Tom Moeller

According to The National Association of Purchasing Management data, the recession in U.S. factory sector activity is over. Its August composite index jumped to 52.9 from an unrevised July reading of 48.9 and reached it's highest [...]

The Factory Sector Recession IsOver; ISM Index Jumps To Highest Level Since Early-2007

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831d.jpg" align="left" border="0" height="265" width="353">India's real gross domestic
product rose 6.1% in the second
quarter from the second quarter of 2008, up from the 5.8% year over
year growth in the first quarter. It was the first acceleration in
growth since the fourth quarter of 2007 when the global recession began
to affect the Indian economy. Among the industries contributing to the
acceleration in growth were manufacturing, mining and quarrying,
electricity gas and water and the service industries covering trade,
hotels, transport and communications. The year to year growth in these
industries is shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831e.jpg" align="right" border="0" height="265" width="353">
Earlier this year, the Reserve Bank of India forecasted that
the economy would increase 6% in the fiscal year ending March 2010
while the Federal Government was estimating growth between 6.25% and
7.75%. Since then, the weak summer monsoon, reducing prospects for
agriculture output, has cast doubts on these projections, Although
agriculture has been declining in importance in the Indian economy for
years (as can be seen in the second chart), it still accounts for a
slightly larger portion of the economy than manufacturing. In fiscal
2008, agriculture accounted for 17% of total GDP and manufacturing for
15%. Agriculture output increased 2.4% in the second quarter over the
corresponding period of 2008, down from the 2.7% increase in the first
quarter. The recent announcement by the Farm ministry that 44% of the
625 administered districts reported drought or drought like conditions
suggests a grim outlook for agriculture in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Year/year
Percent Change</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</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">Gross Domestic Product by
Industry</td>
<td>6.13</td>
<td>5.76</td>
<td>4.8</td>
<td>7.75</td>
<td>7.80</td>
<td>8.63</td>
<td>9.25</td>
<td>9.01</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>3.45</td>
<td>-1.36</td>
<td>0.90</td>
<td>5.08</td>
<td>5.50</td>
<td>6.29</td>
<td>8.62</td>
<td>8.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining and Quarrying</td>
<td>7.88</td>
<td>1.60</td>
<td>4.90</td>
<td>3.70</td>
<td>4.61</td>
<td>4.67</td>
<td>4.16</td>
<td>3.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Electric, Gas, Water</td>
<td>6.19</td>
<td>3.58</td>
<td>3.51</td>
<td>3.78</td>
<td>2.75</td>
<td>4.58</td>
<td>3.80</td>
<td>5.86</td>
</tr>
<tr class="odd">
<td class="firstcol">Agriculture</td>
<td>2.37</td>
<td>2.68</td>
<td>-0.84</td>
<td>2.65</td>
<td>3.04</td>
<td>2.23</td>
<td>8.06</td>
<td>3.86</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>7.70</td>
<td>8.41</td>
<td>9.53</td>
<td>9.77</td>
<td>9.99</td>
<td>11.28</td>
<td>10.21</td>
<td>10.68</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>7.10</td>
<td>6.79</td>
<td>4.16</td>
<td>9.56</td>
<td>8.44</td>
<td>6.90</td>
<td>9.70</td>
<td>13.4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade, Hotels,
Transport, Communications</td>
<td>8.08</td>
<td>6.32</td>
<td>5.88</td>
<td>12.09</td>
<td>12.97</td>
<td>13.76</td>
<td>11.66</td>
<td>10.90</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Finance, Insurance,
Real Estate &amp; Business Services</td>
<td>8.06</td>
<td>9.51</td>
<td>8.30</td>
<td>6.37</td>
<td>6.92</td>
<td>10.31</td>
<td>11.89</td>
<td>12.37</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Community, Social
and Personal Services</td>
<td>6.78</td>
<td>12.55</td>
<td>22.49</td>
<td>8.96</td>
<td>8.17</td>
<td>9.73</td>
<td>5.51</td>
<td>7.08</td>
</tr>
</tbody>
</table>

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India's real gross domestic product rose 6.1% in the second quarter from the second quarter of 2008, up from the 5.8% year over year growth in the first quarter. It was the first acceleration in growth since the fourth quarter of 2007 [...]

India Reports Acceleration in 2nd Q Growth, but Weak Monsoon Challenges Its Continuance

