Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923a.jpg" align="left" border="0">
Released yesterday was the U.S. House Price Index from the
Federal Housing and Finance Agency (FHFA). The Purchase Only Index for
July rose 0.3% from June and it was the third consecutive monthly
increase. Moreover, the latest gain eased the year-to-year decline in
the nationwide average of home prices to 4.2% from its worst reading of
negative 8.9% last November. Since their peak in early-2007 home prices
nationwide have fallen 10.5%. The FHFA uses data provided by Fannie Mae
and Freddie Mac and it is not value-weighted.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923b.jpg" align="right" border="0">
Most notable during July was the 1.6% gain in home prices in
the Pacific region of the country. It followed similarly strong 0.7%
and 1.6% increases during the prior two months. Nevertheless these
increases follow earlier home price declines that were amongst the
sharpest in the country. Versus last July prices in the region were
still down 9.0% after having fallen 17.3% during all of 2008. Recent
improvement in home prices also was evident in a 1.0% July increase in
the Mid-Atlantic region. That gain, however, only recouped the decline
during June and left prices roughly even with the year-end 2008 level.
More moderate monthly gain in home prices were logged in the West North
Central, South Atlantic and Mountain Regions of the country. In the
latter two regions, however, prices continued notably below the
year-ago level.
Continuing weak were home prices in several of the country's
regions. Despite a 0.3% July increase, prices in the Mountain states
remained off 9.8% from the year ago level and they were off 16.1% from
the 2007 peak. In the South Atlantic region prices also posted a gain
during July but the 0.6% uptick still left them off by 5.6% from one
year ago. Since their early-2007 peak prices here have fallen 12.8%. In
the populous East North Central region prices slipped another 0.3%
during July and they were flat year-to-date.
Cross-Country Causes and Consequences of the 2008
Crisis: Early Warning Signals from the Federal Reserve Bank
of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-17bk.pdf">
here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">FHFA
U.S. House Price Index Purchase Only (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3</td>
<td>0.1</td>
<td>-4.2</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-0.1</td>
<td>0.3</td>
<td>-2.5</td>
<td>-4.6</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle Atlantic</td>
<td>1.0</td>
<td>-1.1</td>
<td>-2.9</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North Central</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-3.3</td>
<td>-4.4</td>
<td>-1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West North Central</td>
<td>0.3</td>
<td>-0.3</td>
<td>-1.5</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South Atlantic</td>
<td>0.6</td>
<td>-0.2</td>
<td>-5.6</td>
<td>-7.1</td>
<td>1.4</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South Central</td>
<td>-0.9</td>
<td>2.3</td>
<td>-1.7</td>
<td>-1.4</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South Central</td>
<td>-0.2</td>
<td>1.1</td>
<td>0.1</td>
<td>0.7</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.3</td>
<td>-1.0</td>
<td>-9.8</td>
<td>-6.0</td>
<td>4.0</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>1.6</td>
<td>0.7</td>
<td>-9.0</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
 Weekly Chain Store Sales Trend
Lower During September 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 22, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922c.jpg" align="left" border="0" height="265" width="353">
Encouraging indications that consumer spending was improving
faded further during September. During the latest week, chain store
sales fell 2.0% and that was enough to pull sales for the month so far
to their lowest level since June.
During the last ten years there has been a 69% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. The weekly figures are available
in Haver's SURVEYW database.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Prospects for improvement in sales seem limited. The leading
indicator of sales slipped 0.5% (-2.0% y/y) during the latest week
though it had risen somewhat earlier this summer.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922d.jpg" align="right" border="0" height="265" width="353">
The Johnson Redbook also reported soft sales of late. General
merchandise store sales so far this month increased a seasonally
adjusted 0.4% from August (-2.1% y/y) following three months of
sometimes sharp decline. Department store sales were down 4.8% y/y on a
same-store basis while discount store sales slipped just 0.2% as
shoppers searched for bargains.
The Dynamics of Automobile Expenditures from
the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr394.pdf">
here</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">09/19/09</th>
<th scope="col">09/12/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>484.6</td>
<td>494.5</td>
<td>0.6%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
 Canadian Retail Sales Are Digging
Out Slowly 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 22, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922e.jpg" align="left" border="0" height="265" width="353">
Retail sales in Canada fell by 0.6% in July following a surge
in growth of 1% in June and of 1.1% in May. In the new quarter retail
sales are expanding at a 3% pace in nominal terms. For the quarter
supermarket sales are dropping. Sales of new car dealers are surging in
double digits. Clothing sales are up at a 3.4% nominal pace. Excluding
autos the annual rate gain early in Q3 are 0.9%. 
 

