Louise Curley

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126g.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126h.jpg" style="width: 312px; height: 265px;">German
business confidence improved in January in contrast to that of
investors and consumers, but it is still relatively subdued.&nbsp;
The IFO institute, which surveys some 7000 executives in manufacturing,
construction, wholesale and retail trade, reports its results in two
ways: in index form with (2000=100) and as a percent balance between
those who see improvement and those who see deterioration.&nbsp;
The index is useful in tracking the ups and downs in confidence, but
the percent balances give some insight into the degree of confidence of
the&nbsp; participants.&nbsp; For example, in January, the
index of current conditions increased to 91.2 from 90.4 in December and
the percent balance increased to -21.0% from -22.6%.&nbsp; Thus
both measures showed an improvement in the appraisal of current
conditions, but the percent balance also showed that there were still
21% more respondents who appraised current conditions negatively than
those who appraised them positively.
 The IFO's
headline measure of confidence, the Business Climate for all industry,
is a combination of the replies of the participants regarding current
conditions and expectations for the future.&nbsp; The percent
balances for the Business Climate, Current Conditions and Expectations
for the future are shown in the first chart.
 The
Business Climate for all industry has improved steadily since March of
this year when it was -42.8% to -9.0% in January.&nbsp; There has
been little change in construction climate.&nbsp; The pessimists
still exceed the optimists by 21.5%.&nbsp; The climate in retail
trade has fared better than that of construction, but the pessimists
still exceed the optimists by 12.8%.&nbsp; The strongest
improvements in confidence have taken place in manufacturing and
wholesale trade climates, where the pessimists now exceed the optimists
by only 4.7% in wholesale trade and 6.6% in manufacturing. These trends
are shown in the second chart.
 Most of the percent balance data in the
latest survey are still negative indicating that the predominant mood
of most German business executives is still pessimistic, or at best,
skeptical. There is, however, one notable change.&nbsp; The latest
survey shows that, for the first time since August 2007, there is a
small, but significant, excess, 3.7%, of optimists over pessimists
regarding business expectations.&nbsp;&nbsp; In November there
was a balance between optimists and pessimists and in December an
excess of optimists of 0.2%.&nbsp;&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">IFO
Business Survey (% balance)</th>
<th scope="col">Jan 10&nbsp;</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Climate</td>
<td>-9.0</td>
<td>-11.5</td>
<td>-12.9</td>
<td>-16.5</td>
<td>-17.8</td>
<td>-19.2</td>
<td>-25.4</td>
<td>-28.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>-21.0</td>
<td>-22.6</td>
<td>-24.9</td>
<td>-28.4</td>
<td>-29.0</td>
<td>-30.6</td>
<td>-34.1</td>
<td>-38.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>3.7</td>
<td>0.2</td>
<td>0.0</td>
<td>-3.9</td>
<td>-5.9</td>
<td>-7.0</td>
<td>-16.1</td>
<td>-18.1</td>
</tr>
<tr>
<td colspan="9" class="firstcol">Business
Climate</td>

</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-6.6</td>
<td>-9.3</td>
<td>-11.4</td>
<td>-16.5</td>
<td>-19.4</td>
<td>-21.2</td>
<td>-29.0</td>
<td>-33.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-21.5</td>
<td>-26.8</td>
<td>-27.3</td>
<td>-25.2</td>
<td>-25.6</td>
<td>-23.8</td>
<td>-25.2</td>
<td>-23.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>-4.7</td>
<td>-6.9</td>
<td>-8.1</td>
<td>-10.6</td>
<td>-12.0</td>
<td>-14.0</td>
<td>-21.8</td>
<td>-24.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Trade</td>
<td>-12.8</td>
<td>-12.3</td>
<td>-12.9</td>
<td>-17.0</td>
<td>-12.6</td>
<td>-14.9</td>
<td>-17.6</td>
<td>-17.1</td>
</tr>
</tbody>
</table>

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German business confidence improved in January in contrast to that of investors and consumers, but it is still relatively subdued. The IFO institute, which surveys some 7000 executives in manufacturing, construction, wholesale and [...]

Less Pessimism Among German Business Executives

Tom Moeller

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126d.jpg" style="width: 353px; height: 265px;" align="right">The
consumer's mood regarding the economy has improved, but after the jump
last spring little headway developed. The Conference Board indicated
that consumer confidence during January rose 4.3% from December after
similar gains during the prior two months. Due to earlier declines,
however, these increases left confidence roughly equal to last May. The
Conference Board data can be found in Haver's CBDB
database. Despite the loss of forward momentum confidence remained up
roughly one-half from last January. During the last ten years there has
been an 87% correlation between the level of consumer confidence and
the y/y change in real consumer spending.
 Consumers' assessment of the
current economic conditions jumped by one-quarter this month but only
back to last summer's high. It remained near the historic low. Jobs
were seen as hard to get by 47.4% of respondents and jobs were seen as
plentiful by only 4.3%. That was up just slightly from the series'
historic low. Business conditions were seen as good by only 9.0% and
that also was near the series' low. Consumers who thought business
conditions were bad rose slightly to 46.1%. While off somewhat from its
high the reading was still nearly the highest since 1983.&nbsp;·
The expectations component of confidence improved slightly m/m and the
index remained near the highest level since late-2007. Most expected
business conditions &amp; employment to remain the same and that's
a vast improvement from the deterioration seen last winter.
Expectations for the inflation rate in twelve months held stable at
5.3%, the lowest level since 2007 and down from last year's high of
7.7%. Interest rates in twelve months were expected to be higher by an
increased 52.3% of respondents, while a reduced 12.5% expected rates to
fall. A greatly increased 36.3% of respondents expected stock prices to
rise. 
 Consumers continued to manage their spending plans
cautiously. A reduced 1.8% plan to buy a home during the next six
months while just 24.7% plan to buy a major appliance. That's versus
30.9% back in 2007. Only 5.1% plan to buy an automobile versus 6.0% in
2007. Just 2.0% plan to buy a new one.
 Real Time
Underlying Inflation Gauges for Monetary Policymakers from
the Federal Reserve Bank of New York is available&nbsp; <a href="http://www.newyorkfed.org/research/staff_reports/sr420.pdf">here</a>.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board&nbsp;(SA, 1985=100)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y %</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>55.9</td>
<td>53.6</td>
<td>50.6</td>
<td>49.5</td>
<td>45.2</td>
<td>57.9</td>
<td>103.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>25.0</td>
<td>20.2</td>
<td>21.2</td>
<td>-15.8</td>
<td>24.0</td>
<td>69.9</td>
<td>128.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>76.5</td>
<td>75.9</td>
<td>70.3</td>
<td>80.0</td>
<td>59.3</td>
<td>50.0</td>
<td>86.4</td>
</tr>
</tbody>
</table>

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The consumer's mood regarding the economy has improved, but after the jump last spring little headway developed. The Conference Board indicated that consumer confidence during January rose 4.3% from December after similar gains during [...]

