Tom Moeller

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

Case-Shiller Home Price Index Increases For Third Consecutive Month

Louise Curley

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<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026i.jpg" align="right" border="0" height="265" width="353">South Korean
joins China and Singapore among the emerging economies of the Pacific
Rim to report third quarter GDP.&nbsp; GDP growth in the three
countries is shown in the first chart.&nbsp; The declines in the
economies of Korea and Singapore have been much more severe than those
in China.&nbsp; China has not experienced a year to year decline in
GDP, merely a deceleration of growth.&nbsp; At their low points in
the first quarter of this year, GDP in Singapore was 9.5% below the
year ago figure and GDP in Korea, 4.3% below.Korea reported that GDP
grew 2.9% in the third quarter on a seasonally adjusted basis, compared
with 2.7% in the second quarter.&nbsp; On a seasonally unadjusted
basis, GDP was 0.6% above the year ago figure, the first positive
figure since the third quarter of 2008.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026j.jpg" align="right" border="0" height="265" width="353">
A swing in inventories from a liquidation of 4,506 million won* in the
second quarter to an accumulation of 6,486 won in the third quarter was
the main factor in the third quarter strength.&nbsp; However, this
should not be a cause of concern at this point in the business
cycle.&nbsp; The rise follows three successive quarters of big
liquidations, beginning in the fourth quarter of 2008--7,290 million
won 6,788 million won and 4,506 million wan.&nbsp; The inventory to
shipments ratio for manufacturing at the end of the second quarter was
.97 down from 1.25 at the end of 2008.&nbsp; As can be seen in the
second chart, the I/S ratio for manufacturing was somewhat below normal
at the end of the second quarter so that a build up in the third
quarter is not unexpected. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026k.jpg" align="right" border="0" height="265" width="353">
The performance of the other components of
GDP was generally typical of that seen in the early stages of
recovery--some increases and some retrenchments.&nbsp; The one
notable exception was a greater decline in exports of goods and
services, than that in imports of goods and services, with the result
that the balance on goods and services declined from 20.3 billion won
in the second quarter to 19.1 billion won .&nbsp; In the past,
exports have been a dynamic element in the growth of the Korean economy
and generally quick to respond to improvements in the world economy.
Private consumption increased by 3,524.7 million won in the third
quarter compared with an increase of 1,367.1, this could be an sign
that Korea is beginning to shift away from its policy of export led
growth but it is probably not too wise to base a conclusion on one
quarter's evidence. See the third chart.&nbsp; There were small
declines in construction,&nbsp; fixed investment in intangible
assets and government consumption and the change in business investment
in plant and equipment was essentially unchanged at 1,778 million won
in the third quarter, compared with a rise of 1,846 million won in the
second quarter.*The won in all cases is the 2005
chained won.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
SOUTH KOREA</th>
<th scope="col">Q3 09</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="10"> GDP </td>
</tr>
<tr>
<td class="firstcol">Q/Q Change (SA)</td>
<td>2.93</td>
<td>2.65</td>
<td>0.12</td>
<td>-5.07</td>
<td>0.22</td>
<td>0.43</td>
<td>1.00</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Y/Y Change&nbsp; (NSA)</td>
<td>0.58</td>
<td>-2.16</td>
<td>-425</td>
<td>-3.40</td>
<td>3.11</td>
<td>4.35</td>
<td>5.46</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Change in New Exports (Mil.
2005 Chained Won)</td>
<td>-1263</td>
<td>3572</td>
<td>3175</td>
<td>4876</td>
<td>-1590</td>
<td>48</td>
<td>756</td>
<td>10019</td>
<td>6577</td>
</tr>
<tr>
<td class="firstcol">Change in Inventory Change "</td>
<td>6487</td>
<td>-4506</td>
<td>-6788</td>
<td>-7290</td>
<td>1396</td>
<td>467</td>
<td>2004</td>
<td>7752</td>
<td>-2815</td>
</tr>
<tr>
<td class="firstcol">Change in Private
Consumption&nbsp; "</td>
<td>3525</td>
<td>1367</td>
<td>-880</td>
<td>-3189</td>
<td>1648</td>
<td>-3364</td>
<td>-25</td>
<td>4703</td>
<td>24655</td>
</tr>
</tbody>
</table>
</body></html>

