Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807a.jpg" align="left" border="0" height="265" width="353">
Slack in the labor market developed less rapidly last month.
The Bureau of Labor Statistics indicated that nonfarm payrolls fell
247,000 during July after declines during the prior two months that
were revised slightly shallower. Expectations for July had been for a
deeper 325,000 drop in payrolls and it was the shallowest since August
of last year. Nevertheless, so far during this recession employment has
fallen by a total of 6.7 million, the record by far for a 19-month
period. In percentage terms jobs are down 4.8% since the 2007 peak,
also a record. Most recently, the payroll decline moderated to an
average 331,000 over the last three months versus a peak three-month
rate of 701,000 this past winter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807b.jpg" align="right" border="0" height="265" width="353">
Another indication of the economy's slower rate of decline was
that the unemployment rate slipped m/m for the first time since April
of last year. The dip to 9.4% from 9.5% in July compared with
expectations for a rise to 9.6%. The rate's cycle low of 4.4% occurred
in October 2006. Last month, the dip was due to a sharp 422,000 decline
in the labor force (-0.0% y/y) as the number of "discouraged workers"
surged. This 106,000 rise in the number of workers who want a job now
but stopped looking left the y/y gain at 19.0%. Household sector
employment fell 155,000 (-3.8% y/y) which was a moderation from the
323,000-to-1,239,000 monthly declines since last August.
Also from the household survey, the median duration of
unemployment slipped m/m to 15.7 weeks but that still was up from 9.8
weeks one year ago. The ranks of the long-term unemployed, however,
jumped again m/m and, at 5.0 million, they are more than double one
year ago.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807c.jpg" align="right" border="0" height="265" width="353">
From the payroll survey, the moderation in the rate of job
loss owed to easier declines in both factory sector and private service
payrolls. Manufacturing sector jobs fell 52,000 last month and that was
the mildest decline in one year. On a three-month basis, the 110,000
average monthly decline also was nearly half the rate of this past
winter. Employment in the private service sector dropped 126,000 last
month (-3.2% y/y). Here again the three-month rate of decline of
126,000 was well-reduced from the 393,000 average of this past winter
and fall. The moderation is apparent across industries. Job cuts in the
construction sector also have moderated, but to a lesser extent.
Employment here fell a reduced 76,000 last month but the three-month
average rate of decline amounted to a still-strong 73,000 versus the
worst of 124,000 this winter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807d.jpg" align="right" border="0" height="265" width="353">
In the government sector employment was broadly under pressure
as tax revenues lag. Government jobs rose by just 7,000 last month
(0.1% y/y) after two months of decline. Jobs with the Federal
government rose by 12,000 (+2.0% y/y) after two down months. The number
of state gov't jobs fell for the second consecutive month (-0.3% y/y)
and local gov't payrolls were unchanged (-0.1% y/y. Should
the federal government bail out the states? Lessons from past recessions
from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2009_265.pdf">here</a>.
The breadth of the cutbacks in employment remained a huge
30.1% amongst industries. That is, however, improved from the worst of
this past March. Over a six-month span just 17.3% of firms raised
employment which was near the worst. In the factory sector an improved
22.3% of firms raised employment but over a six-month span just 7.2%
did.
Average hourly earnings rose 0.2% during July and the
three-month change seems to have bottomed at a 1.3% annual rate. That
compares to to roughly 4% growth from 2006 to 2008. Earnings in the
factory sector rose 0.8% and the three-month growth rate improved to
3.8%. Growth in the durable sector's earnings (NSA) jumped over the
last three months but earnings in the private service sector remained
under pressure at +1.1% during the last three months.
The figures referenced above are available in Haver's USECON
database. Additional detail can be found in the LABOR and
in the EMPL databases
Raising automotive fuel efficiency from
the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflseptember2009_266.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Employment:
000s</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>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-247</td>
<td>-443</td>
<td>-303</td>
<td>-4.2%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-467</td>
<td>-322</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-52</td>
<td>-131</td>
<td>-146</td>
<td>-12.2%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-76</td>
<td>-86</td>
<td>-57</td>
<td>-14.6%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-119</td>
<td>-220</td>
<td>-91</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.1</td>
<td>33.0</td>
<td>33.1</td>
<td>33.6 (July '08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.5%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.4%</td>
<td>9.5%</td>
<td>9.4%</td>
<td>5.8% (July '08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
OECD LEIs Turn On A Green Light
For Recovery 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807e.jpg" align="left" border="0" height="265" width="353">
The OECD LEIs are now jumpin.&#8217; The rise is strongly
accelerating across OECD countries; even Japan whose indicator is still
falling is seeing a substantial shift in its negative growth rate to a
substantially diminished pace of decline. The detailed progressive
growth rates from 12-months to six months to three months show that the
acceleration is well in force. The OECD&#8217;s preferred reading is on the
six month growth rate. The US rate is now flat compared to declining at
a 16% pace six months ago. The European index is up at a very strong
6.4% pace after dropping at a 12% rate six months ago. Japan is falling
at a 7% rate after dropping at a 22% rate six months ago. What a
difference a half year makes. 
 