U.S. Consumer Confidence Improves Modestly

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126a.jpg" style="width: 353px; height: 265px;" align="right">The
housing
market has improved enough to improve pricing power but outright
strength is not at hand. The November S&amp;P/Case Shiller Home
Price Index edged up another 0.2%, about as it did during the prior two
months. The increases in this 20 City Composite index were below those
during the prior three months. However, they were enough to improve the
y/y comparison to -5.3% from its worst of -19.0% last January.
The
narrower 10 City Composite Index also gained 0.2% and the y/y change
improved to -4.5% from -19.4% at its worst. These negative comparisons
by far outpace those during the 1990-91 recession which reached minus
6.3%.· Notable monthly gains in home prices during November were logged
by Los Angeles, San Diego and San Francisco. Positive changes also were
logged in Dallas.
 The Case Shiller home price series are
value-weighted, i.e., a greater index weight is&nbsp; assigned to
more expensive homes. The S&amp;P/Case-Shiller home price series
can be found in Haver's USECON database and the
city data highlighted below is in the REGIONAL
database.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">November m/m</th>
<th scope="col">October&nbsp;&nbsp;
m/m</th>
<th scope="col">September m/m</th>
<th scope="col">Nov. 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">20 City Composite Index</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-5.3%</td>
<td>-15.7%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
<tr>
<td colspan="8">&nbsp; Regional
Indicators</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Atlanta</td>
<td>0.2</td>
<td>-0.4</td>
<td>0.1</td>
<td>-6.2</td>
<td>-8.5</td>
<td>0.7</td>
<td>4.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Boston</td>
<td>0.4</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-0.7</td>
<td>-5.7</td>
<td>-4.0</td>
<td>-1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Chicago</td>
<td>-0.8</td>
<td>-1.0</td>
<td>1.2</td>
<td>-8.5</td>
<td>-10.0</td>
<td>-1.0</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Dallas</td>
<td>0.6</td>
<td>0.2</td>
<td>-0.3</td>
<td>1.4</td>
<td>-3.2</td>
<td>0.5</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Denver</td>
<td>0.3</td>
<td>0.3</td>
<td>0.0</td>
<td>0.5</td>
<td>-4.9</td>
<td>-1.7</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Los Angeles</td>
<td>1.0</td>
<td>0.7</td>
<td>0.7</td>
<td>-3.5</td>
<td>-24.2</td>
<td>-5.2</td>
<td>11.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
New York</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-7.1</td>
<td>-7.4</td>
<td>-2.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
San Francisco</td>
<td>1.5</td>
<td>1.8</td>
<td>1.5</td>
<td>1.0</td>
<td>-24.3</td>
<td>-4.5</td>
<td>4.5</td>
</tr>
</tbody>
</table>

</body></html>

The housing market has improved enough to improve pricing power but outright strength is not at hand. The November S&P/Case Shiller Home Price Index edged up another 0.2%, about as it did during the prior two months. The increases in [...]

Case-Shiller Home Price Gains Are Modest

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126a.jpg" style="width: 353px; height: 265px;" align="right">The
housing
market has improved enough to improve pricing power but outright
strength is not at hand. The November S&amp;P/Case Shiller Home
Price Index edged up another 0.2%, about as it did during the prior two
months. The increases in this 20 City Composite index were below those
during the prior three months. However, they were enough to improve the
y/y comparison to -5.3% from its worst of -19.0% last January.
The
narrower 10 City Composite Index also gained 0.2% and the y/y change
improved to -4.5% from -19.4% at its worst. These negative comparisons
by far outpace those during the 1990-91 recession which reached minus
6.3%.· Notable monthly gains in home prices during November were logged
by Los Angeles, San Diego and San Francisco. Positive changes also were
logged in Dallas.
 The Case Shiller home price series are
value-weighted, i.e., a greater index weight is&nbsp; assigned to
more expensive homes. The S&amp;P/Case-Shiller home price series
can be found in Haver's USECON database and the
city data highlighted below is in the REGIONAL
database.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">November m/m</th>
<th scope="col">October&nbsp;&nbsp;
m/m</th>
<th scope="col">September m/m</th>
<th scope="col">Nov. 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">20 City Composite Index</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-5.3%</td>
<td>-15.7%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
<tr>
<td colspan="8">&nbsp; Regional
Indicators</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Atlanta</td>
<td>0.2</td>
<td>-0.4</td>
<td>0.1</td>
<td>-6.2</td>
<td>-8.5</td>
<td>0.7</td>
<td>4.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Boston</td>
<td>0.4</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-0.7</td>
<td>-5.7</td>
<td>-4.0</td>
<td>-1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Chicago</td>
<td>-0.8</td>
<td>-1.0</td>
<td>1.2</td>
<td>-8.5</td>
<td>-10.0</td>
<td>-1.0</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Dallas</td>
<td>0.6</td>
<td>0.2</td>
<td>-0.3</td>
<td>1.4</td>
<td>-3.2</td>
<td>0.5</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Denver</td>
<td>0.3</td>
<td>0.3</td>
<td>0.0</td>
<td>0.5</td>
<td>-4.9</td>
<td>-1.7</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Los Angeles</td>
<td>1.0</td>
<td>0.7</td>
<td>0.7</td>
<td>-3.5</td>
<td>-24.2</td>
<td>-5.2</td>
<td>11.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
New York</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-7.1</td>
<td>-7.4</td>
<td>-2.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
San Francisco</td>
<td>1.5</td>
<td>1.8</td>
<td>1.5</td>
<td>1.0</td>
<td>-24.3</td>
<td>-4.5</td>
<td>4.5</td>
</tr>
</tbody>
</table>

U.S. Consumer Confidence Improves
Modestly 
by <a href="/comment/Moeller.html">Tom
Moeller&nbsp;</a> December 26, 2009



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126d.jpg" style="width: 353px; height: 265px;" align="right">The
consumer's mood regarding the economy has improved, but after the jump
last spring little headway developed. The Conference Board indicated
that consumer confidence during January rose 4.3% from December after
similar gains during the prior two months. Due to earlier declines,
however, these increases left confidence roughly equal to last May. The
Conference Board data can be found in Haver's CBDB
database.
 Despite the loss of forward momentum confidence remained up
roughly one-half from last January. During the last ten years there has
been an 87% correlation between the level of consumer confidence and
the y/y change in real consumer spending.
 Consumers' assessment of the
current economic conditions jumped by one-quarter this month but only
back to last summer's high. It remained near the historic low. Jobs
were seen as hard to get by 47.4% of respondents and jobs were seen as
plentiful by only 4.3%. That was up just slightly from the series'
historic low. Business conditions were seen as good by only 9.0% and
that also was near the series' low. Consumers who thought business
conditions were bad rose slightly to 46.1%. While off somewhat from its
high the reading was still nearly the highest since 1983.&nbsp;·
The expectations component of confidence improved slightly m/m and the
index remained near the highest level since late-2007. Most expected
business conditions &amp; employment to remain the same and that's
a vast improvement from the deterioration seen last winter.
Expectations for the inflation rate in twelve months held stable at
5.3%, the lowest level since 2007 and down from last year's high of
7.7%. Interest rates in twelve months were expected to be higher by an
increased 52.3% of respondents, while a reduced 12.5% expected rates to
fall. A greatly increased 36.3% of respondents expected stock prices to
rise. 
 Consumers continued to manage their spending plans
cautiously. A reduced 1.8% plan to buy a home during the next six
months while just 24.7% plan to buy a major appliance. That's versus
30.9% back in 2007. Only 5.1% plan to buy an automobile versus 6.0% in
2007. Just 2.0% plan to buy a new one.
 Real Time
Underlying Inflation Gauges for Monetary Policymakers from
the Federal Reserve Bank of New York is available&nbsp; <a href="http://www.newyorkfed.org/research/staff_reports/sr420.pdf">here</a>.&nbsp;
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board&nbsp;(SA, 1985=100)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y %</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>55.9</td>
<td>53.6</td>
<td>50.6</td>
<td>49.5</td>
<td>45.2</td>
<td>57.9</td>
<td>103.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>25.0</td>
<td>20.2</td>
<td>21.2</td>
<td>-15.8</td>
<td>24.0</td>
<td>69.9</td>
<td>128.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>76.5</td>
<td>75.9</td>
<td>70.3</td>
<td>80.0</td>
<td>59.3</td>
<td>50.0</td>
<td>86.4</td>
</tr>
</tbody>
</table>

Less Pessimism Among German
Business Executives 
by <a href="/comment/Curley.html">Louise
Curley</a> December 26, 2009