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

South Korea Reports 3Q GDP

Robert Brusca

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

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

Germany’s Consumer Climate Improves

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026d.jpg" align="right" border="0" height="265" width="353">
The National Association For Business Economics (NABE)
indicated in its latest Industry Survey that U.S. economic conditions
showed broad-based improvement during the last three months. That gain
was paced by improvement in unit demand and profit margins.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026e.jpg" align="right" border="0" height="265" width="353">
The net percentage of firms reporting higher demand rose to
23.4% which was the highest level in over one year. The improvement
came as 44.2% of firms indicated higher demand but only 20.8% showed
demand falling during 3Q. That was down from nearly half reporting
lower demand at the end of last year. Overall economic growth
through the end of next year is expected to average 3%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026f.jpg" align="right" border="0" height="265" width="353">
Higher net-profit margins were indicated by firms for the
first time since the fourth quarter of 2007. Thirty-six percent of
firms indicated higher margins, up from 10% during 4Q08, while a
reduced 27% reported lower margins.
While still negative, net-employment improved materially as
12% of firms reported higher employment, double the low of last
quarter, and a much-reduced 31% reported lower hiring.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026g.jpg" align="right" border="0" height="265" width="353">
With the improvement in economic conditions, NABE indicated
that pricing power improved. The net-reading of 12% was the highest
level in one year as 23% reported higher prices and a reduced 11%
reported lower prices. Rising capital spending was indicated by firms
for the first time in one year as 26% showed higher spending while a
reduced 22% reported lower spending. 
 

The NABE Industry Survey can be found in Haver's SURVEYS
database. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Nat'l
Assn. For Business Economics 3Q Industry Survey (Net Rising Index, %)</th>
<th scope="col">3Q09</th>
<th scope="col">2Q09</th>
<th scope="col">1Q09</th>
<th scope="col">4Q08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unit Demand</td>
<td>23.4</td>
<td>-5.0</td>
<td>-14.3</td>
<td>-27.5</td>
</tr>
<tr>
<td class="firstcol">Profit Margins</td>
<td>8.7</td>
<td>-17.0</td>
<td>-30.4</td>
<td>-41.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>-19.2</td>
<td>-30.0</td>
<td>-25.0</td>
<td>-29.8</td>
</tr>
<tr>
<td class="firstcol">Prices Charged</td>
<td>12.2</td>
<td>-12.9</td>
<td>-2.0</td>
<td>-9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Spending</td>
<td>4.2</td>
<td>-23.6</td>
<td>-15.8</td>
<td>-26.0</td>
</tr>
</tbody>
</table>
</body></html>

The National Association For Business Economics (NABE) indicated in its latest Industry Survey that U.S. economic conditions showed broad-based improvement during the last three months. That gain was paced by improvement in unit [...]

National Association For Business Economics Indicates Demand, Profits and Employment Improved

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026b.jpg" align="right" border="0" height="265" width="353">The Chicago Federal Reserve
Bank indicated that while the U.S.
economy had improved, growth was still below the historic trend. For
September, the Chicago Fed National Activity Index (CFNAI) slipped m/m
after having improved sharply from the January low. The reading of
-0.90 was down from -0.56 during August yet both readings were up
sharply from the series' low of -4.13 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP but during the last ten years that
correlation has risen to 80%.
The three-month moving average which smoothes out
some of the volatility of the index improved to its highest level since
June of '08.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2009.pdf">here</a>.
The Chicago Fed indicated that 32 of the series' individual
indicators made positive contributions to the September index while 53
made negative contributions. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026c.jpg" align="right" border="0" height="265" width="353">
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index slipped during August but remained near its
lowest since late-1993. Indicators for the steel, machinery and
resource sectors improved modestly, however, that was outweighed by
deterioration in the auto sector. The Chicago Federal Reserve figures
are available in Haver's SURVEYS database.
International Perspective on the Crisis and Response is
the title of Friday's speech by Fed Vice-Chairman Donald L. Kohn and it
can be found here <a href="http://www.federalreserve.gov/newsevents/speech/kohn20091023a.htm">here</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.90</td>
<td>-0.56</td>
<td>-1.82</td>
<td>-2.01</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">3-Month Moving Average</td>
<td>-1.09</td>
<td>-1.61</td>
<td>-2.15</td>
<td>-1.42</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Chicago Federal Reserve Bank indicated that while the U.S. economy had improved, growth was still below the historic trend. For September, the Chicago Fed National Activity Index (CFNAI) slipped m/m after having improved sharply [...]