The United State&#8217;s own LEI from the Conference Board usually
carves out lower recession lows than the OECD LEI for the US. The
Conference Board indicator usually carves out higher highs in the
transition to recovery, by a small amount, as well. In this recession
however the OECD LEI for the US is much weaker than the low for the
Conference Board&#8217;s measure based on percentage drops in the respective
indices. As a result, while the OECD index has a bigger US turnaround
from its low to its present value, the positive reading on the
Conference Board LEI is far stronger that the current OECD LEI signal
(the OECD measure is flat over six months). 
 

Different measures capture different aspects of the economy&#8217;s
weakness. Right now both of these measures have the same sort of
positive momentum to different degrees but positive momentum
nonetheless. It is interesting that the European economies are showing
much more momentum in this framework. We will have to keep our eye on
the economies and see if European economic performance can live up to
the strong positive signal the OECD has for that region. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">OECD
Trend-restored leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td colspan="5" class="firstcol">Growth
progression-SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>11.0%</td>
<td>2.7%</td>
<td>-6.1%</td>
<td>-2.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>10.4%</td>
<td>1.3%</td>
<td>-7.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.E-Area</td>
<td>16.0%</td>
<td>6.4%</td>
<td>-3.2%</td>
<td>-3.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Japan</td>
<td>-4.4%</td>
<td>-7.1%</td>
<td>-15.0%</td>
<td>-1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>11.4%</td>
<td>0.0%</td>
<td>-8.5%</td>
<td>-3.2%</td>
</tr>
<tr class="grey4">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>2.7%</td>
<td>-14.2%</td>
<td>-4.2%</td>
<td>-1.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>1.3%</td>
<td>-15.8%</td>
<td>-4.2%</td>
<td>-2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Eur</td>
<td>6.4%</td>
<td>-12.0%</td>
<td>-6.9%</td>
<td>-0.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Japan</td>
<td>-7.1%</td>
<td>-22.3%</td>
<td>2.0%</td>
<td>-5.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>0.0%</td>
<td>-16.3%</td>
<td>-4.3%</td>
<td>-2.2%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD
RED</td>
</tr>
</tbody>
</table>
</body></html>

Slack in the labor market developed less rapidly last month. The Bureau of Labor Statistics indicated that nonfarm payrolls fell 247,000 during July after declines during the prior two months that were revised slightly shallower. [...]

U.S. Payroll Employment DeclineEases While Unemployment Rate Falls

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806d.jpg" align="left" border="0" height="265" width="353">
German new orders rose by 4.5% in June after rising by 4.4% in
May. Orders are up and at a 42% annual rate over three-months and STILL
they stand lower by 23.7% than they did one year ago. In the newly
completed second quarter, orders are up at a 26.8% annual rate. While
real sector sales in mining and MFG are up at a 3.4% pace in the
quarter. Germany is beginning to turn the corner, despite ongoing
weakness in retail sales. 
 

German domestic orders barely nudged higher rising by nearly
rounding error (0.2%) in June. Foreign orders spurted by 8.3% putting
in their second strong month in a row. Exports remain the lifeblood of
the German economy. The report that Hungary&#8217;s industrial output rose
for the second month in a row is good news for Germany, suggesting that
eastern European export markets are among those that are reviving. 
 

In June German real sector sales for consumer goods rose by
0.2% as consumer durables plunged by 3.7%. Capital goods real sales
rose by 1.2% after spurting by 9.2% in May. Intermediates goods sales
rose by 2.8%. German real sector sales were up across the abroad in the
quarter as well with the exception of consumer durables, where sales
fell in the quarter at a hefty -8.4% annual rate. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">
German Orders and Sales By Sector and Origin
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>4.5%</td>
<td>4.4%</td>
<td>0.1%</td>
<td>42.6%</td>
<td>19.4%</td>
<td>-23.7%</td>
<td>-8.0%</td>
<td>26.8%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>8.3%</td>
<td>4.9%</td>
<td>-0.9%</td>
<td>61.2%</td>
<td>27.0%</td>
<td>-24.2%</td>
<td>-11.4%</td>
<td>40.0%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.2%</td>
<td>4.1%</td>
<td>1.1%</td>
<td>23.8%</td>
<td>11.3%</td>
<td>-23.1%</td>
<td>-3.6%</td>
<td>13.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real Sector Sales</td>