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831a.jpg" align="right" border="0" height="265" width="353">Middle
America finally appears to be emerging from its sharp recession.
Reporting this morning, the Chicago Purchasing Managers Association
indicated that its August Business Barometer Index rose to 50, at the
break-even level for the first month since last September. The increase
was led by a rise in the orders and production components that breached
50 for the first month since June of last year. In addition, the order
backlogs index surged to its highest level since last September. The
employment series also gained but only back to its December level. The
Chicago PMI figures are diffusion indexes and are available in Haver's SURVEYS
database. In a separate report issued last week, the Chicago
Federal Reserve Bank reported that the National Activity Index (CFNAI)
rose in July to the highest level since January of last year. The
reading of -0.74 was up from June and both figures were higher than the
series' low of -3.99 reached this past January. Since 1970 there has
been a 74% correlation between the level of the index and the q/q
change in real GDP. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831b.jpg" align="right" border="0" height="265" width="353">
The three-month moving average
of the index also improved to its highest level since August. An index
level at or below -0.70 typically has indicated negative U.S. economic
growth. A zero value of the CFNAI indicates that the economy is
expanding at its historical trend rate of growth of roughly 3%. The
complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_august2009.pdf">here.</a>·
The production and income components made the largest positive
contributions to the July CFNAI. Thirty-five of the index components
had a positive influence on the overall index while 50 had a negative
influence. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831c.jpg" align="right" border="0" height="265" width="353">
These figures contrast to last month's report on June
activity when 22 of the index components had a positive influence while
63 made a negative contribution. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders. In yet a third survey, the
Chicago Fed indicated that its Midwest manufacturing index improved
slightly during July and recovered declines during the prior two
months. Nevertheless, the figure remained near the lowest since 2003.
Indicators for the auto and steel sectors rose while machinery fell.
The Chicago Federal Reserve figures also are available in Haver's SURVEYS
database. Clearing and settlement of exchange
traded derivatives from the Federal Reserve Bank of Chicago
can be found <a href="http://www.chicagofed.org/publications/fedletter/cfloctober2009_267.pdf">
here</a>.&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Aug. '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Chicago
Purchasing Managers Index</td>
<td>50.0</td>
<td>43.4</td>
<td>39.9</td>
<td>56.4</td>
<td>46.8</td>
<td>54.4</td>
<td>56.8</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>52.5</td>
<td>48.0</td>
<td>41.6</td>
<td>58.0</td>
<td>46.7</td>
<td>57.7</td>
<td>59.9</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; Production</td>
<td>52.9</td>
<td>43.3</td>
<td>39.3</td>
<td>61.2</td>
<td>48.1</td>
<td>58.3</td>
<td>60.3</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>38.7</td>
<td>35.3</td>
<td>28.9</td>
<td>39.2</td>
<td>41.4</td>
<td>51.5</td>
<td>51.6</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey2">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed Nat'l Activity Index</a></td>
<td>--</td>
<td>-0.74</td>
<td>-1.82</td>
<td>-1.29 (July '08)</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td></td>
<td>-1.69</td>
<td>-2.18</td>
<td>-1.17</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey1">
<td class="firstcol">Chicago Fed
Midwest Factory Index</td>
<td>--</td>
<td>79.7</td>
<td>78.1</td>
<td>103.5</td>
<td>101.6</td>
<td>107.4</td>
<td>107.1</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;&nbsp; Auto Sector</td>
<td>--</td>
<td>51.7</td>
<td>45.1</td>
<td>76.8</td>
<td>73.2</td>
<td>86.5</td>
<td>87.8</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;&nbsp; Machinery
Sector</td>
<td>--</td>
<td>91.6</td>
<td>93.6</td>
<td>126.4</td>
<td>125.3</td>
<td>127.7</td>
<td>129.1</td>
</tr>
</tbody>
</table>
</body></html>

Middle America finally appears to be emerging from its sharp recession. Reporting this morning, the Chicago Purchasing Managers Association indicated that its August Business Barometer Index rose to 50, at the break-even level for the [...]

Several Indices of Midwest Economic Activity Improve; August PMI Moves To Break-Even

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831a.jpg" align="right" border="0" height="265" width="353">Middle
America finally appears to be emerging from its sharp recession.
Reporting this morning, the Chicago Purchasing Managers Association
indicated that its August Business Barometer Index rose to 50, at the
break-even level for the first month since last September. The increase
was led by a rise in the orders and production components that breached
50 for the first month since June of last year. In addition, the order
backlogs index surged to its highest level since last September. The
employment series also gained but only back to its December level. The
Chicago PMI figures are diffusion indexes and are available in Haver's SURVEYS
database. 
In a separate report issued last week, the Chicago
Federal Reserve Bank reported that the National Activity Index (CFNAI)
rose in July to the highest level since January of last year. The
reading of -0.74 was up from June and both figures were higher than the
series' low of -3.99 reached this past January. Since 1970 there has
been a 74% correlation between the level of the index and the q/q
change in real GDP. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831b.jpg" align="right" border="0" height="265" width="353">
The three-month moving average
of the index also improved to its highest level since August. An index
level at or below -0.70 typically has indicated negative U.S. economic
growth. A zero value of the CFNAI indicates that the economy is
expanding at its historical trend rate of growth of roughly 3%. The
complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_august2009.pdf">here.</a>·
The production and income components made the largest positive
contributions to the July CFNAI. Thirty-five of the index components
had a positive influence on the overall index while 50 had a negative
influence. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831c.jpg" align="right" border="0" height="265" width="353">
These figures contrast to last month's report on June
activity when 22 of the index components had a positive influence while
63 made a negative contribution. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders.
 In yet a third survey, the
Chicago Fed indicated that its Midwest manufacturing index improved
slightly during July and recovered declines during the prior two
months. Nevertheless, the figure remained near the lowest since 2003.
Indicators for the auto and steel sectors rose while machinery fell.
The Chicago Federal Reserve figures also are available in Haver's SURVEYS
database.
 Clearing and settlement of exchange
traded derivatives from the Federal Reserve Bank of Chicago
can be found <a href="http://www.chicagofed.org/publications/fedletter/cfloctober2009_267.pdf">
here</a>.&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Aug. '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Chicago
Purchasing Managers Index</td>
<td>50.0</td>
<td>43.4</td>
<td>39.9</td>
<td>56.4</td>
<td>46.8</td>
<td>54.4</td>
<td>56.8</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>52.5</td>
<td>48.0</td>
<td>41.6</td>
<td>58.0</td>
<td>46.7</td>
<td>57.7</td>
<td>59.9</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; Production</td>
<td>52.9</td>
<td>43.3</td>
<td>39.3</td>
<td>61.2</td>
<td>48.1</td>
<td>58.3</td>
<td>60.3</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>38.7</td>
<td>35.3</td>
<td>28.9</td>
<td>39.2</td>
<td>41.4</td>
<td>51.5</td>
<td>51.6</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey2">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed Nat'l Activity Index</a></td>
<td>--</td>
<td>-0.74</td>
<td>-1.82</td>
<td>-1.29 (July '08)</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td></td>
<td>-1.69</td>
<td>-2.18</td>
<td>-1.17</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey1">
<td class="firstcol">Chicago Fed
Midwest Factory Index</td>
<td>--</td>
<td>79.7</td>
<td>78.1</td>
<td>103.5</td>
<td>101.6</td>
<td>107.4</td>
<td>107.1</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;&nbsp; Auto Sector</td>
<td>--</td>
<td>51.7</td>
<td>45.1</td>
<td>76.8</td>
<td>73.2</td>
<td>86.5</td>
<td>87.8</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;&nbsp; Machinery
Sector</td>
<td>--</td>
<td>91.6</td>
<td>93.6</td>
<td>126.4</td>
<td>125.3</td>
<td>127.7</td>
<td>129.1</td>
</tr>
</tbody>
</table>

