Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007b.jpg" align="right" border="0" height="265" width="353">
Liquidity has long been viewed as having the potential for
fueling inflationary problems for an economy. Before that problem
actually emerges, several "market-based" indicators help provide a
market view of the pricing outlook. While hardly precise, the figures
do give a measure of risk. Some view that risk as an outgrowth of how
much liquidity there is in the economy, and by all measures,
inflationary pressures are set to rise.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007c.jpg" align="right" border="0" height="265" width="353">
So far, the inflationary environment has been tame. Through
August, lower oil prices dropped the y/y change in the CPI to -1.4%
although recent gains in prices have raised the three-month rate to
4.9%. During that period "core" prices power fell to 1.5% on both a
twelve and three-month basis, down from a high of 2.9% during the
summer of 2006.
Let's look at five market-based harbingers of future inflation.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007d.jpg" align="right" border="0" height="265" width="353">
First, the dollar is an indicator of a potential inflationary
threat in that it raises the prices of imported goods relative to
domestically made products. The dollar has been under significant
pressure recently as the weak U.S. economy has forced the Federal
Reserve to lower interest rates to near-zero from above 5% in 2007.
Certainly, recessions abroad have forced rates lower there as well. The
declines, however, have been not as large as in the U.S.
Next, gold &amp; commodity prices give signals of
potential inflationary threats. They do not feed directly significantly
into product prices, but rather they can be a measure of the market's
inflationary psychology. To that end, gold recently has jumped to a
record $1,040 per ounce, up 14% y/y. Copper prices also have been
strong. They have doubled since December while aluminum prices have
risen by one-half.
The interest rate
yield curve gives yet another reading of inflationary psychology in the
credit market. Following inversion as recently as late-2007 the spread
has widened to over 300 basis points, though it recently has narrowed
slightly. Also providing an indication of inflationary risk is the
market for TIPS, or Treasury inflation-protected securities. Recently,
that signal has stabilized after a sharp upturn this spring. From the
U.S. Federal Reserve, two papers discuss the value of TIPS. One, The
TIPS Yield Curve and Inflation Compensation<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007e.jpg" align="right" border="0" height="265" width="353">

 can
be found <a href="http://www.federalreserve.gov/pubs/feds/2008/200805/200805pap.pdf">here</a>
while the other, The
U.S. Treasury Yield Curve: 1961 to the Present can be found <a href="http://www.federalreserve.gov/Pubs/feds/2006/200628/200628pap.pdf">here</a>.

Money supply growth also can fuel inflation, directly through
a heightened demand for goods and services, or just through increased
liquidity. The Fed raised the growth rate in M2 to nearly 20% in the
aftermath of the crash in stock prices last year. Instead of spending,
consumers have chosen to lift their savings to a 3-4% rate from one
percent early last year. Lately, money growth has been scaled back
radically to near zero or less. In tandem, growth in the monetary base
has been dropped. Nevertheless, the liquidity provided earlier by the
Fed has not been drained.
What is money being used for? A measure of the degree to which
money is being spent or that savings are being rebuilt is the velocity
of money, i.e., the ratio of GDP to the money supply. Here the message
is clear. Recent money creation is being used for personal liquidity
rather than spending power. The ratio recently continued its collapse
and fell to 8.6 from its high near 10.5 last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007f.jpg" align="right" border="0" height="265" width="353">
Velocity tends to
fall during periods of declining interest rates and the recent decline
has been to the lowest level since the recession of 2001.
So far, the pieces of the puzzle suggest a coming problem of
rising prices. What could diffuse this problem is a concerted effort by
the Fed to rein in the growth of money. That may already have begun as
indicated by no growth in M2 since the spring. However, that's only one
of the above measures that points to a diminished inflationary threat.
Thus, more aggressive action seems warranted. Recent speculation of the
Fed delaying an interest rate increase until later next year is not
encouraging.
</body></html>

Liquidity has long been viewed as having the potential for fueling inflationary problems for an economy. Before that problem actually emerges, several "market-based" indicators help provide a market view of the pricing outlook. While [...]

Several Indicators Signal U.S. Inflationary Upturn

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007a.jpg" align="left" border="0" height="265" width="353">
Order Trends: German new orders growth was
extended as foreign orders snapped back after a one-month decline.
Domestic orders fell by 1.9% after surging by 9.5% in July. Orders have
been rising steadily, strongly, over the past six months with domestic
orders up in five of those six months and foreign orders up in four of
those six months. Both series are showing continuing acceleration not
just growth. In the current quarter domestic orders are outpacing on
the back of a one month 9.5% spurt in orders in July as the new quarter
began. 
 

Foreign order sources: Orders from
countries outside the euro zone alone jumped 5.9%, in August while
foreign demand for German manufactured goods from the other 15
countries sharing the euro rose by just 2.8% in August from the month
earlier. Growth outside of the e-Zone drove German orders this past
month. 
 

Euro-Area policy cuts no slack - Apart
from orders, the European Commission Wednesday warned nine countries,
including Germany, that their budget deficits are too large. This is
the legacy effect of having used domestic deficit spending to bolster
the economy in the recession. That policy response was good thing, but
it now puts those countries afoul of EU Commission rules. 
 