Chicago Fed Index Dipped Last Month But Trend Level Still Rising

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026b.jpg" align="right" border="0" height="265" width="353">The Chicago Federal Reserve
Bank indicated that while the U.S.
economy had improved, growth was still below the historic trend. For
September, the Chicago Fed National Activity Index (CFNAI) slipped m/m
after having improved sharply from the January low. The reading of
-0.90 was down from -0.56 during August yet both readings were up
sharply from the series' low of -4.13 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP but during the last ten years that
correlation has risen to 80%.
The three-month moving average which smoothes out
some of the volatility of the index improved to its highest level since
June of '08.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2009.pdf">here</a>.
The Chicago Fed indicated that 32 of the series' individual
indicators made positive contributions to the September index while 53
made negative contributions. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026c.jpg" align="right" border="0" height="265" width="353">
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index slipped during August but remained near its
lowest since late-1993. Indicators for the steel, machinery and
resource sectors improved modestly, however, that was outweighed by
deterioration in the auto sector. The Chicago Federal Reserve figures
are available in Haver's SURVEYS database.
International Perspective on the Crisis and Response is
the title of Friday's speech by Fed Vice-Chairman Donald L. Kohn and it
can be found here <a href="http://www.federalreserve.gov/newsevents/speech/kohn20091023a.htm">here</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.90</td>
<td>-0.56</td>
<td>-1.82</td>
<td>-2.01</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">3-Month Moving Average</td>
<td>-1.09</td>
<td>-1.61</td>
<td>-2.15</td>
<td>-1.42</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>

National Association For Business
Economics Indicates Demand, Profits and Employment Improved 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026d.jpg" align="right" border="0" height="265" width="353">
The National Association For Business Economics (NABE)
indicated in its latest Industry Survey that U.S. economic conditions
showed broad-based improvement during the last three months. That gain
was paced by improvement in unit demand and profit margins.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026e.jpg" align="right" border="0" height="265" width="353">
The net percentage of firms reporting higher demand rose to
23.4% which was the highest level in over one year. The improvement
came as 44.2% of firms indicated higher demand but only 20.8% showed
demand falling during 3Q. That was down from nearly half reporting
lower demand at the end of last year. Overall economic growth
through the end of next year is expected to average 3%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026f.jpg" align="right" border="0" height="265" width="353">
Higher net-profit margins were indicated by firms for the
first time since the fourth quarter of 2007. Thirty-six percent of
firms indicated higher margins, up from 10% during 4Q08, while a
reduced 27% reported lower margins.
While still negative, net-employment improved materially as
12% of firms reported higher employment, double the low of last
quarter, and a much-reduced 31% reported lower hiring.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026g.jpg" align="right" border="0" height="265" width="353">
With the improvement in economic conditions, NABE indicated
that pricing power improved. The net-reading of 12% was the highest
level in one year as 23% reported higher prices and a reduced 11%
reported lower prices. Rising capital spending was indicated by firms
for the first time in one year as 26% showed higher spending while a
reduced 22% reported lower spending. 
 