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126g.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126h.jpg" style="width: 312px; height: 265px;">German
business confidence improved in January in contrast to that of
investors and consumers, but it is still relatively subdued.&nbsp;
The IFO institute, which surveys some 7000 executives in manufacturing,
construction, wholesale and retail trade, reports its results in two
ways: in index form with (2000=100) and as a percent balance between
those who see improvement and those who see deterioration.&nbsp;
The index is useful in tracking the ups and downs in confidence, but
the percent balances give some insight into the degree of confidence of
the&nbsp; participants.&nbsp; For example, in January, the
index of current conditions increased to 91.2 from 90.4 in December and
the percent balance increased to -21.0% from -22.6%.&nbsp; Thus
both measures showed an improvement in the appraisal of current
conditions, but the percent balance also showed that there were still
21% more respondents who appraised current conditions negatively than
those who appraised them positively.
 The IFO's
headline measure of confidence, the Business Climate for all industry,
is a combination of the replies of the participants regarding current
conditions and expectations for the future.&nbsp; The percent
balances for the Business Climate, Current Conditions and Expectations
for the future are shown in the first chart.
 The
Business Climate for all industry has improved steadily since March of
this year when it was -42.8% to -9.0% in January.&nbsp; There has
been little change in construction climate.&nbsp; The pessimists
still exceed the optimists by 21.5%.&nbsp; The climate in retail
trade has fared better than that of construction, but the pessimists
still exceed the optimists by 12.8%.&nbsp; The strongest
improvements in confidence have taken place in manufacturing and
wholesale trade climates, where the pessimists now exceed the optimists
by only 4.7% in wholesale trade and 6.6% in manufacturing. These trends
are shown in the second chart.
 Most of the percent balance data in the
latest survey are still negative indicating that the predominant mood
of most German business executives is still pessimistic, or at best,
skeptical. There is, however, one notable change.&nbsp; The latest
survey shows that, for the first time since August 2007, there is a
small, but significant, excess, 3.7%, of optimists over pessimists
regarding business expectations.&nbsp;&nbsp; In November there
was a balance between optimists and pessimists and in December an
excess of optimists of 0.2%.&nbsp;&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">IFO
Business Survey (% balance)</th>
<th scope="col">Jan 10&nbsp;</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Climate</td>
<td>-9.0</td>
<td>-11.5</td>
<td>-12.9</td>
<td>-16.5</td>
<td>-17.8</td>
<td>-19.2</td>
<td>-25.4</td>
<td>-28.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>-21.0</td>
<td>-22.6</td>
<td>-24.9</td>
<td>-28.4</td>
<td>-29.0</td>
<td>-30.6</td>
<td>-34.1</td>
<td>-38.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>3.7</td>
<td>0.2</td>
<td>0.0</td>
<td>-3.9</td>
<td>-5.9</td>
<td>-7.0</td>
<td>-16.1</td>
<td>-18.1</td>
</tr>
<tr>
<td colspan="9" class="firstcol">Business
Climate</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-6.6</td>
<td>-9.3</td>
<td>-11.4</td>
<td>-16.5</td>
<td>-19.4</td>
<td>-21.2</td>
<td>-29.0</td>
<td>-33.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-21.5</td>
<td>-26.8</td>
<td>-27.3</td>
<td>-25.2</td>
<td>-25.6</td>
<td>-23.8</td>
<td>-25.2</td>
<td>-23.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>-4.7</td>
<td>-6.9</td>
<td>-8.1</td>
<td>-10.6</td>
<td>-12.0</td>
<td>-14.0</td>
<td>-21.8</td>
<td>-24.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Trade</td>
<td>-12.8</td>
<td>-12.3</td>
<td>-12.9</td>
<td>-17.0</td>
<td>-12.6</td>
<td>-14.9</td>
<td>-17.6</td>
<td>-17.1</td>
</tr>
</tbody>
</table>

FHFA Home Price Index Ticks Up
Both M/M And Y/Y 
by <a href="/comment/Moeller.html">Tom
Moeller&nbsp;</a> December 26, 2009



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126i.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126j.jpg" style="width: 312px; height: 265px;">

The U.S. House Price Index from the Federal Housing and
Finance Agency (FHFA) continued to show improvement last fall. The
Purchase Only Index for November rose 0.7% after its 0.4% October
increase. Moreover, the year-to-year change turned positive for the
first time since late-2007. Since their peak in early-2007 home prices
nationwide have fallen 10.3%. The FHFA uses data provided by Fannie Mae
and Freddie Mac and is not value-weighted.

The HPI is calculated using a repeat sales index. That means
that the HPI measures changes in the price of the same property over
time but does not measure changes in property types over time. So if,
for example, the price of a larger, new home was not growing very
rapidly, but the number of people transitioning from smaller homes to
larger homes greatly increased, median house prices would go up (people
buying more expensive houses) much more than the HPI. In this way, the
HPI is a better measure of how any particular home is appreciating
while the median house price is a better measure of what the typical
home buyer is paying.
Notable monthly gains in home prices during November were
logged in the Pacific, South Atlantic and Mountain regions of the
country and the y/y declines moderated significantly.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126k.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100126l.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><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">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7</td>
<td>0.4</td>
<td>-0.3</td>
<td>0.5</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-0.3</td>
<td>0.7</td>
<td>0.5</td>
<td>0.3</td>
<td>-4.7</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle
Atlantic</td>
<td>-0.1</td>
<td>1.3</td>
<td>-1.3</td>
<td>-1.6</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North
Central</td>
<td>0.1</td>
<td>-0.9</td>
<td>0.9</td>
<td>0.1</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>-0.0</td>
<td>0.4</td>
<td>-0.0</td>
<td>2.1</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South
Atlantic</td>
<td>2.0</td>
<td>-1.5</td>
<td>0.0</td>
<td>-0.1</td>
<td>-7.3</td>
<td>1.3</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South
Central</td>
<td>-0.4</td>
<td>2.3</td>
<td>-1.6</td>
<td>1.5</td>
<td>-1.5</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South
Central</td>
<td>0.3</td>
<td>0.6</td>
<td>-0.3</td>
<td>2.5</td>
<td>0.6</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.7</td>
<td>0.7</td>
<td>-1.3</td>
<td>-4.9</td>
<td>-6.2</td>
<td>3.9</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>2.3</td>
<td>2.2</td>
<td>-0.8</td>
<td>2.9</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
</body></html>

Case-Shiller Home Price Gains AreModest

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125a.jpg" style="width: 353px; height: 265px;" align="right">
The National
Association of Realtors reported that sales of existing homes
fell 16.7% from November as a since-extended tax credit for first home
buyers was due to expire. The decline to 5.450M units (SAAR) followed a
little-revised 7.4% rise and similarly strong gains back through July.
The fall in December home sales greatly exceeded Consensus expectations
for decline to 5.90M. For all of last year, the tax credit, along with
improved affordability, raised home sales by 5.5% from 2008. However,
that recovery made up only a piece of larger declines during the prior
three years. As a result, total sales last year remained 27.0% below
the 2005 peak. Total sales include sales of condos and co-ops. Sales
of existing single-family homes alone fell 16.8% from November to
4.790M but remained up 18.3% from the January low. For all of 2009,
sales rose 5.4% after sharp declines during the prior three years.
(These data have a longer history than the total sales series). Sales
of condos and co-ops fell 15.4% m/m but were up by one-third from the
November '08 low. Sales have been helped by a recently
extended tax credit for first-time home buyers. The credit of up to
$8,000 now runs though April 30. Additionally, a new credit of up to
$6,500 is available to some existing home owners who move. The full
details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.&nbsp; The median price of all existing homes jumped 4.9% last month to the
highest level since July. The median price for a single-family home
alone was strong, rising 4.8% to $177,500 (1.4% y/y). For the year as a
whole, however, weakness in home sales pulled prices lower. The 11.6%
decline from 2007 was the third consecutive year of decline. Prices
remained down 22% from the 2007 monthly peak. Price weakness sharply
raised home affordability; by 7.8% since July and by two-thirds from
the 2006 low. The median family income for existing home buyers was
$60,034 and mortgage payments amounted to 14.9% of that total.&nbsp; The
number of unsold homes (single-family &amp; co-ops) for sale fell a
sharp 6.6% (-11.1% y/y) during December to the lowest level since
March&nbsp; 2006. At the current sales rate there was a 7.2 months'
supply of homes on the market, near the lowest since late 2006. The
latest figure was down from a high of 11.3 months during April of 2008.
For single-family homes, the inventory fell to a 6.9 months' supply,
the lowest since March 2007.&nbsp;The data on existing home
sales, prices and affordability can be found in Haver's USECON
database. The regional price, affordability and inventory data is
available in the REALTOR database.Alt-A:
The Forgotten Segment of the Mortgage Market from the
Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/10/01/Sengupta.pdf">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous, SAAR)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Dec. Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,450</td>
<td>6,540</td>
<td>6,090</td>
<td>15.0%</td>
<td>5,164</td>
<td>4,893</td>
<td>5,674</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>910</td>
<td>1,130</td>
<td>1,060</td>
<td>21.3</td>
<td>863</td>
<td>845</td>
<td>1,010</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,150</td>
<td>1,550</td>
<td>1,430</td>
<td>8.5</td>
<td>1,168</td>
<td>1,130</td>
<td>1,331</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>2,010</td>
<td>2,400</td>
<td>2,280</td>
<td>15.5</td>
<td>1,913</td>
<td>1,860</td>
<td>2,243</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,380</td>
<td>1,450</td>
<td>1,320</td>
<td>15.0</td>
<td>1,216</td>
<td>1,064</td>
<td>1,095</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,790</td>
<td>5,760</td>
<td>5,320</td>
<td>12.7</td>
<td>4,573</td>
<td>4,341</td>
<td>4,960</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $
(NSA)</td>
<td>178,300</td>
<td>170,000</td>
<td>172,200</td>
<td>1.5</td>
<td>173,458</td>
<td>197,233</td>
<td>216,633</td>
</tr>
</tbody>
</table>


