Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217g.jpg" align="right" border="0" height="265" width="353">The
Philadelphia Federal Reserve Bank indicated that its index of regional
factory sector activity rose this month to its highest level since
early-2005. At 20.5, the index was unexpectedly strong and positive for
the fifth consecutive month. The latest level compared to figures near
-40.0 this past fall and winter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217h.jpg" align="right" border="0" height="265" width="353">During the
last ten years there has
been a 77% correlation between the level of the Philadelphia Fed
Business Conditions Index and the three-month growth in factory sector
industrial production. There has been a 70% correlation with q/q growth
in real GDP. The latest survey from the Philadelphia Federal Reserve
Bank can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos1209.pdf">here.</a>·
Amongst the components, the employment index was notably strong as it
rose to well above break-even and to the highest level since late-2007.
During the last ten years there has been a 91% correlation between the
index level and the three-month change in manufacturing sector
payrolls. Remaining strong were shipments, the workweek, unfilled
orders and the delivery times components. The inventory component also
improved significantly from its March low.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217i.jpg" align="left" border="0" height="265" width="353">The prices paid index rose
sharply to its highest level since August of last year and compares to
negative readings this past winter and spring. During the last ten
years there has been a 71% correlation between the prices paid index
and the three-month growth in the intermediate goods PPI. There has
been an 82% correlation with the change in core intermediate goods
prices.
Expected business conditions in six months deteriorated for
the sixth straight month. The December index fell to a still-positive
reading of 24.4&nbsp; but that was well-off the recent high. Many
of the index components, especially orders and shipments, were down
sharply.· The figures from the Philadelphia Federal Reserve can be
found in Haver's SURVEYS database.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">December '08</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">General Activity Index</td>
<td>20.4</td>
<td>16.7</td>
<td>11.5</td>
<td>-35.1</td>
<td>-7.5</td>
<td>-21.3</td>
<td>5.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>6.5</td>
<td>14.8</td>
<td>6.2</td>
<td>-29.3</td>
<td>-9.6</td>
<td>-14.7</td>
<td>6.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Number of Employees</td>
<td>6.3</td>
<td>-0.5</td>
<td>-6.8</td>
<td>-23.8</td>
<td>-23.7</td>
<td>-8.7</td>
<td>6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index</td>
<td>33.8</td>
<td>14.9</td>
<td>21.3</td>
<td>&nbsp;-26.6</td>
<td>-4.0</td>
<td>36.4</td>
<td>26.3</td>
</tr>
</tbody>
</table>

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The Philadelphia Federal Reserve Bank indicated that its index of regional factory sector activity rose this month to its highest level since early-2005. At 20.5, the index was unexpectedly strong and positive for the fifth [...]

Philadelphia Fed Index Gains With Strength in Employment

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217e.jpg" width="353">
The Conference Board&#39;s Index of Leading Economic Indicators continued its uptrend last month giving a strong signal that the recent recession has ended. The 0.9% rise during November was the eighth consecutive monthly increase. Moreover, the 10.2% (centered) rate of increase during the last six months was nearly the strongest since early-1983. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, consumer and capital goods orders.
The breadth of increase amongst the component series sagged again last month. Sixty-five percent of the components rose during November versus last month&#39;s reading of 70% that increased. During the most recent six months, however, 80% of the series rose. Prominent in last month&#39;s increase was a longer workweek, fewer jobless insurance claims, more building permits, and the steeper interest rate yield curve. These gains were offset by easier vendor performance, lower consumer expectations and a downtick in capital goods orders.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217f.jpg" width="353">
Continuing to suggest that the rate of decline in the economy is slowing were the coincident indicators which rose for the first month in the last three. The 0.2% gain followed an unrevised no-change during October. During the last six months the 1.4% rate of decline in the coincident series compares with a shortfall of 8.0% at its worst in January. Moderation of earlier declines has been due to higher industrial production, higher real personal income and higher business sales as well as easier declines in payroll employment.
In a continued sign that excesses in the U.S. economy are falling, the lagging index has been falling since January. Leading the decline has been lower commercial &amp; industrial loans outstanding as well as slower growth in labor costs and less consumer credit. The ratio of coincident-to-lagging indicators (another leading indicator) also continued higher for the eighth straight month to the highest level since November.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August 6-Month % (AR)</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">Leading</td>
<td>0.9</td>
<td>0.3</td>
<td>1.2</td>
<td>10.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2</td>
<td>0.0</td>
<td>-0.1</td>
<td>-1.4</td>
<td>-0.9</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-6.3</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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The Conference Board's Index of Leading Economic Indicators continued its uptrend last month giving a strong signal that the recent recession has ended. The 0.9% rise during November was the eighth consecutive monthly increase. [...]

