Tom Moeller

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917c.jpg" align="right" border="0" height="265" width="353">
Extraordinary
developments continued to characterize the US financial system through
Q2, as indicated in the Federal Reserve's flow-of-funds accounts,
published today at noon.&nbsp; Two sectors in particular caught our
attention, households and the federal government, each for opposing
reasons.First, after six consecutive quarters of
deterioration, household net worth finally experienced an
improvement.&nbsp; It increased $2.0 trillion to $53.1
trillion.&nbsp; The biggest gains came from the upturn in the stock
market, which added $1.1 trillion to people's assets.&nbsp;
Additionally, mutual fund holdings gained $486 billion, and pension
fund reserves -- largely invested in equities, of course -- added $742
billion.&nbsp; Among tangible assets, household real estate values
rose by $323 billion following nine consecutive quarters of
erosion.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917e.jpg" align="right" border="0" height="265" width="353">
&nbsp;Household financial positions also improved because
they continued to pay down liabilities.&nbsp; These changes were
small compared to the asset moves, but clearly still in a favorable
direction; total liabilities fell $35 billion in Q2, the fourth
reduction in the last five quarters.&nbsp; Mortgage debt and
consumer credit had the largest declines, while conventional bank loans
increased.In these comparisons, the concept of "mortgage equity
withdrawal" plays a role.&nbsp; Homeowners' equity in real estate
increased in Q2 by $353 billion.&nbsp; It had contracted in 12 of
the last 13 quarters, a span extending back to the beginning of 2006
and interrupted by just a token increase in Q4 2006.&nbsp; For the
first year of this period, the reductions were evidently deliberate on
the part of consumers, who borrowed heavily against their
properties.&nbsp; Such "mortgage equity withdrawal" became a
popular addition to economists' tools for forecasting consumer
spending, which could be larger still when income was augmented by
liquidations of home values.&nbsp; This practice dwindled rapidly
however as real estate prices began to decline in 2007 and according to
the Haver measure, "MEW" turned negative last year.&nbsp; So people
began borrowing a smaller portion of the value of the real estate they
were purchasing or remodeling to try to hold a larger equity
stake.&nbsp; In the aggregate this effort was subverted by the the
continuing decline in real estate prices in general.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917m.jpg" align="right" border="0" height="265" width="353">
&nbsp; Finally,
though, this last quarter saw homeowners' equity go up.&nbsp; As
noted above, the value of real estate increased some $323
billion.&nbsp; Our measure of MEW declined by about $90 billion,
and mortgage debt itself was paid down by some $29 billion.&nbsp;
As a media headline writer noted recently, once again, the main
function of a home is returning to that of residence, not a resource to
pay for something else.Separately in this flow-of-funds report, we
were also struck by the magnitude of the federal government's
borrowing, and just one small comparison will suffice to
illustrate.&nbsp; In these data, it's the historical comparison
available through the time series that helps put these things in
perspective.&nbsp; It's easy to joke about "a trillion here and
trillion there", but here's a new way to look at these
numbers.&nbsp; In Q2, net new issues of Treasury securities were
just under $339 billion.&nbsp; In this one three-month period, at a
time of year when tax inflows usually mean the Treasury borrows little
or even pays down on the debt, the Treasury borrowed more than it had
in any whole year before 2003.&nbsp; And this latest quarter's new
debt was in fact seasonally small: the prior three quarters had
averaged $518 billion, easily larger than any whole year ever -- until
2008.&nbsp;
End of Year
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Flow
of Funds (Y/Y % Chg.)</th>
<th scope="col">% of Total
Outstanding</th>
<th scope="col">2Q '09</th>
<th scope="col">1Q '09</th>
<th scope="col" colspan="3">End of Year</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td class="firstcol">2008</td>
<td>2007</td>
<td>2006</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt
Outstanding</td>
<td>--</td>
<td>3.0</td>
<td>4.2</td>
<td>5.0</td>
<td>10.4</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Federal Government</td>
<td>13.6%</td>
<td>35.9</td>
<td>28.3</td>
<td>24.2</td>
<td>4.9</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Households</td>
<td>25.9%</td>
<td>-1.2</td>
<td>-0.7</td>
<td>0.3</td>
<td>6.6</td>
<td>10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfinancial Corporate Business</td>
<td>13.8%</td>
<td>2.9</td>
<td>4.4</td>
<td>5.3</td>
<td>14.2</td>
<td>8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfarm, Noncorporate Business</td>
<td>6.9%</td>
<td>-1.7</td>
<td>1.4</td>
<td>4.9</td>
<td>12.6</td>
<td>14.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>31.3%</td>
<td>-0.9</td>
<td>3.7</td>
<td>5.5</td>
<td>13.4</td>
<td>9.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Trillions of
$</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Net Worth: Households &amp;
Nonprofit Organizations</td>
<td>--</td>
<td>$53.140</td>
<td>$51.141</td>
<td>$52.917</td>
<td>$62.911</td>
<td>$63.335</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tangible Assets:
Households</td>
<td>--</td>
<td>$24.847</td>
<td>$24.660</td>
<td>$25.177</td>
<td>$27.526</td>
<td>$28.724</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Financial Assets:
Households</td>
<td>--</td>
<td>$42.361</td>
<td>$40.584</td>
<td>$41.957</td>
<td>$50.703</td>
<td>$48.025</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total Liabilities:
Households</td>
<td>--</td>
<td>$14.068</td>
<td>$14.103</td>
<td>$14.217</td>
<td>$14.318</td>
<td>$13.414</td>
</tr>
</tbody>
</table>
</body></html>

Extraordinary developments continued to characterize the US financial system through Q2, as indicated in the Federal Reserve's flow-of-funds accounts, published today at noon. Two sectors in particular caught our attention, households [...]

U.S. Leading Indicators Rise ForAFifth Straight Month And Signal Economic Recovery

Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917a.jpg" align="left" border="0" height="265" width="353">
August following and outsized drop of 1.6% in July. Even so
the drop in German PPI prices is becoming progressively smaller. Over
three-months the pace of decline for PPI-ex-construction prices is 4.4%
compared to a larger 6.9% pace of decline Yr./Yr. Ex energy PI prices
are starting to creep up. Over thee-months the ex-energy price trend is
flat; over six months it&#8217;s a rate of decline of 1.9% and over 12-months
the pace of decline is 3.3%. PPI prices ex-energy are stabilizing and
paving the way to rise on a more consistent basis. 
 

Sectors and quarterly trend: Still in the quarter, PPI prices
are still falling with two of three-months&#8217; data in hand. Yr/Yr trends
for sector prices are still falling although for intermediate goods
there has started to be some cutting of the pace of the decline in the
year-over-year price trend. 
 

German prospects: The strong euro will help to keep a lid on
German PPI prices. And much of the rise in oil prices is already under
our belt in Germany although there may be some subtle transmission
effects that are still at work. The recent back off in the IFO index
suggests that the German recovery will not be the sort of blockbuster
that introduces demand-pull inflation to the recovery process. But just
as clearly the period of falling prices is coming to an end. There will
groups that experienced set-backs in the recession and will be looking
to make up for those with gains as the economy gets healthier. In
Germany especially there is a concern among policymakers about how this
transition plays out. 
 