More broadly, sales trends show gains that are gathering pace
over three-months and mixed to the positive side over six months.
Overall sales are expanding at a rate of 6.4% over three months at a
pace of 3.6% excluding autos and at a 6.4% pace for overall sales. 
 

The chart shows how Canada&#8217;s retail sales simply fell off a
cliff at the end of 2008 when the US economy&#8217;s financial crisis took
hold. Since then ex-auto sales are showing a more consistent rebound.
Overall sales have only really reduced their rate of decline and the
trend drop still seems to be operative for year-over year calculations.
However over that short spans memorialized in the table both overall
and ex-auto sales are hosing that progress is in train. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Canada
Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td colspan="4">Saar</td>
<td>New QTR</td>
</tr>
<tr>
<td class="firstcol">Nominal %</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-MO</td>
<td>Yr-Ago</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Total RTL</td>
<td>-0.6%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>2.5%</td>
<td>-4.9%</td>
<td>5.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">New Car Dealerss</td>
<td>0.2%</td>
<td>0.5%</td>
<td>3.5%</td>
<td>18.0%</td>
<td>15.1%</td>
<td>-6.6%</td>
<td>-5.8%</td>
<td>10.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Supermarkets</td>
<td>-1.6%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>-3.9%</td>
<td>-2.5%</td>
<td>4.3%</td>
<td>3.1%</td>
<td>-6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing Stores</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>-2.1%</td>
<td>-4.1%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail less MVs</td>
<td>-0.8%</td>
<td>1.1%</td>
<td>0.6%</td>
<td>3.6%</td>
<td>0.2%</td>
<td>-4.7%</td>
<td>7.9%</td>
<td>0.9%</td>
</tr>
</tbody>
</table>
 Unemployment In Ireland, Italy,
Finland, And Taiwan 
by <a href="/comment/Curley.html">
Louise Curley</a> September 22, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922f.jpg" align="right" border="0" height="265" width="353">
Quarterly unemployment data for the second quarter for Ireland
and Italy, and monthly data for August for Finland and Taiwan were
released today. The attached two charts show the year over year changes
in the unemployment rates for the four countries: monthly data for
Finland and Taiwan and quarterly data for Ireland and Italy. Ireland
has the highest rate of unemployment, 12%, of the four countries and
the largest increase, 6.3 percentage points, over the same period of a
year ago. The other three countries show year over year increases of
2.6 percentage points or less. The big rise in unemployment in Ireland
is another indicator of the severity of the recession hitting that
country.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922g.jpg" align="right" border="0" height="265" width="353">
The rise in unemployment in Ireland has undoubtedly played a
part in the dramatic change in its net migration. The Irish Central
Statistics Office reported today that in the year ending April, 2009,
emigrants exceeded immigrants by 7,800, compared with an excess of
immigrants of 38,500 in the previous year. This was the first excess of
emigrants since 1995. Ireland's long history of net emigration, was
reversed beginning in 1996 and continued through 2008 as the economy
prospered. Net migration reached a high of 71,800 in 2006 at the height
of the economic boom.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Unemployment Rates (NAS %)</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4 09</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4 07</th>
<th scope="col">Q3 07</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>12.0</td>
<td>10.2</td>
<td>7.6</td>
<td>7.0</td>
<td>5.7</td>
<td>4.9</td>
<td>4.5</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>7.4</td>
<td>7.9</td>
<td>7.1</td>
<td>6.1</td>
<td>6.7</td>
<td>7.1</td>
<td>6.6</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Aug 09</td>
<td>Jul&nbsp; 09</td>
<td>Jun 09</td>
<td>May 09&nbsp;</td>
<td>Apr 09&nbsp;</td>
<td>Mar 09&nbsp;</td>
<td>Feb 09 </td>
<td> Jan 09 </td>
</tr>
<tr class="odd">
<td class="firstcol">Finland</td>
<td>7.6</td>
<td>7.7</td>
<td>9.1</td>
<td>10.9</td>
<td>8.8</td>
<td>8.3</td>
<td>7.6</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Taiwan</td>
<td>6.1</td>
<td>6.1</td>
<td>5.9</td>
<td>5.8</td>
<td>5.8</td>
<td>5.8</td>
<td>5.8</td>
<td>5.3</td>
</tr>
</tbody>
</table>
</body></html>

Released yesterday was the U.S. House Price Index from the Federal Housing and Finance Agency (FHFA). The Purchase Only Index for July rose 0.3% from June and it was the third consecutive monthly increase. Moreover, the latest gain [...]