India Reports Acceleration in 2nd
Q Growth, but Weak Monsoon Challenges Its Continuance 
by <a href="/comment/Curley.html">Louise
Curley</a> August 31, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831d.jpg" align="left" border="0" height="265" width="353">India's real gross domestic
product rose 6.1% in the second
quarter from the second quarter of 2008, up from the 5.8% year over
year growth in the first quarter. It was the first acceleration in
growth since the fourth quarter of 2007 when the global recession began
to affect the Indian economy. Among the industries contributing to the
acceleration in growth were manufacturing, mining and quarrying,
electricity gas and water and the service industries covering trade,
hotels, transport and communications. The year to year growth in these
industries is shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831e.jpg" align="right" border="0" height="265" width="353">
Earlier this year, the Reserve Bank of India forecasted that
the economy would increase 6% in the fiscal year ending March 2010
while the Federal Government was estimating growth between 6.25% and
7.75%. Since then, the weak summer monsoon, reducing prospects for
agriculture output, has cast doubts on these projections, Although
agriculture has been declining in importance in the Indian economy for
years (as can be seen in the second chart), it still accounts for a
slightly larger portion of the economy than manufacturing. In fiscal
2008, agriculture accounted for 17% of total GDP and manufacturing for
15%. Agriculture output increased 2.4% in the second quarter over the
corresponding period of 2008, down from the 2.7% increase in the first
quarter. The recent announcement by the Farm ministry that 44% of the
625 administered districts reported drought or drought like conditions
suggests a grim outlook for agriculture in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Year/year
Percent Change</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</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">Gross Domestic Product by
Industry</td>
<td>6.13</td>
<td>5.76</td>
<td>4.8</td>
<td>7.75</td>
<td>7.80</td>
<td>8.63</td>
<td>9.25</td>
<td>9.01</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>3.45</td>
<td>-1.36</td>
<td>0.90</td>
<td>5.08</td>
<td>5.50</td>
<td>6.29</td>
<td>8.62</td>
<td>8.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining and Quarrying</td>
<td>7.88</td>
<td>1.60</td>
<td>4.90</td>
<td>3.70</td>
<td>4.61</td>
<td>4.67</td>
<td>4.16</td>
<td>3.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Electric, Gas, Water</td>
<td>6.19</td>
<td>3.58</td>
<td>3.51</td>
<td>3.78</td>
<td>2.75</td>
<td>4.58</td>
<td>3.80</td>
<td>5.86</td>
</tr>
<tr class="odd">
<td class="firstcol">Agriculture</td>
<td>2.37</td>
<td>2.68</td>
<td>-0.84</td>
<td>2.65</td>
<td>3.04</td>
<td>2.23</td>
<td>8.06</td>
<td>3.86</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>7.70</td>
<td>8.41</td>
<td>9.53</td>
<td>9.77</td>
<td>9.99</td>
<td>11.28</td>
<td>10.21</td>
<td>10.68</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>7.10</td>
<td>6.79</td>
<td>4.16</td>
<td>9.56</td>
<td>8.44</td>
<td>6.90</td>
<td>9.70</td>
<td>13.4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade, Hotels,
Transport, Communications</td>
<td>8.08</td>
<td>6.32</td>
<td>5.88</td>
<td>12.09</td>
<td>12.97</td>
<td>13.76</td>
<td>11.66</td>
<td>10.90</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Finance, Insurance,
Real Estate &amp; Business Services</td>
<td>8.06</td>
<td>9.51</td>
<td>8.30</td>
<td>6.37</td>
<td>6.92</td>
<td>10.31</td>
<td>11.89</td>
<td>12.37</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Community, Social
and Personal Services</td>
<td>6.78</td>
<td>12.55</td>
<td>22.49</td>
<td>8.96</td>
<td>8.17</td>
<td>9.73</td>
<td>5.51</td>
<td>7.08</td>
</tr>
</tbody>
</table>
</body></html>