Perspective: A new dawn of a tentative dawn - The ECB remains
wary in this circumstance. But the Bundesbank and ECB have not been as
over-the-top with stimulus as was the US Federal Reserve. There is not
as much to pull back or to offset. Even now credit growth in Europe
remains weak and stilted. The UK is on the same page with this result.
Without rapid credit growth, it seems unlikely that any sort of
overheating would have legs. But as we transition away from the &#8216;era of
falling prices&#8217; expect the central bankers to begin to sound a new note
even as they are wary not to overdo any tightening of policy too soon
or to do it too rapidly once they start. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> Germany PPI</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> %m/m</td>
<td colspan="4"> %-SAAR</td>
<td>&nbsp;</td>
</tr>
<tr>
<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>12-moY-Ago</td>
<td>IN Q3</td>
</tr>
<tr class="odd">
<td class="firstcol">PPIxConst</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-0.2%</td>
<td>-4.4%</td>
<td>-6.8%</td>
<td>-6.9%</td>
<td>0.3%</td>
<td>-6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ex Energy</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-1.9%</td>
<td>-3.3%</td>
<td>3.2%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
</body></html>

August following and outsized drop of 1.6% in July. Even so the drop in German PPI prices is becoming progressively smaller. Over three-months the pace of decline for PPI-ex-construction prices is 4.4% compared to a larger 6.9% pace [...]

German PPI Rises And Sets Sites On A New Horizon

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917a.jpg" align="left" border="0" height="265" width="353">
August following and outsized drop of 1.6% in July. Even so
the drop in German PPI prices is becoming progressively smaller. Over
three-months the pace of decline for PPI-ex-construction prices is 4.4%
compared to a larger 6.9% pace of decline Yr./Yr. Ex energy PI prices
are starting to creep up. Over thee-months the ex-energy price trend is
flat; over six months it&#8217;s a rate of decline of 1.9% and over 12-months
the pace of decline is 3.3%. PPI prices ex-energy are stabilizing and
paving the way to rise on a more consistent basis. 
 

Sectors and quarterly trend: Still in the quarter, PPI prices
are still falling with two of three-months&#8217; data in hand. Yr/Yr trends
for sector prices are still falling although for intermediate goods
there has started to be some cutting of the pace of the decline in the
year-over-year price trend. 
 

German prospects: The strong euro will help to keep a lid on
German PPI prices. And much of the rise in oil prices is already under
our belt in Germany although there may be some subtle transmission
effects that are still at work. The recent back off in the IFO index
suggests that the German recovery will not be the sort of blockbuster
that introduces demand-pull inflation to the recovery process. But just
as clearly the period of falling prices is coming to an end. There will
groups that experienced set-backs in the recession and will be looking
to make up for those with gains as the economy gets healthier. In
Germany especially there is a concern among policymakers about how this
transition plays out. 
 

Perspective: A new dawn of a tentative dawn - The ECB remains
wary in this circumstance. But the Bundesbank and ECB have not been as
over-the-top with stimulus as was the US Federal Reserve. There is not
as much to pull back or to offset. Even now credit growth in Europe
remains weak and stilted. The UK is on the same page with this result.
Without rapid credit growth, it seems unlikely that any sort of
overheating would have legs. But as we transition away from the &#8216;era of
falling prices&#8217; expect the central bankers to begin to sound a new note
even as they are wary not to overdo any tightening of policy too soon
or to do it too rapidly once they start. 


Germany PPI
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="9" scope="col"> Germany
PPI</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
<td>&nbsp;</td>
</tr>
<tr>
<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>12-moY-Ago</td>
<td>IN Q3</td>
</tr>
<tr class="odd">
<td class="firstcol">PPIxConst</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-0.2%</td>
<td>-4.4%</td>
<td>-6.8%</td>
<td>-6.9%</td>
<td>0.3%</td>
<td>-6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ex Energy</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-1.9%</td>
<td>-3.3%</td>
<td>3.2%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
</body></html>

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917b.jpg" align="left" border="0" height="265" width="353">
Exports rose sharply in the e-Zone in July posting a gain of
4.1% in the month as imports edged lower by 0.3%. The widening surplus
will boost EMU GDP and surpluses have emerged and steadily widened over
the last four months. The chart shows a considerable trend in place
with exports rising and imports still extending their losses in
percentage terms. 
 

Among export components raw material are having the largest
export boom over the previous three months (detailed trade data lag one
month). But even over that period MFG exports are falling at an 8.6%
pace. On the import side imports continue to post negative growth rates
even over three-months. Raw material imports are falling sharply on
that period. And manufacturing imports are falling at nearly
three-times the pace of MFG exports. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="6" scope="col">Ezone
13-Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; 6,777</td>
<td>&#8364;&#8364; 2,288</td>
<td>&#8364;&#8364; 3,514</td>
<td>&#8364;&#8364; 1,181</td>
<td>&#8364;&#8364; (1,230)</td>
</tr>
<tr class="grey3">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Exp</td>
<td>4.1%</td>
<td>0.9%</td>
<td>14.2%</td>
<td>8.6%</td>
<td>-20.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Food and Drinks</td>
<td>--</td>
<td>0.6%</td>
<td>5.7%</td>
<td>-15.0%</td>
<td>-9.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Raw materials</td>
<td>--</td>
<td>-0.2%</td>
<td>84.5%</td>
<td>8.4%</td>
<td>-21.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>--</td>
<td>-1.6%</td>
<td>-8.6%</td>
<td>-27.9%</td>
<td>-24.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">All IMP</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>-10.7%</td>
<td>-14.5%</td>
<td>-28.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Food and Drinks</td>
<td>--</td>
<td>-0.9%</td>
<td>-8.2%</td>
<td>-13.8%</td>
<td>-7.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Raw materials</td>
<td>--</td>
<td>0.3%</td>
<td>-49.4%</td>
<td>-58.0%</td>
<td>-41.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>--</td>
<td>-2.0%</td>
<td>-31.2%</td>
<td>-28.9%</td>
<td>-22.8%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">*Eur mlns; mo or period average;
Gray shaded areas lag one month</td>
</tr>
</tbody>
</table>
</body></html>

Exports rose sharply in the e-Zone in July posting a gain of 4.1% in the month as imports edged lower by 0.3%. The widening surplus will boost EMU GDP and surpluses have emerged and steadily widened over the last four months. The [...]

Euro Trade Surplus Surges

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917a.jpg" align="left" border="0" height="265" width="353">
Yr/Yr regional housing markets all are still declining, of
course, but the pace of the drop is diminishing across each of the main
regions. The turn is clear but to keep it in gear will require more
growth. With the first time home buyer incentives coming off, home
purchases will find a greater challenge to hold the uptrend. It is a
good time to hold our breath and to wait and see how much of this turn
remains in place. Hopefully with the incentives off, a stronger economy
will provide the incentive for a lasting rebound in housing starts. 
 

The table shows that the strength of the housing rebound is in
the single family sector where these purchase incentives play strongly.
For single family units, current strength is building momentum and
permits are steadily strengthening as well, despite the date with the
expiration for incentives. 
 

The 2-4 unit sector is falling at an accelerated pace. Permits
are showing some lift nonetheless. Multifamily starts are still very
weak and despite that permits are improving. 
 