FHFA Home Price Index Strengthens Due To Notable Gains In The Pacific & Mid-Atlantic Regions

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921h.jpg" align="left" border="0">
Preliminary data suggest that the Russian Gross Domestic
Product, fell 0.5% in the second quarter, a marked improvement over the
9.0% decline in the first quarter. (These figures are based on the
series that have been seasonally adjusted by Haver Analytics.) August
data on production, construction, and retail sales have been
disappointing. Production and construction declined in contrast to
increases in July and retail sales showed a smaller increase in August
than in July. The unemployment rate, however, was 8.6% in August 2
basis points below July.
In spite of the July hiccup particularly in industrial
production, the prospects for increased activity in Russia have
brightened. Oil prices are up, the Reserve Bank has steadily lowered
the refinancing rate from 13% in March to 10.5% in September.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921i.jpg" align="right" border="0" height="265" width="353">
Inflation, though still high, was 11.6% in August, down from 13.15% in
April. Recent data for these aspects of the Russian economy are shown
in the table below.
The Purchasing Mangers Survey published by Markit Economics in
London reported earlier this month that the GDP indicator for Russia
reached the expansion stage in August (above 50) for the first time
since September, 2008 as shown in the first chart. Finally, the Stock
Market has increased 44% from the recent low point reached on July10
and 1208 today is 139% above the low reached on February 2, 2009. The
decline and rise in the stock market is shown in the second chart.


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">RUSSIA&nbsp;</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp; 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun
09&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</th>
<th scope="col">May 09&nbsp;</th>
<th scope="col">Apr 09&nbsp;</th>
<th scope="col">Mar 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production (M/M %
Chg)</td>
<td>--</td>
<td>-3.0</td>
<td>4.7</td>
<td>4.5</td>
<td>-2.1</td>
<td>-8.1</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Retail Sales&nbsp; (M/M %
Chg)</td>
<td>--</td>
<td>1.68</td>
<td>2.36</td>
<td>0.88</td>
<td>1.70</td>
<td>0.71</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Value of Construction Work
Performed&nbsp; (M/M % Chg)</td>
<td>--</td>
<td>-2.66</td>
<td>2.61</td>
<td>210.55</td>
<td>0.74</td>
<td>11.54</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>--</td>
<td>8.6</td>
<td>8.8</td>
<td>8.7</td>
<td>8.9</td>
<td>8.7</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Inflation (%)</td>
<td>--</td>
<td>11.6</td>
<td>12.0</td>
<td>11.9</td>
<td>12.3</td>
<td>13.2</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Refinancing Rate&nbsp; (%)</td>
<td>10.50</td>
<td>10.75</td>
<td>11.00</td>
<td>11.50</td>
<td>12.00</td>
<td>12.50</td>
<td>13.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Oil Price Brent Crude (Ave of
Daily Prices $ per barrel)</td>
<td>--</td>
<td>72.86</td>
<td>65.62</td>
<td>69.24</td>
<td>58.25</td>
<td>51.18</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Preliminary data suggest that the Russian Gross Domestic Product, fell 0.5% in the second quarter, a marked improvement over the 9.0% decline in the first quarter. (These figures are based on the series that have been seasonally [...]

Recent Data For The Russian Economy

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921g.jpg" align="left" border="0" height="265" width="353">
French orders were up by a solid 2% in July as foreign orders
surged by 14%. In Italy orders jumped by 3.2% on foreign order strength
of 15.6%. Both Italy and France as seeing strong orders in the new
quarter (Q3, one month in) led by huge gains in orders from abroad. 
 

Both Italy and France show recovery patterns of order growth
but order levels that remain just a bit less than 25% below year-ago
levels. 
 

Europe- Europe continues to show economic recovery. But with
the G-20 set to meet in the re-made but old US industrial city of
Pittsburgh, the OECD, the IMF and a German think-tank have taken this
opportunity to highlight the risks to the future of this recovery. The
OECD is very concerned about the health of banks and that there could
be some backsliding and troubles with capitalization. The IMF is
concerned that German employment could rise sharply over the next year,
pushing unemployment to over 10.5% and creating weak growth under 0.5%
in 2010. This would clearly become a problem for growth in the rest of
the e-Zone. Not to be outdone by this sort of sour outlook, the German
think-tank IWH Institute warns of a credit crunch highlighting the
potential for a double dip as government stimulus programs come off the
books. 
 

Pessimism shuns trends: Despite some very strong current
indicators that spread across the major EMU economies there remains in
Europe, much like in the US, a core of pessimism about the risks.
Unlike after other recessions apparently this recovery cannot be
trusted to bottom and begin to rise and for that upswing to be
self-sustaining. The abnormal degree of and scope of early government
help that will eventually be rescinded is one of the common culprits in
both US and European pessimism. If that is so what ever do it in the
first place? 
 

