Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090825d.jpg" align="left" border="0" height="265" width="353">
German GDP&#8217;s turnaround reveals its secrets &#8211; Germany
finalized its GDP and provided details on Q2 GDP performance. GDP rose
by 1.3% annualized and compounded Q/Q. Private consumption continued
positive in Q2. Public spending on Consumption cooled, rising at a 1.7%
a.r. down from its pace of +4.3% in Q1. Gross fixed capital spending
made a sharp turn rising at a mild 3% pace after plunging at a rate of
-27% in Q1. Housing investment picked up to a 5.8% pace from 1% in Q1.
But exports fell subtracting from growth. That was more than offset by
the plunge of 19% at annual rate by imports in Q2. On balance domestic
demand still contracted in Germany in Q2 on an inventory pullback. 
 

Imports cushion drop in domestic demand - The sharp drop in
imports helped to offset the impact of domestic demand weakness on GDP
by adding 8.6% to the annual rate of growth as exports cut over two
percentage points from GDP growth in Q2. Private consumption alone
added 1.7 percentage points to growth. The cut in GDP has a lot do with
inventory investment that is still a drag. But that will become a
positive in the future. 
 

So far so good - So far the German details on GDP are
relatively encouraging. But the outsized drop in imports that boosted
growth will not repeat. Meanwhile exports fell in Q2 and they are a key
factor in the growth story. Exports do show signs of turning up; at
least orders for exports are up. Retail spending in Germany is positive
but it has remained weak. So while there are bright spots there are
still challenges ahead for German growth. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> German GDP </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3">Consumption</td>
<td>Capital Formation</td>
<td>&nbsp;</td>
<td></td>
<td>Domestic</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>G Fix Invst</td>
<td>Housing</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol"> % change Q/Q; X-M is Q/Q
change in Blns of euros</td>
</tr>
<tr>
<td class="firstcol">Q2-09</td>
<td>1.3%</td>
<td>2.9%</td>
<td>1.7%</td>
<td>3.1%</td>
<td>5.8%</td>
<td>-4.7%</td>
<td>-19.0%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">Q1-09</td>
<td>-13.4%</td>
<td>2.6%</td>
<td>4.3%</td>
<td>-27.5%</td>
<td>1.0%</td>
<td>-35.8%</td>
<td>-19.6%</td>
<td>-4.1%</td>
</tr>
<tr>
<td class="firstcol">Q4-08</td>
<td>-9.4%</td>
<td>-1.7%</td>
<td>2.2%</td>
<td>-7.8%</td>
<td>-4.0%</td>
<td>-28.1%</td>
<td>-15.6%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Q3-08</td>
<td>-1.3%</td>
<td>1.3%</td>
<td>0.5%</td>
<td>2.4%</td>
<td>-1.6%</td>
<td>-0.4%</td>
<td>14.2%</td>
<td>4.8%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol"> % change Yr/Yr; X-M is
Yr/Yr change in Gap in Blns of euros</td>
</tr>
<tr>
<td class="firstcol">Q2-09</td>
<td>-5.9%</td>
<td>1.2%</td>
<td>2.2%</td>
<td>-8.3%</td>
<td>0.2%</td>
<td>-18.6%</td>
<td>-11.0%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Q1-09</td>
<td>-6.7%</td>
<td>-0.1%</td>
<td>2.5%</td>
<td>-11.2%</td>
<td>-5.4%</td>
<td>-17.5%</td>
<td>-7.6%</td>
<td>-1.6%</td>
</tr>
<tr>
<td class="firstcol">Q4-08</td>
<td>-1.8%</td>
<td>-0.3%</td>
<td>2.4%</td>
<td>-1.4%</td>
<td>-0.1%</td>
<td>-6.3%</td>
<td>0.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Q3-08</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>2.3%</td>
<td>2.9%</td>
<td>1.7%</td>
<td>3.4%</td>
<td>5.3%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">5-Yrs</td>
<td>0.4%</td>
<td>0.6%</td>
<td>1.4%</td>
<td>1.6%</td>
<td>0.7%</td>
<td>2.0%</td>
<td>3.0%</td>
<td>0.7%</td>
</tr>
</tbody>
</table>
</body></html>

German GDP’s turnaround reveals its secrets – Germany finalized its GDP and provided details on Q2 GDP performance. GDP rose by 1.3% annualized and compounded Q/Q. Private consumption continued positive in Q2. Public spending on [...]