Out of touch with reality? The warning
comes at an odd time since Euro-central bankers and policy officials in
the US have underscored that the time is not right to withdraw
stimulus. Hanging the &#8216;Sword of Damocles&#8217; over the heads of the various
ECB nations does not seem like the right policy tilt to encourage them
to keep their stimulus efforts in place. It sounds a lot like pressure
to get you house in order NOW! The EU Commission is using bad judgment
and being too strict on rules of evaluations at a time like this. Yes
it is just this sort of thinking that keeps the euro strong but it also
unduly complicates and hampers policy. This stance reminds me of the
ECB&#8217;s problems in cutting rates in timely fashion in the recession. The
target rate ceiling on the HICP hampered the ECB in the pits of the
crisis. It cut rates as a part of an &#8216;international effort&#8217;, using that
as an excuse to cut rates with headline inflation well over its ceiling
at the time. I suppose we are to understand that this warning from the
EU Commission as a formality that has come as scheduled. But in times
such as these what is the merit? Does this act brand the EU Commission
tough or as out of touch? 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</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>Year Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>1.4%</td>
<td>3.1%</td>
<td>3.8%</td>
<td>38.7%</td>
<td>17.8%</td>
<td>-21.1%</td>
<td>-2.4%</td>
<td>43.7%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>4.6%</td>
<td>-2.4%</td>
<td>6.9%</td>
<td>42.1%</td>
<td>19.2%</td>
<td>-24.0%</td>
<td>-3.8%</td>
<td>30.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.9%</td>
<td>9.5%</td>
<td>0.5%</td>
<td>35.5%</td>
<td>16.4%</td>
<td>-17.6%</td>
<td>-0.9%</td>
<td>59.5%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="9">Real
Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>2.7%</td>
<td>-0.5%</td>
<td>1.1%</td>
<td>13.8%</td>
<td>6.7%</td>
<td>-16.6%</td>
<td>1.8%</td>
<td>14.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-8.4%</td>
<td>-3.0%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>1.6%</td>
<td>0.5%</td>
<td>-2.6%</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>-20.6%</td>
<td>-1.8%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurable</td>
<td>0.2%</td>
<td>-0.9%</td>
<td>0.5%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-6.2%</td>
<td>-3.2%</td>
<td>-6.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>4.2%</td>
<td>-2.0%</td>
<td>1.4%</td>
<td>15.4%</td>
<td>7.4%</td>
<td>-20.9%</td>
<td>4.8%</td>
<td>18.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.5%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>23.9%</td>
<td>11.3%</td>
<td>-16.2%</td>
<td>1.0%</td>
<td>22.9%</td>
</tr>
<tr>
<td class="firstcol">All Manufacturing Sales</td>
<td>2.6%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>13.8%</td>
<td>6.7%</td>
<td>-16.9%</td>
<td>1.9%</td>
<td>14.3%</td>
</tr>
</tbody>
</table>
</body></html>

Order Trends: German new orders growth was extended as foreign orders snapped back after a one-month decline. Domestic orders fell by 1.9% after surging by 9.5% in July. Orders have been rising steadily, strongly, over the past six [...]

German Orders Growth Extended

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007a.jpg" align="left" border="0" height="265" width="353">
Order Trends: German new orders growth was
extended as foreign orders snapped back after a one-month decline.
Domestic orders fell by 1.9% after surging by 9.5% in July. Orders have
been rising steadily, strongly, over the past six months with domestic
orders up in five of those six months and foreign orders up in four of
those six months. Both series are showing continuing acceleration not
just growth. In the current quarter domestic orders are outpacing on
the back of a one month 9.5% spurt in orders in July as the new quarter
began. 
 

Foreign order sources: Orders from
countries outside the euro zone alone jumped 5.9%, in August while
foreign demand for German manufactured goods from the other 15
countries sharing the euro rose by just 2.8% in August from the month
earlier. Growth outside of the e-Zone drove German orders this past
month. 
 

Euro-Area policy cuts no slack - Apart
from orders, the European Commission Wednesday warned nine countries,
including Germany, that their budget deficits are too large. This is
the legacy effect of having used domestic deficit spending to bolster
the economy in the recession. That policy response was good thing, but
it now puts those countries afoul of EU Commission rules. 
 