Still the story of housing this month is that it was buoyed by
gains in the multifamily sector even though that sector has weak
trends. Single family starts fell sharply in the month. The small 2-4
unit sector also fell. This month growth was propped up by the sector
that has showed the least promise. The homebuilder survey released on
Sept 16th showed a one &#8211;point rise in that index. For the time being
housing retains its upward momentum, however slight. 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Housing
Starts/Permits By Unit Size</th>
</tr>
<tr class="grey7">
<th colspan="9">Analytical Comparisons (Pct.
Changes-Not Compounded)</th>
</tr>
<tr class="grey6">
<th colspan="9">Aug.2009</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">Total</td>
<td colspan="2">One Unit</td>
<td colspan="2">2-4 Units</td>
<td colspan="2">5 or more</td>
</tr>
<tr class="grey4">
<td class="firstcol">In 000's of Units</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
</tr>
<tr class="grey3">
<td class="firstcol">This Month:Saar</td>
<td>598</td>
<td>579</td>
<td>479</td>
<td>462</td>
<td>4</td>
<td>19</td>
<td>115</td>
<td>98</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jul.2009</td>
<td>589</td>
<td>564</td>
<td>494</td>
<td>463</td>
<td>10</td>
<td>18</td>
<td>85</td>
<td>83</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jun.2009</td>
<td>590</td>
<td>570</td>
<td>478</td>
<td>433</td>
<td>11</td>
<td>23</td>
<td>101</td>
<td>114</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-month avg.</td>
<td>592</td>
<td>571</td>
<td>484</td>
<td>453</td>
<td>8</td>
<td>20</td>
<td>100</td>
<td>98</td>
</tr>
<tr class="grey3">
<td class="firstcol">1-month % chg.</td>
<td>1.5%</td>
<td>2.7%</td>
<td>-3.0%</td>
<td>-0.2%</td>
<td>-60.0%</td>
<td>5.6%</td>
<td>35.3%</td>
<td>18.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">3-month % chg</td>
<td>8.5%</td>
<td>11.8%</td>
<td>17.1%</td>
<td>13.8%</td>
<td>-55.6%</td>
<td>5.6%</td>
<td>-13.5%</td>
<td>4.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">6-month % chg</td>
<td>4.2%</td>
<td>5.3%</td>
<td>34.2%</td>
<td>21.3%</td>
<td>-69.2%</td>
<td>11.8%</td>
<td>-43.6%</td>
<td>-35.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">yr/yr % chg.</td>
<td>-29.6%</td>
<td>-32.4%</td>
<td>-21.7%</td>
<td>-15.7%</td>
<td>-73.3%</td>
<td>-44.1%</td>
<td>-48.2%</td>
<td>-64.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Drop from Max</td>
<td>-73.7%</td>
<td>-74.4%</td>
<td>-73.7%</td>
<td>-74.3%</td>
<td>-95.2%</td>
<td>-82.1%</td>
<td>-73.6%</td>
<td>-81.6%</td>
</tr>
</tbody>
</table>
</body></html>

Yr/Yr regional housing markets all are still declining, of course, but the pace of the drop is diminishing across each of the main regions. The turn is clear but to keep it in gear will require more growth. With the first time home [...]

Housing Starts Show Turns Across Regions

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917a.jpg" align="left" border="0" height="265" width="353">
Yr/Yr regional housing markets all are still declining, of
course, but the pace of the drop is diminishing across each of the main
regions. The turn is clear but to keep it in gear will require more
growth. With the first time home buyer incentives coming off, home
purchases will find a greater challenge to hold the uptrend. It is a
good time to hold our breath and to wait and see how much of this turn
remains in place. Hopefully with the incentives off, a stronger economy
will provide the incentive for a lasting rebound in housing starts. 
 

The table shows that the strength of the housing rebound is in
the single family sector where these purchase incentives play strongly.
For single family units, current strength is building momentum and
permits are steadily strengthening as well, despite the date with the
expiration for incentives. 
 

The 2-4 unit sector is falling at an accelerated pace. Permits
are showing some lift nonetheless. Multifamily starts are still very
weak and despite that permits are improving. 
 

Still the story of housing this month is that it was buoyed by
gains in the multifamily sector even though that sector has weak
trends. Single family starts fell sharply in the month. The small 2-4
unit sector also fell. This month growth was propped up by the sector
that has showed the least promise. The homebuilder survey released on
Sept 16th showed a one &#8211;point rise in that index. For the time being
housing retains its upward momentum, however slight. 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Housing
Starts/Permits By Unit Size</th>
</tr>
<tr class="grey7">
<th colspan="9">Analytical Comparisons (Pct.
Changes-Not Compounded)</th>
</tr>
<tr class="grey6">
<th colspan="9">Aug.2009</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">Total</td>
<td colspan="2">One Unit</td>
<td colspan="2">2-4 Units</td>
<td colspan="2">5 or more</td>
</tr>
<tr class="grey4">
<td class="firstcol">In 000's of Units</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
</tr>
<tr class="grey3">
<td class="firstcol">This Month:Saar</td>
<td>598</td>
<td>579</td>
<td>479</td>
<td>462</td>
<td>4</td>
<td>19</td>
<td>115</td>
<td>98</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jul.2009</td>
<td>589</td>
<td>564</td>
<td>494</td>
<td>463</td>
<td>10</td>
<td>18</td>
<td>85</td>
<td>83</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jun.2009</td>
<td>590</td>
<td>570</td>
<td>478</td>
<td>433</td>
<td>11</td>
<td>23</td>
<td>101</td>
<td>114</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-month avg.</td>
<td>592</td>
<td>571</td>
<td>484</td>
<td>453</td>
<td>8</td>
<td>20</td>
<td>100</td>
<td>98</td>
</tr>
<tr class="grey3">
<td class="firstcol">1-month % chg.</td>
<td>1.5%</td>
<td>2.7%</td>
<td>-3.0%</td>
<td>-0.2%</td>
<td>-60.0%</td>
<td>5.6%</td>
<td>35.3%</td>
<td>18.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">3-month % chg</td>
<td>8.5%</td>
<td>11.8%</td>
<td>17.1%</td>
<td>13.8%</td>
<td>-55.6%</td>
<td>5.6%</td>
<td>-13.5%</td>
<td>4.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">6-month % chg</td>
<td>4.2%</td>
<td>5.3%</td>
<td>34.2%</td>
<td>21.3%</td>
<td>-69.2%</td>
<td>11.8%</td>
<td>-43.6%</td>
<td>-35.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">yr/yr % chg.</td>
<td>-29.6%</td>
<td>-32.4%</td>
<td>-21.7%</td>
<td>-15.7%</td>
<td>-73.3%</td>
<td>-44.1%</td>
<td>-48.2%</td>
<td>-64.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Drop from Max</td>
<td>-73.7%</td>
<td>-74.4%</td>
<td>-73.7%</td>
<td>-74.3%</td>
<td>-95.2%</td>
<td>-82.1%</td>
<td>-73.6%</td>
<td>-81.6%</td>
</tr>
</tbody>
</table>
 Euro Trade Surplus Surges 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 17, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917b.jpg" align="left" border="0" height="265" width="353">
Exports rose sharply in the e-Zone in July posting a gain of
4.1% in the month as imports edged lower by 0.3%. The widening surplus
will boost EMU GDP and surpluses have emerged and steadily widened over
the last four months. The chart shows a considerable trend in place
with exports rising and imports still extending their losses in
percentage terms. 
 