Several Indices of MidwestEconomic Activity Improve; August PMI Moves To Break-Even

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090828a.jpg" align="left" border="0" height="265" width="353">
The EU Commission indices kicked out the jams this month with
increases that left the economic forecasts standing in the dust
wondering what happened. The overall commission sentiment index made
its largest jump since at least 1988l lead by the industrial index&#8217;s
largest jump since 1988 and the service sector&#8217;s largest jump since it
began in 1996. While consumer confidence and retailing improved
month-to-month their respective rises were milder ranking as the 31st
best rise (out of 251 that is still not bad). The EMU overall index
made its second largest jump, The German sentiment index made its
largest jump along with the UK. The monthly rises for Italy and Spain
ranked about 20th in their respective histories. France did not report. 
 

In terms of levels all sectors have a ways to go as sector
readings are negative in absolute terms. 
 

In terms of the various indices standing in their respective
ranges compared to historic vales the EU index stands in the 36th
percentile of its range just above the boundary for the lower third of
its range. The EMU index Germany and Spain all stand around the 30th
percentiles of their respective ranges. The UK is better off in the
40th percentile of its range. 
 

In terms of sectors, the relatively strongest sector is
retailing in the 41st percentile of its range followed by the consumer
confidence reading (35th percentile) and services (31st percentile).
The industrial sector stands in the 28th percentile of its range and
construction hovers in the bottom 13th percentile of its range. 
 

For the most part these distinctions are not so important. All
the various indices stand well below the 50 percentile mark that
denotes the middle of their respective ranges. All are well below par.
All are well away from their respective range midpoints. If this were a
game of football none would have an insurmountable lead but the
construction sector (team) might consider resting its best players to
use another day&#8230;The good news this month is in how much the various
indices have risen and improved not about what strikingly high values
they have reached. These readings are still quite weak across sectors
and across EU and EMU reporting countries. The momentum, however, is
excellent. 


<table border="0" cellpadding="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="14" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Aug 
09</td>
<td>
Jul 
09</td>
<td>Jun 
09</td>
<td>May 
09</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>By
 
Queue 
Rank%</td>
<td>R-SQ 
w/Overall</td>
<td>Rank
of 
Change</td>
</tr>
<tr>
<td class="firstcol">Overall
Index</td>
<td>80.9</td>
<td>75</td>
<td>71.1</td>
<td>67.9</td>
<td>36.9</td>
<td>229</td>
<td>116</td>
<td>60</td>
<td>56</td>
<td>100</td>
<td>-48.7%</td>
<td>1.00</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-26</td>
<td>-30</td>
<td>-33</td>
<td>-34</td>
<td>28.3</td>
<td>236</td>
<td>7</td>
<td>-39</td>
<td>46</td>
<td>-7</td>
<td>-53.2%</td>
<td>0.90</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-20</td>
<td>-21</td>
<td>-23</td>
<td>-26</td>
<td>35.3</td>
<td>220</td>
<td>2</td>
<td>-32</td>
<td>34</td>
<td>-11</td>
<td>-42.9%</td>
<td>0.86</td>
<td>31</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-12</td>
<td>-14</td>
<td>-17</td>
<td>-17</td>
<td>41.9</td>
<td>216</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-6</td>
<td>-40.3%</td>
<td>0.66</td>
<td>31</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-36</td>
<td>-37</td>
<td>-37</td>
<td>-39</td>
<td>13.0</td>
<td>227</td>
<td>4</td>
<td>-42</td>
<td>46</td>
<td>-16</td>
<td>-47.4%</td>
<td>0.47</td>
<td>44</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-11</td>
<td>-19</td>
<td>-23</td>
<td>-26</td>
<td>31.7</td>
<td>145</td>
<td>32</td>
<td>-31</td>
<td>63</td>
<td>14</td>
<td>5.8%</td>
<td>0.89</td>
<td>1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>Aug 
09</td>
<td colspan="2">Based
on&nbsp;
Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>6.1%</td>
<td>3.8%</td>
<td>4.3%</td>
<td>80.6</td>
<td>30.5</td>
<td>230</td>
<td>117</td>
<td>65</td>
<td>53</td>
<td>100</td>
<td>-49.4%</td>
<td>0.95</td>
<td>2</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>6.3%</td>
<td>4.1%</td>
<td>4.3%</td>
<td>85.9</td>
<td>28.0</td>
<td>218</td>
<td>121</td>
<td>72</td>
<td>49</td>
<td>100</td>
<td>-41.6%</td>
<td>0.70</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.5%</td>
<td>4.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>4.5%</td>
<td>4.4%</td>
<td>1.4%</td>
<td>87.5</td>
<td>37.0</td>
<td>222</td>
<td>122</td>
<td>67</td>
<td>55</td>
<td>100</td>
<td>-44.2%</td>
<td>0.83</td>
<td>20</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>3.7%</td>
<td>5.2%</td>
<td>2.0%</td>
<td>81.9</td>
<td>30.5</td>
<td>223</td>
<td>117</td>
<td>67</td>
<td>50</td>
<td>100</td>
<td>-44.8%</td>
<td>0.74</td>
<td>19</td>
</tr>
<tr>
<td class="firstcol">Memo: UK</td>
<td>13.1%</td>
<td>7.3%</td>
<td>4.1%</td>
<td>83.5</td>
<td>40.3</td>
<td>226</td>
<td>124</td>
<td>56</td>
<td>68</td>
<td>100</td>
<td>-46.8%</td>
<td>0.59</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Since Oct 1988</td>
<td></td>
<td></td>
<td>251</td>
<td>-Count</td>
<td>Services:</td>
<td>154</td>
<td>-Count</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="14" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures</td>
</tr>
</tbody>
</table>
</body></html>