Out of touch with reality? The warning
comes at an odd time since Euro-central bankers and policy officials in
the US have underscored that the time is not right to withdraw
stimulus. Hanging the &#8216;Sword of Damocles&#8217; over the heads of the various
ECB nations does not seem like the right policy tilt to encourage them
to keep their stimulus efforts in place. It sounds a lot like pressure
to get you house in order NOW! The EU Commission is using bad judgment
and being too strict on rules of evaluations at a time like this. Yes
it is just this sort of thinking that keeps the euro strong but it also
unduly complicates and hampers policy. This stance reminds me of the
ECB&#8217;s problems in cutting rates in timely fashion in the recession. The
target rate ceiling on the HICP hampered the ECB in the pits of the
crisis. It cut rates as a part of an &#8216;international effort&#8217;, using that
as an excuse to cut rates with headline inflation well over its ceiling
at the time. I suppose we are to understand that this warning from the
EU Commission as a formality that has come as scheduled. But in times
such as these what is the merit? Does this act brand the EU Commission
tough or as out of touch? 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</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>Year Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>1.4%</td>
<td>3.1%</td>
<td>3.8%</td>
<td>38.7%</td>
<td>17.8%</td>
<td>-21.1%</td>
<td>-2.4%</td>
<td>43.7%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>4.6%</td>
<td>-2.4%</td>
<td>6.9%</td>
<td>42.1%</td>
<td>19.2%</td>
<td>-24.0%</td>
<td>-3.8%</td>
<td>30.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.9%</td>
<td>9.5%</td>
<td>0.5%</td>
<td>35.5%</td>
<td>16.4%</td>
<td>-17.6%</td>
<td>-0.9%</td>
<td>59.5%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="9">Real
Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>2.7%</td>
<td>-0.5%</td>
<td>1.1%</td>
<td>13.8%</td>
<td>6.7%</td>
<td>-16.6%</td>
<td>1.8%</td>
<td>14.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-8.4%</td>
<td>-3.0%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>1.6%</td>
<td>0.5%</td>
<td>-2.6%</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>-20.6%</td>
<td>-1.8%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurable</td>
<td>0.2%</td>
<td>-0.9%</td>
<td>0.5%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-6.2%</td>
<td>-3.2%</td>
<td>-6.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>4.2%</td>
<td>-2.0%</td>
<td>1.4%</td>
<td>15.4%</td>
<td>7.4%</td>
<td>-20.9%</td>
<td>4.8%</td>
<td>18.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.5%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>23.9%</td>
<td>11.3%</td>
<td>-16.2%</td>
<td>1.0%</td>
<td>22.9%</td>
</tr>
<tr>
<td class="firstcol">All Manufacturing Sales</td>
<td>2.6%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>13.8%</td>
<td>6.7%</td>
<td>-16.9%</td>
<td>1.9%</td>
<td>14.3%</td>
</tr>
</tbody>
</table>
 
Several Indicators Signal U.S.
Inflationary Upturn 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007b.jpg" align="right" border="0" height="265" width="353">
Liquidity has long been viewed as having the potential for
fueling inflationary problems for an economy. Before that problem
actually emerges, several "market-based" indicators help provide a
market view of the pricing outlook. While hardly precise, the figures
do give a measure of risk. Some view that risk as an outgrowth of how
much liquidity there is in the economy, and by all measures,
inflationary pressures are set to rise.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007c.jpg" align="right" border="0" height="265" width="353">
So far, the inflationary environment has been tame. Through
August, lower oil prices dropped the y/y change in the CPI to -1.4%
although recent gains in prices have raised the three-month rate to
4.9%. During that period "core" prices power fell to 1.5% on both a
twelve and three-month basis, down from a high of 2.9% during the
summer of 2006.
Let's look at five market-based harbingers of future inflation.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007d.jpg" align="right" border="0" height="265" width="353">
First, the dollar is an indicator of a potential inflationary
threat in that it raises the prices of imported goods relative to
domestically made products. The dollar has been under significant
pressure recently as the weak U.S. economy has forced the Federal
Reserve to lower interest rates to near-zero from above 5% in 2007.
Certainly, recessions abroad have forced rates lower there as well. The
declines, however, have been not as large as in the U.S.
Next, gold &amp; commodity prices give signals of
potential inflationary threats. They do not feed directly significantly
into product prices, but rather they can be a measure of the market's
inflationary psychology. To that end, gold recently has jumped to a
record $1,040 per ounce, up 14% y/y. Copper prices also have been
strong. They have doubled since December while aluminum prices have
risen by one-half.
The interest rate
yield curve gives yet another reading of inflationary psychology in the
credit market. Following inversion as recently as late-2007 the spread
has widened to over 300 basis points, though it recently has narrowed
slightly. Also providing an indication of inflationary risk is the
market for TIPS, or Treasury inflation-protected securities. Recently,
that signal has stabilized after a sharp upturn this spring. From the
U.S. Federal Reserve, two papers discuss the value of TIPS. One, The
TIPS Yield Curve and Inflation Compensation<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007e.jpg" align="right" border="0" height="265" width="353">

 can
be found <a href="http://www.federalreserve.gov/pubs/feds/2008/200805/200805pap.pdf">here</a>
while the other, The
U.S. Treasury Yield Curve: 1961 to the Present can be found <a href="http://www.federalreserve.gov/Pubs/feds/2006/200628/200628pap.pdf">here</a>.