Among export components raw material are having the largest
export boom over the previous three months (detailed trade data lag one
month). But even over that period MFG exports are falling at an 8.6%
pace. On the import side imports continue to post negative growth rates
even over three-months. Raw material imports are falling sharply on
that period. And manufacturing imports are falling at nearly
three-times the pace of MFG exports. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="6" scope="col">Ezone
13-Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; 6,777</td>
<td>&#8364;&#8364; 2,288</td>
<td>&#8364;&#8364; 3,514</td>
<td>&#8364;&#8364; 1,181</td>
<td>&#8364;&#8364; (1,230)</td>
</tr>
<tr class="grey3">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Exp</td>
<td>4.1%</td>
<td>0.9%</td>
<td>14.2%</td>
<td>8.6%</td>
<td>-20.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Food and Drinks</td>
<td>--</td>
<td>0.6%</td>
<td>5.7%</td>
<td>-15.0%</td>
<td>-9.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Raw materials</td>
<td>--</td>
<td>-0.2%</td>
<td>84.5%</td>
<td>8.4%</td>
<td>-21.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>--</td>
<td>-1.6%</td>
<td>-8.6%</td>
<td>-27.9%</td>
<td>-24.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">All IMP</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>-10.7%</td>
<td>-14.5%</td>
<td>-28.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Food and Drinks</td>
<td>--</td>
<td>-0.9%</td>
<td>-8.2%</td>
<td>-13.8%</td>
<td>-7.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Raw materials</td>
<td>--</td>
<td>0.3%</td>
<td>-49.4%</td>
<td>-58.0%</td>
<td>-41.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>--</td>
<td>-2.0%</td>
<td>-31.2%</td>
<td>-28.9%</td>
<td>-22.8%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">*Eur mlns;
mo or period average;
Gray shaded areas lag one month</td>
</tr>
</tbody>
</table>
 U.S. Leading Indicators Rise
ForAFifth Straight Month And Signal Economic Recovery 
by <a href="/comment/Moeller.html">Tom
Moeller&nbsp;</a> September 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917c.jpg" align="right" border="0" height="265" width="353">
Extraordinary
developments continued to characterize the US financial system through
Q2, as indicated in the Federal Reserve's flow-of-funds accounts,
published today at noon.&nbsp; Two sectors in particular caught our
attention, households and the federal government, each for opposing
reasons.
First, after six consecutive quarters of
deterioration, household net worth finally experienced an
improvement.&nbsp; It increased $2.0 trillion to $53.1
trillion.&nbsp; The biggest gains came from the upturn in the stock
market, which added $1.1 trillion to people's assets.&nbsp;
Additionally, mutual fund holdings gained $486 billion, and pension
fund reserves -- largely invested in equities, of course -- added $742
billion.&nbsp; Among tangible assets, household real estate values
rose by $323 billion following nine consecutive quarters of
erosion.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917e.jpg" align="right" border="0" height="265" width="353">
&nbsp;Household financial positions also improved because
they continued to pay down liabilities.&nbsp; These changes were
small compared to the asset moves, but clearly still in a favorable
direction; total liabilities fell $35 billion in Q2, the fourth
reduction in the last five quarters.&nbsp; Mortgage debt and
consumer credit had the largest declines, while conventional bank loans
increased.
In these comparisons, the concept of "mortgage equity
withdrawal" plays a role.&nbsp; Homeowners' equity in real estate
increased in Q2 by $353 billion.&nbsp; It had contracted in 12 of
the last 13 quarters, a span extending back to the beginning of 2006
and interrupted by just a token increase in Q4 2006.&nbsp; For the
first year of this period, the reductions were evidently deliberate on
the part of consumers, who borrowed heavily against their
properties.&nbsp; Such "mortgage equity withdrawal" became a
popular addition to economists' tools for forecasting consumer
spending, which could be larger still when income was augmented by
liquidations of home values.&nbsp; This practice dwindled rapidly
however as real estate prices began to decline in 2007 and according to
the Haver measure, "MEW" turned negative last year.&nbsp; So people
began borrowing a smaller portion of the value of the real estate they
were purchasing or remodeling to try to hold a larger equity
stake.&nbsp; In the aggregate this effort was subverted by the the
continuing decline in real estate prices in general.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917m.jpg" align="right" border="0" height="265" width="353">
&nbsp; Finally,
though, this last quarter saw homeowners' equity go up.&nbsp; As
noted above, the value of real estate increased some $323
billion.&nbsp; Our measure of MEW declined by about $90 billion,
and mortgage debt itself was paid down by some $29 billion.&nbsp;
As a media headline writer noted recently, once again, the main
function of a home is returning to that of residence, not a resource to
pay for something else.
Separately in this flow-of-funds report, we
were also struck by the magnitude of the federal government's
borrowing, and just one small comparison will suffice to
illustrate.&nbsp; In these data, it's the historical comparison
available through the time series that helps put these things in
perspective.&nbsp; It's easy to joke about "a trillion here and
trillion there", but here's a new way to look at these
numbers.&nbsp; In Q2, net new issues of Treasury securities were
just under $339 billion.&nbsp; In this one three-month period, at a
time of year when tax inflows usually mean the Treasury borrows little
or even pays down on the debt, the Treasury borrowed more than it had
in any whole year before 2003.&nbsp; And this latest quarter's new
debt was in fact seasonally small: the prior three quarters had
averaged $518 billion, easily larger than any whole year ever -- until
2008.&nbsp;
 
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Flow
of Funds (Y/Y % Chg.)</th>
<th scope="col">% of Total
Outstanding</th>
<th scope="col">2Q '09</th>
<th scope="col">1Q '09</th>
<th scope="col" colspan="3">End
of Year</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td class="firstcol">2008</td>
<td>2007</td>
<td>2006</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt
Outstanding</td>
<td>--</td>
<td>3.0</td>
<td>4.2</td>
<td>5.0</td>
<td>10.4</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Federal Government</td>
<td>13.6%</td>
<td>35.9</td>
<td>28.3</td>
<td>24.2</td>
<td>4.9</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Households</td>
<td>25.9%</td>
<td>-1.2</td>
<td>-0.7</td>
<td>0.3</td>
<td>6.6</td>
<td>10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfinancial Corporate Business</td>
<td>13.8%</td>
<td>2.9</td>
<td>4.4</td>
<td>5.3</td>
<td>14.2</td>
<td>8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfarm, Noncorporate Business</td>
<td>6.9%</td>
<td>-1.7</td>
<td>1.4</td>
<td>4.9</td>
<td>12.6</td>
<td>14.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>31.3%</td>
<td>-0.9</td>
<td>3.7</td>
<td>5.5</td>
<td>13.4</td>
<td>9.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Trillions of
$</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Net Worth: Households &amp;
Nonprofit Organizations</td>
<td>--</td>
<td>$53.140</td>
<td>$51.141</td>
<td>$52.917</td>
<td>$62.911</td>
<td>$63.335</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tangible Assets:
Households</td>
<td>--</td>
<td>$24.847</td>
<td>$24.660</td>
<td>$25.177</td>
<td>$27.526</td>
<td>$28.724</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Financial Assets:
Households</td>
<td>--</td>
<td>$42.361</td>
<td>$40.584</td>
<td>$41.957</td>
<td>$50.703</td>
<td>$48.025</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total Liabilities:
Households</td>
<td>--</td>
<td>$14.068</td>
<td>$14.103</td>
<td>$14.217</td>
<td>$14.318</td>
<td>$13.414</td>
</tr>
</tbody>
</table>

</body></html>

Housing Starts Show Turns AcrossRegions

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090916c.jpg" align="left" border="0" height="265" width="353">
The EMU HICP finalized with August&#8217;s headline rate rising by
0.5% in and still dropping by 0.2% Yr/Yr. Core prices rose by 0.2% in
August and rose by 1.2% Yr/Yr &#8211; a moderate result and indicating that
inflation pressures are within the ECB&#8217;s HICP ceiling constraint. With
headline inflation DOWN Yr/Yr the headline constraint is not going to
be an issue for a while. Keeping inflation below 2% will be easy. But
the core rate will provide better guidance as to what true inflation
trends are doing when the energy sector is not bashing the headline
rate hither and thither each month like a tennis ball caught in a long
rally. 
 

So far the picture is still a good one. Goods sector inflation
is down by 1.5% Yr/Yr while service sector inflation is at 1.8% Yr/Yr.
Goods inflation is off in the recent three-months but service sector
inflation has locked in an increasing trend with six month inflation at
3.1% and three-month services inflation at 4.7%. That trend is a more
than a bit uncomfortable. 
 