Professional pessimists: While we expect the main
international regulators and oversight agencies to be less than
cheerleaders and to be wary of risks, the extent to which private
sector naysayers have piggy-backed on that tact is surprising. For now
we are left with the reality of an upswing and one that is looking
quite nice and consistent across EMU nations. Meanwhile, the outlook
sours as we speak. While the future may still hold risks, one must
wonder if they are as great as is being said or if lowering
expectations has been taken to a new extreme by politicians who in the
end are chastened by their own role in this crisis by seeing it develop
and watching powerlessly, aware that it is a disaster that occurred on
their watch. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> Italy Orders</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td colspan="3">Saar exept m/m</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-mo6-mo12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total</td>
<td>3.2%</td>
<td>2.6%</td>
<td>0.8%</td>
<td>29.5%</td>
<td>-1.9%</td>
<td>-24.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Foreign</td>
<td>15.6%</td>
<td>2.6%</td>
<td>0.9%</td>
<td>105.4%</td>
<td>17.6%</td>
<td>-19.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Domestic</td>
<td>-2.9%</td>
<td>2.5%</td>
<td>0.7%</td>
<td>0.9%</td>
<td>-11.3%</td>
<td>-26.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Sales</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-1.0%</td>
<td>-7.4%</td>
<td>-11.0%</td>
<td>-22.1%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol"> French Orders</td>
</tr>
<tr class="grey4">
<td colspan="3">Saar exept m/m</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-mo6-mo12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total</td>
<td>2.0%</td>
<td>1.2%</td>
<td>0.0%</td>
<td>13.7%</td>
<td>5.6%</td>
<td>-22.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Foreign</td>
<td>14.0%</td>
<td>-3.0%</td>
<td>7.0%</td>
<td>96.1%</td>
<td>19.1%</td>
<td>-16.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">IP xConstruct</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>16.3%</td>
<td>2.8%</td>
<td>-13.8%</td>
</tr>
</tbody>
</table>
</body></html>

French orders were up by a solid 2% in July as foreign orders surged by 14%. In Italy orders jumped by 3.2% on foreign order strength of 15.6%. Both Italy and France as seeing strong orders in the new quarter (Q3, one month in) led by [...]

Industrial Orders Keep Rising In France And In Italy Pessimism Continues To Haunt The Outlook, However

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921d.jpg" align="right" border="0" height="265" width="353">
Each
quarter, the Federal Reserve Bank of Philadelphia surveys a group of
professional forecasters to gain perspective on the outlook for the
U.S. economy. In the August survey, the panel expected the recession to
have reached its end, though the recovery is expected to be subpar.
That subpar nature is expected to keep unemployment high but it is not
expected to prevent inflation and interest rates from rising.Just
2.4% growth in real GDP is expected during the current quarter to be
followed by growth at about that rate into next year. That follows the
3.9% y/y drop in real GDP through last quarter, which was the deepest
decline since the Great Depression. Indeed, this recovery is subpar
compared to prior periods of severe recession. Following the 1973-75
recession, when GDP fell at a peak y/y rate of 2.3%, growth shortly
rebounded to 6.2%. Similarly following the 1981-82 recession, when GDP
fell 2.7% y/y, a snapback came quickly at near an 8%
rate. The subpar nature of the coming economic
recovery stems very much from the consumer who remains burdened by
excessive levels of debt. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921e.jpg" reaching only two that compares with excess six percent during recoveries similarly quarterly in residential middle next fraction prior periods past overbuilding weighs activity finally on domestic demand side business investment is expected to recover at a subpar rate after its decline this year as corporate profits remain under pressure and outlook for global economic remains contained federal spending also should rise but rates of growth are constrained by the soaring budget deficit align="right" border="0" height="265" width="353">A swing towards inventory accumulation also should
play a part in the pending economic recovery, yet here again it's not a
huge part. Accumulation at near a $20 billion annual rate is expected
by the end of next year. Certainly that is improved from the peak rate
of decumulation of $141 last quarter, and the dollar swing is
impressive. But as a percentage of the economy's overall real size it
amounts to barely half the swing after prior severe recessions. As for
the foreign trade deficit, recent improvement has helped forestall an
even deeper decline in U.S. GDP during this recession. However, that
improvement is expected to now end with little or no improvement
through next year as foreign economies remain weak. Weak
economic growth is expected to do little reduce unemployment. The
unemployment rate is expected to average 9.9% and then dip just to 9.6%
by next year's third quarter. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921f.jpg" align="right" border="0" height="265" width="353">
These rates are the highest jobless rates
since 1982-83 and reflect little or no growth in expected employment.
Pricing power is thus expected to be severely constrained. The y/y
growth in the overall GDP price deflator is expected to drift up to
1.5% from its low of 1.0% this year. Perhaps not-so-surprisingly,
forecasters expect that lift to stem from a liquidity-driven rise in
core consumer prices to 1.6% from a low of 1.1% being reached now.
Ten-year Treasury yields are expected to rise in tandem to highs near
4% by the middle of next year. The full Third
Quarter 2009 Survey of Professional Forecasters from the
Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/2009/survq309.cfm">here</a>.
The data are available in Haver's SURVEYS database.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">FRB
Philadelphia Survey of Professional Forecasters (AR)</th>
<th scope="col">2Q '09</th>
<th scope="col">3Q '09</th>
<th scope="col">4Q '09</th>
<th scope="col">1Q '10</th>
<th scope="col">2Q '10</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>-1.0%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; PCE</td>
<td>-1.2</td>
<td>1.7</td>
<td>1.1</td>
<td>1.7</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-Residential
Investment</td>
<td>-8.9</td>
<td>-7.3</td>
<td>-6.3</td>
<td>2.1</td>
<td>3.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>-29.3</td>
<td>-7.3</td>
<td>1.8</td>
<td>5.6</td>
<td>13.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Federal
Government&nbsp;</td>
<td>10.9</td>
<td>6.2</td>
<td>4.1</td>
<td>1.5</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Change in Business
Inventories</td>
<td>$-141.1B</td>
<td>$-89.9B</td>
<td>$-32.7B</td>
<td>$-1.7B</td>
<td>$9.5B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports</td>
<td>-339.3</td>
<td>-340.0</td>
<td>-342.1</td>
<td>-353.6</td>
<td>-366.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>9.3</td>
<td>9.6</td>
<td>9.9</td>
<td>9.9</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Price Index (Y/Y, %)</td>
<td>2.4</td>
<td>1.7</td>
<td>1.1</td>
<td>1.5</td>
<td>1.5</td>
</tr>
</tbody>
</table>