</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>1.4%</td>
<td>4.6%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.4%</td>
<td>0.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.2%</td>
<td>-2.2%</td>
<td>4.0%</td>
<td>8.0%</td>
<td>3.9%</td>
<td>-6.8%</td>
<td>-3.9%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>-3.7%</td>
<td>6.1%</td>
<td>-1.2%</td>
<td>3.8%</td>
<td>1.9%</td>
<td>-21.8%</td>
<td>-1.6%</td>
<td>-8.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>0.6%</td>
<td>-3.2%</td>
<td>4.6%</td>
<td>7.8%</td>
<td>3.8%</td>
<td>-4.1%</td>
<td>-4.2%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.2%</td>
<td>9.2%</td>
<td>-7.3%</td>
<td>10.1%</td>
<td>4.9%</td>
<td>-22.3%</td>
<td>3.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.8%</td>
<td>2.8%</td>
<td>1.5%</td>
<td>32.0%</td>
<td>14.9%</td>
<td>-18.2%</td>
<td>1.2%</td>
<td>9.7%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>1.5%</td>
<td>4.4%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.6%</td>
<td>0.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

German new orders rose by 4.5% in June after rising by 4.4% in May. Orders are up and at a 42% annual rate over three-months and STILL they stand lower by 23.7% than they did one year ago. In the newly completed second quarter, orders [...]

German Orders Surge Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806a.jpg" align="left" border="0" height="265" width="353">
Improvement in the U.S. labor market still is evident, but
lately it's been a halting trend. The latest figures from the Labor
Department indicate that initial claims for unemployment insurance fell
last week to 550,000 and more than reversed the prior week's unrevised
increase. For all of July, claims fell 9.4% from June, but since the
beginning of the month they moved sideways. The four-week moving
average of claims, which smoothes out some of the volatility in the
weekly numbers, slipped to 555,250 which was its lowest level since
late-January. A rise in weekly claims to 580,000 had been expected.
The Bureau of Labor Statistics will release the report on July
nonfarm payrolls tomorrow. During the last ten years, there has been an
86% correlation between the level of initial unemployment insurance
claims and the m/m change in payroll employment.
The Labor Department indicated that the largest increases in
initial claims for the week ending July 25 were in Ohio (+891, +3.6%
y/y), Oklahoma (+644, +121% y/y), Mississippi (+222, -5.2% y/y),
Louisiana (+154, +33.7% y/y), and Alaska (+129, +51.9% y/y), while the
largest decreases were in North Carolina (-9,809, +17.7% y/y), Michigan
(-9,085, +20.9% y/y), Florida (-8,714, +11.9% y/y), Georgia (-6,948,
+61.5% y/y), and Alabama (-3,822, +31.8% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806b.jpg" align="right" border="0" height="265" width="353">
A sideways movement in continuing claims for unemployment
insurance also became apparent last month. For the latest week, they
rose a modest 69,000 and that was enough to reverse the declines during
the prior two weeks. Continuing claims provide an indication of
workers' ability to find employment and the level of 6,310,000
claims is up sharply from the year-ago level. The four-week
average of continuing claims fell back to 6,378,750 and that was the
lowest since late-April. The series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806c.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment remained at 4.7% which was
the lowest level since mid-April. During the last ten years, there has
been a 93% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.
The highest insured unemployment rates in the week ending July
18 were in Puerto Rico (8.0 percent), Michigan (6.7), Oregon (6.5),
Pennsylvania (6.5), Nevada (6.1), Wisconsin (5.7), Connecticut (5.5),
New Jersey (5.5), California (5.4), Rhode Island (5.3), and South
Carolina (5.3). The lowest rates were in South Dakota (1.4) and North
Dakota (1.5), Virginia (2.5), Wyoming (3.0), Texas (3.1), Maine (3.3),
Colorado (3.3), Maryland (3.7), Minnesota (3.8), Florida (4.3),
Mississippi (4.3), New York (4.4) and Georgia (4.4).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/01/09</th>
<th scope="col">07/25/09</th>
<th scope="col">07/18/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>550</td>
<td>588</td>
<td>559</td>
<td>22.2%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,310</td>
<td>6,241</td>
<td>88.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td></td>
<td>4.7</td>
<td>4.7</td>
<td>2.5</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

Improvement in the U.S. labor market still is evident, but lately it's been a halting trend. The latest figures from the Labor Department indicate that initial claims for unemployment insurance fell last week to 550,000 and more than [...]