The EU Commission indices kicked out the jams this month with increases that left the economic forecasts standing in the dust wondering what happened. The overall commission sentiment index made its largest jump since at least 1988l [...]

EU Commission Indices Surprise: Show a Real Turn Is in Progress

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090828b.jpg" width="353">
Personal income in July was almost exactly equalto June&#39;s amount, $11,957.4 billion versus $11,953.6 billion. While transfer payments and dividends decreased, this report includes the first increase in wages and salaries since last October, surely a welcome development, albeit a small one. Consensus forecasts were close to the actual, as they called for a 0.1% rise in total income.Transfers continued to fall in the wake of the stimulus-generated bulge in May, but the July decline was just 0.2%. Notably, this included a small decrease in unemployment benefits. The drop in dividends was 2.6%, larger than in May and June, but much less than the 4.9% average cut each month of Q1.
The wage and salary increases were small, just 0.1%, but this was evenly spread across goods producers, service producers and government workers. Another cyclically tied item, nonfarm proprietors&#39; income, gained for a second month, rising in July by 0.8% after 0.3% in June. Prior to that, this small-business-owners&#39; income had fallen for 10 consecutive months. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090828c.jpg" width="353">
Taxes turned back higher as well last month, increasing 0.8%, their first increase since August 2008. Obviously, the pattern of stimulus-oriented refunds is impacting the monthly changes. More generally, taxes have recently been running at 9% of personal income, compared with 12.6% back at the peak of the economy and the first few months of recession in early 2008.
The steadier behavior of pre-tax incomes means that, despite the higher taxes in July, disposable personal income basically held at its June amount after a slightly revised 1.1% decline in June. Adjusted for inflation, real disposable income eased just 0.1%; it had fallen 1.6% in June. The saving rate decreased again, from June&#39;s 4.5% to 4.2%; obviously lower than the recent peak of 6.0% in May, it remains far higher than last July&#39;s 2.6% and compares favorably with almost the entire stretch of this decade so far.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090828d.jpg" width="353">
Consumer spending gained 0.2% in July after a 0.6% rise in June. Durable goods outlays were up 1.3%, as the initial weeks of the &quot;cash-for-clunkers&quot; program generated a surge of 22.3% in spending on new autos. [What will August&#39;s number show??]. Trucks benefited little from the program, but spending for them still went up 4.8%. Nondurable goods spending eased 0.3%, including a 2.2% drop in gasoline; recreation items, personal care products and household supplies also saw moderate decreases. Among services, total outlays increased 0.3%. This modest change masks some interesting moves individual items: spending on electricity was down 2% and has fallen in every month of 2009 so far. Transportation services were up 1.6%, but those related to personal motor vehicles increased just 0.3% while public transportation outlays gained 5.6%, with ground and air transport both participating. Finally, the comprehensive national accounts revisions have moved restaurants from nondurable goods to the service sector. Food services spending was up 0.4% in July, reversing June&#39;s 0.3% decline; the portion spent on &quot;alcohol in purchased meals&quot; gained 0.9%, however, its first increase in five months.
Pricing power remains basically nonexistent. The PCE chain price index was virtually flat last month, as energy prices decreased 0.4% after their surge in June. The ex-food-and-energy &quot;core&quot; was up a mere 0.1%, very close to its May and June amounts. Prices for services, long the most inflation-prone consumer items, increased just 0.1%, but this was largest one-month increase since last October.
The personal income &amp; consumption figures are available in Haver&#39;s USECON and USNA databases.

<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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)&nbsp;</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.0</td>
<td>-1.1</td>
<td>1.4</td>
<td>-2.4</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>0.0</td>
<td>-1.1</td>
<td>1.7</td>
<td>-0.3</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption Expenditures</td>
<td>0.2</td>
<td>0.6</td>
<td>0.1</td>
<td>-1.6</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>4.2</td>
<td>4.5</td>
<td>6.0</td>
<td>2.6 (July &#39;08)</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.0</td>
<td>0.5</td>
<td>0.1</td>
<td>-0.8</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1</td>
<td>0.2</td>
<td>0.1</td>
<td>1.4</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Personal income in July was almost exactly equalto June's amount, $11,957.4 billion versus $11,953.6 billion. While transfer payments and dividends decreased, this report includes the first increase in wages and salaries since last [...]