At the country level core inflation (excluding food, energy
and alcohol) is well behaved over twelve months with Germany France
Italy and Spain each with 12-month rates below 1.5%. But over the
shorter horizons things get dicey. Only Italy shows a core rate that is
not accelerating. There the core HICP is up by 0.7% over three-months
when annualized. For Germany, France and Spain core inflation has
accelerated to a pace of 1.6%, 1.4% and 1.9% respectively. Those are
uncomfortable results. 
 

Europe remains a troubled economic zone, even as it is engaged
in the recovery process. Recovery is not instantaneous; those who are
displaced have to live through the process until they are re-engaged in
economic activity. And the weaker than expected IFO survey for Germany
has economists thinking that the EMU recovery will be slower rather
than faster. Still at such an early stage of recovery and with the
upswing still nascent, the ECB&#8217;s ceiling for headline inflation at 2%
implies a lot of room for discretion but the core rates are doing
things that are troublesome and testing that flexibility. It will be
interesting to see how the ECB handles this delicate proposition. At
least it has a rising exchange rate to help fend of any imported
inflation. With the headline rate under wraps The ECB does have some
time, but when nettlesome inflation trends are present the ECB has not
been known for its patience. Yet the currency is so strong that the ECB
probably does not want to signal that it is closer to the upside of the
cycle for interest rates. The ECB has a dilemma in the making. Core
inflation trends yet could evaporate. But unless they do the ECB is on
a collision course with some hard and unpopular decisions. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Trends in HICP</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="odd">
<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>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>0.5%</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>0.6%</td>
<td>-0.2%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>1.4%</td>
<td>1.2%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>0.4%</td>
<td>-1.7%</td>
<td>0.2%</td>
<td>-4.1%</td>
<td>0.1%</td>
<td>-1.5%</td>
<td>4.6%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0.2%</td>
<td>0.8%</td>
<td>0.1%</td>
<td>4.7%</td>
<td>3.1%</td>
<td>1.8%</td>
<td>2.7%</td>
</tr>
<tr class="even">
<td colspan="8">HICP</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>2.6%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>0.6%</td>
<td>-0.2%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.5%</td>
<td>-0.6%</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.9%</td>
<td>0.1%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.7%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>4.9%</td>
<td>1.3%</td>
<td>-0.7%</td>
<td>5.0%</td>
</tr>
<tr class="even">
<td colspan="8">Core excl Food Energy
&amp; Alcohol</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>1.7%</td>
<td>1.2%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.6%</td>
<td>1.4%</td>
<td>1.4%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>1.3%</td>
<td>1.2%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>1.1%</td>
<td>0.5%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
</body></html>

The EMU HICP finalized with August’s headline rate rising by 0.5% in and still dropping by 0.2% Yr/Yr. Core prices rose by 0.2% in August and rose by 1.2% Yr/Yr – a moderate result and indicating that inflation pressures are within [...]

HICP and Core Rate Are in Good Shape but Some Trends are Not

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090916b.jpg" align="left" border="0" height="265" width="353">
Headline rises 0.4% core rises 0.1% for second month in a row 
 

The summary table shows that inflation remains contained for
the most part. Energy prices rose 8.5% in August slamming the headline
and lien items with energy in them. But core CPI trends remain
controlled. Inflation diffusion rose above 50 to 58.9 in August
implying that inflation rose m/m in more CPI categories than it fell.
But core diffusion was at 48.6 implying that inflation FELL m/m in more
CORE categories in which it rose and that was with the core pace at
+0.1%. That is pretty impressive. 
 

Over three-months: Red figures in the table
above flag four top panel categories as having accelerating inflation
over three-months: Food and beverages where inflation has &#8216;risen&#8217; to
-0.2% from -1.1% over six months; Housing where at -0.6% over three
months inflation compares to a pace of -0.8% over six months; Apparel
and upkeep where the inflation&#8217;s pace shot up to 4.8% over three-months
compared to 1.2% over six months; and, transportation where energy
prices are at work driving the price index up at a 30% pace over
three-months compared to 12.6% over six months. On balance these are
not worrisome developments Transportation is mostly energy prices,
housing costs are tame despite being hit by rising utilities and energy
costs, food and beverage prices are still falling despite
&#8216;accelerating.&#8217; Apparel prices we will see about; but the series is
very volatile and prices tend to run hot and cold without much trend;
indeed despite the high 3-month trend, apparel prices fell in the month
are up by only 0.6% Yr/yr. 
 

These observations underscore several points: that energy
inflation is not always passed along and that it is hard to tell price
volatility from true inflation in the month-to-month reports. So we use
the diffusion results to help guide us and they are very good this
month. 
 
 

Core Services: Core inflation for services
(excluding energy) appears to be mostly steady at the 1.5% level or so.
Twelve month six-month and three-month inflation trends all converge
around that 1.5% pace which is a very low pace for the service sector
where productivity is lower than for goods making input price pressures
harder to fight-off. Still, all that is going well. 
 

Core Goods: Core goods inflation (excluding
food and energy) had spurted early in the year but it is settling down.
Three-month and Yr/Yr inflation rates are right at the 1% mark but over
six months core goods inflation is still a bit higher at 2.7%, and it
is still coming down from its cyclical peak rate. The trends are good. 
 