U.S. Weekly Claims For Jobless Insurance Inch Lower While Continuing Claims Tick Higher

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806a.jpg" align="left" border="0" height="265" width="353">
Improvement in the U.S. labor market still is evident, but
lately it's been a halting trend. The latest figures from the Labor
Department indicate that initial claims for unemployment insurance fell
last week to 550,000 and more than reversed the prior week's unrevised
increase. For all of July, claims fell 9.4% from June, but since the
beginning of the month they moved sideways. The four-week moving
average of claims, which smoothes out some of the volatility in the
weekly numbers, slipped to 555,250 which was its lowest level since
late-January. A rise in weekly claims to 580,000 had been expected.
The Bureau of Labor Statistics will release the report on July
nonfarm payrolls tomorrow. During the last ten years, there has been an
86% correlation between the level of initial unemployment insurance
claims and the m/m change in payroll employment.
The Labor Department indicated that the largest increases in
initial claims for the week ending July 25 were in Ohio (+891, +3.6%
y/y), Oklahoma (+644, +121% y/y), Mississippi (+222, -5.2% y/y),
Louisiana (+154, +33.7% y/y), and Alaska (+129, +51.9% y/y), while the
largest decreases were in North Carolina (-9,809, +17.7% y/y), Michigan
(-9,085, +20.9% y/y), Florida (-8,714, +11.9% y/y), Georgia (-6,948,
+61.5% y/y), and Alabama (-3,822, +31.8% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806b.jpg" align="right" border="0" height="265" width="353">
A sideways movement in continuing claims for unemployment
insurance also became apparent last month. For the latest week, they
rose a modest 69,000 and that was enough to reverse the declines during
the prior two weeks. Continuing claims provide an indication of
workers' ability to find employment and the level of 6,310,000
claims is up sharply from the year-ago level. The four-week
average of continuing claims fell back to 6,378,750 and that was the
lowest since late-April. The series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806c.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment remained at 4.7% which was
the lowest level since mid-April. During the last ten years, there has
been a 93% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.
The highest insured unemployment rates in the week ending July
18 were in Puerto Rico (8.0 percent), Michigan (6.7), Oregon (6.5),
Pennsylvania (6.5), Nevada (6.1), Wisconsin (5.7), Connecticut (5.5),
New Jersey (5.5), California (5.4), Rhode Island (5.3), and South
Carolina (5.3). The lowest rates were in South Dakota (1.4) and North
Dakota (1.5), Virginia (2.5), Wyoming (3.0), Texas (3.1), Maine (3.3),
Colorado (3.3), Maryland (3.7), Minnesota (3.8), Florida (4.3),
Mississippi (4.3), New York (4.4) and Georgia (4.4).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/01/09</th>
<th scope="col">07/25/09</th>
<th scope="col">07/18/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>550</td>
<td>588</td>
<td>559</td>
<td>22.2%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,310</td>
<td>6,241</td>
<td>88.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td></td>
<td>4.7</td>
<td>4.7</td>
<td>2.5</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
German Orders Surge Again 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 6, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806d.jpg" align="left" border="0" height="265" width="353">
German new orders rose by 4.5% in June after rising by 4.4% in
May. Orders are up and at a 42% annual rate over three-months and STILL
they stand lower by 23.7% than they did one year ago. In the newly
completed second quarter, orders are up at a 26.8% annual rate. While
real sector sales in mining and MFG are up at a 3.4% pace in the
quarter. Germany is beginning to turn the corner, despite ongoing
weakness in retail sales. 
 

German domestic orders barely nudged higher rising by nearly
rounding error (0.2%) in June. Foreign orders spurted by 8.3% putting
in their second strong month in a row. Exports remain the lifeblood of
the German economy. The report that Hungary&#8217;s industrial output rose
for the second month in a row is good news for Germany, suggesting that
eastern European export markets are among those that are reviving. 
 