U.S. Leading Economic Indicators Rise Again Signaling Positive Growth

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217a.jpg" align="right" border="0" height="265" width="353">Recent
steadying in the job market stalled last week. The Labor Department
indicated that initial claims for unemployment insurance rose to
480,000 from a little-revised 473,000 during the prior week. As a
result, claims reached the highest level in four weeks but remained
down from the recession peak of 674,000 hit in March. The four-week
moving average of claims slipped to 467,500 and the latest weekly
figure was higher than Consensus expectations for a decline to 465,000
claims.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217b.jpg" align="right" border="0" height="265" width="353">Initial
claims during the latest week cover the survey period
for November nonfarm payrolls. Claims fell 21,000 (4.2%) from the same
week in October. During the last ten years there has been a negative
84% correlation between the level of claims and the m/m change in
nonfarm payrolls.· Continuing claims for unemployment insurance during
the latest week ticked up 5,000 after a little-revised 289,000 decline
during the week prior. Continuing claims were at the lowest level since
late-February. The overall decline is a function of the improved job
market but also reflects the exhaustion of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims fell to
5,318,250. This series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217c.jpg" align="right" border="0" height="265" width="353">Extended
benefits for unemployment insurance retraced much of the prior week's
decline with a rise to 503,100 during the fourth week of November. The
latest compares to 550,343 during all of October.
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;· The highest
insured unemployment rates in the week ending November 28 were in
Wisconsin (6.4), Oregon (6.3), Alaska (6.2), Nevada (5.5),&nbsp;
Puerto Rico (5.5%), Pennsylvania (5.3), Michigan (5.3), California
(4.9) and South Carolina (4.8). The lowest insured unemployment rates
were in North Dakota (1.6%), Virginia (2.2), Texas (2.6), Maine (3.1),
Wyoming (3.2), Maryland (3.2),&nbsp; Mississippi (3.7), New York
(3.8), Florida (3.8) and Ohio (3.9). 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">12/12/09</th>
<th scope="col">12/05/09</th>
<th scope="col">11/28/09</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>480</td>
<td>473</td>
<td>454</td>
<td>-13.0%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,186</td>
<td>5,181</td>
<td>19.1%</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>


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Recent steadying in the job market stalled last week. The Labor Department indicated that initial claims for unemployment insurance rose to 480,000 from a little-revised 473,000 during the prior week. As a result, claims reached the [...]