The NABE Industry Survey can be found in Haver's SURVEYS
database. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Nat'l
Assn. For Business Economics 3Q Industry Survey (Net Rising Index, %)</th>
<th scope="col">3Q09</th>
<th scope="col">2Q09</th>
<th scope="col">1Q09</th>
<th scope="col">4Q08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unit Demand</td>
<td>23.4</td>
<td>-5.0</td>
<td>-14.3</td>
<td>-27.5</td>
</tr>
<tr>
<td class="firstcol">Profit Margins</td>
<td>8.7</td>
<td>-17.0</td>
<td>-30.4</td>
<td>-41.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>-19.2</td>
<td>-30.0</td>
<td>-25.0</td>
<td>-29.8</td>
</tr>
<tr>
<td class="firstcol">Prices Charged</td>
<td>12.2</td>
<td>-12.9</td>
<td>-2.0</td>
<td>-9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Spending</td>
<td>4.2</td>
<td>-23.6</td>
<td>-15.8</td>
<td>-26.0</td>
</tr>
</tbody>
</table>
Germany&#8217;s Consumer Climate
Improves 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October
26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026h.jpg" align="left" border="0" height="265" width="353">
Germany&#8217;s GFK survey rose in October. It was a month-to-month
rise of 0.4 for the third month in a row. The economic index rose by
5.2 points its smallest rise since May but on the heels of a 10.9 point
spurt in September. Income expectations fell by 3.1 points, the first
drop in five months but after two large gains. The propensity to buy
dropped back by 10.4 points a huge drop and the largest since a drop of
15.7 in May 2008. 

Still the Climate index at +4.2 is above its average of 3.3.
All of these components are above their average values since 2002. The
&#8216;income&#8217; and &#8216;propensity to buy&#8217; percentiles are stronger for the count
percentiles than for the range percentiles; the standing among past
observations is stronger than their range standing between the highs
and lows. This means that while the current readings are still well off
peak they are in the upper part of the distribution of readings and in
the upper region of normal. 

The GFK index shows that confidence is still improving in
Germany. Germans are relatively more worried about the economy in
generally than they are impacted by expectations for income or buying
power problems. Still the fact of the matter is that German consumption
has not been very strong. And Germany&#8217;s Chancellor is out warning that
in 2011 there will be another crisis and that unemployment will rise
from current levels. I guess that Obama&#8217;s pessimistic approach to
assessing the economy is spreading abroad.