In June German real sector sales for consumer goods rose by
0.2% as consumer durables plunged by 3.7%. Capital goods real sales
rose by 1.2% after spurting by 9.2% in May. Intermediates goods sales
rose by 2.8%. German real sector sales were up across the abroad in the
quarter as well with the exception of consumer durables, where sales
fell in the quarter at a hefty -8.4% annual rate. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>4.5%</td>
<td>4.4%</td>
<td>0.1%</td>
<td>42.6%</td>
<td>19.4%</td>
<td>-23.7%</td>
<td>-8.0%</td>
<td>26.8%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>8.3%</td>
<td>4.9%</td>
<td>-0.9%</td>
<td>61.2%</td>
<td>27.0%</td>
<td>-24.2%</td>
<td>-11.4%</td>
<td>40.0%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.2%</td>
<td>4.1%</td>
<td>1.1%</td>
<td>23.8%</td>
<td>11.3%</td>
<td>-23.1%</td>
<td>-3.6%</td>
<td>13.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real
Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>1.4%</td>
<td>4.6%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.4%</td>
<td>0.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.2%</td>
<td>-2.2%</td>
<td>4.0%</td>
<td>8.0%</td>
<td>3.9%</td>
<td>-6.8%</td>
<td>-3.9%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>-3.7%</td>
<td>6.1%</td>
<td>-1.2%</td>
<td>3.8%</td>
<td>1.9%</td>
<td>-21.8%</td>
<td>-1.6%</td>
<td>-8.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>0.6%</td>
<td>-3.2%</td>
<td>4.6%</td>
<td>7.8%</td>
<td>3.8%</td>
<td>-4.1%</td>
<td>-4.2%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.2%</td>
<td>9.2%</td>
<td>-7.3%</td>
<td>10.1%</td>
<td>4.9%</td>
<td>-22.3%</td>
<td>3.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.8%</td>
<td>2.8%</td>
<td>1.5%</td>
<td>32.0%</td>
<td>14.9%</td>
<td>-18.2%</td>
<td>1.2%</td>
<td>9.7%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>1.5%</td>
<td>4.4%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.6%</td>
<td>0.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Weekly Claims For JoblessInsurance Inch Lower While Continuing Claims Tick Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805h.jpg" width="353">
An easing rate of inventory decumulation is now playing a part in improving the level of factory sector output. During June, factory sector inventories fell 0.8%, the same as they did in May and that compares with 1.0%+ declines extending back to December. During the last three months the 10.5% annualized rate of inventory decumulation was down from 15.9% this past Winter. Much of that deceleration is due, however, to lower oil prices. Excluding oil, factory inventories fell at a 12.4% three-month rate that was just a slight moderation from earlier.
In fact, moderation in inventory decumulation rates is fairly spotty amongst various industries. Showing very modest accumulation were inventories of transportation equipment after declining at a three-month rate of 9.3% as recently as March. In addition, inventories of electrical equipment &amp; appliances have fallen at a slightly reduced 19.3% rate and machinery inventories fell at a somewhat reduced 14.8% rate. Conversely, steep production cuts lowered furniture inventories at a 28.6% rate which near its quickest. Inventories of primary metals also fell at a fairly stable 32.4% pace and computer inventory decumulation accelerated to a 15.1% rate during the last three months. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805i.jpg" width="353">
The reason for the modest improvement in inventory destocking has been an improved shipment picture. Factory shipments actually rose 1.4% during June and that was the first monthly increase in nearly one year. Increases in the transportation area and in the machinery industries accounted for much of the gain. Most elsewhere the rates of decline in shipments moderated substantially.
Finally, new orders have improved. The 0.4% June increase was the fourth in the last five months. It reflected a sharp monthly rise both in primary metals (-46.5% y/y) and machinery (-26.0% y/y) orders as well as a slight increase in electrical equipment (-30.8% y/y) orders. Bookings of transportation equipment and furniture continued to fall.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON database.
The international dimension of productivity and demand shocks in the U.S. economy from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-09bk.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</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>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.8</td>
<td>-0.8</td>
<td>-8.5</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.4</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.4</td>
<td>11.1</td>
<td>-24.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>2.3</td>
<td>0.9</td>
<td>-22.6</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.4</td>
<td>-0.8</td>
<td>-21.4</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>1.4</td>
<td>-0.0</td>
<td>-21.6</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-9.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-0.1</td>
<td>-0.7</td>
<td>-14.0</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

An easing rate of inventory decumulation is now playing a part in improving the level of factory sector output. During June, factory sector inventories fell 0.8%, the same as they did in May and that compares with 1.0%+ declines [...]

U.S. Factory Inventory Decumulation Eases Somewhat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805g.jpg" width="353">
The outplacement firm of Challenger, Grey &amp; Christmas indicated that job cut announcements picked up last month. They rose to 97,373 versus the 74,373 jobs lost during June. Nevertheless, the figures remain well below this cycle&#39;s peak level of layoffs which occurred this past January when there were 241,749 cuts. Challenger also reported that announced hiring plans remained near the cycle low.
Announcement of job cuts in the chemical, energy, telecommunications, transportation and financial sectors remained strong. Shallower declines elsewhere were broad-based including the auto, consumer goods, computer, electronics, government, retail and services.
During the last ten years there has been a 67% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment. Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
The Challenger figures are available in Haver&#39;s SURVEYS database.

