Economic Opinion
</tr>
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<td class="firstcol">&nbsp;</td>
<td colspan="3">Net Balance Readings</td>
<td colspan="3">Change</td>
<td>Range Q4&#39;91</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Yr Ago</td>
<td>2-Yr</td>
<td>3-Yr</td>
<td>Q4-09</td>
<td>Q2-09</td>
</tr>
<tr>
<td class="firstcol">Economic Conditions</td>
<td>-10</td>
<td>-17</td>
<td>2</td>
<td>-27</td>
<td>-41</td>
<td>-34</td>
<td>25.8</td>
<td>14.5</td>
</tr>
<tr>
<td class="firstcol">Business Expectations</td>
<td>0</td>
<td>-27</td>
<td>-35</td>
<td>7</td>
<td>-15</td>
<td>-10</td>
<td>58.3</td>
<td>13.3</td>
</tr>
<tr>
<td class="firstcol">Export Expectations</td>
<td>7</td>
<td>-34</td>
<td>-35</td>
<td>-6</td>
<td>-30</td>
<td>-27</td>
<td>55.3</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">Investment Intentions</td>
<td>-17</td>
<td>-30</td>
<td>-23</td>
<td>-15</td>
<td>-31</td>
<td>-23</td>
<td>27.7</td>
<td>0.0</td>
</tr>
<tr>
<td class="firstcol">Hiring Intentions</td>
<td>-15</td>
<td>-25</td>
<td>-20</td>
<td>-13</td>
<td>-24</td>
<td>-15</td>
<td>38.3</td>
<td>17.0</td>
</tr>
</tbody>
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<thead>
<tr>
DIHK-Balance of Economic Opinion
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Net Balance Readings</td>
<td colspan="3">Change</td>
<td>Range Q4&#39;91</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Yr Ago</td>
<td>2-Yr</td>
<td>3-Yr</td>
<td>Q4-09</td>
<td>Q2-09</td>
</tr>
<tr>
<td class="firstcol">Economic Conditions</td>
<td>-10</td>
<td>-17</td>
<td>2</td>
<td>-27</td>
<td>-41</td>
<td>-34</td>
<td>25.8</td>
<td>14.5</td>
</tr>
<tr>
<td class="firstcol">Business Expectations</td>
<td>0</td>
<td>-27</td>
<td>-35</td>
<td>7</td>
<td>-15</td>
<td>-10</td>
<td>58.3</td>
<td>13.3</td>
</tr>
<tr>
<td class="firstcol">Export Expectations</td>
<td>7</td>
<td>-34</td>
<td>-35</td>
<td>-6</td>
<td>-30</td>
<td>-27</td>
<td>55.3</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">Investment Intentions</td>
<td>-17</td>
<td>-30</td>
<td>-23</td>
<td>-15</td>
<td>-31</td>
<td>-23</td>
<td>27.7</td>
<td>0.0</td>
</tr>
<tr>
<td class="firstcol">Hiring Intentions</td>
<td>-15</td>
<td>-25</td>
<td>-20</td>
<td>-13</td>
<td>-24</td>
<td>-15</td>
<td>38.3</td>
<td>17.0</td>
</tr>
</tbody>
</table>
DIHK Survey Points to Continued Improvement in German Economy 
by <a href="/comment/Brusca.html">Bob Brusca</a> October 14, 2009