 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="5">
 Germany Consumer Climate Survey GFK</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol"></td>
<td> Climate</td>
<td colspan="2"> Expectations</td>
<td> Propensity to</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td> Economic</td>
<td>Income</td>
<td>Buy</td>
</tr>
<tr class="grey3">
<td class="firstcol">Oct-09</td>
<td>4.2</td>
<td>8.7</td>
<td>12.9</td>
<td>26.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Sep-09</td>
<td>3.8</td>
<td>3.4</td>
<td>16.0</td>
<td>36.5</td>
</tr>
<tr class="grey3">
<td class="firstcol">Aug-09</td>
<td>3.4</td>
<td>-7.5</td>
<td>8.8</td>
<td>31.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jul-09</td>
<td>3.0</td>
<td>-14.0</td>
<td>1.8</td>
<td>25.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jun-09</td>
<td>2.7</td>
<td>-22.6</td>
<td>-3.3</td>
<td>14.5</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="5">&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Average</td>
<td>3.3</td>
<td>0.9</td>
<td>-3.8</td>
<td>-9.6</td>
</tr>
<tr class="grey3">
<td class="firstcol">Max</td>
<td>9.1</td>
<td>69.5</td>
<td>33.6</td>
<td>64.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">Min</td>
<td>-3.5</td>
<td>-32.9</td>
<td>-24.5</td>
<td>-55.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">% range</td>
<td>61.1%</td>
<td>40.6%</td>
<td>64.4%</td>
<td>68.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Count%</td>
<td>59.6%</td>
<td>66.0%</td>
<td>92.6%</td>
<td>87.2%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">% range is
current reading as a
percentile of Hi/Low range</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Count % is
current reading ranked as
a %-tile among all readings</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">GFK survey
dates from January 2002</td>
</tr>
</tbody>
</table>
 South Korea Reports 3Q GDP 
by <a href="/comment/Curley.html">Louise
Curley</a> October 26, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026i.jpg" align="right" border="0" height="265" width="353">South Korean
joins China and Singapore among the emerging economies of the Pacific
Rim to report third quarter GDP.&nbsp; GDP growth in the three
countries is shown in the first chart.&nbsp; The declines in the
economies of Korea and Singapore have been much more severe than those
in China.&nbsp; China has not experienced a year to year decline in
GDP, merely a deceleration of growth.&nbsp; At their low points in
the first quarter of this year, GDP in Singapore was 9.5% below the
year ago figure and GDP in Korea, 4.3% below.
Korea reported that GDP
grew 2.9% in the third quarter on a seasonally adjusted basis, compared
with 2.7% in the second quarter.&nbsp; On a seasonally unadjusted
basis, GDP was 0.6% above the year ago figure, the first positive
figure since the third quarter of 2008.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026j.jpg" align="right" border="0" height="265" width="353">A swing in
inventories from a liquidation of 4,506 million won* in the
second quarter to an accumulation of 6,486 won in the third quarter was
the main factor in the third quarter strength.&nbsp; However, this
should not be a cause of concern at this point in the business
cycle.&nbsp; The rise follows three successive quarters of big
liquidations, beginning in the fourth quarter of 2008--7,290 million
won 6,788 million won and 4,506 million wan.&nbsp; The inventory to
shipments ratio for manufacturing at the end of the second quarter was
.97 down from 1.25 at the end of 2008.&nbsp; As can be seen in the
second chart, the I/S ratio for manufacturing was somewhat below normal
at the end of the second quarter so that a build up in the third
quarter is not unexpected.
 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026k.jpg" align="right" border="0" height="265" width="353">The
performance of the other components of
GDP was generally typical of that seen in the early stages of
recovery--some increases and some retrenchments.&nbsp; The one
notable exception was a greater decline in exports of goods and
services, than that in imports of goods and services, with the result
that the balance on goods and services declined from 20.3 billion won
in the second quarter to 19.1 billion won .&nbsp; In the past,
exports have been a dynamic element in the growth of the Korean economy
and generally quick to respond to improvements in the world economy.
Private consumption increased by 3,524.7 million won in the third
quarter compared with an increase of 1,367.1, this could be an sign
that Korea is beginning to shift away from its policy of export led
growth but it is probably not too wise to base a conclusion on one
quarter's evidence. See the third chart.&nbsp; There were small
declines in construction,&nbsp; fixed investment in intangible
assets and government consumption and the change in business investment
in plant and equipment was essentially unchanged at 1,778 million won
in the third quarter, compared with a rise of 1,846 million won in the
second quarter.
*The won in all cases is the 2005
chained won.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
SOUTH KOREA</th>
<th scope="col">Q3 09</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="10"> GDP </td>
</tr>
<tr>
<td class="firstcol">Q/Q Change (SA)</td>
<td>2.93</td>
<td>2.65</td>
<td>0.12</td>
<td>-5.07</td>
<td>0.22</td>
<td>0.43</td>
<td>1.00</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Y/Y Change&nbsp; (NSA)</td>
<td>0.58</td>
<td>-2.16</td>
<td>-425</td>
<td>-3.40</td>
<td>3.11</td>
<td>4.35</td>
<td>5.46</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Change in New Exports (Mil.
2005 Chained Won)</td>
<td>-1263</td>
<td>3572</td>
<td>3175</td>
<td>4876</td>
<td>-1590</td>
<td>48</td>
<td>756</td>
<td>10019</td>
<td>6577</td>
</tr>
<tr>
<td class="firstcol">Change in Inventory Change "</td>
<td>6487</td>
<td>-4506</td>
<td>-6788</td>
<td>-7290</td>
<td>1396</td>
<td>467</td>
<td>2004</td>
<td>7752</td>
<td>-2815</td>
</tr>
<tr>
<td class="firstcol">Change in Private
Consumption&nbsp; "</td>
<td>3525</td>
<td>1367</td>
<td>-880</td>
<td>-3189</td>
<td>1648</td>
<td>-3364</td>
<td>-25</td>
<td>4703</td>
<td>24655</td>
</tr>
</tbody>
</table>