Money supply growth also can fuel inflation, directly through
a heightened demand for goods and services, or just through increased
liquidity. The Fed raised the growth rate in M2 to nearly 20% in the
aftermath of the crash in stock prices last year. Instead of spending,
consumers have chosen to lift their savings to a 3-4% rate from one
percent early last year. Lately, money growth has been scaled back
radically to near zero or less. In tandem, growth in the monetary base
has been dropped. Nevertheless, the liquidity provided earlier by the
Fed has not been drained.
What is money being used for? A measure of the degree to which
money is being spent or that savings are being rebuilt is the velocity
of money, i.e., the ratio of GDP to the money supply. Here the message
is clear. Recent money creation is being used for personal liquidity
rather than spending power. The ratio recently continued its collapse
and fell to 8.6 from its high near 10.5 last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007f.jpg" align="right" border="0" height="265" width="353">
Velocity tends to
fall during periods of declining interest rates and the recent decline
has been to the lowest level since the recession of 2001.
So far, the pieces of the puzzle suggest a coming problem of
rising prices. What could diffuse this problem is a concerted effort by
the Fed to rein in the growth of money. That may already have begun as
indicated by no growth in M2 since the spring. However, that's only one
of the above measures that points to a diminished inflationary threat.
Thus, more aggressive action seems warranted. Recent speculation of the
Fed delaying an interest rate increase until later next year is not
encouraging.
 
U.S. Consumer Credit Outstanding
Continues To Fall 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 7, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007g.jpg" align="right" border="0" height="265" width="353">There's
been no let-up in the deleveraging of consumer balance sheets. For the
seventh consecutive month, the Federal Reserve reported that consumer
credit outstanding has fallen. During August, it was down by $12.0, or
4.0% y/y, and the sharper July decline was revised only slightly
shallower. The latest was the eleventh since last summer. The magnitude
of the cutbacks continues to impress as the y/y change amounted to a
record 4.4% drop. Double-digit monthly declines have prevailed all this
year. The latest decline was roughly double expectations.
Usage of
non-revolving credit (autos &amp; other consumer durables), which
accounts for nearly two-thirds of the total, fell $2.1B after the
record $16.6B July drop. The 2.4% y/y decline is near the record.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007h.jpg" align="right" border="0" height="265" width="353">
Additionally weighing on overall credit has been the tight rein on
revolving credit usage. During August, revolving credit outstanding
fell a near-record $9.9B for the eleventh consecutive monthly drop.
Year-to-year the 7.8% decline is by far the record as consumers left
their credit cards in their wallets.· With these declines, consumers
have been successful in reducing credit outstanding as a percentage of
disposable income to 22.6% from its 2005 high of 24.4%. This compares
to the low near 16% in the early-1990s. Now that the
"shop-till-you-drop" mantra has been diffused by the aging population
of the U.S., a return to a permanently lower level of credit usage is
likely.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007i.jpg" align="right" border="0" height="265" width="353">Finance
companies (-11.5% y/y) and savings institutions
(-18.5% y/y) have seen the largest pullbacks in credit extension while
commercial banks (+0.1% y/y) and credit unions continue to see
positive, though diminished growth. The Federal government and Sallie
Mae continued to lend during August by 20.6% y/y which was the
strongest growth rate since early 1991. These figures are the major
input to the Fed's quarterly Flow of Funds accounts for the household
sector.
Credit data are available in Haver's USECON
database.&nbsp; The Flow of Funds data are in Haver's FFUNDS
database.
Predicting Crises, Part II: Did Anything Matter
(to Everybody)? from the Federal Reserve Bank of San
Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-30.html">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit Outstanding (m/m Chg, SAAR)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-12.0B</td>
<td>&nbsp;$-15.0B</td>
<td>-4.0%</td>
<td>1.6%</td>
<td>5.6%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-9.9B</td>
<td>$-2.4B</td>
<td>-7.8%</td>
<td>1.9%</td>
<td>7.8%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-2.1B</td>
<td>$-16.6B</td>
<td>-2.4%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007a.jpg" align="left" border="0" height="265" width="353">
Order Trends: German new orders growth was
extended as foreign orders snapped back after a one-month decline.
Domestic orders fell by 1.9% after surging by 9.5% in July. Orders have
been rising steadily, strongly, over the past six months with domestic
orders up in five of those six months and foreign orders up in four of
those six months. Both series are showing continuing acceleration not
just growth. In the current quarter domestic orders are outpacing on
the back of a one month 9.5% spurt in orders in July as the new quarter
began. 
 

Foreign order sources: Orders from
countries outside the euro zone alone jumped 5.9%, in August while
foreign demand for German manufactured goods from the other 15
countries sharing the euro rose by just 2.8% in August from the month
earlier. Growth outside of the e-Zone drove German orders this past
month. 
 

Euro-Area policy cuts no slack - Apart
from orders, the European Commission Wednesday warned nine countries,
including Germany, that their budget deficits are too large. This is
the legacy effect of having used domestic deficit spending to bolster
the economy in the recession. That policy response was good thing, but
it now puts those countries afoul of EU Commission rules. 
 