Jumpin' German GDP

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090825c.jpg" align="left" border="0" height="265" width="353">
Among the many Haver data bases where information on Eastern
European economies can be found are: EMERGECW, EUROSTAT, OECDMEI,
OECDNAQ, IFS, EIUDEEUR and EIUIEEUR.
EMERGECW contains data from the official country source.
EUROSTAT contains data on those eastern European countries
that belong to the Euro Area: Slovakia and Slovenia and those in the
European Union: Bulgaria, Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland and Romania. The data sometimes differ from the
official sources as the European Commission attempts to "harmonize"
that is use a common definition for a particular series or concept for
all countries that may vary from the national definition of a
particular country. For example, the harmonized rate of unemployment in
EUROSTAT was 8.2% in Poland in June while the official rate in EMERGECW
was 10.9%.
OECDMEI (OECD Main Economic Indicators), OECDNAQ (OECD
National Accounts Quarterly) and IFS (International Monetary Fund Data)
were the forerunners of the Eurostat and Country sourced data. In
general the data for a particular country found in these data bases are
the similar to those in EMERGECW and EUROSTAT. There are, however,
differences. Data may be available monthly in some cases and only
quarterly in others. Indexes in one data base may have a different base
in another data base. As noted above the unemployment rates in EUROSTAT
and in EMERGECW are significantly different. The OECDMEI unemployment
rate is the same as the Eurostat unemployment rate and the unadjusted
IFS unemployment rate is equal to the unadjusted unemployment rate in
the EMERGECW data base. In the latter data base, seasonally adjusted
data are available. As an example of the similarities and differences
among the data bases, the attached chart shows the unadjusted IFS
unemployment rate compared with the seasonally adjusted rate from the
EMERGECW data base and the seasonally adjusted EUROSTAT and OECDMEI
unemployment rates, which are identical. The data are shown quarterly
since the unemployment rate in OECDMEI is only available on a quarterly
basis..EIUDEEUR and EIUIEEUR data bases contains a wealth of
specialized data from the Economist Intelligence Unit, including
forecasts of selected economic indicators.

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Among the many Haver data bases where information on Eastern European economies can be found are: EMERGECW, EUROSTAT, OECDMEI, OECDNAQ, IFS, EIUDEEUR and EIUIEEUR. EMERGECW contains data from the official country source. EUROSTAT [...]

Economic Information for Eastern European Countries

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Jumpin' German GDP
 
August 25, 2009
By Robert Brusca

 
 
 
 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090825d.jpg" align="left" border="0" width="353" height="265">·
 German GDP’s turnaround reveals its secrets – Germany finalized its GDP and provided details on Q2 GDP performance. GDP rose by 1.3% annualized and compounded Q/Q. Private consumption continued positive in Q2. Public spending on Consumption cooled, rising at a 1.7% a.r. down from its pace of +4.3% in Q1. Gross fixed capital spending made a sharp turn rising at a mild 3% pace after plunging at a rate of -27% in Q1. Housing investment picked up to a 5.8% pace from 1% in Q1. But exports fell subtracting from growth. That was more than offset by the plunge of 19% at annual rate by imports in Q2. On balance domestic demand still contracted in Germany in Q2 on an inventory pullback.&nbsp; 
 
 · Imports cushion drop in domestic demand - The sharp drop in imports helped to offset the impact of domestic demand weakness on GDP by adding 8.6% to the annual rate of growth as exports cut over two percentage points from GDP growth in Q2. Private consumption alone added 1.7 percentage points to growth. The cut in GDP has a lot do with inventory investment that is still a drag. But that will become a positive in the future.&nbsp; 
 
 · So far so good - So far the German details on GDP are relatively encouraging. But the outsized drop in imports that boosted growth will not repeat. Meanwhile exports fell in Q2 and they are a key factor in the growth story. Exports do show signs of turning up; at least orders for exports are up. Retail spending in Germany is positive but it has remained weak. So while there are bright spots there are still challenges ahead for German growth.&nbsp; 
 
 
 