<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/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></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>
<td class="firstcol">Announced Job Cuts</td>
<td>97,373</td>
<td>74,373</td>
<td>-9.0%</td>
<td>1,223,993</td>
<td>768,264</td>
<td>839,822</td>
</tr>
</tbody>
</table>
</body>
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The outplacement firm of Challenger, Grey & Christmas indicated that job cut announcements picked up last month. They rose to 97,373 versus the 74,373 jobs lost during June. Nevertheless, the figures remain well below this cycle's [...]

Challenger Layoffs Pick Up Slightly Last Month But Remain Moderate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805e.jpg" width="353">
The recent sharp improvement in service sector activity stalled last month, but not by much. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) slipped to 46.4 from an unrevised reading of 47.0 during June. Though below the break-even level of 50, the latest figure still was near the highest level since September of last year. It fell short of Consensus expectations for a reading of 48.0. A level of the ISM index below 50 indicates declining activity. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the business activity index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.
The July decline in the overall index was broad-based amongst the component series. The employment index slipped to 41.5 but that still was near the highest level since October. Thirteen percent of firms reported higher employment levels while 26% reported lower levels. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805f.jpg" width="353">
The overall business activity index for the service sector also fell to 46.1, but remained near its highest level since September. And slipping just slightly to 48.1 was the new orders series, though it remained well above last November&#39;s low of 35.6. Perhaps suggesting that the level of slack in the service sector has diminished, the supplier delivery index rose to the highest level since January.
The decline in service sector activity brought with it an easing of price pressure. The sharp 12.4 point m/m decline in the price index to 41.3 returned it to the lowest level since April. It was the sharpest one-month decline since last November. A much reduced 13% of firms reported higher prices while a significantly increased 28% reported lower prices. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;08</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">Composite Index</td>
<td>46.4</td>
<td>47.0</td>
<td>49.6</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business Activity</td>
<td>46.1</td>
<td>49.8</td>
<td>50.1</td>
<td>47.4</td>
<td>56.0</td>
<td>58.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>41.5</td>
<td>43.4</td>
<td>46.8</td>
<td>43.8</td>
<td>52.0</td>
<td>53.8</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>41.3</td>
<td>53.7</td>
<td>78.8</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


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The recent sharp improvement in service sector activity stalled last month, but not by much. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) slipped to 46.4 from an unrevised reading [...]

U.S. ISM Nonmanufacturing Index Backpedals Slightly And Prices Fall Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805d.jpg" align="left" border="0">
Sales fall -Retail sales fell in the Zone
in June. While the growth rat of sales is not decaying further, retail
sales volumes have been dropping at a pace of -2.5% to -2.2% over the
past twelve months. The year-over-year pace for retail sales seems to
have finally stopped falling, based on the trend in the chart above. 
 

The Good and Ugly of it all - Europe has
not suffered the same sort of spurt in the rate of unemployment that we
have in the US. But its level of unemployment remains high and it has
become even more elevated than it was. Consumer confidence has been hit
and consumers, even though better supported in Europe than in the US by
government programs, have cut back spending. Various programs in Europe
to spur auto sales have been successful as the auto registration data
show. So even as retail sales volumes shrink there is a bright spot in
the retail sector even if it is one aided by government actions. It is
always good to see that when given an incentive the consumer can and
does respond &#8211; that is not always the case. 
 

Underlying trends are improving - The PMI
index from Markit on the service sector shows some improvement in the
service sector but not much. Services has improved to a reading of
44.82 in may then they slipped to 44.65 in June and in July they have
risen to 45.69. German showed a rather sharp rise in July along with
Italy while France has back-slipped in July along with Spain. The UK,
an EU member not an EMU member, has just posted its third reading in a
row above 50 for services and is the only large EU country showing
service sector expansion. 
 

 Trends that matter are more favorable -
Since most of the jobs are in services and since jobs determine
spending we can be encouraged about prospects for retail sales progress
from these developments. Retail sales remain the back bone of GDP
growth. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Euro Area Retail Sales Volume </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area Total</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.2%</td>
<td>-2.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Beverages, Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="even">
<td colspan="7">Registrations:</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicle Registration</td>
<td>6.4%</td>
<td>2.3%</td>
<td>6.3%</td>
<td>79.6%</td>
<td>45.1%</td>
<td>10.6%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">Non-Food Country Detail:
Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-1.8%</td>
<td>-1.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-5.5%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK(EU)</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>0.8%</td>
<td>4.0%</td>
<td>1.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

Sales fall -Retail sales fell in the Zone in June. While the growth rat of sales is not decaying further, retail sales volumes have been dropping at a pace of -2.5% to -2.2% over the past twelve months. The year-over-year pace for [...]