Out of touch with reality? The warning
comes at an odd time since Euro-central bankers and policy officials in
the US have underscored that the time is not right to withdraw
stimulus. Hanging the &#8216;Sword of Damocles&#8217; over the heads of the various
ECB nations does not seem like the right policy tilt to encourage them
to keep their stimulus efforts in place. It sounds a lot like pressure
to get you house in order NOW! The EU Commission is using bad judgment
and being too strict on rules of evaluations at a time like this. Yes
it is just this sort of thinking that keeps the euro strong but it also
unduly complicates and hampers policy. This stance reminds me of the
ECB&#8217;s problems in cutting rates in timely fashion in the recession. The
target rate ceiling on the HICP hampered the ECB in the pits of the
crisis. It cut rates as a part of an &#8216;international effort&#8217;, using that
as an excuse to cut rates with headline inflation well over its ceiling
at the time. I suppose we are to understand that this warning from the
EU Commission as a formality that has come as scheduled. But in times
such as these what is the merit? Does this act brand the EU Commission
tough or as out of touch? 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">German Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</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>Year Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>1.4%</td>
<td>3.1%</td>
<td>3.8%</td>
<td>38.7%</td>
<td>17.8%</td>
<td>-21.1%</td>
<td>-2.4%</td>
<td>43.7%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>4.6%</td>
<td>-2.4%</td>
<td>6.9%</td>
<td>42.1%</td>
<td>19.2%</td>
<td>-24.0%</td>
<td>-3.8%</td>
<td>30.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.9%</td>
<td>9.5%</td>
<td>0.5%</td>
<td>35.5%</td>
<td>16.4%</td>
<td>-17.6%</td>
<td>-0.9%</td>
<td>59.5%</td>
</tr>
<tr class="even">
<td class="firstcol">Real Sector Sales</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>2.7%</td>
<td>-0.5%</td>
<td>1.1%</td>
<td>13.8%</td>
<td>6.7%</td>
<td>-16.6%</td>
<td>1.8%</td>
<td>14.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-8.4%</td>
<td>-3.0%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>1.6%</td>
<td>0.5%</td>
<td>-2.6%</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>-20.6%</td>
<td>-1.8%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurable</td>
<td>0.2%</td>
<td>-0.9%</td>
<td>0.5%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-6.2%</td>
<td>-3.2%</td>
<td>-6.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>4.2%</td>
<td>-2.0%</td>
<td>1.4%</td>
<td>15.4%</td>
<td>7.4%</td>
<td>-20.9%</td>
<td>4.8%</td>
<td>18.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.5%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>23.9%</td>
<td>11.3%</td>
<td>-16.2%</td>
<td>1.0%</td>
<td>22.9%</td>
</tr>
<tr>
<td class="firstcol">All Manufacturing Sales</td>
<td>2.6%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>13.8%</td>
<td>6.7%</td>
<td>-16.9%</td>
<td>1.9%</td>
<td>14.3%</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006g.jpg" width="353">
Indications that consumer spending might be improving faded during the last several weeks. During the latest week, chain store sales slipped 0.3% leaving them 0.6% below September after that month&#39;s 0.7% decline.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Prospects for improvement in sales seem limited. The leading indicator of sales slipped 0.3% (-0.1% y/y) during the latest week though it had risen somewhat earlier this summer.
A Bit Better, But Very Far From Best are yesterday&#39;s comments by New York Fed President William C. Dudley and they are available <a href="http://www.newyorkfed.org/newsevents/speeches/2009/dud091005.html">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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/03/09</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</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>486.5</td>
<td>485.0</td>
<td>1.0%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

Indications that consumer spending might be improving faded during the last several weeks. During the latest week, chain store sales slipped 0.3% leaving them 0.6% below September after that month's 0.7% decline. During the last ten [...]