 
 
 German GDP
 
 
 <td WIDTH="16%" VALIGN="BOTTOM" BGCOLOR="#000000">&nbsp;</td>
 <td WIDTH="10%" VALIGN="BOTTOM" BGCOLOR="#000000">&nbsp;</td>
 
 Consumption
 
 Capital Formation
 <td WIDTH="10%" VALIGN="BOTTOM" BGCOLOR="#000000">&nbsp;</td>
 
 
 
 Domestic
 
 
 <td WIDTH="16%" VALIGN="BOTTOM" BGCOLOR="#000000" HEIGHT="16">
 &nbsp;
 </td>
 
 GDP
 
 Private
 
 Public
 
 G Fix Invst
 
 Housing
 
 Exports
 
 Imports
 
 Demand
 
 
 
 
 % change Q/Q; X-M is Q/Q change in Blns of euros
 
 
 
 
 Q2-09
 
 
 1.3%
 
 
 2.9%
 
 
 1.7%
 
 
 3.1%
 
 
 5.8%
 
 
 -4.7%
 
 
 -19.0%
 
 
 -5.0%
 
 
 
 
 Q1-09
 
 
 -13.4%
 
 
 2.6%
 
 
 4.3%
 
 
 -27.5%
 
 
 1.0%
 
 
 -35.8%
 
 
 -19.6%
 
 
 -4.1%
 
 
 
 
 Q4-08
 
 
 -9.4%
 
 
 -1.7%
 
 
 2.2%
 
 
 -7.8%
 
 
 -4.0%
 
 
 -28.1%
 
 
 -15.6%
 
 
 -1.5%
 
 
 
 
 Q3-08
 
 
 -1.3%
 
 
 1.3%
 
 
 0.5%
 
 
 2.4%
 
 
 -1.6%
 
 
 -0.4%
 
 
 14.2%
 
 
 4.8%
 
 
 
 
 % change Yr/Yr; X-M is Yr/Yr change in Gap in
 Blns of euros
 
 
 
 
 Q2-09
 
 
 -5.9%
 
 
 1.2%
 
 
 2.2%
 
 
 -8.3%
 
 
 0.2%
 
 
 -18.6%
 
 
 -11.0%
 
 
 -1.5%
 
 
 
 
 Q1-09
 
 
 -6.7%
 
 
 -0.1%
 
 
 2.5%
 
 
 -11.2%
 
 
 -5.4%
 
 
 -17.5%
 
 
 -7.6%
 
 
 -1.6%
 
 
 
 
 Q4-08
 
 
 -1.8%
 
 
 -0.3%
 
 
 2.4%
 
 
 -1.4%
 
 
 -0.1%
 
 
 -6.3%
 
 
 0.8%
 
 
 1.7%
 
 
 
 
 Q3-08
 
 
 0.8%
 
 
 -0.1%
 
 
 2.3%
 
 
 2.9%
 
 
 1.7%
 
 
 3.4%
 
 
 5.3%
 
 
 1.4%
 
 
 
 
 5-Yrs
 
 
 0.4%
 
 
 0.6%
 
 
 1.4%
 
 
 1.6%
 
 
 0.7%
 
 
 2.0%
 
 
 3.0%
 <td WIDTH="11%" VALIGN="BOTTOM">
 
 0.7%
 
 
 &nbsp;
 </td>
 
 

©
2009&nbsp; HAVER ANALYTICS. All rights reserved
&nbsp;
<a href="http://www.haver.com/COMMENT/archive.htm">Commentary
Archive</a>




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· German GDP’s turnaround reveals its secrets – Germany finalized its GDP and provided details on Q2 GDP performance. GDP rose by 1.3% annualized and compounded Q/Q. Private consumption continued positive in Q2. Public spending on [...]