U.S. Initial Jobless Insurance Claims Unexpectedly Rise To Highest In One Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217a.jpg" align="right" border="0" height="265" width="353">Recent
steadying in the job market stalled last week. The Labor Department
indicated that initial claims for unemployment insurance rose to
480,000 from a little-revised 473,000 during the prior week. As a
result, claims reached the highest level in four weeks but remained
down from the recession peak of 674,000 hit in March. The four-week
moving average of claims slipped to 467,500 and the latest weekly
figure was higher than Consensus expectations for a decline to 465,000
claims.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217b.jpg" align="right" border="0" height="265" width="353">Initial
claims during the latest week cover the survey period
for November nonfarm payrolls. Claims fell 21,000 (4.2%) from the same
week in October. During the last ten years there has been a negative
84% correlation between the level of claims and the m/m change in
nonfarm payrolls.· Continuing claims for unemployment insurance during
the latest week ticked up 5,000 after a little-revised 289,000 decline
during the week prior. Continuing claims were at the lowest level since
late-February. The overall decline is a function of the improved job
market but also reflects the exhaustion of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims fell to
5,318,250. This series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217c.jpg" align="right" border="0" height="265" width="353">Extended
benefits for unemployment insurance retraced much of the prior week's
decline with a rise to 503,100 during the fourth week of November. The
latest compares to 550,343 during all of October.
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;· The highest
insured unemployment rates in the week ending November 28 were in
Wisconsin (6.4), Oregon (6.3), Alaska (6.2), Nevada (5.5),&nbsp;
Puerto Rico (5.5%), Pennsylvania (5.3), Michigan (5.3), California
(4.9) and South Carolina (4.8). The lowest insured unemployment rates
were in North Dakota (1.6%), Virginia (2.2), Texas (2.6), Maine (3.1),
Wyoming (3.2), Maryland (3.2),&nbsp; Mississippi (3.7), New York
(3.8), Florida (3.8) and Ohio (3.9). 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">12/12/09</th>
<th scope="col">12/05/09</th>
<th scope="col">11/28/09</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>480</td>
<td>473</td>
<td>454</td>
<td>-13.0%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,186</td>
<td>5,181</td>
<td>19.1%</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>


U.S. Leading Economic Indicators
Rise Again Signaling Positive Growth 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 17, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217e.jpg" align="left" border="0" height="265" width="353">
The Conference Board's Index of Leading Economic Indicators
continued its uptrend last month giving a strong signal that the recent
recession has ended. The 0.9% rise during November was the eighth
consecutive monthly increase. Moreover, the 10.2% (centered) rate of
increase during the last six months was nearly the strongest since
early-1983. The leading index is based on actual reports for eight
economic data series. The Conference Board initially estimates two
series, consumer and capital goods orders.
The breadth of increase amongst the component series sagged
again last month. Sixty-five percent of the components rose during
November versus last month's reading of 70% that increased. During the
most recent six months, however, 80% of the series rose. Prominent in
last month's increase was a longer workweek, fewer jobless insurance
claims, more building permits, and the steeper interest rate yield
curve. These gains were offset by easier vendor performance, lower
consumer expectations and a downtick in capital goods orders.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217f.jpg" align="right" border="0" height="265" width="353">
Continuing to suggest that the rate of decline in the economy
is slowing were the coincident indicators which rose for the first
month in the last three. The 0.2% gain followed an unrevised no-change
during October. During the last six months the 1.4% rate of decline in
the coincident series compares with a shortfall of 8.0% at its worst in
January. Moderation of earlier declines has been due to higher
industrial production, higher real personal income and higher business
sales as well as easier declines in payroll employment.
In a continued sign that excesses in the U.S. economy are
falling, the lagging index has been falling since January. Leading the
decline has been lower commercial &amp; industrial loans
outstanding as well as slower growth in labor costs and less consumer
credit. The ratio of coincident-to-lagging indicators (another leading
indicator) also continued higher for the eighth straight month to the
highest level since November.
The Conference Board figures are available in Haver's BCI
database. Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


<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/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August 6-Month % (AR)</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">Leading</td>
<td>0.9</td>
<td>0.3</td>
<td>1.2</td>
<td>10.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2</td>
<td>0.0</td>
<td>-0.1</td>
<td>-1.4</td>
<td>-0.9</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-6.3</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
 Philadelphia Fed Index Gains With
Strength in Employment 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 17, 2009