</body></html>

The National Association of Realtors reported that sales of existing homes fell 16.7% from November as a since-extended tax credit for first home buyers was due to expire. The decline to 5.450M units (SAAR) followed a little-revised [...]

U.S. Existing Home Sales Sink But Prices Firm

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125a.jpg" style="width: 353px; height: 265px;" align="right">The
National
Association of Realtors reported that sales of existing homes
fell 16.7% from November as a since-extended tax credit for first home
buyers was due to expire. The decline to 5.450M units (SAAR) followed a
little-revised 7.4% rise and similarly strong gains back through July.
The fall in December home sales greatly exceeded Consensus expectations
for decline to 5.90M.
 For all of last year, the tax credit, along with
improved affordability, raised home sales by 5.5% from 2008. However,
that recovery made up only a piece of larger declines during the prior
three years. As a result, total sales last year remained 27.0% below
the 2005 peak. 
Total sales include sales of condos and co-ops. Sales
of existing single-family homes alone fell 16.8% from November to
4.790M but remained up 18.3% from the January low. For all of 2009,
sales rose 5.4% after sharp declines during the prior three years.
(These data have a longer history than the total sales series). Sales
of condos and co-ops fell 15.4% m/m but were up by one-third from the
November '08 low.
 Sales have been helped by a recently
extended tax credit for first-time home buyers. The credit of up to
$8,000 now runs though April 30. Additionally, a new credit of up to
$6,500 is available to some existing home owners who move. The full
details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.&nbsp;
 The median price of all existing homes jumped 4.9% last month
to the
highest level since July. The median price for a single-family home
alone was strong, rising 4.8% to $177,500 (1.4% y/y). For the year as a
whole, however, weakness in home sales pulled prices lower. The 11.6%
decline from 2007 was the third consecutive year of decline. Prices
remained down 22% from the 2007 monthly peak. Price weakness sharply
raised home affordability; by 7.8% since July and by two-thirds from
the 2006 low. The median family income for existing home buyers was
$60,034 and mortgage payments amounted to 14.9% of that total.&nbsp;
 The
number of unsold homes (single-family &amp; co-ops) for sale fell a
sharp 6.6% (-11.1% y/y) during December to the lowest level since
March&nbsp; 2006. At the current sales rate there was a 7.2 months'
supply of homes on the market, near the lowest since late 2006. The
latest figure was down from a high of 11.3 months during April of 2008.
For single-family homes, the inventory fell to a 6.9 months' supply,
the lowest since March 2007.&nbsp;
The data on existing home
sales, prices and affordability can be found in Haver's USECON
database. The regional price, affordability and inventory data is
available in the REALTOR database.
Alt-A:
The Forgotten Segment of the Mortgage Market from the
Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/10/01/Sengupta.pdf">here</a>.
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous, SAAR)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Dec. Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,450</td>
<td>6,540</td>
<td>6,090</td>
<td>15.0%</td>
<td>5,164</td>
<td>4,893</td>
<td>5,674</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>910</td>
<td>1,130</td>
<td>1,060</td>
<td>21.3</td>
<td>863</td>
<td>845</td>
<td>1,010</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,150</td>
<td>1,550</td>
<td>1,430</td>
<td>8.5</td>
<td>1,168</td>
<td>1,130</td>
<td>1,331</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>2,010</td>
<td>2,400</td>
<td>2,280</td>
<td>15.5</td>
<td>1,913</td>
<td>1,860</td>
<td>2,243</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,380</td>
<td>1,450</td>
<td>1,320</td>
<td>15.0</td>
<td>1,216</td>
<td>1,064</td>
<td>1,095</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,790</td>
<td>5,760</td>
<td>5,320</td>
<td>12.7</td>
<td>4,573</td>
<td>4,341</td>
<td>4,960</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $
(NSA)</td>
<td>178,300</td>
<td>170,000</td>
<td>172,200</td>
<td>1.5</td>
<td>173,458</td>
<td>197,233</td>
<td>216,633</td>
</tr>
</tbody>
</table>