Jumpin' German GDP 

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090825a.jpg" align="left" border="0" height="265" width="353">
Asian economies appear to be emerging from recession. Thailand
is the latest Far Eastern country to report growth in its second
quarter GDP.The second quarter was 2.32% above the first quarter.
Contrary to the experience of other Asian economies, the source of
growth in Thailand has not been exports, but the business sector.Gross
fixed capital formation increased 5% after declining almost 13% in the
first quarter and the rate of inventory liquidation declined sharply
from a liquidation of 75,380 million baht in the first quarter to one
of 4,394 million baht in the second quarter. Private consumption barely
increased while government consumption was up by 1.6%. Exports actually
declined by over 3% in the second quarter while imports increased by
almost 9%. Perhaps part of the increase in exports was due to the
increase in fixed capital formation that often entails some foreign
know how.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090825b.jpg" align="right" border="0" height="265" width="353">
Earlier, Singapore, South Korea, Indonesia and Greater
China--China, Hong Kong and Taiwan--all reported growth in the second
quarter. (China does not report quarter to quarter growth rates, but
the increase in the second quarter year over year growth implies an
increase in the first quarter.) The two charts show the growth that has
taken place in these countries in the second quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Q/Q
Percent Changes ex where noted</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4&nbsp; 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">GDP,Mil US$ 2008 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China (Y/Y Percent Change)</td>
<td>7.9</td>
<td>6.1</td>
<td>6.8</td>
<td>9.0</td>
<td>10.1</td>
<td>10.6</td>
<td>4,415,884</td>
</tr>
<tr>
<td class="firstcol">Hong Kong</td>
<td>3.82</td>
<td>-4.44</td>
<td>-2.50</td>
<td>-1.71</td>
<td>-0.74</td>
<td>1.21</td>
<td>215</td>
</tr>
<tr class="odd">
<td class="firstcol">Taiwan</td>
<td>4.51</td>
<td>-2.46</td>
<td>-6.14</td>
<td>-2.79</td>
<td>0.13</td>
<td>0.33</td>
<td>392</td>
</tr>
<tr>
<td class="firstcol">Singapore</td>
<td>4.82</td>
<td>-3.21</td>
<td>4.38</td>
<td>-0.52</td>
<td>-198</td>
<td>2.92</td>
<td>182</td>
</tr>
<tr class="odd">
<td class="firstcol">South Korea</td>
<td>2.33</td>
<td>0.12</td>
<td>-5.07</td>
<td>-0.52</td>
<td>-1.98</td>
<td>2.92</td>
<td>947</td>
</tr>
<tr>
<td class="firstcol">Indonesia</td>
<td>1.37</td>
<td>0.88</td>
<td>0.20</td>
<td>1.49</td>
<td>1.82</td>
<td>1.65</td>
<td>510</td>
</tr>
<tr class="odd">
<td class="firstcol">Thailand</td>
<td>2.32</td>
<td>-1.85</td>
<td>-5.89</td>
<td>0.55</td>
<td>0.07</td>
<td>1.15</td>
<td>273</td>
</tr>
</tbody>
</table>
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Asian economies appear to be emerging from recession. Thailand is the latest Far Eastern country to report growth in its second quarter GDP.The second quarter was 2.32% above the first quarter. Contrary to the experience of other [...]

More Good News From Asia: Thailand's Q2 GDP Increases 2.32%

Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821a.jpg">
The National Association of Realtors reported that sales of existing homes during July jumped for the fourth consecutive month. The 7.2% m/m rise to 5,240 (SAAR) was to the highest level since August of 2007. The increase in July sales beat Consensus expectations for sales of 5.00M homes. Total sales include sales of condos and co-ops.
Sales of existing single-family homes alone increased 5.5% last month and were up 13.8% from the January low. (These data have a longer history than the total sales series).
Recent sales have been helped by a tax credit for first-time home buyers. The credit of up to $8,000 extends though the end of this year. The full details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.
The improvement in home sales looks to have inspired potential sellers to put more homes on the market. The number of unsold homes (condos &amp; single-family) for sale rose 7.3% during July to the highest level since November. Nevertheless, year-to-year inventories were down 10.6%. At the current sales rate there was a 9.4 months&#39; supply on the market. The figure was stable with June and was near the lowest since June 2007. For single-family homes the inventory rose 3.1% m/m (-13.2% y/y). At the current sales rate there was an 8.6 month&#39;s supply of homes on the market, the lowest since 2007.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821b.jpg">
The median price of an existing home dipped m/m to $178,400. Though prices were still lower than the year ago level, they have risen by 8.3% from the January low.
The data on existing home sales, prices and affordability can be found in Haver&#39;s USECON database. The regional price, affordability and inventory data is available in the REALTOR database.
Reflections on a Year of Crisis is the title of this morning&#39;s speech by Fed Chairman Ben S. Bernanke in Jackson Hole, Wyoming and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090821a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous, SAAR)</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>5,240</td>
<td>4,890</td>
<td>5.0%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>930</td>
<td>820</td>
<td>3.3</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,220</td>
<td>1,100</td>
<td>8.0</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,950</td>
<td>1,820</td>
<td>5.4</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,130</td>
<td>1,150</td>
<td>1.8</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,610</td>
<td>4,330</td>
<td>5.0</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>178,400</td>
<td>182,000</td>
<td>-15.1</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Realtors reported that sales of existing homes during July jumped for the fourth consecutive month. The 7.2% m/m rise to 5,240 (SAAR) was to the highest level since August of 2007. The increase in July [...]