 
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Consumer Prices: 2009 August Report</th>
</tr>
</thead>
<tbody>
<tr class="grey6">
<td colspan="9">Overview: Controlled after
last month's spurting headline</td>
</tr>
<tr class="grey5">
<td class="firstcol">Quick Summary</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Year-To-Date</td>
<td>One Mo.</td>
<td>Mo/Mo</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>Yr/Yr</td>
<td>6-Mo a.r.</td>
<td>3-Mo a.r.</td>
<td>&nbsp;</td>
<td>2009</td>
<td>2008</td>
<td>Diffusion</td>
<td>Aug.2009</td>
</tr>
<tr class="grey4">
<td class="firstcol">CPI</td>
<td>-1.4%</td>
<td>2.3%</td>
<td>4.9%</td>
<td>--</td>
<td>2.7%</td>
<td>4.9%</td>
<td>58.9</td>
<td>NOT</td>
</tr>
<tr class="grey4">
<td class="firstcol">Core CPI</td>
<td>1.5%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>--</td>
<td>1.9%</td>
<td>2.4%</td>
<td>48.6</td>
<td>Annualized</td>
</tr>
<tr class="grey3">
<td class="firstcol">Commodity Category</td>
<td>Mon a.r.</td>
<td>&nbsp;</td>
<td colspan="5">Annualized Inflation Rate
For Last:</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">By Expenditure Category</td>
<td>Aug.2009</td>
<td>% Weight</td>
<td>3-Mos</td>
<td>&nbsp;</td>
<td>6-Mos</td>
<td>&nbsp;</td>
<td>Year</td>
<td>Month</td>
</tr>
<tr class="grey2">
<td class="firstcol">All Items</td>
<td>5.5%</td>
<td>100.00</td>
<td>4.9%</td>
<td>--</td>
<td>2.3%</td>
<td>--</td>
<td>-1.4%</td>
<td>0.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and Beverages</td>
<td>1.1%</td>
<td>16.20</td>
<td>-0.2%</td>
<td>--</td>
<td>-1.1%</td>
<td>--</td>
<td>0.6%</td>
<td>0.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Housing</td>
<td>0.6%</td>
<td>39.98</td>
<td>-0.6%</td>
<td>--</td>
<td>-0.8%</td>
<td>--</td>
<td>-0.6%</td>
<td>0.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Apparel &amp; Upkeep</td>
<td>-1.1%</td>
<td>4.45</td>
<td>4.8%</td>
<td>--</td>
<td>1.2%</td>
<td>--</td>
<td>0.6%</td>
<td>-0.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Transportation</td>
<td>31.5%</td>
<td>17.57</td>
<td>30.1%</td>
<td>--</td>
<td>12.6%</td>
<td>--</td>
<td>-10.7%</td>
<td>2.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Medical care</td>
<td>3.5%</td>
<td>5.81</td>
<td>2.7%</td>
<td>--</td>
<td>3.1%</td>
<td>--</td>
<td>3.3%</td>
<td>0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Recreation</td>
<td>1.3%</td>
<td>5.91</td>
<td>2.4%</td>
<td>--</td>
<td>2.9%</td>
<td>--</td>
<td>3.7%</td>
<td>0.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Educucation &amp;
Communication</td>
<td>2.0%</td>
<td>5.31</td>
<td>2.5%</td>
<td>--</td>
<td>3.2%</td>
<td>--</td>
<td>3.2%</td>
<td>0.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Other Goods &amp; Services</td>
<td>1.1%</td>
<td>4.77</td>
<td>4.6%</td>
<td>--</td>
<td>13.1%</td>
<td>--</td>
<td>7.4%</td>
<td>0.1%</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">By Industry Group</td>
</tr>
<tr class="grey1">
<td class="firstcol">Nondurables (NSA)</td>
<td>20.9%</td>
<td>31.26</td>
<td>17.4%</td>
<td>&nbsp;</td>
<td>6.2%</td>
<td>&nbsp;</td>
<td>-5.5%</td>
<td>1.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Durables</td>
<td>-7.3%</td>
<td>10.57</td>
<td>-1.2%</td>
<td>&nbsp;</td>
<td>0.5%</td>
<td>&nbsp;</td>
<td>-1.5%</td>
<td>-0.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Services</td>
<td>2.4%</td>
<td>58.17</td>
<td>1.1%</td>
<td>&nbsp;</td>
<td>0.5%</td>
<td>&nbsp;</td>
<td>0.7%</td>
<td>0.2%</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">By Economic Group</td>
</tr>
<tr class="grey1">
<td class="firstcol">All: Excl Food &amp; Energy</td>
<td>0.8%</td>
<td>77.10</td>
<td>1.4%</td>
<td>&nbsp;</td>
<td>1.9%</td>
<td>&nbsp;</td>
<td>1.5%</td>
<td>0.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">(Median Increase)</td>
<td>1.2%</td>
<td>100.00</td>
<td>0.9%</td>
<td>&nbsp;</td>
<td>0.9%</td>
<td>&nbsp;</td>
<td>0.8%</td>
<td>0.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Excl. Energy</td>
<td>0.9%</td>
<td>92.32</td>
<td>1.1%</td>
<td>&nbsp;</td>
<td>1.4%</td>
<td>&nbsp;</td>
<td>1.3%</td>
<td>0.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Commodities: Excl Food
&amp; Energy</td>
<td>-3.6%</td>
<td>22.77</td>
<td>1.0%</td>
<td>(29% of core)</td>
<td>2.7%</td>
<td>&nbsp;</td>
<td>1.1%</td>
<td>-0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Services: Excl Energy</td>
<td>2.6%</td>
<td>54.33</td>
<td>1.6%</td>
<td>(71% of core)</td>
<td>1.6%</td>
<td>&nbsp;</td>
<td>1.6%</td>
<td>0.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Core CPI less Tobacco</td>
<td>0.8%</td>
<td>&nbsp;</td>
<td>1.3%</td>
<td>&nbsp;</td>
<td>1.4%</td>
<td>&nbsp;</td>
<td>1.2%</td>
<td>0.1%</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">Food &amp; Energy</td>
</tr>
<tr class="grey1">
<td class="firstcol">Energy</td>
<td>167.6%</td>
<td>7.68</td>
<td>148.5%</td>
<td>&nbsp;</td>
<td>42.2%</td>
<td>&nbsp;</td>
<td>-30.8%</td>
<td>8.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food</td>
<td>1.0%</td>
<td>15.22</td>
<td>-0.5%</td>
<td>&nbsp;</td>
<td>-1.4%</td>
<td>&nbsp;</td>
<td>0.4%</td>
<td>0.1%</td>
</tr>
</tbody>
</table>
</body></html>

Headline rises 0.4% core rises 0.1% for second month in a row The summary table shows that inflation remains contained for the most part. Energy prices rose 8.5% in August slamming the headline and lien items with energy in them. But [...]

CPI Headline Pops but Core Rate Flat Lines

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

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

**The growth consensus for 2026** 
Consensus growth forecasts for 2026 have continued to firm over the past six months, with upward revisions most pronounced in economies that are more directly exposed to the global AI investment cycle. Taiwan stands out, reflecting its central role in advanced semiconductor manufacturing and the spillovers from sustained AI-related capex across the global tech supply chain. The US has also seen a sizeable upgrade, consistent with strong domestic investment in AI infrastructure and data-centre capacity, alongside resilient demand for high-value tech services. Elsewhere in Asia, upgrades to South Korea and, to a lesser extent, China and India point to a broader regional benefit from the AI-driven electronics and capital-goods cycle, even as underlying macro conditions remain mixed. Canada has also seen modest upward revisions, likely reflecting its close integration with US investment trends. By contrast, revisions across much of Europe and Japan have been more muted, while forecasts for Russia remain under downward pressure.

260115Z1.jpg

**The next steps for central bank policy** 
Based on responses to the special questions in the latest Blue Chip survey, the chart highlights how uncertain panelists remain about the precise timing of the next policy move, even where there is broad agreement on direction. Expectations for both the Fed and the Bank of England are now loosely centred on March 2026 as the most likely window for the next easing step, but the spread of responses points to limited conviction and a high sensitivity to incoming data. By contrast, panelists continue to see the ECB as largely through its easing cycle, with a clear majority expecting any further move only later, if at all. The Bank of Japan remains the clear outlier: while further tightening is still the central expectation, views are split on timing, with panelists divided between a March move and a hike pushed beyond April 2026—highlighting ongoing uncertainty over the durability of domestic inflation and wage dynamics.

260115Z2.jpg

**The UK economy and BoE policy** 
While Blue Chip panelists remain divided on the precise timing of the Bank of England’s next policy cut, the latest run of UK data is tilting market expectations toward an earlier move. Economic releases have increasingly fallen short of expectations, a pattern that has coincided with a steady decline in short-dated gilt yields. The negative surprise profile reflects a combination of weak household demand and softer labour-market indicators. This has generated downside momentum in the data, reinforcing the case—at least from a market perspective—for earlier or deeper policy easing.

260115Z3.jpg

**The impact of Artificial Intelligence**
Responses to the special questions in the latest Blue Chip survey also suggest that panelists are divided over the timing of AI’s macroeconomic impact in the US. A sizeable share already reports seeing noticeable effects, consistent with the rapid pace of AI-related investment and adoption over the past year. At the same time, a similarly large group expects AI’s impact to become more evident only over the next one to three years, implying a belief that productivity and growth effects will materialise with a lag. These views are notable given that a majority of panelists continue to judge anticipated AI-related gains as being overstated in financial markets, underscoring the risk of disappointment—and potential equity market volatility—if realised outcomes fail to match elevated expectations.