U.S. Personal Income Steadies in July after June Drop; PCE Shows First Effect of "Cash-for-Clunkers"

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090828b.jpg" align="left" border="0" height="265" width="353">
Personal income in July was almost exactly equalto June's
amount, $11,957.4 billion versus $11,953.6 billion. While transfer
payments and dividends decreased, this report includes the first
increase in wages and salaries since last October, surely a welcome
development, albeit a small one. Consensus forecasts were close to the
actual, as they called for a 0.1% rise in total income.Transfers
continued to fall in the wake of the stimulus-generated bulge in May,
but the July decline was just 0.2%. Notably, this included a small
decrease in unemployment benefits. The drop in dividends was 2.6%,
larger than in May and June, but much less than the 4.9% average cut
each month of Q1.
The wage and salary increases were small, just 0.1%, but this
was evenly spread across goods producers, service producers and
government workers. Another cyclically tied item, nonfarm proprietors'
income, gained for a second month, rising in July by 0.8% after 0.3% in
June. Prior to that, this small-business-owners' income had fallen for
10 consecutive months. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090828c.jpg" align="right" border="0" height="265" width="353">
Taxes turned back higher as well last month, increasing 0.8%,
their first increase since August 2008. Obviously, the pattern of
stimulus-oriented refunds is impacting the monthly changes. More
generally, taxes have recently been running at 9% of personal income,
compared with 12.6% back at the peak of the economy and the first few
months of recession in early 2008.
The steadier behavior of pre-tax incomes means that, despite
the higher taxes in July, disposable personal income
basically held at its June amount after a slightly revised 1.1% decline
in June. Adjusted for inflation, real disposable income eased just
0.1%; it had fallen 1.6% in June. The saving rate decreased again, from
June's 4.5% to 4.2%; obviously lower than the recent peak of 6.0% in
May, it remains far higher than last July's 2.6% and compares favorably
with almost the entire stretch of this decade so far.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090828d.jpg" align="left" border="0" height="265" width="353">
Consumer spending gained 0.2% in July after a 0.6% rise in
June. Durable goods outlays were up 1.3%, as the initial weeks of the
"cash-for-clunkers" program generated a surge of 22.3% in spending on
new autos. [What will August's number show??]. Trucks benefited little
from the program, but spending for them still went up 4.8%. Nondurable
goods spending eased 0.3%, including a 2.2% drop in gasoline;
recreation items, personal care products and household supplies also
saw moderate decreases. Among services, total outlays increased 0.3%.
This modest change masks some interesting moves individual items:
spending on electricity was down 2% and has fallen in every month of
2009 so far. Transportation services were up 1.6%, but those related to
personal motor vehicles increased just 0.3% while public transportation
outlays gained 5.6%, with ground and air transport both participating.
Finally, the comprehensive national accounts revisions have moved
restaurants from nondurable goods to the service sector. Food services
spending was up 0.4% in July, reversing June's 0.3% decline; the
portion spent on "alcohol in purchased meals" gained 0.9%, however, its
first increase in five months.
Pricing power remains basically nonexistent. The PCE
chain price index was virtually flat last month, as energy
prices decreased 0.4% after their surge in June. The ex-food-and-energy
"core" was up a mere 0.1%, very close to its May and June amounts.
Prices for services, long the most inflation-prone consumer items,
increased just 0.1%, but this was largest one-month increase since last
October.
The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.

<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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.0</td>
<td>-1.1</td>
<td>1.4</td>
<td>-2.4</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>0.0</td>
<td>-1.1</td>
<td>1.7</td>
<td>-0.3</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.2</td>
<td>0.6</td>
<td>0.1</td>
<td>-1.6</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>4.2</td>
<td>4.5</td>
<td>6.0</td>
<td>2.6 (July '08)</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.0</td>
<td>0.5</td>
<td>0.1</td>
<td>-0.8</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>0.2</td>
<td>0.1</td>
<td>1.4</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
EU Commission Indices Surprise:
Show a Real Turn Is in Progress&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 28, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090828a.jpg" align="left" border="0" height="265" width="353">
The EU Commission indices kicked out the jams this month with
increases that left the economic forecasts standing in the dust
wondering what happened. The overall commission sentiment index made
its largest jump since at least 1988l lead by the industrial index&#8217;s
largest jump since 1988 and the service sector&#8217;s largest jump since it
began in 1996. While consumer confidence and retailing improved
month-to-month their respective rises were milder ranking as the 31st
best rise (out of 251 that is still not bad). The EMU overall index
made its second largest jump, The German sentiment index made its
largest jump along with the UK. The monthly rises for Italy and Spain
ranked about 20th in their respective histories. France did not report. 
 

In terms of levels all sectors have a ways to go as sector
readings are negative in absolute terms. 
 

In terms of the various indices standing in their respective
ranges compared to historic vales the EU index stands in the 36th
percentile of its range just above the boundary for the lower third of
its range. The EMU index Germany and Spain all stand around the 30th
percentiles of their respective ranges. The UK is better off in the
40th percentile of its range. 
 

In terms of sectors, the relatively strongest sector is
retailing in the 41st percentile of its range followed by the consumer
confidence reading (35th percentile) and services (31st percentile).
The industrial sector stands in the 28th percentile of its range and
construction hovers in the bottom 13th percentile of its range. 
 