EMU Retail and Auto Sales: the Good and the Ugly

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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Winnie Tapasanun

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Industrial production (IP) rose a more-than-expected 0.4% m/m in December following a 0.4% rise in November (+0.2% initially) and a 0.3% decline in October (-0.1% previously), data from the Federal Reserve Board showed. December marked the third m/m gain in four months. A 0.1% m/m December increase had been expected in the Action Economics Forecast Survey. The year-on-year growth rate slowed to 2.0% in December, the lowest since September, from 2.5% in November; this compared with a 0.3% y/y decline in December 2024. The December IP index at 102.3 was 3.1% above a low of 99.2 in January 2024. IP rose 0.2% q/q in Q4 2025 after a 0.6% q/q gain in Q3 2025, increasing at a 0.7% annualized rate following a 2.3% Q3 annualized pace. In 2025, IP rose 1.3% after declines of 0.7% in 2024 and 0.2% in 2023.

By **industry groups**, manufacturing production grew 0.2% (2.0% y/y) in December, up for the third time in four months, following a 0.3% increase in November (0.0% initially) and a 0.6% drop in October (-0.4% previously). Durable goods production edged up 0.1% (3.1% y/y) in December, the first m/m increase since September, after a 0.1% downtick in November. Within durables, the following categories rose m/m in December, including output rises of 2.4% (3.5% y/y) in primary metals, 1.7% (1.3% y/y) in electrical equipment, appliances & components, 1.5% (17.2% y/y) in aerospace & miscellaneous transportation equipment, 0.8% (-2.2% y/y) in furniture & related products, 0.2% (4.8% y/y) in machinery, and 0.1% (7.4% y/y) in computer & electronic products. Notably, aircraft & parts production climbed 2.1% (30.0% y/y), the third m/m increase in four months, reversing a 2.1% November drop. To the downside, the following durable goods categories fell m/m in December, including drops of 2.3% (-5.5% y/y) in wood products, 1.1% (-2.8% y/y) in motor vehicles & parts, 1.1% (-1.0% y/y) in nonmetallic mineral products, 0.1% (+2.6% y/y) in fabricated metal products, and 0.1% (-3.7% y/y) in miscellaneous durables goods.

Nondurable goods production increased 0.3% (1.0% y/y) in December, the third m/m gain in four months, after a 0.8% rebound in November. The December increase reflected m/m output rises of 1.8% (2.1% y/y) in petroleum & coal products, 0.5% (1.9% y/y) in food, beverages & tobacco, and 0.3% (-0.2% y/y) in plastics & rubber products. In contrast, the following nondurable goods categories declined m/m in December, including output drops of 1.3% (-0.8% y/y) in textiles & product mills, 1.1% (-0.5% y/y) in apparel & leather goods, 0.3% (-3.1% y/y) in paper, 0.3% (-3.4% y/y) in printing & related support activities, and 0.1% (+1.6% y/y) in chemicals.

Utilities output recovered 2.6% (2.3% y/y) in December, the third m/m rise in four months, following a 0.3% decline in November (-0.4% initially), reflecting a 1.2% rebound (1.3% y/y) in electric utilities output and a 12.0% jump (8.7% y/y) in natural gas utilities output. Mining activity, however, fell 0.7% (+1.7% y/y), the third m/m slide in four months, after an unrevised 1.7% November gain.

By **market groups**, business equipment output advanced 0.8% (10.1% y/y) in December, up for the third time in four months, after a 0.3% increase in November. Consumer goods output rose 0.7% (0.7% y/y) after a 0.7% November rebound, reflecting a 0.7% decline (-3.5% y/y) in durable consumer goods and a 1.1% gain (1.8% y/y) in nondurable consumer goods. Materials production grew 0.2% (1.7% y/y), the third m/m increase in four months, after a 0.5% November rise. In contrast, construction supplies production fell 0.3% (+1.3% y/y) in December, the second m/m fall in three months, reversing a 0.3% increase in November.

In **special classifications**, factory output of selected high-tech industries rose 0.7% (10.9% y/y) in December, the third successive m/m rise, following a downwardly revised 0.5% gain in November (+1.1% initially). Manufacturing production excluding selected high-tech industries grew 0.2% (1.7% y/y) in December, the third m/m gain in four months, after a 0.3% increase in November. Meanwhile, manufacturing production excluding selected high-tech and motor vehicles & parts rose 0.3% (2.1% y/y), also up for the third time in four months, after a 0.4% November increase.