Belgium Leads The Way, Pauses Then
Resumes Its Climb 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 25, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125d.jpg" align="left" border="0" height="265" width="353">
Belgium is a small open EMU economy that tends to lead the way
in the Euro-business cycle. It is headed higher once again in January.
The chart above shows that the Belgium MFG index usually surges early
and peaks ahead of the indices for Germany and EMU. At this point in
the cycle Belgium is doing that again. After leading the parade higher,
the Belgian National Bank index of MFG paused, but has resumed its move
higher. That&#8217;s good news for Europe.
Belgium is a small open economy that sits at the cross roads
of Euro-activity. Its index is usually the first released among the
Zone members so it is a natural as a bellwether from a timing
standpoint. To underscore that point the index reliably tends to lead
the Europe&#8217;s cycle hence paying attention to this small country&#8217;s
economic data makes considerable sense.
Just today Germany sharply revised up its orders in November
that it had released on Friday, leading to upward revisions to November
EMU orders as well. Now in fresh data from January, the Belgian bank
index is continuing to gain momentum. The overall Belgian index has
improved its reading for the 10th month in a row. Manufacturing is back
to improving after a one-month misstep; MFG has improved in eight of
the last ten months.
The Belgian index places MFG in the top two thirds of its
range. Business services stand in the top 40% of its range. Wholesaling
and retailing are near mid-range in the 47th percentile. Construction
is lagging badly in Belgium standing in the eighth percentile of its
range.
For MFG the orders assessment is very up beat with both
domestic and foreign orders in the 60th and 70th percentiles of their
respective ranges. Like Germany and EMU, Belgium shows that foreign
orders are the greater source for growth. Production stands even higher
in the 75th percentile of its range.
On balance the Belgian Bank index is a bit reassuring ahead of
the release of the monthly German reports form Zew and the IFO as well
as the EMU-wide releases from the European Commission. There has been
some sputtering in European and in US data recently. Does the Belgian
index point to a re-emergence of up beat reports for the month ahead?
We shall soon see, but based on historic relationships, the best bet is
that it does point to better euro-reports for the month ahead.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="9"> Belgium National
Bank Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>3Mo Change</td>
<td>6MO Change</td>
<td>12Mo Change</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Total Ind</td>
<td>-7.0</td>
<td>-7.9</td>
<td>-8.8</td>
<td>7.2</td>
<td>15.8</td>
<td>20.6</td>
<td>60.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;MFG</td>
<td>-7.2</td>
<td>-9.3</td>
<td>-8.6</td>
<td>8.6</td>
<td>14.7</td>
<td>21.8</td>
<td>67.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Prod</td>
<td>7.0</td>
<td>4.0</td>
<td>6.0</td>
<td>-2.0</td>
<td>13.0</td>
<td>28.0</td>
<td>75.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Dom Ord</td>
<td>-4.0</td>
<td>-9.0</td>
<td>-9.0</td>
<td>5.0</td>
<td>6.0</td>
<td>13.0</td>
<td>60.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; FGN Ord</td>
<td>8.0</td>
<td>-3.0</td>
<td>-3.0</td>
<td>-1.0</td>
<td>15.0</td>
<td>43.0</td>
<td>70.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Prices</td>
<td>3.0</td>
<td>-9.0</td>
<td>-8.0</td>
<td>11.0</td>
<td>20.0</td>
<td>12.0</td>
<td>66.7%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Current
assess</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Tot Ord</td>
<td>-34.0</td>
<td>-38.0</td>
<td>-36.0</td>
<td>2.0</td>
<td>15.0</td>
<td>15.0</td>
<td>33.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fgn Ord</td>
<td>-34.0</td>
<td>-38.0</td>
<td>-34.0</td>
<td>4.0</td>
<td>15.0</td>
<td>19.0</td>
<td>38.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Inventories</td>
<td>-13.0</td>
<td>-12.0</td>
<td>-10.0</td>
<td>-8.0</td>
<td>-9.0</td>
<td>-11.0</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Wholesale&amp;
Retail</td>
<td>-9.0</td>
<td>-6.3</td>
<td>-10.0</td>
<td>8.1</td>
<td>8.6</td>
<td>18.3</td>
<td>47.5%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-15.7</td>
<td>-9.1</td>
<td>-10.0</td>
<td>-5.0</td>
<td>0.2</td>
<td>-0.2</td>
<td>8.0%</td>
</tr>
<tr>
<td class="firstcol">Business Services</td>
<td>3.1</td>
<td>-1.4</td>
<td>-7.8</td>
<td>13.0</td>
<td>38.6</td>
<td>37.1</td>
<td>59.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Comparisons:</td>
<td colspan="3"></td>
<td colspan="3">Changes lag one month</td>
<td>1-Mo Lag</td>
</tr>
<tr>
<td class="firstcol">EU Index: Industry</td>
<td>#N/A</td>
<td>-16.0</td>
<td>-19.0</td>
<td>8.0</td>
<td>9.0</td>
<td>17.0</td>
<td>48.9%</td>
</tr>
<tr>
<td class="firstcol">Gy Index:Industry</td>
<td>#N/A</td>
<td>-19.0</td>
<td>-21.0</td>
<td>10.0</td>
<td>10.0</td>
<td>15.0</td>
<td>42.3%</td>
</tr>
<tr>
<td class="firstcol">Compare: BNB Index</td>
<td>--&nbsp;</td>
<td>--&nbsp;</td>
<td>&nbsp;--</td>
<td>9.9</td>
<td>10.3</td>
<td>20.9</td>
<td>Since&nbsp;Jan-96</td>
</tr>
</tbody>
</table>
Lackluster German Consumer Climate 
by <a href="/comment/Curley.html">Louise
Curley</a> December 25, 2009


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125e.jpg" style="width: 353px; height: 265px;" align="right">On
the basis of its January survey,
GfK* is forecasting that its economic climate measure will decline for
the fourth month in February to 3.2% from 3.4%, as shown in the first
chart.&nbsp; This marks the fourth month of decline.
 The January
survey has shown that German consumers continue to be less enthusiastic
about the general economy and their own prospects than they were in
September/October of last year.&nbsp; Even though the survey shows
an increase of 4.2 percentage points from December to January in the
percent balance of those who intend to increase their spending, it is,
at 25.4%, still below the recent peak of 36.5% reached in September of
last year.&nbsp; GfK suggested that the proliferation of special
sales and discounted merchandise may have had a positive effect on the
propensity to consume that has over come the negative effect of poor
income prospects.&nbsp;<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100125f.jpg" style="width: 353px; height: 265px;" align="right">
The components of the survey are shown in
the second chart.
 Although there has been a substantial improvement in
the components of the survey since the low points reached at the end of
2008 and early 2009, only income expectations are at all close to the
all time peaks reached in late 2006 and mid 2007.&nbsp; The percent
balance on income expectations was 12.5% in January, 21.1 percentage
points below the all time peak of 33.6%. The comparable
figures&nbsp; for economic expectations were 1.5%, 67.5 percentage
points below the all time peak of 69.0% and for the propensity to
consume 25.4%, 39.0 percentage points below the all time peak of
64.4%&nbsp; These data are shown in the second chart and in the
table below.&nbsp;&nbsp; *Geschellschaft fur
Konsumforshung.&nbsp; (Company for Consumer Research)
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">&nbsp;</th>
<th style="font-weight: normal;" scope="col">Feb
10</th>
<th style="font-weight: normal;" scope="col">Jan
10</th>
<th style="font-weight: normal;" scope="col">Dec
09</th>
<th style="font-weight: normal;" scope="col">Recent&nbsp;
Peak</th>
<th style="font-weight: normal;" scope="col">Date</th>
<th style="font-weight: normal;" scope="col">Recent
Trough</th>
<th style="font-weight: normal;" scope="col">Date</th>
<th style="font-weight: normal;" scope="col">Chg
from Trough</th>
<th style="font-weight: normal;" scope="col">All
Time Peak</th>
<th style="font-weight: normal;" scope="col">Date</th>
<th style="font-weight: normal;" scope="col">Chg
Present from Peak</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Propensity to
Consume</td>
<td>--&nbsp;</td>
<td>25.4</td>
<td>21.2</td>
<td>36.5</td>
<td>Sep 
09</td>
<td>-27.9</td>
<td>Aug 
08</td>
<td>53.3</td>
<td>64.4</td>
<td>Oct 
06</td>
<td>-39.0</td>
</tr>
<tr>
<td class="firstcol">Income Expectations</td>
<td>--&nbsp;</td>
<td>12.5</td>
<td>15.0</td>
<td>16.0</td>
<td>Sep 
09</td>
<td>-20.5</td>
<td>Jan 
09</td>
<td>33.0</td>
<td>33.6</td>
<td>May 
07</td>
<td>-21.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Economic
Expectations</td>
<td>--&nbsp;</td>
<td>1.5</td>
<td>1.7</td>
<td>8.7</td>
<td>Oct 
09</td>
<td>-32.9</td>
<td>Jan 
09</td>
<td>34.4</td>
<td>69.0</td>
<td>Jun 
07</td>
<td>-67.5</td>
</tr>
<tr>
<td class="firstcol">Consumer Climate</td>
<td>3.2</td>
<td>3.4</td>
<td>3.6</td>
<td>4.2</td>
<td>Oct 
09</td>
<td>1.5</td>
<td>Sep/ 
Oct08</td>
<td>4.7</td>
<td>9.1</td>
<td>Dec 
06</td>
<td>-5.9</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Existing Home Sales Sink ButPrices Firm

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091224a.jpg" align="right" border="0" height="265" width="353">Despite
only
a modest rise in November durable goods orders, the trend has improved
sharply. Durable goods orders rose 0.2% last month after an unrevised
0.6% October decline. The latest increase lifted orders 5.4% above the
March low and the y/y decline of 7.8% compares with a peak 26.6%
decline last winter. A 0.5% November gain had been the Consensus
expectation.
A 5.5% (-10.9% y/y) decline in transportation equipment
orders in fact masked the degree of improvement in overall orders.
Transportation orders were pulled down by a 32.6% (-3.7% y/y) decline
in civilian aircraft. Excluding transportation altogether, orders rose
2.0% during November and have risen 7.3% from their April low.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091224b.jpg" align="right" border="0" height="265" width="353">
Primary
metals orders also continued their recovery with a 1.4% November
increase (-7.3% y/y) and they have risen one-quarter from the March
low. Electrical equipment orders rose about as they did during October.
The 3.2% gain lifted orders 10.0% from the spring low. Orders for
computers &amp; related equipment also improved for the second
month by 1.6% during November. The increase lifted them 14.9% above
April's low. Finally, machinery orders increased 3.5% (-14.0% y/y),
made up half of the October decline and raised them 9.8% from the low.