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217g.jpg" align="right" border="0" height="265" width="353">The
Philadelphia Federal Reserve Bank indicated that its index of regional
factory sector activity rose this month to its highest level since
early-2005. At 20.5, the index was unexpectedly strong and positive for
the fifth consecutive month. The latest level compared to figures near
-40.0 this past fall and winter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217h.jpg" align="right" border="0" height="265" width="353">During the
last ten years there has
been a 77% correlation between the level of the Philadelphia Fed
Business Conditions Index and the three-month growth in factory sector
industrial production. There has been a 70% correlation with q/q growth
in real GDP. The latest survey from the Philadelphia Federal Reserve
Bank can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos1209.pdf">here.</a>·
Amongst the components, the employment index was notably strong as it
rose to well above break-even and to the highest level since late-2007.
During the last ten years there has been a 91% correlation between the
index level and the three-month change in manufacturing sector
payrolls. Remaining strong were shipments, the workweek, unfilled
orders and the delivery times components. The inventory component also
improved significantly from its March low.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217i.jpg" align="left" border="0" height="265" width="353">The prices paid index rose
sharply to its highest level since August of last year and compares to
negative readings this past winter and spring. During the last ten
years there has been a 71% correlation between the prices paid index
and the three-month growth in the intermediate goods PPI. There has
been an 82% correlation with the change in core intermediate goods
prices.
Expected business conditions in six months deteriorated for
the sixth straight month. The December index fell to a still-positive
reading of 24.4&nbsp; but that was well-off the recent high. Many
of the index components, especially orders and shipments, were down
sharply.· The figures from the Philadelphia Federal Reserve can be
found in Haver's SURVEYS database.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">December '08</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">General Activity Index</td>
<td>20.4</td>
<td>16.7</td>
<td>11.5</td>
<td>-35.1</td>
<td>-7.5</td>
<td>-21.3</td>
<td>5.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>6.5</td>
<td>14.8</td>
<td>6.2</td>
<td>-29.3</td>
<td>-9.6</td>
<td>-14.7</td>
<td>6.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Number of Employees</td>
<td>6.3</td>
<td>-0.5</td>
<td>-6.8</td>
<td>-23.8</td>
<td>-23.7</td>
<td>-8.7</td>
<td>6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index</td>
<td>33.8</td>
<td>14.9</td>
<td>21.3</td>
<td>&nbsp;-26.6</td>
<td>-4.0</td>
<td>36.4</td>
<td>26.3</td>
</tr>
</tbody>
</table>

 UK Retail Sales Take A Sett Back
In November But Cling To Trend Rise 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 17, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091217d.jpg" align="left" border="0" height="265" width="353">
UK retail sales volumes fell by 0.3% in November after having
rise in October. Sales volumes have risen twice in the last
three-months and seven times in the last 12-months. 
 

The three-month rate of growth has dipped below the six-month
rate of growth but still exceeds the 12-month growth pace. Clothing and
footwear sales, however, are clearly losing momentum having dropped in
the last three months. Retail ex-auto sales are off from their six
month pace but nearly even with their 12-month pace. 
 

In the new quarter, Sales are growing at a pace of 3% to 3.5%.
That should help to underpin Q4 GDP growth. 
 

In a separate report, the CBI survey of the distributive
trades produced diffusion results saying that November sales were flat
with those in October. That of course is more ambitious that the sales
count from National Statistics (above). The outlook in the CBI
framework was negative, however. 
 