For the most part these distinctions are not so important. All
the various indices stand well below the 50 percentile mark that
denotes the middle of their respective ranges. All are well below par.
All are well away from their respective range midpoints. If this were a
game of football none would have an insurmountable lead but the
construction sector (team) might consider resting its best players to
use another day&#8230;The good news this month is in how much the various
indices have risen and improved not about what strikingly high values
they have reached. These readings are still quite weak across sectors
and across EU and EMU reporting countries. The momentum, however, is
excellent. 


<table border="0" cellpadding="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="14" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Aug 
09</td>
<td>
Jul 
09</td>
<td>Jun 
09</td>
<td>May 
09</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>By
 
Queue 
Rank%</td>
<td>R-SQ 
w/Overall</td>
<td>Rank
of 
Change</td>
</tr>
<tr>
<td class="firstcol">Overall
Index</td>
<td>80.9</td>
<td>75</td>
<td>71.1</td>
<td>67.9</td>
<td>36.9</td>
<td>229</td>
<td>116</td>
<td>60</td>
<td>56</td>
<td>100</td>
<td>-48.7%</td>
<td>1.00</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-26</td>
<td>-30</td>
<td>-33</td>
<td>-34</td>
<td>28.3</td>
<td>236</td>
<td>7</td>
<td>-39</td>
<td>46</td>
<td>-7</td>
<td>-53.2%</td>
<td>0.90</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-20</td>
<td>-21</td>
<td>-23</td>
<td>-26</td>
<td>35.3</td>
<td>220</td>
<td>2</td>
<td>-32</td>
<td>34</td>
<td>-11</td>
<td>-42.9%</td>
<td>0.86</td>
<td>31</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-12</td>
<td>-14</td>
<td>-17</td>
<td>-17</td>
<td>41.9</td>
<td>216</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-6</td>
<td>-40.3%</td>
<td>0.66</td>
<td>31</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-36</td>
<td>-37</td>
<td>-37</td>
<td>-39</td>
<td>13.0</td>
<td>227</td>
<td>4</td>
<td>-42</td>
<td>46</td>
<td>-16</td>
<td>-47.4%</td>
<td>0.47</td>
<td>44</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-11</td>
<td>-19</td>
<td>-23</td>
<td>-26</td>
<td>31.7</td>
<td>145</td>
<td>32</td>
<td>-31</td>
<td>63</td>
<td>14</td>
<td>5.8%</td>
<td>0.89</td>
<td>1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>Aug 
09</td>
<td colspan="2">Based
on&nbsp;
Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>6.1%</td>
<td>3.8%</td>
<td>4.3%</td>
<td>80.6</td>
<td>30.5</td>
<td>230</td>
<td>117</td>
<td>65</td>
<td>53</td>
<td>100</td>
<td>-49.4%</td>
<td>0.95</td>
<td>2</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>6.3%</td>
<td>4.1%</td>
<td>4.3%</td>
<td>85.9</td>
<td>28.0</td>
<td>218</td>
<td>121</td>
<td>72</td>
<td>49</td>
<td>100</td>
<td>-41.6%</td>
<td>0.70</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.5%</td>
<td>4.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>4.5%</td>
<td>4.4%</td>
<td>1.4%</td>
<td>87.5</td>
<td>37.0</td>
<td>222</td>
<td>122</td>
<td>67</td>
<td>55</td>
<td>100</td>
<td>-44.2%</td>
<td>0.83</td>
<td>20</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>3.7%</td>
<td>5.2%</td>
<td>2.0%</td>
<td>81.9</td>
<td>30.5</td>
<td>223</td>
<td>117</td>
<td>67</td>
<td>50</td>
<td>100</td>
<td>-44.8%</td>
<td>0.74</td>
<td>19</td>
</tr>
<tr>
<td class="firstcol">Memo: UK</td>
<td>13.1%</td>
<td>7.3%</td>
<td>4.1%</td>
<td>83.5</td>
<td>40.3</td>
<td>226</td>
<td>124</td>
<td>56</td>
<td>68</td>
<td>100</td>
<td>-46.8%</td>
<td>0.59</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Since Oct 1988</td>
<td></td>
<td></td>
<td>251</td>
<td>-Count</td>
<td>Services:</td>
<td>154</td>
<td>-Count</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="14" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures</td>
</tr>
</tbody>
</table>
</body></html>

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
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background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
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background-color:#d4d4d4;
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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090827e.jpg" align="left" border="0" height="265" width="353">
The chart exhibits growth rates for money presented in
national currency terms for several key countries. The table produces
the same data with some different horizons for calculation. In the
chart&#8217;s lower panel, the various series are inflation-adjusted (real
balances). 
 

Monetary expansions looks too strong - The
picture on Yr/Yr money growth is a bit frightening. Japan&#8217;s growth rate
for M2 plus CD&#8217;s, its preferred monetary measure, is at 2.7% and is
quite contained. EMU&#8217;s rate at 5.5% seems high for its current growth
state. At 8.1% and 12% respectively the US and the UK seem to have
flooded their respective markets with liquidity. And in some ways they
have. 
 