U.S. Existing Home Sales Rise With Distress Sales & Tax Credit

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821c.jpg" align="left" border="0">
PMI Signals Are Lagging - PMI&#8217;s have lagged
the pickup but they are near to neutral and the Markit overview index
has reached the neutral mark of 50 in August. Markit&#8217;s overall PMI
reading for the Euro Area rose to this neutral level of 50 in August
lagging behind the GDP signals that in Q2 already turned up for two key
E-Zone countries (Germany and France) and with the Zone&#8217;s own GDP
barely falling. Purchaser indices that usually are more sensitive than
other macro-data have not been leading in Europe and that is a point to
ponder. 
 

Large jumps in August play catch-up --
The jumps in the respective MFG and Services indices were large. For
Services it is the largest jump in its history that extends back to
mid-1998. For the MFG index it is the eighth strongest jump in a
history that goes back to mid-1997. 
 

Still, the fact that the big signal from the PMIs is lagging
is a curiosity. 
 

Thinking more about PMIs -- PMI indices are
diffusion indices and formally they are indices of the breadth of
change in a certain direction (up or down, greater or less) rather than
of strength. The overall index is a weighted average of components that
look at specific aspects of an industry getting diffusion responses on
each. However, these indices are used as a proxy for strength since the
correlation with &#8216;strength&#8217; is high for &#8216;breadth&#8217;. Still we should bear
in mind always that &#8216;strength&#8217; is not in fact &#8216;breadth&#8217;, they are
different things and sometimes the difference matters, even if most of
the time it does not. 
 

Viva la difference?? If you have never
thought of the PMIs this way before, note that this concept has been
long in play in analyzing trends in the stock market. The stock market
index is a weighted average of stocks, an index that goes up and down,
but technicians also look at indicators of &#8216;breadth&#8217;. And when they do,
they DO NOT call them &#8216;strength&#8217; but when breadth and strength go
together a rally&#8217;s strength is said to be more powerful. Sometimes the
market goes &#8216;up&#8217; but decliners &#8216;outpace&#8217; advancers. This is exactly the
same thing as looking at output Vs its diffusion. Output and diffusion
do not always go in the same direction. Manufacturing output is like
the stock index and the MFG PMI is its breath measure. Services output
is compared to the breadth of the services PMI. But in the case of our
economic statistics we get the breadth reports much more quickly than
we get the output reports and so the diffusion indices take on a life
of their own and become proxies for &#8216;output.&#8217; 

The diffusion difference - What the
diffusion indices usually do, is to pick up small improvements that
might be scattered around the economy and lost. Diffusion indices
create a signal that would otherwise get lost in the aggregation of
data with weighting always going to the largest of reporters. So this
time around it seems that the opposite is happening. A few larger
reporting firms are doing better and driving the macro -data higher
while the smaller firms are not yet on board for the ride. This is not
surprising with all the government intervention (&#8230;in Europe, the UK and
the US, in fact) since government tends to work &#8216;best&#8217; with big
business. If the assistance works properly (or at all) stimulating
output at the larger firms (like auto makers) should create some
knock-on effects that will draw other firms into the upswing. And the
PMI reports may be signaling that, in August, this is finally
happening. But this process is a bit like trying to start a fire with
wet wood on windy day. Just because you have gotten a spark does not
means you will be able to nurse a bone-warming bonfire out of it.
Still, with a spark, you have a chance. And there is some tentative
evidence that growth is spreading- at last. Getting the diffusion
indices on board is crucial &#8211; they remain important barometers of the
success in spreading growth. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the E-Zone</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Aug-09</td>
<td>47.87</td>
<td>49.53</td>
</tr>
<tr>
<td class="firstcol">Jul-09</td>
<td>46.25</td>
<td>45.69</td>
</tr>
<tr>
<td class="firstcol">Jun-09</td>
<td>42.62</td>
<td>44.65</td>
</tr>
<tr>
<td class="firstcol">May-09</td>
<td>40.68</td>
<td>44.82</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>43.18</td>
<td>46.53</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>38.98</td>
<td>44.58</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>39.28</td>
<td>44.11</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">127-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>53.2%</td>
<td>44.5%</td>
</tr>
</tbody>
</table>
</body></html>