A poll of UK inflation expectations found that expectations
were stuck at 2.4% for the third consecutive quarter. While this is
above the BOE ceiling pace for inflation (of 2%) the Bank has admitted
that there would be some temporary overshoot to which it will not
respond. It is heartening that as inflation has risen in the UK,
inflation expectations have not. BOE credibility seems to be well
intact despite the damage done in the financial crisis. 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="8"> UK Real
and Nominal Retail Sales</th>
<th>Quarter</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>Nov-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
<td>2-date</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>0.4%</td>
<td>2.9%</td>
<td>4.0%</td>
<td>2.6%</td>
<td>2.0%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp;
Tobacco</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.3%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>7.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>-2.0%</td>
<td>1.5%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>1.5%</td>
<td>1.4%</td>
<td>-1.7%</td>
<td>0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Retial Ex auto</td>
<td>-0.4%</td>
<td>0.6%</td>
<td>0.4%</td>
<td>2.9%</td>
<td>5.3%</td>
<td>3.1%</td>
<td>0.8%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Initial JoblessInsurance Claims Unexpectedly Rise To Highest In One Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216h.jpg" align="right" border="0" height="265" width="353">In an
anticipated and unanimous vote, the Federal Open Market Committee today
left the Federal funds rate in a "range from 0 to 1/4 percent." The
discount rate also was left unchanged at 0.5%. The action was as
expected and left the Fed funds rate at its lowest level ever.
"Information received since the Federal Open Market Committee
met in
November suggests that economic activity has continued to pick up and
that the deterioration in the labor market is abating." Thus reads the
opening statement from today's FOMC meeting press release. The
statement then cites improvement in each of the economy's sectors;
however, it notes that activity "is likely to remain weak for a time
..."
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216i.jpg" align="right" border="0" height="265" width="353">The
statement goes on to suggest that economic strengthening will
result from monetary &amp; fiscal stimulus. 
The Fed mentioned
price inflation twice, indicating that "higher levels of resource
utilization would occur in the context of price stability" and that
"inflation will remain subdued for some time" as resource utilization
remained low.
Again the Fed indicated that moderate economic growth
and slack capacity utilization would allow rates to say low for an
extended period of time. Also, "To provide support to mortgage lending
and housing markets and to improve overall conditions in private credit
markets, the Federal Reserve is in the process of purchasing $1.25
trillion of agency mortgage-backed securities and about $175 billion of
agency debt. In order to promote a smooth transition in markets, the
Committee is gradually slowing the pace of these purchases, and it
anticipates that these transactions will be executed by the end of the
first quarter of 2010."
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216j.jpg" align="right" border="0" height="265" width="353">A complete
text of the Fed's latest press
release can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20091216a.htm">here</a>.
The Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.
 Supply
and Demand Shocks in Residential Mortgages from the Federal
Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2009/1209/01banfin.cfm">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>

</body></html>

In an anticipated and unanimous vote, the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount rate also was left unchanged at 0.5%. The action was as expected and left the [...]

FOMC Notes Economic & Job Market Improvement But Leaves Rates Unchanged

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216g.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s service sector as gauged by its tertiary sector index
advanced in October after registering a drop in September. The index is
down by 4.3 percent over 12-months compared to MFG and mining where the
index is down by 14% over 12-months. These drops compare to March and
February lows in the two indices, respectively. In March the tertiary
index was down by 8.6% Yr/Yr. In February the mining and MFG index
scored its largest 12-month drop at -36.9%.
Cleary Japan has been improving sharply from its recession
lows. But while the mining and MFG sector has eight straight months of
improvement in its mo/mo readings, services has only improved for one
month in a row. Services also has improved in five of the past six
months. Still, the tertiary sector is only up by 2.5% from its cycle
low point whereas MFG and mining is up by 23.8% from its cycle low
reading. MFG and mining currently stands by 21.8% below its cycle peak
whereas the services sector is off by just 6.4% from its cycle peak.
Two sectors are experiencing very different recession and recovery
forces.
The service sector stands in the 53rd percentile of its range
while Mining and MFG stands in the 40th percentile of its range, well
below its mid-way mark.
Still, the failure of services to post consistent gains or
strong gains while MFG is improving sharply is a sign that Japan is
still struggling. We know it is having some renewed problems with
deflation. In this environment because the service sector employs so
many, it is easy to see why confidence does not easily come back and
why Japan remains vulnerable to deflation even in face of some export
recovery and a strong MFG rebound. The rising yen has pre-empted the
possibility of compensation for service sector weakness with strong
export-led growth. While Japan&#8217;s exports are recovering they are also
hindered by the continuing strength of the yen. Japan&#8217;s recovery
continues to face a dilemma

&nbsp;Japan Industry Survey
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;</td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes; Range</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-2009</td>
<td>Sep-2009</td>
<td>Aug-2009</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Mining and MFG</td>
<td>86.1</td>
<td>85.7</td>
<td>83.9</td>
<td>85.2</td>
<td>83.1</td>
<td>80.7</td>
<td>110.1</td>
<td>69.5</td>
<td>40.9%</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>96.8</td>
<td>96.3</td>
<td>96.9</td>
<td>96.7</td>
<td>96.4</td>
<td>97.0</td>
<td>103.5</td>
<td>89.1</td>
<td>53.5%</td>
</tr>
<tr class="odd">
<td colspan="10" class="firstcol">Ranges, Max, Min since 1993</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s service sector as gauged by its tertiary sector index advanced in October after registering a drop in September. The index is down by 4.3 percent over 12-months compared to MFG and mining where the index is down by 14% over [...]