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Each quarter, the Federal Reserve Bank of Philadelphia surveys a group of professional forecasters to gain perspective on the outlook for the U.S. economy. In the August survey, the panel expected the recession to have reached its [...]

Forecasters Expect Return Of Positive GDP Growth This Quarter, Slow Thereafter

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921a.jpg" align="right" border="0" height="265" width="353">
The
Conference Board's Index of Leading Economic Indicators continued to
suggest a pending economic recovery with a 0.6% August increase that
was close to expectations. The rise in the composite index of leaders
was the fifth in a row and the 4.7% increase during those five months
was the strongest since early-1983. The index itself was at the highest
level since January of last year. The leading index is based on actual
reports for eight economic data series. The Conference Board initially
estimates two series, orders for consumer goods and orders for capital
goods. Perhaps tempering the outlook was that the 0.6%
August increase in the leaders was the weakest of the last five months.
Moreover, a slightly diminished 60% of the index components rose.
Higher stock prices and a steeper interest rate yield curve, along with
a slower speed of vendor deliveries, made the largest positive
contributions to the latest overall increase in the leaders. However,
the real money supply fell for the fourth month in the last five and
average weekly factory hours worked were unchanged as were new orders
for consumer goods &amp; materials.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921b.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. They were unchanged during August after a slim
0.1% July gain. While hardly indicative of a robust economy, these
declines compare with monthly shortfalls of 0.6%-to-1.1% dating back to
September. Fostering the turnaround have been slight increases in
industrial production and real personal income as well as diminished
monthly declines in payrolls.Wringing out past economic
excesses is needed for real economic recovery. In a further sign that
excesses in the U.S. economy are diminishing, the lagging index fell
for the eight month in the last nine. To that point, C&amp;I loans
outstanding fell sharply for the ninth straight month and consumer
credit versus personal income was off for the fifth month this year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921c.jpg" align="right" border="0" height="265" width="353">
Regardless, the average duration of unemployment shortened and the
change in CPI for services eased. The ratio of coincident-to-lagging
indicators (a measure of economic excess) also continued higher for the
fifth 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.
Beyond Inflation Targeting: Should Central Banks
Target the Price Level? from the Federal Reserve Bank
of Kansas City is available <a href="%A0http:/www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3kahn.pdf">here.</a> 
How Will Unemployment
Fare Following the Recession? also from the Federal
Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3knotek.pdf">here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May 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>0.6</td>
<td>0.9</td>
<td>0.8</td>
<td>6.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0</td>
<td>0.1</td>
<td>-0.4</td>
<td>-5.4</td>
<td>-0.9</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1</td>
<td>-0.5</td>
<td>-0.9</td>
<td>-8.6</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
</body></html>

The Conference Board's Index of Leading Economic Indicators continued to suggest a pending economic recovery with a 0.6% August increase that was close to expectations. The rise in the composite index of leaders was the fifth in a row [...]