260115Z4.jpg

**US business formation and productivity growth**
The chart points to a renewed pick-up in US productivity growth alongside a marked step-up in business applications, a combination that has naturally fuelled interest in the role of AI. The acceleration in output per hour over the past year coincides with a surge in corporate formations, potentially reflecting both heightened investment in new technologies and the emergence of new, AI-enabled business models. That said, productivity growth has historically been highly cyclical, often strengthening late in the cycle or during periods of labour hoarding and cost discipline, before fading again. As such, while AI may be contributing at the margin, it remains too early to conclude that the recent improvement marks a durable, technology-driven shift rather than another cyclical upswing.

260115Z5.jpg

**China’s export growth**
This week’s China trade data revealed that its export growth has continued to rotate away from the US and toward Europe and ASEAN, a pattern that has become more pronounced over the past year. While exports to the US have fallen sharply on a year-on-year basis, shipments to both Europe and ASEAN have held up markedly better, and in recent months have returned to positive growth. This divergence is consistent with the tightening of US trade policy toward China, including higher tariffs, expanded export controls and broader efforts to “de-risk” supply chains. By contrast, trade with Europe and ASEAN appears to be benefiting from trade diversion and re-routing, as Chinese firms redirect exports toward markets where barriers remain lower and supply-chain integration is deeper.

260115Z6.jpg

The global backdrop remains unsettled, reflected in rising gold prices amid geopolitical tensions—most recently around Venezuela—and renewed political noise, including questions over Federal Reserve independence. At the same time, however, many major equity indices remain at or close to all-time highs, buoyed by optimism around AI and reinforced by a run of relatively benign US inflation readings. Against this mixed backdrop, the charts this week point to a global outlook that is becoming more differentiated rather than uniformly weaker. Blue Chip forecasts for 2026 growth have edged higher over the past six months, with upgrades concentrated in economies most exposed to the AI investment cycle, notably the US and parts of Asia (chart 1). Central bank expectations remain fluid: while panelists broadly anticipate easing by the Fed and Bank of England, conviction around timing is limited, and the Bank of Japan remains an outlier with further tightening still expected (chart 2). In the UK, that uncertainty sits alongside a deteriorating data flow, with negative economic surprises increasingly tilting market expectations toward an earlier BoE rate cut (chart 3). Turning to the US, special questions highlight a divide over whether AI is already having a noticeable macro impact or whether its effects will emerge more gradually, a tension that mirrors concerns about over-optimism in financial markets (chart4). That debate is echoed in the recent pick-up in US productivity growth and the step-change in business formation—developments that may reflect AI-related dynamics but which also warrant caution given the historically cyclical nature of productivity (chart 5). Finally, China’s trade data point to a continued re-orientation of export growth away from the US and toward Europe and ASEAN, consistent with evolving US trade policy and broader supply-chain realignment (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2mhM227WWeJJ6kRv7sJMiE?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

260115J.jpg

260115K.jpg

The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October to include with the November report. The charts above have a gap in October, and the November figures are represented by a small dot.

Import prices have been remarkably stable in the past three years, as shown by the sideways movement in the level of the import price index (left chart). Focusing on percent changes (i.e. inflation rates) rather than the level of the index shows deflation in 2023 and early 2024 followed by higher prices more recently (right chart). Still, the net change in the past 12 months has totaled only 0.1% and the cumulative change in the past three years amounted to a decline of 0.4%.

A calm environment in the energy sector has helped to restrain import prices, as the price of crude oil showed little change in 2023 and 2024 and declined in 2025. Import prices excluding petroleum products have increased in recent years, but the changes have been modest: 0.9 in the past 12 months and 1.3% in the past three years.

The non-oil components of import prices have traced various patterns in recent years, but shifts have been largely offsetting. Prices of food and autos increased noticeably in 2023 and 2024, but they gave back much of those increases in 2025. Prices of capital goods were stable in 2023 and 2024, but they started to increase in 2025. Prices of consumer goods have been volatile, showing bursts of higher prices followed by discounting, leaving a modest net increase in the past three years.

The calm energy environment also seemed to play a role on the export side, as the industrial supply category showed little net change in prices over 2023 and 2024 before jumping in early 2025. Food prices followed a similar pattern, showing two years of restraint before moving higher in 2025. These two categories account for much of the upward movement in overall export prices in 2025. Prices of consumer goods also started to move higher in 2025 after little net change in the prior two years. Prices of capital goods and automobiles have traced reasonably steady upward paths.

Many observers might try to use the import component of this report to gain insight into the effect of tariffs on prices. That will be difficult because the figures from this report are pre-tariff; there will be no independent upward pressure on prices in this report because of tariffs. In fact, one should look for lower import prices in searching for a tariff effect. That is, if a foreign exporter were to absorb the tariff burden, that would be accomplished by reducing the pre-tariff price in order to keep the after-tariff price steady.

260115L.jpg

Some exporters to the US may have made such efforts. The nearby chart shows the month-to-month change in import prices in 2025, and May and June both showed lower prices. These months were especially important because they followed the announcement by President Trump of marked increases in tariffs in April. Also, some of the downward pressure occurred in components that would be sensitive to price (autos and consumer goods). Of course, May and June might be too soon after the announcement of draconian tariffs for foreign exporters to assess and change their pricing strategy.

The chart on monthly changes ends in September because the absence of an October reading prevents the calculation of the month-to-month changes for October and November. However, the two-month change from September to November is easily calculated, and the increase of 0.4% suggests little or no effort to absorb the burden of tariffs.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

- Import prices have changed little in the past three years.
- Export prices were stable in 2023-24, but moved higher in 2025.

Import & Export Prices: Generally Modest Changes

Winnie Tapasanun

260115J39.jpg

260115JK9.jpg

The Empire State Manufacturing Index of General Business Conditions rose to a higher-than-expected 7.7 in January following a 17.2-drop to -3.7 in December, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 1.0 for January had been expected in the Action Economics Forecast Survey. The positive January figure indicated that the business activity in New York State expanded for the third time in four months; it was an improvement from -7.4 in January 2025 and a low of -29.7 in January 2024, though still below a high of 16.8 in November 2024. The percentage of respondents reporting an increase in general business conditions was 34.2% in January, up from 31.7% in December; the percentage reporting a decrease was 26.5%, down from December’s 35.4%. The latest survey was conducted between January 2 and January 9.

The headline index reflects the answer to a single question concerning the state of economic activity and is not calculated from the components. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index increased to 51.2 in January following a 4.2-point decline to the neutral-level 50.0 in December (the lowest level since September); it was slightly up from 50.7 in January 2025 and well above a low of 43.0 in January 2024. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index rose to 6.6 in January after a 10.6-point drop to -1.0 in December, marking the third m/m gain in orders in four months and a sharp improvement from a low of -30.7 in January 2024. The shipments index jumped to 16.3 in January, the highest level since November 2024, following a 16.5-point fall to -5.0 in December; it was well above a low of -21.7 in April 2024. The unfilled orders index improved to -8.2 in January after a 9.1-point decrease to -14.9 in December, indicating that unfilled orders contracted for the eighth straight month but at a less severe pace; the index reached a low of -24.2 in January 2024. The inventories index fell to -2.1 in January, the lowest level since September, after a 2.7-point decline to 4.0 in December, signaling the first inventory contraction since October. Meanwhile, the delivery times index increased to 0.0 in January from -5.9 in December, with 12.4% of respondents reporting longer delivery times and an identical 12.4% reporting shorter times, indicating that delivery times were unchanged.

On the labor front, the number of employees index fell to -9.0 in January after a 1.0-point increase to 7.5 in December, indicating that employment contracted for the first time since September and reached its lowest level since January 2024. The index remained well below a peak of 24.9 in February 2022. In January, only 7.9% of respondents reported an increase in employment while a higher 16.8% reported a decline. The average workweek index dropped to -5.4 in January from 2.5 in December, turning negative for the first time since October and hitting the lowest level since April 2025.