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014e.jpg">
Weakness in the U.S. dollar is pushing up non-oil import prices. Following the strength in oil prices earlier this year, now non-oil prices have firmed. U.S. import prices last month ticked up the expected 0.1% after jumps between 1.0% and 3.0% during three of the prior four months.
The latest report showed that non-oil import prices rose 0.4%, which was the strongest monthly increase since July of last year. On a three-month basis, these prices have risen at a 1.9% annual rate after declining at a 13.6% rate as of last December. (During the last ten years, there has been a negative 81% correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non-oil import prices.)<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014f.jpg">
Import prices break down as follows: Food prices added 0.4% to a 1.3% August increase (-5.0% y/y). Capital goods prices broke from weakness with a 0.1% uptick which raised the three-month change to 0.4% following a 3.4% rate of decline in June. Prices for nonauto consumer goods also rose 0.1% (-1.0% y/y) and brought the three-month change to -1.1% from its weakest reading of -2.6% in January. Durable consumer goods prices were unchanged (-1.4% y/y) after two months of slight decline. Household goods rose slightly (-1.6% y/y) and furniture prices jumped 0.9% (-1.0% y/y). Apparel prices were unchanged for the second month (-1.1% y/y) but the three-month change improved to -0.4% from -4.3% six months ago.
The recent gain in petroleum prices took a breather last month and fell 1.1% after sharp increases during six of the prior seven months. This month, however, crude oil prices have found renewed strength and were up to $74.15 per barrel yesterday from a September average of $69.46.
Total export prices reversed some of their earlier strengthening with a fall of 0.3%. The drop was led by a 2.8% (-16.6% y/y) decline in agricultural prices. Nonagricultural export prices were unchanged and down 4.4% y/y.
The import and export price series can be found in Haver&#39;s USECON database. Detailed figures are available in the USINT database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA, %)</a></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>
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<td class="firstcol">Import - All Commodities</td>
<td>0.1</td>
<td>1.6</td>
<td>-0.7</td>
<td>-12.0</td>
<td>11.5</td>
<td>4.2</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-1.1</td>
<td>7.7</td>
<td>-2.5</td>
<td>-32.5</td>
<td>37.7</td>
<td>11.6</td>
<td>20.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.4</td>
<td>0.3</td>
<td>-0.2</td>
<td>-5.4</td>
<td>5.3</td>
<td>2.7</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>-0.3</td>
<td>0.7</td>
<td>-0.3</td>
<td>-5.6</td>
<td>6.0</td>
<td>4.9</td>
<td>3.6</td>
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</tbody>
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U.S. Import Prices Tick Higher As Non-Oil Prices Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> October, 14, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014h.jpg" width="353">
Why hold inventories if they&#39;re loosing value and the demand outlook is uncertain? These two questions are behind the decumulation which continued through August. Business inventories fell another 1.5% which exceeded expectations for a 0.9% drop. The drop was pervasive amongst businesses and the 14.9% three-month rate of decline is a record.
Retail inventories fell a hefty 2.3% during August. That was led by a 7.9% (-31.1% y/y) drop in auto inventories followed by a 0.3% (-6.4% y/y) shrinkage in nonauto inventories. Furniture inventories (-12.3% y/y) continued down as did clothing inventories (-8.7% y/y). General merchandise inventories posted an uptick but they still were off 4.1% y/y and building materials stores shed 0.6% of inventories (-9.0% y/y. Factory inventories fell 0.8% and at an accelerated 11.5% y/y. Wholesale inventories were off 1.3% and, excluding oil, wholesale inventories fell 1.5% (-15.0% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014g.jpg" width="353">
Businesses&#39; success in slashing inventories has kept up with recent weakness in sales. As a result, the inventory-to-sales ratio for total business fell to its cycle low of 1.33 versus a high of 1.46 in January. The latest was the lowest since last September.
The business sales and inventory data are available in Haver&#39;s USECON database.
Disagreement About The Inflation Outlook from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-31.html">here</a>

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<th scope="col" class="firstcol">Business Inventories (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
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</thead>
<tbody>
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<td class="firstcol">Total</td>
<td>-1.5</td>
<td>-1.1</td>
<td>-1.4</td>
<td>-13.3</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
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<td class="firstcol">&nbsp; Retail</td>
<td>-2.3</td>
<td>-1.0</td>
<td>-1.2</td>
<td>-14.1</td>
<td>-3.1</td>
<td>2.5</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Auto</td>
<td>-0.3</td>
<td>-0.5</td>
<td>-0.5</td>
<td>-6.4</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Wholesale</td>
<td>-1.3</td>
<td>-1.6</td>
<td>-2.1</td>
<td>-14.7</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.8</td>
<td>-0.9</td>
<td>-1.1</td>
<td>-11.5</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
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The DIHK survey, a poling of over 25000 firms by the German chambers of industry and commerce, is not conducted in Q3. So the fourth quarters -10 reading compares to the -17 reading from Q2. It is a net balance of opinion diffusion [...]

U.S. Retail Sales Decline In September After Auto-Led August Gain; Underlying Trend Firms