The decline in aircraft bookings also masked improvement in other
capital goods orders. Nondefense capital goods orders less aircraft
more than recovered the October slump with a 2.9% increase and they now
are 9.8% above the April low.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091224c.jpg" align="right" border="0" height="265" width="353">
Shipments of durable goods ticked up
0.3% (-8.8% y/y) during November following increases in two of the
prior three months. Shipments now have risen 4.4% from the April low.
The improvement has been paced by strong monthly gains in shipments of
metals (-16.6% y/y), up 24.2% from the low. Machinery orders rose 2.0%
(-20.3% y/y) after touching the cycle low in October. Electrical
equipment orders rose 2.2% (-9.1% y/y), about as they did in October.
As was
suggested by the October data, the shedding of inventories of
durable manufactured goods seems to be ending after nearly a year of
correction. Durable goods inventories slipped 0.2% (-11.3% y/y) after
no change during October. Declines in inventories lowered the ratio to
shipments to its lowest since October of last year.. Unfilled orders
fell another 0.7% (-10.9% y/y) led by declines in the transportation
sector. Less transportation backlogs rose 0.1% (-11.4% y/y) for the
second gain in three months.
The durable goods figures are available
in Haver's USECON database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM" style="color: rgb(0, 0, 0);">NAICS Classification
</a>(%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>0.2</td>
<td>-0.6</td>
<td>2.2</td>
<td>-7.8</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>2.0</td>
<td>-0.7</td>
<td>2.1</td>
<td>-6.9</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-1.9</td>
<td>0.8</td>
<td>3.4</td>
<td>-11.1</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>2.9</td>
<td>-2.0</td>
<td>2.9</td>
<td>-10.2</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>

</body></html>

Despite only a modest rise in November durable goods orders, the trend has improved sharply. Durable goods orders rose 0.2% last month after an unrevised 0.6% October decline. The latest increase lifted orders 5.4% above the March low [...]

Rate of U.S. GDP Decline Slows in Q2 2009

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091224d.jpg" align="right" border="0" height="265" width="353">
The jobs
market resumed its recent trend toward improvement. The Labor
Department reported that initial claims for unemployment insurance fell
to 452,000 from an unrevised 480,000 during the prior week. Claims now
stand at the lowest level since the first week of September 2008 and
were down from the recession peak of 674,000 hit in March. The
four-week moving average of claims also fell to a new low of 465,250.
The latest weekly figure was lower than Consensus expectations for
470,000 claims.
Continuing claims for unemployment insurance during
the latest week fell 127,000 after an upwardly revised 40,000 gain
during the prior week. Continuing claims were at the lowest level since
February. The overall decline is a function of the improved job market
but also reflects the exhaustion of 26 weeks of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims fell to
5,233,000. This series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091224e.jpg" align="right" border="0" height="265" width="353">Extended
benefits for unemployment insurance dropped sharply to 393,956 during
the first week of December. The latest was down from the peak during
last month of 597,688.
The insured rate of unemployment remained
stable at 3.9%, the lowest level since February. The rate reached a
high of 5.2% during late-June. During the last ten years, there has
been a 93% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.&nbsp;
p&gt;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091224f.jpg" align="right" border="0" height="265" width="353">
The highest insured unemployment rates in
the week ending December 5 were in&nbsp; Puerto Rico (6.4%), Oregon
(5.9), Pennsylvania (5.6), Wisconsin (5.6), Alaska (5.5), Nevada (5.2),
Michigan (4.9), California (4.9) and South Carolina (4.7). The lowest
insured unemployment rates were in North Dakota (1.7%), Virginia (2.0),
Texas (2.5), Wyoming (3.0), Maine (3.3), Maryland (3.4), Mississippi
(3.4), Florida (3.5), New York (3.7) and Ohio (3.7). The data are not
seasonally adjusted but the overall insured unemployment rate is.
The
unemployment insurance claims data is available in Haver's WEEKLY
database and the state data is in the REGIONW
database.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a></th>
<th scope="col">12/19/09</th>
<th scope="col">12/12/09</th>
<th scope="col">12/05/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>452</td>
<td>480</td>
<td>475</td>
<td>-19.9%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,076</td>
<td>5,203</td>
<td>17.2%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.9</td>
<td>3.9</td>
<td>3.3 (12/2008)</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>


</body></html>

The jobs market resumed its recent trend toward improvement. The Labor Department reported that initial claims for unemployment insurance fell to 452,000 from an unrevised 480,000 during the prior week. Claims now stand at the lowest [...]

U.S. Initial Jobless Insurance Claims Fall Back To New Low

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Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

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

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Sandy Batten

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The luster fell a bit off the employment rose in June with nonfarm payrolls rising 57,000 against expectations of a 115,000 increase, according to today’s report from the Bureau of Labor Statistics. Moreover, the increases previously reported for April and May were revised down by a total of 74,000. Upon revision, payrolls increased 148,000 in April versus 179,000 previously reported and rose 129,000 in May versus 172,000 previously reported. The average increase over the past three months fell to 111,000 from 164,000 in May while the average increase over the past six months rose to 92,000 in June, its highest reading since February 2025, from 80,000 in May. Both remain on a modest uptrend and much stronger than payroll gains last year. In 2025, monthly payroll gains averaged only 10,000.

The weaker-than-expected payroll report was reinforced by a weak report from the **household survey**. While the number of unemployed fell 213,000 and the unemployment rate edged down to 4.2% from 4.3% in May, the number of employed slumped 507,000 in June, the largest monthly decline since May 2025 (with population adjustment to January 2026). The labor force plunged 720,000 with the labor force participation rate falling to 61.5%, its lowest level since March 2021.

Growth of average hourly earnings (AHE), a key variable for the Federal Reserve, was relatively well behaved in June. AHE increased 0.3% m/m, the same monthly gain as in May, in line with expectations. The y/y rate of advance edged up to 3.5% in June from 3.4% in May. Wage growth in private services-producing firms picked up in June, rising 0.4% m/m (3.4% y/y) versus 0.2% m/m (3.2% y/y) in May. Goods-producing wages increased 0.2% m/m in June after 0.3% monthly gains in both April and May with the y/y rate holding at 4.1%.

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In the **establishment survey**, private-sector employment was also weaker than expected in June, increasing only 49,000 against an expected 115,000 increase. Moreover, April and May figures were also revised down by a total of 50,000. Government employment rose 8,000 following a 32,000 increase in May. Private goods-producing employment increased 10,000, its largest monthly gain in three months with an 11,000 gain in construction and a 3,000 rise in manufacturing jobs, the first increase in three months. In contrast, services-producing employment increased only 39,000 in June, its weakest monthly performance in four months. Private education and health services jobs posted another solid gain of 69,000, up from 45,000 in May. However, retail jobs fell 7,500, their first monthly decline in four months, and leisure and hospitality jobs slumped 61,000, their largest monthly decline since December 2020, after increasing 40,000 in May. There had been speculation in the market that the World Cup would generate additional leisure and hospitality jobs, but this obviously failed to pan out. On a brighter note, although the one-month payroll diffusion index, a measure of the breadth of job gains, slipped to 54.4 in June from 56.0 in May, it remained well above the key 50 level that indicates that more industries were adding jobs than losing them.

The length of the workweek was unchanged at 34.3 hours in June with the aggregate weekly hours index edging up 0.1% m/m, the same monthly gain as in May. The aggregate hours index rose 1.3% q/q saar in Q2, the fastest quarterly gain in four quarters, providing a solid base for Q2 real GDP growth. The goods-producing workweek was unchanged at 40.1 hours, the highest since January 2023, while the private service-producing workweek edged down to 33.2 hours from 33.3 hours in May.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- U.S. nonfarm payrolls increased 57,000 in June with meaningful downward revisions to both April and May.
- The market consensus looked for a 115,000 increase.
- The unemployment rate edged down to 4.2% from 4.3%, due mostly to a large decrease in the labor force.
- Average hourly earnings rose 0.3% m/m (3.5% y/y), in line with expectations.