</body></html>

Chicago Fed Index Dipped LastMonth But Trend Level Still Rising

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026a.jpg" align="left" border="0" height="265" width="353">
The EMU economy continues to spin off better economic signals.
Orders rose by 2% in August after a 3% rise in July and a 4.2% gain in
June. As a result the sequential growth rates are showing explosive
growth in orders- up at a 43% annual rate over three months - still
orders are lower Yr/Yr by over 20%. EMU MFG sales were up in August,
too, and they show sequential growth rates are improving. 
Orders rose in two of the four largest economies as Italy and
the UK took order setbacks in August. 
Italy and the UK also show dropping orders over three months.
The UK took a set back in growth as GDP dropped 0.4% Q/Q in Q3
(a 1.6% annualized rate of decline) an unexpected result that extends
the UK recession that was thought to have ended.
 Italy &#8217;s sharper drop in orders of 8.6% raises some
questions there. The UK GDP drop has brought pressure on sterling as
one might well have expected, but the weakness in Italy is another
matter as it is safely cocooned within the euro area. We do not know
how badly Italy &#8217;s orders drop will affect the economy but retail sales
have faltered recently. Consumers and businesses are seeing and
expecting totally different trends there. The hardest thing for EMU
policymakers is to have countries within the Zone moving in different
directions.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">Euro Area
and UK Industrial Orders &amp; Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">% m/m</td>
<td>Aug 
09</td>
<td>Aug 
09</td>
<td>Aug 
09</td>
<td>Aug 
08</td>
<td>Aug 
07</td>
<td>Qtr 
2 
Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>Aug 
09</td>
<td>Jul 
09</td>
<td>Jun 
09</td>
<td>3
Mo</td>
<td>6
mo</td>
<td>12
mo</td>
<td>12
mo</td>
<td>12
mo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">Manufacturing Sales</td>
<td>1.0%</td>
<td>1.6%</td>
<td>-0.9%</td>
<td>7.1%</td>
<td>2.3%</td>
<td>-19.6%</td>
<td>3.5%</td>
<td>5.8%</td>
<td>11.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate</td>
<td>-3.7%</td>
<td>4.8%</td>
<td>6.8%</td>
<td>34.6%</td>
<td>3.2%</td>
<td>-21.4%</td>
<td>2.0%</td>
<td>9.0%</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Manufacturing Orders</td>
<td>2.0%</td>
<td>3.0%</td>
<td>4.2%</td>
<td>43.7%</td>
<td>20.4%</td>
<td>-21.8%</td>
<td>-2.1%</td>
<td>4.7%</td>
<td>37.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Aug 09</td>
<td>Jul 09</td>
<td>Jun 09</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12-mo</td>
<td>Qtr 2 Date</td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>1.8%</td>
<td>2.0%</td>
<td>4.1%</td>
<td>36.9%</td>
<td>33.2%</td>
<td>-24.7%</td>
<td>-1.0%</td>
<td>6.0%</td>
<td>30.5%</td>
</tr>
<tr>
<td class="firstcol">France:</td>
<td>3.0%</td>
<td>4.1%</td>
<td>1.5%</td>
<td>39.8%</td>
<td>6.1%</td>
<td>-13.8%</td>
<td>-7.7%</td>
<td>8.1%</td>
<td>43.8%</td>
</tr>
<tr>
<td class="firstcol">Italy</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>
<td>-3.4%</td>
<td>-1.6%</td>
<td>-34.5%</td>
</tr>
<tr>
<td class="firstcol">UK(EU)</td>
<td>-15.6%</td>
<td>7.3%</td>
<td>3.6%</td>
<td>-22.5%</td>
<td>1.3%</td>
<td>-11.1%</td>
<td>-12.6%</td>
<td>4.3%</td>
<td>-48.8%</td>
</tr>
</tbody>
</table>


 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0910231.gif" v:shapes="_x0000_s1026" align="left" height="258" hspace="12" width="203">
Markit PMIS are up-beat - The
goods news for EMU was that the Markit monthly look-ahead PMI reading
for October improved overall and for each of MFG and Services. The MFG
reading actually showed expansion for the first time since May of 2008.
Overall the EMU area seems to be continuing its progress despite Italy
&#8217;s troubles. 

Adding to the sense of good news in the face of the UK &#8217;s
ominous GDP drop was an improvement in Germany &#8217;s IFO index as business
climate improved along with current conditions and
expectations.
A background report from the OECD demonstrated that world
trade flows had stabilized in 2009-Q2. To
be sure it remains a day of mixed data but putting the UK &#8217;s GDP report
aside the news elsewhere was pretty upbeat. Dropping UK GDP is a big
fly in the ointment, but on the whole the signals from the UK economy
have not turned uniformly glum. Until GDP was reported, based on data
in hand, economists had expected a rise in GDP. Sometimes GDP
accounting can have this effect. While GDP is the best comprehensive
measure of how an economy is doing, around economic turning points
oddities with trade and inventories can send mixed the signals more
than they should. While we need to be wary of the UK economy&#8217;s
performance, on the whole the global economy seems to be in an upswing
and doing better. Ultimately that will help the UK too.