Weekly Chain Store Sales Tick Higher After Sharp September Decline

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006d.jpg" align="right" border="0" height="265" width="353">The Central
Bank of Australia raised its policy interest rate from 3.00% to 3.25%
today, the first of the Group of 20 to increase interest rates since
the start of the global financial crisis in late 2007. In
relative terms, the recession in Australia has been mild.&nbsp; The
first two charts comparing the levels in the rate of unemployment and
the changes in Gross Domestic Product with those in the United States
and the Euro Area show that there has been considerably less
unemployment in Australia and that its decline in total activity has
been milder and of shorter duration.&nbsp; GDP in Australia has
actually increased in the first two quarters of 2009.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006e.jpg" align="right" border="0" height="265" width="353">
Among the
reasons for Australia's better performance is the condition of its
financial system.&nbsp;&nbsp; Australia's financial system had
not been disrupted to the extent that those of the Americans, British
and Europeans had been by unsound practices.&nbsp; Moreover, demand
for Australian natural resources has been maintained at relatively high
levels.&nbsp; After a slow down in late 2008 Australia's most
important trading partner, China, rapidly regained its high growth
trend in 2009 and its demand for Australia's
resources.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006f.jpg" align="right" border="0" height="265" width="353">
Economic conditions in Australia in
recent months have been stronger than expected.&nbsp;&nbsp; The
Reserve Bank of Australia publishes quarterly forecasts of
GDP.&nbsp; Its last two forecasts of May 2009 and August 2009 are
shown in the third chart compared with the actual results in the first
and second quarters of 2009.&nbsp; In May, the Bank was forecasting
year over year percent declines for the four quarters of 2009 and for
the first quarter of 2010.&nbsp; The Bank raised its forecast in
August but still actual conditions were stronger than expected. The
bank's forecast for the first and second quarters of this
year--0.40%&nbsp; and 0.25% year over year increases-were below the
actual year over year increases of 0.32% and 0.53% .&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
UNEMPLOYMENT RATE (%)</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09&nbsp;</th>
<th scope="col">APR 09&nbsp;</th>
<th scope="col">Mar 09&nbsp;</th>
<th scope="col">FEB 09 </th>
<th scope="col"> Jan 09 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Australia</td>
<td>5.8</td>
<td>5.8</td>
<td>5.6</td>
<td>5.7</td>
<td>5.5</td>
<td>5.7</td>
<td>5.3</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>9.6</td>
<td>9.5</td>
<td>9.4</td>
<td>9.3</td>
<td>9.2</td>
<td>9.0</td>
<td>8.8</td>
<td>8.5</td>
</tr>
<tr class="odd">
<td class="firstcol">U. S.</td>
<td>9.7</td>
<td>9.4</td>
<td>9.5</td>
<td>9.4</td>
<td>8.9</td>
<td>8.5</td>
<td>8.1</td>
<td>7.6</td>
</tr>
<tr>
<td class="firstcol">GDP (Q/Q %
chg)</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08&nbsp;</td>
<td>Q2 08&nbsp;</td>
<td>Q1 09&nbsp;</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Australia</td>
<td>0.62</td>
<td>0.40</td>
<td>-0.71</td>
<td>0.32</td>
<td>0.34</td>
<td>0.74</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>-0.12</td>
<td>-2.45</td>
<td>-1.81</td>
<td>-0.35</td>
<td>-.033</td>
<td>0.79</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">U. S.</td>
<td>-0.18</td>
<td>-1.65</td>
<td>-1.37</td>
<td>-0.68</td>
<td>0.36</td>
<td>-0.18</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Central Bank of Australia raised its policy interest rate from 3.00% to 3.25% today, the first of the Group of 20 to increase interest rates since the start of the global financial crisis in late 2007. In relative terms, the [...]

Central Bank Of Australia Raises Interest Rate 25 Basis Points To 3.25%

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006a.jpg">
The pump price for regular gasoline fell last week to the lowest level since late-July. At an average $2.50 per gallon the price dropped a nickel from the prior week and may have broken out of the sideways pattern since early-June. These prices compare to the December low of $1.61. Yesterday, prices fell further. The wholesale gasoline price was down to $1.65 per gallon. Prices had reached a high in early-August of $2.03. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
During August, the consumer price index for gasoline recouped the July decline with a not seasonally adjusted 3.3% increase. Seasonally adjusted gas prices were quite firm and rose 9.1% m/m, up 40.3% YTD.
Crude oil prices have led the decline in refined product prices. Light sweet crude oil prices (WTI) fell to $68.41 per barrel, though that still was up from the December low of $32.37. Yesterday, the spot market price for light sweet crude oil fell further to $66.84 per barrel versus a daily high of $71.55 last week.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006b.jpg">
The demand for gasoline continued to improve through mid-month. The y/y rise of 1.1% was the first meaningful positive comparison since early-2007. Demand for residual fuel oil slacked off from its earlier strength and fell 5.1% y/y while distillate demand is off 13.2% y/y. Finally, oil remains plentiful as evidenced by a 16.5% y/y rise in inventories of crude oil &amp; petroleum products. Inventories of gasoline recently have surged and are up 19.2% versus last year. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Natural gas prices increased again last week to an average of $3.48 per mmbtu (-54.9% y/y) but they remained down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu. Yesterday prices were up from last week&#39;s level at $3.54/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">09/28/09</th>
<th scope="col">09/21/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.50</td>
<td>2.55</td>
<td>-31.2%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>68.41</td>
<td>71.36</td>
<td>-37.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
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The pump price for regular gasoline fell last week to the lowest level since late-July. At an average $2.50 per gallon the price dropped a nickel from the prior week and may have broken out of the sideways pattern since early-June. [...]