Japan's Service Sector Shows Improvement

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216d.jpg" align="right" border="0" height="265" width="353">The recent
recovery in home building has been hardly ebullient. Housing starts
rose 8.9% last month to 574,000 (AR) units versus 527,000 during
October, which was revised down slightly. These levels were, however,
6.2% below the 3Q average and remain down 12.4% y/y. More sobering is
the startling decline in housing in recent years. Since the peak in
January of 2006, starts have fallen by more than three-quarters.
November's figure fell short of Consensus expectations for 578,000
starts.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216e.jpg" align="right" border="0" height="265" width="353">Last
month, starts of single-family homes recovered
merely 2.1% to 482,000 after October's 7.1% decline. So far this
quarter, starts have fallen 4.2% from the 3Q average. Despite this loss
of forward momentum, single-family starts have recovered
from the February low. During the last ten years, there has been an 84%
correlation between the q/q change in single-family starts and their
contribution to quarterly GDP growth. The increase in
starts of single-family units was contained to the Southern (12.9% y/y)
and the Western (2.1% y/y) regions of the country. Elsewhere, starts in
the Northeast (2.1% y/y) and in the Midwest (-13.6% y/y) fell
month-to-month. A bit firmer were starts of multi-family units which
nearly doubled m/m during November from their record low. Starts of
apartments, condominiums &amp; town houses still were down 79.6%
from the January 2006 peak.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216f.jpg" align="right" border="0" height="265" width="353">Perhaps
more strength in starts is coming.
Building permits rose 6.0% during November to their highest level in
twelve months. As with starts, permits to build a single-family home
have been relatively strong versus the total. Moreover, they rose 5.3%
versus 3Q they have risen 38.3% from the January low.The
housing starts figures can be found in Haver's USECON database.Housing's
Great Fall: Putting Household Balance Sheets Together Again
from the Federal Reserve Bank of St. Louis is available <a href="http://www.stlouisfed.org/publications/re/articles/?id=1716">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</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">Total</td>
<td>574</td>
<td>527</td>
<td>586</td>
<td>-12.4%</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>482</td>
<td>472</td>
<td>508</td>
<td>5.5</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>92</td>
<td>55</td>
<td>78</td>
<td>-53.5</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>584</td>
<td>551</td>
<td>575</td>
<td>-7.3</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>

</body></html>

The recent recovery in home building has been hardly ebullient. Housing starts rose 8.9% last month to 574,000 (AR) units versus 527,000 during October, which was revised down slightly. These levels were, however, 6.2% below the 3Q [...]

U.S. Housing Starts Improve Modestly

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216a.jpg" align="right" border="0" height="265" width="353">Pricing
power took on a new dimension last month. Despite higher fuel costs,
core prices were unchanged, a result not seen since the depths of the
recent recession. The overall November CPI matched Consensus
expectations and rose 0.4% after an unrevised 0.3% October increase.
Other than energy &amp; food prices, however, consumer prices were
flat. The last time they were unchanged was December of last year when
recessionary forces were gathering steam.