</body></html>

The EMU economy continues to spin off better economic signals. Orders rose by 2% in August after a 3% rise in July and a 4.2% gain in June. As a result the sequential growth rates are showing explosive growth in orders- up at a 43% [...]

EMU Orders Continue to Rise and Cut Year/Year Drop

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&nbsp;

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091023c.jpg" align="right" border="0" height="265" width="353">
The decline in home prices continued to moderate according the
U.S. House Price Index from the Federal Housing and Finance Agency
(FHFA). The Purchase Only Index for August fell 0.3% and reversed its
July increase. Nevertheless, the year-to-year decline in the nationwide
average of home prices eased to -3.6% from its worst reading of -8.8%
last November. Since their peak in early-2007 home prices nationwide
have fallen 10.7%. The FHFA uses data provided by Fannie Mae and
Freddie Mac and is not value-weighted.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091023d.jpg" align="right" border="0" height="265" width="353">

Notable monthly declines in home prices during August were
logged in the South Atlantic and the New England regions of the
country, though the y/y declines have moderated significantly.
Conversely, prices in the Mountain and in the Pacific regions recovered
m/m but remain down the most of the country's regions versus last
August. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091023e.jpg" align="right" border="0" height="265" width="353">
Prices in the Middle Atlantic and in the East North Central
Regions also fell moderately during August but the y/y declines have
moderated significantly this year.
In the populous East North Central region prices slipped
another 0.6% during August but they were flat year-to-date. Prices also
slipped in the West South Central region but have risen slightly since
December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091023f.jpg" align="right" border="0" height="265" width="353">
Mideast Oil Exporters Face the Crisis Ahead from
the International Monetary Fund can be found <a href="http://blog-imfdirect.imf.org/2009/10/11/mideast-oil-exporters/">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">FHFA
U.S. House Price Index Purchase Only (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3</td>
<td>0.3</td>
<td>-3.6</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-1.1</td>
<td>-0.1</td>
<td>-3.4</td>
<td>-4.6</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle Atlantic</td>
<td>-0.6</td>
<td>0.9</td>
<td>-2.8</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North Central</td>
<td>-0.6</td>
<td>-0.1</td>
<td>-3.4</td>
<td>-4.4</td>
<td>-1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West North Central</td>
<td>0.2</td>
<td>0.1</td>
<td>1.0</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South Atlantic</td>
<td>-1.6</td>
<td>1.2</td>
<td>-5.5</td>
<td>-7.1</td>
<td>1.4</td>
<td>7.1</td>
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<td class="firstcol">&nbsp; East South Central</td>
<td>0.4</td>
<td>-1.1</td>
<td>-0.7</td>
<td>-1.4</td>
<td>3.8</td>
<td>7.2</td>
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<tr>
<td class="firstcol">&nbsp; West South Central</td>
<td>-0.0</td>
<td>-0.6</td>
<td>0.4</td>
<td>0.7</td>
<td>4.7</td>
<td>7.2</td>
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<td class="firstcol">&nbsp; Mountain</td>
<td>0.3</td>
<td>-0.0</td>
<td>-7.8</td>
<td>-6.0</td>
<td>4.0</td>
<td>10.6</td>
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<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>1.1</td>
<td>0.9</td>
<td>-6.5</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
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</body></html>

The decline in home prices continued to moderate according the U.S. House Price Index from the Federal Housing and Finance Agency (FHFA). The Purchase Only Index for August fell 0.3% and reversed its July increase. Nevertheless, the [...]

FHFA Home Price Index Reverses Monthly Gain While Y/Y Loss Eases

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

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**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

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**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

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**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

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**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

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**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

260205C2.jpg

260205D2.jpg

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

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

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

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

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

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

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

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

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