U.S. Leading Indicators Rise For A Fifth Straight Month And Signal Economic Recovery

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921a.jpg" align="right" border="0" height="265" width="353">The
Conference Board's Index of Leading Economic Indicators continued to
suggest a pending economic recovery with a 0.6% August increase that
was close to expectations. The rise in the composite index of leaders
was the fifth in a row and the 4.7% increase during those five months
was the strongest since early-1983. The index itself was at the highest
level since January of last year. The leading index is based on actual
reports for eight economic data series. The Conference Board initially
estimates two series, orders for consumer goods and orders for capital
goods.
 Perhaps tempering the outlook was that the 0.6%
August increase in the leaders was the weakest of the last five months.
Moreover, a slightly diminished 60% of the index components rose.
Higher stock prices and a steeper interest rate yield curve, along with
a slower speed of vendor deliveries, made the largest positive
contributions to the latest overall increase in the leaders. However,
the real money supply fell for the fourth month in the last five and
average weekly factory hours worked were unchanged as were new orders
for consumer goods &amp; materials.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921b.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. They were unchanged during August after a slim
0.1% July gain. While hardly indicative of a robust economy, these
declines compare with monthly shortfalls of 0.6%-to-1.1% dating back to
September. Fostering the turnaround have been slight increases in
industrial production and real personal income as well as diminished
monthly declines in payrolls.
Wringing out past economic
excesses is needed for real economic recovery. In a further sign that
excesses in the U.S. economy are diminishing, the lagging index fell
for the eight month in the last nine. To that point, C&amp;I loans
outstanding fell sharply for the ninth straight month and consumer
credit versus personal income was off for the fifth month this year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921c.jpg" align="right" border="0" height="265" width="353">
Regardless, the average duration of unemployment shortened and the
change in CPI for services eased. The ratio of coincident-to-lagging
indicators (a measure of economic excess) also continued higher for the
fifth 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.
Beyond Inflation Targeting: Should Central Banks
Target the Price Level? from the Federal Reserve Bank
of Kansas City is available <a href="%A0http:/www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3kahn.pdf">here.</a> 

How Will Unemployment
Fare Following the Recession? also from the Federal
Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3knotek.pdf">here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May 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>0.6</td>
<td>0.9</td>
<td>0.8</td>
<td>6.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0</td>
<td>0.1</td>
<td>-0.4</td>
<td>-5.4</td>
<td>-0.9</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1</td>
<td>-0.5</td>
<td>-0.9</td>
<td>-8.6</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>

Forecasters Expect Return Of
Positive GDP Growth This Quarter, Slow Thereafter 
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/090921d.jpg" align="right" border="0" height="265" width="353">Each
quarter, the Federal Reserve Bank of Philadelphia surveys a group of
professional forecasters to gain perspective on the outlook for the
U.S. economy. In the August survey, the panel expected the recession to
have reached its end, though the recovery is expected to be subpar.
That subpar nature is expected to keep unemployment high but it is not
expected to prevent inflation and interest rates from rising.
Just
2.4% growth in real GDP is expected during the current quarter to be
followed by growth at about that rate into next year. That follows the
3.9% y/y drop in real GDP through last quarter, which was the deepest
decline since the Great Depression. Indeed, this recovery is subpar
compared to prior periods of severe recession. Following the 1973-75
recession, when GDP fell at a peak y/y rate of 2.3%, growth shortly
rebounded to 6.2%. Similarly following the 1981-82 recession, when GDP
fell 2.7% y/y, a snapback came quickly at near an 8%
rate.
 The subpar nature of the coming economic
recovery stems very much from the consumer who remains burdened by
excessive levels of debt. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921e.jpg" reaching only two that compares with excess six percent during recoveries similarly quarterly in residential middle next fraction prior periods past overbuilding weighs activity finally on domestic demand side business investment is expected to recover at a subpar rate after its decline this year as corporate profits remain under pressure and outlook for global economic remains contained federal spending also should rise but rates of growth are constrained by the soaring budget deficit align="right" border="0" height="265" width="353">
A swing towards inventory accumulation also should
play a part in the pending economic recovery, yet here again it's not a
huge part. Accumulation at near a $20 billion annual rate is expected
by the end of next year. Certainly that is improved from the peak rate
of decumulation of $141 last quarter, and the dollar swing is
impressive. But as a percentage of the economy's overall real size it
amounts to barely half the swing after prior severe recessions. As for
the foreign trade deficit, recent improvement has helped forestall an
even deeper decline in U.S. GDP during this recession. However, that
improvement is expected to now end with little or no improvement
through next year as foreign economies remain weak.
 Weak
economic growth is expected to do little reduce unemployment. The
unemployment rate is expected to average 9.9% and then dip just to 9.6%
by next year's third quarter. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921f.jpg" align="right" border="0" height="265" width="353">
These rates are the highest jobless rates
since 1982-83 and reflect little or no growth in expected employment.
Pricing power is thus expected to be severely constrained. The y/y
growth in the overall GDP price deflator is expected to drift up to
1.5% from its low of 1.0% this year. Perhaps not-so-surprisingly,
forecasters expect that lift to stem from a liquidity-driven rise in
core consumer prices to 1.6% from a low of 1.1% being reached now.
Ten-year Treasury yields are expected to rise in tandem to highs near
4% by the middle of next year.
 The full Third
Quarter 2009 Survey of Professional Forecasters from the
Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/2009/survq309.cfm">here</a>
.
The data are available in Haver's SURVEYS database.&nbsp;