U.S. Payroll Employment Gains Smaller than Expected in June

Robert Brusca

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Unemployment rates in the European Monetary Union (EMU) were steady in May at 6.2%, the same level as in April, after April had fallen to 6.2% from 6.3%. The 6.2% reading is the lowest for the community since it was formed. Meanwhile, for the larger community, the EU, the unemployment rate has stabilized at 5.9%, the same as in April, again, a tick lower than it was in March. This 5.9% reading is a tick above the historic low for the European Union (EU). In both cases, the performance of these two economic conglomerations is quite excellent.

**Monthly**
The table looks at 12 of the most senior members of the monetary union, including an observation for the United Kingdom based on its claimant-count unemployment rate, presented at the bottom of the table. In May, the monetary union saw 4 of 12 members in the table with lower unemployment rates than they had in April. In April, five members had lower unemployment rates than in March. In March, seven members had lower unemployment rates than they posted in February. The progression to lower unemployment rates has slowed based on monthly data.

**Sequentially**
Looking at changes in the unemployment rates over broader sequential periods—three months, six months, and 12 months—6 out of 12 reporters have lower unemployment rates over three months; 7 have lower unemployment rates over six months; only 4 report unemployment rates that are lower over 12 months. The broader periods for comparison show changes in the unemployment rates that report more declines over the shorter and more recent periods compared to the longer/older periods. This is not the same trend leaning that we get from the last three months of data. It'll be good to watch these developments in the coming months to see if the tendency to lower unemployment rates is slowing or whether dropping unemployment is continuing in force.

**Rankings**
The ranking of unemployment rates since 1990 finds only three of these 12 monetary union members with unemployment rates above their medians. Those are Luxembourg, with a 98.2 percentile standing, Finland with an 81.9 percentile standing, and Austria with a 76.6 percentile standing. Italy, on the other hand, is reporting the lowest unemployment rate that it has seen during this period. The Greek unemployment rate has been this low or lower only about 3% of the time, while in Spain the unemployment rate has been this low or lower 11% of the time. For Portugal, the unemployment ranking figure has been weaker 13% of the time. The monetary union continues to report excellent labor market results even though economic growth has been relatively disappointing.

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**Summing up and central bankers**
In the wake of the monetary conference in the Sintra this past week, central banks featuring contributions from the European Central Bank, the Bank of England, the Federal Reserve, and the Bank of Canada, saw central bank heads talking about getting back to basics and stopping the use of some of the newer tools that had been pressed into service after the great financial crisis and during COVID. Bankers are getting back to basics to focus on short-term interest rates and say they will stop fiddling with the size of the balance sheet and to largely set aside the use of forward guidance. It will take time to determine what these changes are going to mean in terms of how policy performs and how markets will react. While there was a lot of discussion, and in some places concerns about the loss of forward guidance, what is clear is that, with forward guidance gone, there will be more volatility; however, the markets will be freer to price economic events themselves and will not be so stuck to the outlook of the central bank.  That could turn out to be a gigantic win for both markets and central bankers.

Europe

Unemployment Remains Quite Low in Europe

Andrew Cates

**Tightening Bias Intact, but Unevenly Distributed**
The July Blue Chip Financial Forecasts survey's expectations for policy rate changes over the next twelve months reveal a striking divergence across the major advanced economies, as chart 1 below makes clear. Across the board, the rate outlook is higher than it was in late February, before the US-Iran conflict escalated: the energy price shock and its inflationary consequences have left an imprint on the panel's thinking, even as oil prices have since retreated. Japan tops the list with an expected increase of around 40 basis points, reflecting the building pressure on the Bank of Japan to respond to yen weakness and still-elevated domestic inflation. Canada and the euro area also sit firmly in positive territory, with expected increases of around 30 and 20 basis points respectively. The US and the UK, by contrast, are in negative territory — the US barely so, the UK more distinctly, with the panel pencilling in modest rate reductions over the coming year. This pattern is not simply a reflection of where each economy sits in the inflation cycle. It also encodes a judgement about the current stance of monetary policy: in Japan, the euro area and Canada, policy is likely seen as insufficiently tight relative to the inflation challenge, and the conflict has reinforced that view. In the US and UK, by contrast, policy is judged to be closer to or already beyond neutral, meaning the next move is more likely to be an easing than a further tightening — even if, in the US case, that easing has been pushed well into 2027.

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**When Will the Next Move Come?**
Chart 2 below adds a timing dimension to the rate outlook, showing where the BCFF panel currently places the next policy move for the Fed, ECB, Bank of England and Bank of Japan. For the BoJ, the distribution is concentrated around the near term, with a significant share of respondents expecting action in September or October — consistent with the building pressure illustrated in chart 1 and with the BoJ’s next scheduled decision on 31 July. For the ECB, September or later than November emerge as the most likely timing for the next step. The Bank of England panel is more spread, with a meaningful share expecting action to come later. For the Fed, the dominant view places the next move firmly in the ‘later’ category, consistent with the BCFF consensus that the Fed funds rate will hold through the rest of 2026, with a first cut not expected until Q2 2027. Under chair Kevin Warsh, the June FOMC meeting delivered a hawkish dot plot that shifted some participants toward a hike before year-end, but the panel as a whole has not moved that far.

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**Headline Up, Core Contained: The Inflation Picture Across Advanced Economies**
One of the more reassuring features of the current inflation episode has been the limited pass-through from energy prices to underlying price dynamics. Across the advanced economies, headline CPI inflation has risen materially since the conflict escalated in March, driven overwhelmingly by consumer energy costs. Core inflation — stripping out food and energy — has edged higher, but only modestly, suggesting that second-round effects remain contained for now. In the United States, the pressures are arguably more alarming, with core PCE rising sharply between February and May to its highest level since October 2023. In the euro area, the focus this week has been firmly on Eurostat's June flash CPI estimate, published yesterday. Headline inflation fell back to 2.8% from a peak of 3.2% in May, as energy costs — the main driver of the surge since the conflict began — eased meaningfully. Crucially, core inflation also ticked down, and services inflation retreated as well. The June data therefore tell a broadly reassuring story: the energy shock is unwinding without leaving a lasting imprint on underlying price dynamics — precisely what the ECB will have been hoping for.

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**Consumer Price Expectations: Are Households Convinced?**
The aggregate inflation picture looks relatively contained at the macro level, but whether households are similarly reassured is a separate question. Chart 4 below draws on the European Commission's consumer survey data on price expectations — one of the more timely and widely watched indicators of inflation psychology in the euro area. The survey captures whether consumers expect prices to rise, stay the same or fall over the coming twelve months, and its relationship with actual inflation outturns has historically been close. A sustained elevation in consumer price expectations risks becoming self-fulfilling, feeding into wage demands and pricing behaviour in ways that complicate the ECB's task considerably. The June survey, however, brought an encouraging development: expectations fell steeply, suggesting that households have begun to register the reversal in energy prices and the broader easing of the inflationary impulse. That said, the absolute level of expectations remains elevated relative to the pre-conflict period, and one month's decline does not constitute a trend. Whether the June reading marks the beginning of a sustained normalisation — or proves a temporary dip before expectations re-anchor at a higher level — will be one of the key variables shaping the ECB's decision calculus in the months ahead.

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**Japan: A Weak Yen at the Worst Possible Time**
Japan occupies a particularly uncomfortable position in the current global conjuncture. The yen has depreciated to levels not seen since December 1986, with USD/JPY touching 162 this week. The move reflects the persistence of a large interest rate differential: even as the Bank of Japan has continued its gradual tightening, the Fed’s hawkish pivot under chair Kevin Warsh — with the mid-June FOMC dot plot signalling a possible hike before year-end — has reinforced the carry trade dynamics weighing on the currency. For Japan, which imports virtually all of its energy, yen weakness at a time of still-elevated global oil prices is a double burden, amplifying domestic inflation and squeezing real incomes. Verbal warnings from Japan’s Finance Ministry have had only a modest and short-lived effect on the exchange rate. The Bank of Japan’s next policy decision is on 31 July, and the pressure to act more decisively is building. The BCFF panel’s July survey revised upward its expectation for a stronger US dollar against the yen over the coming year — consistent with the fundamental picture that chart 5 below describes.