PMI Signals Are Lagging - PMI’s have lagged the pickup but they are near to neutral and the Markit overview index has reached the neutral mark of 50 in August. Markit’s overall PMI reading for the Euro Area rose to this neutral level [...]

Flash PMI’s Turn in EMU

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821a.jpg" align="left" border="0">
The National Association of Realtors reported that sales of
existing homes during July jumped for the fourth consecutive
month. The 7.2% m/m rise to 5,240 (SAAR) was to the highest level since
August of 2007. The increase in July sales beat Consensus expectations
for sales of 5.00M homes. Total sales include sales of condos and
co-ops.
Sales of existing single-family homes alone increased 5.5%
last month and were up 13.8% from the January low. (These data have a
longer history than the total sales series).
Recent sales have been helped by a tax credit for first-time
home buyers. The credit of up to $8,000 extends though the end of this
year. The full details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.
The improvement in home sales looks to have inspired potential
sellers to put more homes on the market. The number of unsold homes
(condos &amp; single-family) for sale rose 7.3% during July to the
highest level since November. Nevertheless, year-to-year inventories
were down 10.6%. At the current sales rate there was a 9.4 months'
supply on the market. The figure was stable with June and was near the
lowest since June 2007. For single-family homes the inventory rose 3.1%
m/m (-13.2% y/y). At the current sales rate there was an 8.6 month's
supply of homes on the market, the lowest since 2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821b.jpg" align="right" border="0">
The median price of an existing home dipped m/m to $178,400.
Though prices were still lower than the year ago level, they have risen
by 8.3% from the January low.
The data on existing home sales, prices and affordability can
be found in Haver's USECON database. The regional
price, affordability and inventory data is available in the REALTOR
database.
Reflections on a Year of Crisis is the
title of this morning's speech by Fed Chairman Ben S. Bernanke in
Jackson Hole, Wyoming and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090821a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous, SAAR)</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>5,240</td>
<td>4,890</td>
<td>5.0%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>930</td>
<td>820</td>
<td>3.3</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,220</td>
<td>1,100</td>
<td>8.0</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,950</td>
<td>1,820</td>
<td>5.4</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,130</td>
<td>1,150</td>
<td>1.8</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,610</td>
<td>4,330</td>
<td>5.0</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>178,400</td>
<td>182,000</td>
<td>-15.1</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>
Flash PMI&#8217;s Turn in EMU 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821c.jpg" align="left" border="0">
PMI Signals Are Lagging - PMI&#8217;s have lagged
the pickup but they are near to neutral and the Markit overview index
has reached the neutral mark of 50 in August. Markit&#8217;s overall PMI
reading for the Euro Area rose to this neutral level of 50 in August
lagging behind the GDP signals that in Q2 already turned up for two key
E-Zone countries (Germany and France) and with the Zone&#8217;s own GDP
barely falling. Purchaser indices that usually are more sensitive than
other macro-data have not been leading in Europe and that is a point to
ponder. 
 

Large jumps in August play catch-up --
The jumps in the respective MFG and Services indices were large. For
Services it is the largest jump in its history that extends back to
mid-1998. For the MFG index it is the eighth strongest jump in a
history that goes back to mid-1997. 
 

Still, the fact that the big signal from the PMIs is lagging
is a curiosity. 
 