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">FRB
Philadelphia Survey of Professional Forecasters (AR)</th>
<th scope="col">2Q '09</th>
<th scope="col">3Q '09</th>
<th scope="col">4Q '09</th>
<th scope="col">1Q '10</th>
<th scope="col">2Q '10</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>-1.0%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; PCE</td>
<td>-1.2</td>
<td>1.7</td>
<td>1.1</td>
<td>1.7</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-Residential
Investment</td>
<td>-8.9</td>
<td>-7.3</td>
<td>-6.3</td>
<td>2.1</td>
<td>3.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>-29.3</td>
<td>-7.3</td>
<td>1.8</td>
<td>5.6</td>
<td>13.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Federal
Government&nbsp;</td>
<td>10.9</td>
<td>6.2</td>
<td>4.1</td>
<td>1.5</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Change in Business
Inventories</td>
<td>$-141.1B</td>
<td>$-89.9B</td>
<td>$-32.7B</td>
<td>$-1.7B</td>
<td>$9.5B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports</td>
<td>-339.3</td>
<td>-340.0</td>
<td>-342.1</td>
<td>-353.6</td>
<td>-366.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>9.3</td>
<td>9.6</td>
<td>9.9</td>
<td>9.9</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Price Index (Y/Y, %)</td>
<td>2.4</td>
<td>1.7</td>
<td>1.1</td>
<td>1.5</td>
<td>1.5</td>
</tr>
</tbody>
</table>
Industrial Orders Keep Rising In
France And In Italy Pessimism Continues To Haunt The Outlook, However 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921g.jpg" align="left" border="0" height="265" width="353">
French orders were up by a solid 2% in July as foreign orders
surged by 14%. In Italy orders jumped by 3.2% on foreign order strength
of 15.6%. Both Italy and France as seeing strong orders in the new
quarter (Q3, one month in) led by huge gains in orders from abroad. 
 

Both Italy and France show recovery patterns of order growth
but order levels that remain just a bit less than 25% below year-ago
levels. 
 

Europe- Europe continues to show economic recovery. But with
the G-20 set to meet in the re-made but old US industrial city of
Pittsburgh, the OECD, the IMF and a German think-tank have taken this
opportunity to highlight the risks to the future of this recovery. The
OECD is very concerned about the health of banks and that there could
be some backsliding and troubles with capitalization. The IMF is
concerned that German employment could rise sharply over the next year,
pushing unemployment to over 10.5% and creating weak growth under 0.5%
in 2010. This would clearly become a problem for growth in the rest of
the e-Zone. Not to be outdone by this sort of sour outlook, the German
think-tank IWH Institute warns of a credit crunch highlighting the
potential for a double dip as government stimulus programs come off the
books. 
 

Pessimism shuns trends: Despite some very strong current
indicators that spread across the major EMU economies there remains in
Europe, much like in the US, a core of pessimism about the risks.
Unlike after other recessions apparently this recovery cannot be
trusted to bottom and begin to rise and for that upswing to be
self-sustaining. The abnormal degree of and scope of early government
help that will eventually be rescinded is one of the common culprits in
both US and European pessimism. If that is so what ever do it in the
first place? 
 