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**AI: Optimism on the Technology, Scepticism on the Price**
Returning to the BCFF survey, its special questions reveal a panel that continues to look beyond the current cyclical turbulence toward a longer-horizon structural narrative. On artificial intelligence, respondents are broadly optimistic: 45% expect a noticeable impact on US productivity and growth within one to three years, with a further 45% believing those effects are already becoming evident. That is a striking degree of conviction about a technology whose macro-level productivity impact remains, by most empirical measures, still to fully materialise. Yet the same panellists are considerably more cautious about financial markets than about the technology itself. Nearly all respondents believe that expected AI gains are already fully reflected — or even over-reflected — in current asset prices. Chart 6 below captures this tension. It is a combination — high conviction on transformative potential, high scepticism on current valuations — that has historically been associated with stretched risk premia and vulnerability to disappointment, even where the underlying technology story ultimately proves correct.

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Global financial markets have had a more settled feel this week, reflecting the continued unwinding of the geopolitical risk premium that had built up during the worst of the US-Iran conflict. Oil prices have fallen further, equity markets have been broadly supported, and incoming inflation data — notably the euro area’s June flash CPI estimate — have come in below expectations. The US holiday-shortened week ahead, with Independence Day on Friday, is likely to keep volumes thin and activity subdued. The bigger picture, however, remains one of tension between a more benign near-term inflation trajectory and central banks that may not yet be ready to stand down. In the charts below we look first at what the latest Blue Chip Financial Forecasts (BCFF) survey reveals about the expected change in and timing of policy rates across the major economies (charts 1 and 2), then at the divergence between headline and core inflation across the advanced economies (chart 3), and at what euro area consumers are more specifically expecting about inflation in the period ahead (chart 4). We turn next to Japan and the yen’s slide this week to 40-year lows (chart 5), and finally to the BCFF survey’s special questions on artificial intelligence and asset valuations (chart 6).

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Charts of the Week: Forecasters Hold Firm

Winnie Tapasanun

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The ISM U.S. manufacturing PMI fell to a lower-than-expected 53.3 in June, the first m/m fall since February, following a 1.3-point increase to 54.0 in May, according to data from the Institute for Supply Management. The June reading, above the 50 expansion-contraction threshold, indicated the U.S. manufacturing sector expanded for the sixth straight month, albeit at a slightly slower pace. A reading of 53.8 for June had been expected in the Action Economics Forecast Survey. The June manufacturing PMI, while above a contraction-level 49.0 in June 2025 and a low of 47.0 in October 2024, remained below a peak of 63.8 in March 2021.

The production index declined to 52.2 in June from 54.3 in May, indicating production expanded for the eighth consecutive month but at the slowest pace since December. The index was above a low of 44.8 in April 2025 but below a peak of 66.5 in March 2021. In June, 19.0% (NSA) of respondents reported higher production while 13.0% reported lower production. The new orders index slipped to 56.0 in June from 56.8 in May, signaling new orders grew for the sixth straight month following four successive months of contraction. The index remained well above a low of 41.8 in January 2023 but below a high of 67.0 in May 2021. In June, 22.3% (NSA) of respondents reported higher new orders while 13.4% reported declines. The inventories index climbed to 51.4 in June from 49.9 in May, marking the first expansion since April 2025. The index was slightly below a high of 52.7 in March 2025 but above a low of 43.8 in October 2024. Meanwhile, the supplier deliveries index fell to 57.4 in June from 60.6 in May and April, indicating slowing delivery performance for the seventh consecutive month after faster deliveries in November. In June, 18.1% (NSA) of respondents reported slower delivery speeds while 3.4% reported faster speeds.

On the labor front, the employment index improved to 49.7 in June from 48.6 in May, showing employment contracted for the 33rd straight month but at the slowest contraction pace since January 2025. The index was above a low of 44.1 in November 2025 but below a high of 56.5 in March 2022. In June, 16.2% (NSA) of respondents reported higher employment while 13.8% reported lower hiring.

On the pricing front, the prices paid index fell to a still-high 73.0 (NSA) in June, a 9.1-point drop—the largest decline since July 2022—from 82.1 in May, indicating raw materials prices rose for the 21st straight month but at the slowest rising pace since February. The index remained well above a low of 39.4 in December 2022 but below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. In June, 55.1% (NSA) of respondents reported higher prices while 9.2% reported price declines.

In other ISM series not included in the composite index, the new export orders index fell to 48.5 in June from 50.6 in May, indicating new export orders contracted for the third time in four months. The index was up from a low of 40.1 in May 2025 but down from a high of 52.4 in January 2025 and a peak of 57.1 in February 2022. The imports index edged down to 52.9 in June from 53.0 in May, suggesting imports expanded for the fifth successive month. The index was below its recent high of 54.9 in February but above a low of 39.9 in May 2025. The order backlog index decreased to 50.5 (NSA) in June from 52.2 in May, showing backlog levels grew at the slowest pace in six months. The index was below a high of 56.6 in February and a peak of 70.6 in May 2021 but well above a low of 37.5 in May 2023.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- ISM Mfg. PMI down slightly to 53.3 in June; sixth straight month above 50.
- Production (52.2) expands for the eighth consecutive mth.; new orders (56.0) for the sixth successive mth.
- Employment (49.7) contracts for the 33rd straight mth.; at the slowest contraction pace since Jan. ’25.
- Prices Index (73.0) at a four-month low, still indicating prices rising for the 21st consecutive mth.
- Exports (48.5) contract for the third time in four mths.; imports (52.9) continue to grow.

U.S. ISM Manufacturing PMI Still Expansionary in June; New Orders and Production Growing at a Slower Pace; Employment Contracting

Michael J. Moran

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The monthly report on construction activity receives scant attention in the financial press, and investors and traders in financial markets typically pay little heed. However, it is a valuable report for economists, as it provides a broad-based view of building activity, covering private residential and business construction, as well as government-related activity. The figures feed into the calculation of GDP. Unfortunately, results have been soft since early 2025.

Total construction activity rose 0.1 percent in May, marking the third consecutive increase. However, the gains have not been especially large, averaging 0.3%, and they have barely dented the string of weak readings in the preceding 17 months. The year-over-year change in May totaled -1.5%.

Private residential construction, the largest component of the total (41% share), rose 0.3% in May, adding to an average gain of 1.1% in the prior two months and leaving a year-over-year increase of 1.8% (chart, upper left). Most of the advance in the past year was the result of improvements to existing homes (up 8.1%). Construction of new multi-family units has shown little net change in the past year or so, while new single-family building has traced a mild downward trend (off 4.0% in the past year). Public construction has been flat in the past year, with both the federal government and state and local governments showing little net change (chart, upper right).

Private nonresidential construction (34% of the total) has received considerable press attention in the past few years because of explosive growth in the building of data centers. Growth has indeed been vigorous. Building started in 2020 and grew moderately at first, but this sector took off in 2022, about the time when artificial intelligence models became publicly available (chart, lower left, in levels to show the strong trend more clearly). Average annual growth for the three years ended 2025 totaled 48%.

Interestingly, despite the rapid growth in the building of data centers, the private nonresidential sector has been the weakest area of the construction report, with activity trending lower since early 2025 (chart, lower right). Some components of private nonresidential construction have held steady or improved (e.g. amusement & recreation, electric power), but three areas stand out on the soft side: general office, commercial, and manufacturing.

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- Building activity in the US was firm in 2023 and 2024, but it has lost ground since then.
- Government-related construction and private residential building have been little changed in the past year or so.
- Private nonresidential construction has been notably weak, despite robust activity in the building of data centers.