Thinking more about PMIs -- PMI indices are
diffusion indices and formally they are indices of the breadth of
change in a certain direction (up or down, greater or less) rather than
of strength. The overall index is a weighted average of components that
look at specific aspects of an industry getting diffusion responses on
each. However, these indices are used as a proxy for strength since the
correlation with &#8216;strength&#8217; is high for &#8216;breadth&#8217;. Still we should bear
in mind always that &#8216;strength&#8217; is not in fact &#8216;breadth&#8217;, they are
different things and sometimes the difference matters, even if most of
the time it does not. 
 

Viva la difference?? If you have never
thought of the PMIs this way before, note that this concept has been
long in play in analyzing trends in the stock market. The stock market
index is a weighted average of stocks, an index that goes up and down,
but technicians also look at indicators of &#8216;breadth&#8217;. And when they do,
they DO NOT call them &#8216;strength&#8217; but when breadth and strength go
together a rally&#8217;s strength is said to be more powerful. Sometimes the
market goes &#8216;up&#8217; but decliners &#8216;outpace&#8217; advancers. This is exactly the
same thing as looking at output Vs its diffusion. Output and diffusion
do not always go in the same direction. Manufacturing output is like
the stock index and the MFG PMI is its breath measure. Services output
is compared to the breadth of the services PMI. But in the case of our
economic statistics we get the breadth reports much more quickly than
we get the output reports and so the diffusion indices take on a life
of their own and become proxies for &#8216;output.&#8217; 

The diffusion difference - What the
diffusion indices usually do, is to pick up small improvements that
might be scattered around the economy and lost. Diffusion indices
create a signal that would otherwise get lost in the aggregation of
data with weighting always going to the largest of reporters. So this
time around it seems that the opposite is happening. A few larger
reporting firms are doing better and driving the macro -data higher
while the smaller firms are not yet on board for the ride. This is not
surprising with all the government intervention (&#8230;in Europe, the UK and
the US, in fact) since government tends to work &#8216;best&#8217; with big
business. If the assistance works properly (or at all) stimulating
output at the larger firms (like auto makers) should create some
knock-on effects that will draw other firms into the upswing. And the
PMI reports may be signaling that, in August, this is finally
happening. But this process is a bit like trying to start a fire with
wet wood on windy day. Just because you have gotten a spark does not
means you will be able to nurse a bone-warming bonfire out of it.
Still, with a spark, you have a chance. And there is some tentative
evidence that growth is spreading- at last. Getting the diffusion
indices on board is crucial &#8211; they remain important barometers of the
success in spreading growth. 
 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the E-Zone</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Aug-09</td>
<td>47.87</td>
<td>49.53</td>
</tr>
<tr>
<td class="firstcol">Jul-09</td>
<td>46.25</td>
<td>45.69</td>
</tr>
<tr>
<td class="firstcol">Jun-09</td>
<td>42.62</td>
<td>44.65</td>
</tr>
<tr>
<td class="firstcol">May-09</td>
<td>40.68</td>
<td>44.82</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>43.18</td>
<td>46.53</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>38.98</td>
<td>44.58</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>39.28</td>
<td>44.11</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">127-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>53.2%</td>
<td>44.5%</td>
</tr>
</tbody>
</table>
</body></html>

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

260115Z5.jpg

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

260115Z6.jpg

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

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

Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

260115J.jpg

260115K.jpg

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

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

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

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

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

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

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

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

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

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

Import & Export Prices: Generally Modest Changes

Winnie Tapasanun

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

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

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

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

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

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

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

Philly Fed Manufacturing Activity Rebounds in January

Kathleen Stephansen, CBE

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

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

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

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

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 27, the highest unemployment rates were in Rhode Island (2.86%), New Jersey (2.85%), Washington (2.81%), Minnesota (2.74%), Massachusetts (2.59%), Oregon (2.28%), Montana (2.16%), California and Connecticut (both 2.12%) and Alaska (2.06%). The lowest rates were in Florida (0.31%), North Carolina (0.41%), Louisiana (0.43%), Alabama and Virginia (both 0.49%). Rates in other notable states include Illinois (2.18%), New York (2.10%), Pennsylvania (2.02%), and Texas (1.20%). These state data are not seasonally adjusted.

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

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

Economy in Brief

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