Weekly Gasoline Prices Fall To Lowest Level In One Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006a.jpg" align="left" border="0">
The pump price for regular gasoline fell
last week to the lowest level since late-July. At an average $2.50 per
gallon the price dropped a nickel from the prior week and may have
broken out of the sideways pattern since early-June. These prices
compare to the December low of $1.61. Yesterday, prices fell further.
The wholesale gasoline price was down to $1.65 per gallon. Prices had
reached a high in early-August of $2.03. The figures are reported by
the U.S. Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
During August, the consumer price index for gasoline recouped
the July decline with a not seasonally adjusted 3.3% increase.
Seasonally adjusted gas prices were quite firm and rose 9.1% m/m, up
40.3% YTD.
Crude oil prices have led the decline in
refined product prices. Light sweet crude oil prices (WTI) fell to
$68.41 per barrel, though that still was up from the December low of
$32.37. Yesterday, the spot market price for light sweet crude oil fell
further to $66.84 per barrel versus a daily high of $71.55 last week.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006b.jpg" align="right" border="0">
The demand for gasoline continued to improve through
mid-month. The y/y rise of 1.1% was the first meaningful positive
comparison since early-2007. Demand for residual fuel oil slacked off
from its earlier strength and fell 5.1% y/y while distillate demand is
off 13.2% y/y. Finally, oil remains plentiful as evidenced by a 16.5%
y/y rise in inventories of crude oil &amp; petroleum products.
Inventories of gasoline recently have surged and are up 19.2% versus
last year. The figures on crude oil production and inventories are
available in Haver's OILWKLY database.
Natural gas prices increased again last week to an average of
$3.48 per mmbtu (-54.9% y/y) but they remained down by three-quarters
from the high reached in early-July of last year of $13.19/mmbtu.
Yesterday prices were up from last week's level at $3.54/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">09/28/09</th>
<th scope="col">09/21/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.50</td>
<td>2.55</td>
<td>-31.2%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>68.41</td>
<td>71.36</td>
<td>-37.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
 German Orders Growth Extended 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091007a.jpg" align="left" border="0" height="265" width="353">
Order Trends: German new orders growth was
extended as foreign orders snapped back after a one-month decline.
Domestic orders fell by 1.9% after surging by 9.5% in July. Orders have
been rising steadily, strongly, over the past six months with domestic
orders up in five of those six months and foreign orders up in four of
those six months. Both series are showing continuing acceleration not
just growth. In the current quarter domestic orders are outpacing on
the back of a one month 9.5% spurt in orders in July as the new quarter
began. 
 

Foreign order sources: Orders from
countries outside the euro zone alone jumped 5.9%, in August while
foreign demand for German manufactured goods from the other 15
countries sharing the euro rose by just 2.8% in August from the month
earlier. Growth outside of the e-Zone drove German orders this past
month. 
 

Euro-Area policy cuts no slack - Apart
from orders, the European Commission Wednesday warned nine countries,
including Germany, that their budget deficits are too large. This is
the legacy effect of having used domestic deficit spending to bolster
the economy in the recession. That policy response was good thing, but
it now puts those countries afoul of EU Commission rules. 
 