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014h.jpg" width="353">
Why hold inventories if they&#39;re loosing value and the demand outlook is uncertain? These two questions are behind the decumulation which continued through August. Business inventories fell another 1.5% which exceeded expectations for a 0.9% drop. The drop was pervasive amongst businesses and the 14.9% three-month rate of decline is a record.
Retail inventories fell a hefty 2.3% during August. That was led by a 7.9% (-31.1% y/y) drop in auto inventories followed by a 0.3% (-6.4% y/y) shrinkage in nonauto inventories. Furniture inventories (-12.3% y/y) continued down as did clothing inventories (-8.7% y/y). General merchandise inventories posted an uptick but they still were off 4.1% y/y and building materials stores shed 0.6% of inventories (-9.0% y/y. Factory inventories fell 0.8% and at an accelerated 11.5% y/y. Wholesale inventories were off 1.3% and, excluding oil, wholesale inventories fell 1.5% (-15.0% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014g.jpg" width="353">
Businesses&#39; success in slashing inventories has kept up with recent weakness in sales. As a result, the inventory-to-sales ratio for total business fell to its cycle low of 1.33 versus a high of 1.46 in January. The latest was the lowest since last September.
The business sales and inventory data are available in Haver&#39;s USECON database.
Disagreement About The Inflation Outlook from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-31.html">here</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Inventories (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</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="even">
<td class="firstcol">Total</td>
<td>-1.5</td>
<td>-1.1</td>
<td>-1.4</td>
<td>-13.3</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail</td>
<td>-2.3</td>
<td>-1.0</td>
<td>-1.2</td>
<td>-14.1</td>
<td>-3.1</td>
<td>2.5</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Auto</td>
<td>-0.3</td>
<td>-0.5</td>
<td>-0.5</td>
<td>-6.4</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Wholesale</td>
<td>-1.3</td>
<td>-1.6</td>
<td>-2.1</td>
<td>-14.7</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.8</td>
<td>-0.9</td>
<td>-1.1</td>
<td>-11.5</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
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Why hold inventories if they're loosing value and the demand outlook is uncertain? These two questions are behind the decumulation which continued through August. Business inventories fell another 1.5% which exceeded expectations for [...]

U.S. Business Inventory Decumulation Continues At A Record Rate

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014e.jpg" align="left" border="0">
Weakness in the U.S. dollar is pushing up non-oil import prices.
Following the strength in oil prices earlier this year, now non-oil
prices have firmed. U.S. import prices last month ticked up the
expected 0.1% after jumps between 1.0% and 3.0% during three of the
prior four months.
The latest report showed that non-oil import prices rose 0.4%, which
was the strongest monthly increase since July of last year. On a
three-month basis, these prices have risen at a 1.9% annual rate after
declining at a 13.6% rate as of last December. (During the last ten
years, there has been a negative 81% correlation between the nominal
trade-weighted exchange value of the US dollar vs. major currencies and
the y/y change in non-oil import prices.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091014f.jpg" align="right" border="0">
Import prices break down as follows: Food prices added 0.4% to a
1.3% August increase (-5.0% y/y). Capital goods prices broke from
weakness with a 0.1% uptick which raised the three-month change to 0.4%
following a 3.4% rate of decline in June. Prices for nonauto consumer
goods also rose 0.1% (-1.0% y/y) and brought the three-month change to
-1.1% from its weakest reading of -2.6% in January. Durable consumer
goods prices were unchanged (-1.4% y/y) after two months of slight
decline. Household goods rose slightly (-1.6% y/y) and furniture prices
jumped 0.9% (-1.0% y/y). Apparel prices were unchanged for the second
month (-1.1% y/y) but the three-month change improved to -0.4% from
-4.3% six months ago.
The recent gain in petroleum prices took a breather last month and
fell 1.1% after sharp increases during six of the prior seven months.
This month, however, crude oil prices have found renewed strength and
were up to $74.15 per barrel yesterday from a September average of
$69.46.
Total export prices reversed some of their earlier strengthening
with a fall of 0.3%. The drop was led by a 2.8% (-16.6% y/y) decline in
agricultural prices. Nonagricultural export prices were unchanged and
down 4.4% y/y.
The import and export price series can be found in Haver's USECON database. Detailed figures are available in the USINT database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA, %)</a></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">Import - All Commodities</td>
<td>0.1</td>
<td>1.6</td>
<td>-0.7</td>
<td>-12.0</td>
<td>11.5</td>
<td>4.2</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-1.1</td>
<td>7.7</td>
<td>-2.5</td>
<td>-32.5</td>
<td>37.7</td>
<td>11.6</td>
<td>20.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.4</td>
<td>0.3</td>
<td>-0.2</td>
<td>-5.4</td>
<td>5.3</td>
<td>2.7</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>-0.3</td>
<td>0.7</td>
<td>-0.3</td>
<td>-5.6</td>
<td>6.0</td>
<td>4.9</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</body></html>

Weakness in the U.S. dollar is pushing up non-oil import prices. Following the strength in oil prices earlier this year, now non-oil prices have firmed. U.S. import prices last month ticked up the expected 0.1% after jumps between [...]

U.S. Import Prices Tick Higher As Non-Oil Prices Firm

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 registering 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 in September. 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

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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

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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.

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**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.

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**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.