Inflation pressures eased in January but remained high. The prices paid index fell to 42.8 in January, the lowest level since March 2025, after a 5.9-point decrease to 44.2 in December. Although still well below a peak of 84.9 in April 2022, the index remained above a low of 25.9 in December 2024 and a low of 20.8 in December 2023. In January, 44.5% of respondents reported higher prices paid while only 1.7% reported lower prices paid. The prices received index fell to 14.4 in January, the lowest reading since January 2025, from 25.4 in December. The index was up from a low of 7.5 in December 2024 and a low of 7.7 in July 2023 but far below a high of 51.9 in March 2022. In January, 18.9% of respondents reported higher prices received while 4.4% reported lower prices received.

Firms remained fairly optimistic about the future business outlook in the latest survey. The index for future business conditions eased to 30.3 in January after rising to 33.5 in December, with 50.6% of respondents expecting business conditions to improve over the next six months. Future new orders edged down to 33.3 in January from 34.5 in December, while future shipments rose to 34.9—the highest level since March 2022—from December’s 30.7. Growth in future employment strengthened to 14.9, the highest reading since November 2024, from December’s 7.8. Capital spending plans remained positive for the third consecutive month in January, with the future capital expenditures index rising to 10.3 from December’s 6.9. Expected prices paid fell to 52.6 in January from 55.4 in December and expected prices received fell to 36.5 from 41.6, with both measures at their lowest levels since December 2024.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

260115L39.jpg

260115M39.jpg

- General Business Conditions Index up 11.4 pts. to 7.7 in January.
- Positive: Shipments (16.3, highest since Nov. ’24) and new orders (6.6).
- Negative: Employment (-9.0, lowest since Jan. ’24), unfilled orders (-8.2), and inventories (-2.1, a four-month low).
- Prices paid at a 10-month-low 42.8 and prices received at a one-year-low 14.4.
- Firms fairly optimistic: Future Business Conditions Index down to a still-positive 30.3; future prices paid at a one-year-low 52.6.

U.S. Empire State Manufacturing Index Returns to Positive Territory in January

Sandy Batten

260115N2.jpg

260115O2.jpg

The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia rose to 12.6 in January from -8.8 in December. The survey covers the third Federal Reserve District. A reading of -4.5 for January was expected by the Action Economics Forecast Survey. Over 23% of respondents reported increases in activity in January (up from 21% last month), exceeding the 11% reporting decreases (down from 30%); 63% of the firms reported no change in current activity (up from 50%). Survey responses were collected from January 5 to January 12.

The headline index is the answer to just one question: whether activity increased, decreased or was unchanged from the previous month. Haver Analytics calculates an ISM-adjusted current activity diffusion index from the five key components using the methodology employed to construct the national ISM index. This figure rose to 52.9 in January from 52.5 in December, inching further above the critical 50 value that separates contraction from expansion.

For the component indexes, the new orders index rose to 14.4 from 5.7 in December. The percentage of respondents reporting an increase in orders edged up to 28.3% in January from 27.4% in the prior month while 13.9% reported a decrease, down markedly from 21.7% in December. The shipments index increased to 9.5 in January from 3.2 in December. The percentage of respondents reporting an increase in shipments rose slightly to 27.3% from 26.2% while the percentage reporting a decrease fell to 17.8% from 23.0%. Delivery times lengthened marginally to 7.3 in January from 5.2 in December. The inventories index fell 17 points to -8.4 in January, its lowest level since July 2024.

Respondents continued to report overall increases in employment with the employment index remaining in positive territory. However, the index fell to 9.7 in January from 13.0 in December, indicating that gains in employment slowed in the latest month. The percentage of respondents reporting an increase in employment rose to 19.8% from 13.6% in December but the percentage reporting a decline jumped to 10.1% in January from 0.6% in December. The average workweek index fell from 12.5 in December to 9.1 in January.

On balance, the firms continued to report overall increases in prices. The prices paid index edged down 2 points to 46.9 in January, its second consecutive decrease and its lowest level since June. Nearly 47% of respondents reported increases in input prices, while none reported decreases; 53% reported no change. The current prices received index ticked up 2 points to 27.8. More than 31% of respondents reported increases in the prices of their own goods, 3% reported decreases, and 66% reported no change.

The diffusion index for future general activity declined from a revised reading of 38.1 in December to 25.5 in January, its lowest reading since July. Nearly 35% of respondents expect an increase in activity over the next six months (down from 53% last month), exceeding the 9% that expect a decrease. The future new orders index fell 6 points to 32.9, while the future shipments index ticked up 1 point to 40.8. On balance, the firms continue to expect increases in employment over the next six months with the future employment index rising 4 points to 28.8. Both future price indexes were well above their long-run averages: The future prices paid index rose 2 points to 66.6; the future prices received index moved up 5 points to 61.8. The index for future capital expenditures edged up 1 point to 30.3.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The indexes range from -100 to +100 with positive values indicating an increase in activity. The series from the survey dating back to May 1968 can be found in Haver’s **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

260115P2.jpg

260115Q2.jpg

- The headline index increased to 12.6 in January, the highest reading since September, from -8.8 in December.
- Both new orders and shipments increased in January.
- Delivery times lengthened while the pace of input price increases slowed.
- Employment decreased but remained in positive territory, indicating further gains in employment though at a slower pace.

Philly Fed Manufacturing Activity Rebounds in January

Kathleen Stephansen, CBE

260115A5.jpg

260115B5.jpg

Initial claims for unemployment insurance declined by 9,000 to 198,000 in the week ending January 10, from 207,000 in the week ending January 3, revised from 208,000. The four-week moving average of initial claims was 205,000 in the January 10 week, a decline of 6,500 from 211,500 in the January 3 week, revised from 211,750, and reaching is the lowest level for this average since January 20, 2024, when it was 203,250.

Federal government employees initially filed 646 (NSA) jobless insurance claims in the week ended January 3, after filing 476 claims in the week ended December 27.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 19,000 to 1.884 million in the week ended January 3 from 1.903 million in the December 27 week, revised from 1.914 million. The four-week moving average was 1.889 million in the week ending January 3, a decrease of 250 from the prior week, revised from 1.893 million. The insured unemployment rate stood at 1.2% in the week of January 3, unchanged from previous 5 weeks.

Federal government employees’ continuing benefits claims were 12,803 (NSA) in the week of December 27, 12,161 (NSA) from 12,129 (NSA) in the week of December 20. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 27, the highest unemployment rates were in Rhode Island (2.86%), New Jersey (2.85%), Washington (2.81%), Minnesota (2.74%), Massachusetts (2.59%), Oregon (2.28%), Montana (2.16%), California and Connecticut (both 2.12%) and Alaska (2.06%). The lowest rates were in Florida (0.31%), North Carolina (0.41%), Louisiana (0.43%), Alabama and Virginia (both 0.49%). Rates in other notable states include Illinois (2.18%), New York (2.10%), Pennsylvania (2.02%), and Texas (1.20%). 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.

260115C5.jpg

260115D5.jpg

- Initial claims declined from the prior week.
- Continuing claims declined from the prior week.
- The insured unemployment rate was unchanged.

Economy in Brief

Jump to:

U.S. Leading Indicators Rise ForAFifth Straight Month And Signal Economic Recovery

German PPI Rises And Sets Sites On A New Horizon

German PPI Rises And Sets Sites On A New Horizon

Euro Trade Surplus Surges

Housing Starts Show Turns Across Regions

Housing Starts Show Turns AcrossRegions

HICP and Core Rate Are in Good Shape but Some Trends are Not

CPI Headline Pops but Core Rate Flat Lines