Out of touch with reality? The warning
comes at an odd time since Euro-central bankers and policy officials in
the US have underscored that the time is not right to withdraw
stimulus. Hanging the &#8216;Sword of Damocles&#8217; over the heads of the various
ECB nations does not seem like the right policy tilt to encourage them
to keep their stimulus efforts in place. It sounds a lot like pressure
to get you house in order NOW! The EU Commission is using bad judgment
and being too strict on rules of evaluations at a time like this. Yes
it is just this sort of thinking that keeps the euro strong but it also
unduly complicates and hampers policy. This stance reminds me of the
ECB&#8217;s problems in cutting rates in timely fashion in the recession. The
target rate ceiling on the HICP hampered the ECB in the pits of the
crisis. It cut rates as a part of an &#8216;international effort&#8217;, using that
as an excuse to cut rates with headline inflation well over its ceiling
at the time. I suppose we are to understand that this warning from the
EU Commission as a formality that has come as scheduled. But in times
such as these what is the merit? Does this act brand the EU Commission
tough or as out of touch? 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</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>Year Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>1.4%</td>
<td>3.1%</td>
<td>3.8%</td>
<td>38.7%</td>
<td>17.8%</td>
<td>-21.1%</td>
<td>-2.4%</td>
<td>43.7%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>4.6%</td>
<td>-2.4%</td>
<td>6.9%</td>
<td>42.1%</td>
<td>19.2%</td>
<td>-24.0%</td>
<td>-3.8%</td>
<td>30.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.9%</td>
<td>9.5%</td>
<td>0.5%</td>
<td>35.5%</td>
<td>16.4%</td>
<td>-17.6%</td>
<td>-0.9%</td>
<td>59.5%</td>
</tr>
<tr class="even">
<td class="firstcol">Real Sector Sales</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>2.7%</td>
<td>-0.5%</td>
<td>1.1%</td>
<td>13.8%</td>
<td>6.7%</td>
<td>-16.6%</td>
<td>1.8%</td>
<td>14.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-8.4%</td>
<td>-3.0%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>1.6%</td>
<td>0.5%</td>
<td>-2.6%</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>-20.6%</td>
<td>-1.8%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurable</td>
<td>0.2%</td>
<td>-0.9%</td>
<td>0.5%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-6.2%</td>
<td>-3.2%</td>
<td>-6.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>4.2%</td>
<td>-2.0%</td>
<td>1.4%</td>
<td>15.4%</td>
<td>7.4%</td>
<td>-20.9%</td>
<td>4.8%</td>
<td>18.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.5%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>23.9%</td>
<td>11.3%</td>
<td>-16.2%</td>
<td>1.0%</td>
<td>22.9%</td>
</tr>
<tr>
<td class="firstcol">All Manufacturing Sales</td>
<td>2.6%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>13.8%</td>
<td>6.7%</td>
<td>-16.9%</td>
<td>1.9%</td>
<td>14.3%</td>
</tr>
</tbody>
</table>
 Central Bank Of Australia Raises
Interest Rate 25 Basis Points To 3.25% 
by <a href="/comment/Curley.html">Louise
Curley</a> October 6, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006d.jpg" align="right" border="0" height="265" width="353">The Central
Bank of Australia raised its policy interest rate from 3.00% to 3.25%
today, the first of the Group of 20 to increase interest rates since
the start of the global financial crisis in late 2007.
 In
relative terms, the recession in Australia has been mild.&nbsp; The
first two charts comparing the levels in the rate of unemployment and
the changes in Gross Domestic Product with those in the United States
and the Euro Area show that there has been considerably less
unemployment in Australia and that its decline in total activity has
been milder and of shorter duration.&nbsp; GDP in Australia has
actually increased in the first two quarters of 2009.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006e.jpg" align="right" border="0" height="265" width="353">
Among the
reasons for Australia's better performance is the condition of its
financial system.&nbsp;&nbsp; Australia's financial system had
not been disrupted to the extent that those of the Americans, British
and Europeans had been by unsound practices.&nbsp; Moreover, demand
for Australian natural resources has been maintained at relatively high
levels.&nbsp; After a slow down in late 2008 Australia's most
important trading partner, China, rapidly regained its high growth
trend in 2009 and its demand for Australia's
resources.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006f.jpg" align="right" border="0" height="265" width="353">Economic
conditions in Australia in
recent months have been stronger than expected.&nbsp;&nbsp; The
Reserve Bank of Australia publishes quarterly forecasts of
GDP.&nbsp; Its last two forecasts of May 2009 and August 2009 are
shown in the third chart compared with the actual results in the first
and second quarters of 2009.&nbsp; In May, the Bank was forecasting
year over year percent declines for the four quarters of 2009 and for
the first quarter of 2010.&nbsp; The Bank raised its forecast in
August but still actual conditions were stronger than expected. The
bank's forecast for the first and second quarters of this
year--0.40%&nbsp; and 0.25% year over year increases-were below the
actual year over year increases of 0.32% and 0.53% .&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
UNEMPLOYMENT RATE (%)</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09&nbsp;</th>
<th scope="col">APR 09&nbsp;</th>
<th scope="col">Mar 09&nbsp;</th>
<th scope="col">FEB 09 </th>
<th scope="col"> Jan 09 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Australia</td>
<td>5.8</td>
<td>5.8</td>
<td>5.6</td>
<td>5.7</td>
<td>5.5</td>
<td>5.7</td>
<td>5.3</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>9.6</td>
<td>9.5</td>
<td>9.4</td>
<td>9.3</td>
<td>9.2</td>
<td>9.0</td>
<td>8.8</td>
<td>8.5</td>
</tr>
<tr class="odd">
<td class="firstcol">U. S.</td>
<td>9.7</td>
<td>9.4</td>
<td>9.5</td>
<td>9.4</td>
<td>8.9</td>
<td>8.5</td>
<td>8.1</td>
<td>7.6</td>
</tr>
<tr>
<td class="firstcol">GDP (Q/Q %
chg)</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08&nbsp;</td>
<td>Q2 08&nbsp;</td>
<td>Q1 09&nbsp;</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Australia</td>
<td>0.62</td>
<td>0.40</td>
<td>-0.71</td>
<td>0.32</td>
<td>0.34</td>
<td>0.74</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>-0.12</td>
<td>-2.45</td>
<td>-1.81</td>
<td>-0.35</td>
<td>-.033</td>
<td>0.79</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">U. S.</td>
<td>-0.18</td>
<td>-1.65</td>
<td>-1.37</td>
<td>-0.68</td>
<td>0.36</td>
<td>-0.18</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
 Weekly Chain Store Sales Tick
Higher After Sharp September Decline 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 6, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091006g.jpg" align="left" border="0" height="265" width="353">
Indications that consumer spending might be improving faded
during the last several weeks. During the latest week, chain store
sales slipped 0.3% leaving them 0.6% below September after that month's
0.7% decline.
During the last ten years there has been a 69% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. The weekly figures are available
in Haver's SURVEYW database.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Prospects for improvement in sales seem limited. The leading
indicator of sales slipped 0.3% (-0.1% y/y) during the latest week
though it had risen somewhat earlier this summer.
A Bit Better, But Very Far From Best are
yesterday's comments by New York Fed President William C. Dudley and
they are available <a href="http://www.newyorkfed.org/newsevents/speeches/2009/dud091005.html">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/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">10/03/09</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</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>486.5</td>
<td>485.0</td>
<td>1.0%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>

</body></html>

Weekly Gasoline Prices Fall ToLowest Level In One Month

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.

260205Z1.jpg

**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.

260205Z2.jpg

**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.

260205Z3.jpg

**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.

260205Z4.jpg

**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.

260205Z5.jpg

**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.

260205Z6.jpg

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

260206E.jpg

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.

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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