Professional pessimists: While we expect the main
international regulators and oversight agencies to be less than
cheerleaders and to be wary of risks, the extent to which private
sector naysayers have piggy-backed on that tact is surprising. For now
we are left with the reality of an upswing and one that is looking
quite nice and consistent across EMU nations. Meanwhile, the outlook
sours as we speak. While the future may still hold risks, one must
wonder if they are as great as is being said or if lowering
expectations has been taken to a new extreme by politicians who in the
end are chastened by their own role in this crisis by seeing it develop
and watching powerlessly, aware that it is a disaster that occurred on
their watch. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Italy
Orders</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td colspan="3">Saar exept m/m</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-mo6-mo12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total</td>
<td>3.2%</td>
<td>2.6%</td>
<td>0.8%</td>
<td>29.5%</td>
<td>-1.9%</td>
<td>-24.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Foreign</td>
<td>15.6%</td>
<td>2.6%</td>
<td>0.9%</td>
<td>105.4%</td>
<td>17.6%</td>
<td>-19.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Domestic</td>
<td>-2.9%</td>
<td>2.5%</td>
<td>0.7%</td>
<td>0.9%</td>
<td>-11.3%</td>
<td>-26.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Sales</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-1.0%</td>
<td>-7.4%</td>
<td>-11.0%</td>
<td>-22.1%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">
French Orders</td>
</tr>
<tr class="grey4">
<td colspan="3">Saar exept m/m</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-mo6-mo12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total</td>
<td>2.0%</td>
<td>1.2%</td>
<td>0.0%</td>
<td>13.7%</td>
<td>5.6%</td>
<td>-22.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Foreign</td>
<td>14.0%</td>
<td>-3.0%</td>
<td>7.0%</td>
<td>96.1%</td>
<td>19.1%</td>
<td>-16.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">IP xConstruct</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>16.3%</td>
<td>2.8%</td>
<td>-13.8%</td>
</tr>
</tbody>
</table>
 
Recent Data For The Russian Economy 
by <a href="/comment/Curley.html">
Louise Curley</a> September 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921h.jpg" align="left" border="0">
Preliminary data suggest that the Russian Gross Domestic
Product, fell 0.5% in the second quarter, a marked improvement over the
9.0% decline in the first quarter. (These figures are based on the
series that have been seasonally adjusted by Haver Analytics.) August
data on production, construction, and retail sales have been
disappointing. Production and construction declined in contrast to
increases in July and retail sales showed a smaller increase in August
than in July. The unemployment rate, however, was 8.6% in August 2
basis points below July.
In spite of the July hiccup particularly in industrial
production, the prospects for increased activity in Russia have
brightened. Oil prices are up, the Reserve Bank has steadily lowered
the refinancing rate from 13% in March to 10.5% in September.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921i.jpg" align="right" border="0" height="265" width="353">
Inflation, though still high, was 11.6% in August, down from 13.15% in
April. Recent data for these aspects of the Russian economy are shown
in the table below.
The Purchasing Mangers Survey published by Markit Economics in
London reported earlier this month that the GDP indicator for Russia
reached the expansion stage in August (above 50) for the first time
since September, 2008 as shown in the first chart. Finally, the Stock
Market has increased 44% from the recent low point reached on July10
and 1208 today is 139% above the low reached on February 2, 2009. The
decline and rise in the stock market is shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">RUSSIA&nbsp;</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp; 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun
09&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</th>
<th scope="col">May 09&nbsp;</th>
<th scope="col">Apr 09&nbsp;</th>
<th scope="col">Mar 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production (M/M %
Chg)</td>
<td>--</td>
<td>-3.0</td>
<td>4.7</td>
<td>4.5</td>
<td>-2.1</td>
<td>-8.1</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Retail Sales&nbsp; (M/M %
Chg)</td>
<td>--</td>
<td>1.68</td>
<td>2.36</td>
<td>0.88</td>
<td>1.70</td>
<td>0.71</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Value of Construction Work
Performed&nbsp; (M/M % Chg)</td>
<td>--</td>
<td>-2.66</td>
<td>2.61</td>
<td>210.55</td>
<td>0.74</td>
<td>11.54</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>--</td>
<td>8.6</td>
<td>8.8</td>
<td>8.7</td>
<td>8.9</td>
<td>8.7</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Inflation (%)</td>
<td>--</td>
<td>11.6</td>
<td>12.0</td>
<td>11.9</td>
<td>12.3</td>
<td>13.2</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Refinancing Rate&nbsp; (%)</td>
<td>10.50</td>
<td>10.75</td>
<td>11.00</td>
<td>11.50</td>
<td>12.00</td>
<td>12.50</td>
<td>13.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Oil Price Brent Crude (Ave of
Daily Prices $ per barrel)</td>
<td>--</td>
<td>72.86</td>
<td>65.62</td>
<td>69.24</td>
<td>58.25</td>
<td>51.18</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

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

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<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

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<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

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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