Or is it decelerating too much? But if you
turn your attention to the table instead of the chart you see a second
phenomenon is in play. Money growth rates are and have been
decelerating greatly from 12-months to 6-months and from 6-months to
3-months. In addition we provide some credit measures for EMU and they
have the same properties. 
 

Weak once inflation adjusted - Next if we
turn to the lower panel of the chart to focus on the inflation adjusted
flows there, we find a marked deceleration is in place and that
monetary growth appears to be much less aggressive than it seems on the
broader 12-month horizon and in a nominal framework. 
 

EMU - In EMU 3-Month growth rates for
money are at 2% while credit to residents is rising in real terms at a
1% rate and loans are shrinking by nearly 1% in real terms. 
 

US and UK: Despite double-digit 12-month
growth rates in both the US and the UK each has real money balances
shrinking over three months. 
 

Japan: Only Japan has relatively stable
nominal rates of growth for money and a slightly expanded growth rate
for real money balances over three months. 
 

Policy confusion: All this just adds to the
confusion about policy. Is it tight or is it loose? Is it as loose as
it seems over 12 months or is it being tightened too rapidly as the
3-month trend seems to say? What about extracting ourselves from this
overtly stimulative period? Is there inflation risk and can the central
banks handle it? 
 

Crosscurrents -On balance we see lots of
opinions but few good ways to make a clear discriminating argument. We
prefer to point out that the situation is complicated and in flux. We
urge investors to weigh the issues and we believe that where you come
down on the central bank issue depends on if you have trust in the
central bank/bankers or not. We do not think that the data are very
clear or that any course of action is baked in the cake. We see the
excessive money growth followed by some too-hard squeezing as evidence
that the central bankers are managing the risks &#8211; or trying to do so.
After all, the Yr/Yr money supplies are bloated but that is what the
bankers did to help blunt the crisis. It is in the past. To balance
that we do not see explosive sequential growth rates for money, quite
the opposite. We do not think this is a coincidence. Just as we are
monitoring these flows, so the central bankers are monitoring the
economy and the monetary trends. The data in the table are good
remainders to be careful about only looking at Yr/Yr growth rates. That
Yr/Yr growth in US and UK money supplies looks a lot different when you
shorten the growth horizon and deflate the flows to adjust for the
effects of inflation. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Look at
Global and Euro Liquidity Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">Saar-all</td>
<td colspan="3">Euro Measures (E13): Money
&amp; Credit</td>
<td colspan="3">G-10 Major Markets: Money</td>
<td>Memo</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>&#8364;&#8364;-Supply M2</td>
<td>Credit: 
Residents</td>
<td>Loans</td>
<td>$US M2</td>
<td>&#163;&#163;UK M4</td>
<td>&#165;&#165;Jpn M2+Cds</td>
<td>OIL:WTI</td>
</tr>
<tr class="grey4">
<td class="firstcol">3-MO</td>
<td>1.8%</td>
<td>0.6%</td>
<td>-1.1%</td>
<td>3.2%</td>
<td>3.1%</td>
<td>2.7%</td>
<td>171.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">6-MO</td>
<td>2.7%</td>
<td>-0.8%</td>
<td>-1.9%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>136.3%</td>
</tr>
<tr class="grey4">
<td class="firstcol">12-MO</td>
<td>5.5%</td>
<td>3.0%</td>
<td>0.9%</td>
<td>8.1%</td>
<td>12.1%</td>
<td>2.7%</td>
<td>-52.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">2-Yr</td>
<td>7.8%</td>
<td>7.0%</td>
<td>5.1%</td>
<td>7.3%</td>
<td>11.5%</td>
<td>2.4%</td>
<td>-6.6%</td>
</tr>
<tr class="grey4">
<td class="firstcol">3-Yr</td>
<td>8.8%</td>
<td>8.4%</td>
<td>6.9%</td>
<td>6.8%</td>
<td>12.1%</td>
<td>2.3%</td>
<td>-4.7%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Real
Balances: deflated by
Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-MO</td>
<td>2.0%</td>
<td>0.9%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>5.1%</td>
<td>162.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-MO</td>
<td>2.5%</td>
<td>-1.0%</td>
<td>-2.1%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>4.7%</td>
<td>131.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-MO</td>
<td>6.2%</td>
<td>3.7%</td>
<td>1.6%</td>
<td>10.1%</td>
<td>10.2%</td>
<td>4.9%</td>
<td>-51.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">2-Yr</td>
<td>6.1%</td>
<td>5.3%</td>
<td>3.3%</td>
<td>5.5%</td>
<td>8.2%</td>
<td>2.4%</td>
<td>-8.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-Yr</td>
<td>7.0%</td>
<td>6.6%</td>
<td>5.1%</td>
<td>4.8%</td>
<td>9.2%</td>
<td>2.3%</td>
<td>-6.5%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">Japan CPI
for July is an estimate;
it uses the June value to produce the real balance figure</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The chart exhibits growth rates for money presented in national currency terms for several key countries. The table produces the same data with some different horizons for calculation. In the chart’s lower panel, the various series [...]

Money Supplies Surge...Or Do They?

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.

260205Z1.jpg

**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.

260205Z2.jpg

**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.

260205Z3.jpg

**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.

260205Z4.jpg

**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.

260205Z5.jpg

**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.

260205Z6.jpg

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

260206E.jpg

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.

Economy in Brief

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