Energy prices
jumped 4.1% m/m and have risen 18.7% so far this year. Gasoline prices
were quite strong posting a 6.4% (23.6% y/y) increase and rising by
more-than-half since December. Fuel oil prices also were firm and rose
7.3% (-7.7% y/y) following a 6.0% gain during October. Finally, prices
for natural gas &amp; electricity rose 1.4% (-5.0% y/y) but are
down 5.1% this year.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216b.jpg" align="right" border="0" height="265" width="353">Food
&amp; beverage prices posted another
modest 0.1% uptick. So far this year, food prices have fallen an
unprecedented 0.5%. Recent weakness has been led by lower dairy prices
(-9.0% y/y) and lower fruit &amp; vegetable (-4.9% y/y) costs.
Prices for meats, poultry, fish &amp; eggs also fell 4.0% y/y while
cereals &amp; bakery product prices slipped 0.8%.
Consumer prices
less food &amp; energy were unchanged following two months of 0.2%
increase. A 0.1% November uptick had been expected. The 1.7% y/y gain
has been the annual growth rate of core prices all this year. Core
services prices continue to feel the recession's effect and
slipped slightly last month. Their 1.3% y/y gain was a record
low. Weakness in the housing market accounts for much of that
moderation. Last month, shelter prices slipped 0.2% and they've risen a
minimal 0.2% so far in 2009. Owners equivalent rent of primary
residences, a measure not equivalent to other house price measures,
slipped for the fourth month in the last five and have risen 0.7% so
far this year after a 2.5% increase during 2008. Elsewhere in services,
public transportation prices were strong again and posted a 2.6%
increase. Recent gains are, however, just making up for declines during
the recession.&nbsp;Medical care services prices increased 0.4%
(3.5% y/y). Finally, education costs have been firm, up 4.8% y/y after
a 5.8% gain during 2008. The annual gain is, however, down from the
6.9% increase during 2004. Recreation prices have really shown the
recession's effect and are down 0.2% y/y after a 1.6% 2008 gain. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091216c.jpg" align="right" border="0" height="265" width="353">Despite
the weak economy, core goods prices have
been relatively firm and last month increased 0.2%. The increase lifted
prices 2.8% since December following no change during the prior two
years. Higher tobacco prices continued to account for much of the
recent strength and rose 1.0% last month (30.3% y/y). New &amp;
used motor vehicles also have firmed considerably. The 0.8% increase
last month lifted prices by 5.2% since December. That compares with
price deflation during the last two years. Working the other way,
apparel prices fell for the third month in the last four (1.0% y/y.
That follows price declines which extend back to 1994. Continuing weak
were prices for household furnishings &amp; operation. They fell
another 0.3%, leaving them down 1.1% so far this year. · The chained
CPI, which adjusts for shifts in consumption patterns, was unchanged
during November and year-to-year prices rose 1.6%. Conversely, chained
prices less food and energy edged 0.2% lower last month. 
The consumer
price data is available in Haver's USECON database
while detailed figures can be found in the CPIDATA
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/USECON/@E8/@E801/@E80101/@E80101.HTM" style="color: white;">Consumer Price Index</a> 
(%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</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">Total&nbsp;</td>
<td>0.4</td>
<td>0.3</td>
<td>0.2</td>
<td>1.8</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.0</td>
<td>0.2</td>
<td>0.2</td>
<td>1.7</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.2</td>
<td>0.4</td>
<td>0.3</td>
<td>2.6</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>-0.0</td>
<td>0.1</td>
<td>0.1</td>
<td>1.3</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>4.1</td>
<td>1.5</td>
<td>0.6</td>
<td>7.7</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.1</td>
<td>0.1</td>
<td>-0.1</td>
<td>-0.5</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM" style="color: Black;">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.0</td>
<td>0.1</td>
<td>0.1</td>
<td>1.6</td>
<td>3.3</td>
<td>2.5</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>-0.2</td>
<td>0.3</td>
<td>0.2</td>
<td>1.3</td>
<td>1.9</td>
<td>1.9</td>
<td>2.2</td>
</tr>
</tbody>
</table>

</body></html>

Pricing power took on a new dimension last month. Despite higher fuel costs, core prices were unchanged, a result not seen since the depths of the recent recession. The overall November CPI matched Consensus expectations and rose 0.4% [...]

CPI's 0.4% Gain Is Fueled By Energy; Core Prices Are Unchanged

Crude oil price has returned to pre-conflict level but traffic through Hormuz still subpar

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

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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.