Capacity utilization rose to 76.3% in December, the highest since July, from 76.1% in November (76.0% initially). The Action Economics Forecast Survey forecasted 76.0%. The December reading was 3.2 percentage points below its long-run (1972–2024) average. Manufacturing capacity utilization held at 75.6% in December and November (75.4% previously); the December rate was 2.6 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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260116U23.jpg

- December IP +0.4% (+2.0% y/y), third m/m rise in four months, led by a 2.6% gain in utilities.
- Manufacturing +0.2% (+2.0% y/y), w/ durables +0.1% and nondurables +0.3%.
- Selected high-tech +0.7%, third consecutive m/m rise; motor vehicles -1.1%, fourth straight m/m fall.
- Mining -0.7%, third m/m decline in four months.
- Key categories in market groups mostly increase.
- Capacity utilization at a five-month-high 76.3%; mfg. capacity utilization steady at 75.6%.

U.S. Industrial Production Increases in December on Utilities Rebound

260116E.jpg

The European Monetary Union has concluded a year of weak-to-moderate growth with inflation largely toeing the line. As always, the inflation picture is more complicated than a simple statement. When we look at inflation, we look at the headline, we look at the core, to make sure that the volatile food & energy elements aren't dominating the index, and then we look across some of the main participants to see if the trend for inflation is shared broadly across the largest countries in the Monetary Union. When we apply those kinds of standards, the grading for the year is reduced. However, based on the headline alone, it was an excellent year for the ECB.

**Headline Inflation in 2025**
Headline inflation in 2025 rose by 2%, exactly on the target of the European Central Bank. It rose over six months at a 2% annual rate and then concluded the year over the last three months, rising at a 1.6% annual rate with some margin below the target set by the central bank itself.

**Country Headline Inflation Trends**
On a country basis, the performance is not nearly as good. While year-on-year results look pretty good, with Germany at 2%, France at 0.7% and Italy at 1.3%, Spain comes in at 3.1%. So the three largest monetary union economies come in at or below 2% with Spain as a rogue observation. When we look further at the sequence of inflation within the year, we see Germany at 2% over 12 months, rising to 3.1% over 6 months, rising further to 4% over 3 months. Inflation is accelerating at the end of the year even as Germany hits the target! This is something to keep an eye on. For France, the inflation rate also accelerates slightly but stays below the bar of 2% over three months, six months, and 12 months. For Italy, inflation is decelerating from 1.3% over 12 months to -0.3% over six months, and then inflation in Italy is contracting at a 1.9% annual rate over three months. Spanish inflation shows clear trouble with a 3.1% 12-month pace, rising to 4.6% at an annual rate over six months, and rising further to 5.9% at an annual rate over three months.

**Core Inflation**
For core inflation, the Monetary Union’s consolidated numbers are not yet compiled. However, for the four largest economies, we do have core or ex-energy inflation. For Germany, it's inflation excluding energy. On that basis, German inflation is 2.2% over 12 months, it rises to 2.7% over six months, then falls back to a 2% annual pace over three months All-in-all not a bad performance. For France, core inflation is below 2% over 12 months, six months, and three months. In Italy, once again, we see inflation decelerating: Italian inflation is 2% over 12 months - right on the ECB target. It falls to a 1.3% annual rate over six months and then falls further to a 0.3% annual rate over three months. For Spain, the core has another very difficult story for the Monetary Union. Inflation is 2.7% over 12 months, it rises to 3.1% over six months and stays at an annual rate of about 3% over three months. This is too high and it looks stubborn, particularly because it is the core.

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**Across the Big Four**
On balance, what we see is that the ECB grades-out well, based on headline inflation and based on its sequential performance for the European economic union as a whole. But large countries, show headline inflation building some steam particularly in the largest economy, Germany, and in Spain, the smallest of the BIG-4 economies. Inflation is once again mixed in the Monetary Union with German and Spanish inflation too high and with French and Italian inflation running either at or below the 2% mark and with Italy showing a tendency towards weaker prices for both the headline and the core. The change in prices over these various periods shows inflation gets the most help from oil prices over 12 months where Brent, measured in euros, falls by 22.6%; over six months Brent prices fall by 37% at an annual rate; and over three months Brent oil prices are unchanged, so that the headline isn't getting help at all from oil prices except through lagged effects.

**Summing Up**
Meanwhile, there are some signs of stronger growth taking root in Europe, especially in Germany with better industrial production being logged and with German industrial production looking significantly stronger than the PMI data, suggesting that perhaps PMI data are missing something about the rebound that is developing. Nonetheless, it was a good year for inflation and the ECB; however, it doesn't exactly end the year in the catbird’s seat. On the other hand, it does not end the year behind the curve. There are scattered pressures and needs among member countries which always makes monetary policy difficult. When some countries need higher interest rates and others need lower interest rates, the ECB is in a difficult spot. Clearly, Spain and Germany are experiencing different phenomenon than France and Italy. That could be the policy challenge for the year ahead.

Europe

Big Four Inflation in EMU 2025-Final

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.

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**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.

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**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.

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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).

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Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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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

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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.