Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728e.jpg" width="353">
According to the Conference Board, consumer confidence fell slightly during July for the second consecutive monthly decline. Despite these shortfalls, however, confidence remained up sharply from the February low. The Conference Board data can be found in Haver&#39;s CBDB database.
During the last ten years there has been an 86% correlation between the level of consumer confidence and the y/y change in real consumer spending.
Consumers&#39; assessment of the current economic conditions fell the hardest last month and remained near the recent low. It remained off by almost two-thirds from a year earlier. Jobs were seen as hard to get by an increased 48.1% of respondents and jobs were seen as plentiful by 3.6% which was near the series&#39; low. Business conditions were seen as good by just 9.1% and that was near the 1991 low. Consumers who thought business conditions were bad rose slightly to 46.3%, still near the highest since 1983.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728f.jpg" width="353">
The decline in the expectations component of confidence lagged just slightly with a 5.3% m/m decline. Still, the index remained near the highest level since late 2007. The percentage of respondents expecting business conditions to improve fell to 18.0% though that remained near the highest level since 2004. A much reduced 18.9% expected conditions to worsen. Only 15.0% of respondents expected any economic improvement to generate more jobs, more than double the percentage at the recent low.
Expectations for the inflation rate in twelve months fell back to 5.5%. That&#39;s down from last year&#39;s high of 7.7%. Interest rates in twelve months were expected by 51.9% to be higher while 16.6% expected rates to fall. A greatly increased 31.5% of respondents expected stock prices to rise.
Consumers certainly plan to manage their spending plans cautiously. Just 2.1% plan to buy a home during the next six months while 25.4% plan to buy a major appliance. That&#39;s versus 30.9% who did back in 2007. Only 4.5% plan to buy an automobile, versus 6.0% in 2007.
The Federal Reserve Board announced that it will soon begin a statistical study of household finances to update data collected at the outset of the economic downturn that began in late 2007.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Conference Board &nbsp;(SA, 1985=100)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence Index</td>
<td>46.6</td>
<td>49.3</td>
<td>-10.2</td>
<td>57.9</td>
<td>103.4</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Present Situation</td>
<td>23.4</td>
<td>25.0</td>
<td>-64.4</td>
<td>69.9</td>
<td>128.8</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>62.0</td>
<td>65.5</td>
<td>45.2</td>
<td>50.0</td>
<td>86.4</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body>
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According to the Conference Board, consumer confidence fell slightly during July for the second consecutive monthly decline. Despite these shortfalls, however, confidence remained up sharply from the February low. The Conference Board [...]

U.S. Consumer Confidence Slips For A Second Month

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728d.jpg" align="left" border="0" height="265" width="353">
Confidence is UP! Consumer confidence in
Italy is at its highest since November 2007. Still since January 1992
the reading stand is at the 40th to 41st percentile of its range and in
terms of the ranking among all previous observations. This it is some
10 percentage points below its middle position in terms of range or
ranking percentiles. Ranking percentiles position a reading in a queue
of values while range percentiles position the reading in a range
bounded by the high and low readings. Both readings have some merit. 
 

Past 12 month - Rating the past twelve
months, the overall situation is rates as a -68 which puts it in the
55th percentile in terms of rankings. Prices trends at -48 are the
worst in this period by either range of ranking methods. 
 

The expected future - Looking ahead the
next twelve months overall situation is assigned a value of +2 leaving
it in the top 92nd percentile by ranking, but only the 65th percentile
according to the position of the reading in its range. Obviously among
all rankings this reading is relatively strong but there must be a
strong reading that lies at a much, much higher level to depress the
range reading so much. That would be a reading from June 2001, as from
April to Sept of 2001 readings on this score soared then dipped back to
a more normal range. Unemployment readings are still elevated at a +8
reading. That leaves the reading in the moderated 55th percentile by
range but at a much higher 94th percentile by ranking. Those two
readings tell us that the unemployment reading is rarely higher than
this but it has spiked much higher in the past. The response to the
household budget situation remains weak by any measure at a +1. 
 

Current/Future comparisons - Households
assess their current and future situations as about to be much improved
in the next twelve months with their range and ranking percentile
readings rising from a bottom quarter or third position currently to a
50% to two-thirds position in the outlook. Current savings are
considered high, future savings are expected to be low. Similarly,
major purchase environment was construed as middling over the past
12-months abut is expected to improve sharply to top 4% or better in
the future. 
 

Summing up - On balance these responses by
Italian households show a clear disappointment with past trends. In
that respect the expected future improvement is harder to read. Some of
the future readings are more middling some are strong. It is still not
clear if consumers simply are optimistic that things will improve from
the dregs of the last 12 months or if things are expected to improved
to true strong readings. As current conditions improve we will monitor
these future readings and see if they continue to show the strength
that some of the categories currently exhibit. If much better
conditions are expected then as the current readings improve the future
readings should remain high. If the future is simply expected to be
&#8216;normal&#8217; as the current situation normalizes the expectations readings
in the survey will recede to a region of boredom. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jul-09</th>
<th scope="col">Jun-09</th>
<th scope="col">May-09</th>
<th scope="col">Apr-09</th>
<th scope="col">Percentile</th>
<th scope="col">Rank</th>
<th scope="col">percentile</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>107.5</td>
<td>105.4</td>
<td>104.9</td>
<td>104.9</td>
<td>41.3</td>
<td>126</td>
<td>40.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Last 12 months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">OVERALL SITUATION</td>
<td>-68</td>
<td>-68</td>
<td>-73</td>
<td>-74</td>
<td>63.2</td>
<td>93</td>
<td>55.9%</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>-48</td>
<td>-40.5</td>
<td>-45</td>
<td>-43</td>
<td>0.0</td>
<td>211</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">OVERALL SITUATION</td>
<td>2</td>
<td>-8</td>
<td>-17</td>
<td>-26</td>
<td>65.1</td>
<td>16</td>
<td>92.4%</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>1.5</td>
<td>8.5</td>
<td>10</td>
<td>9.5</td>
<td>3.1</td>
<td>112</td>
<td>46.9%</td>
</tr>
<tr>
<td class="firstcol">UNEMPLOYMENT</td>
<td>8</td>
<td>15</td>
<td>17</td>
<td>21</td>
<td>55.9</td>
<td>11</td>
<td>94.8%</td>
</tr>
<tr>
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>1</td>
<td>0</td>
<td>5</td>
<td>1</td>
<td>17.0</td>
<td>199</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HOUSEHOLD FIN SITUATION</td>
</tr>
<tr>
<td class="firstcol">Last 12 months</td>
<td>-40</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>32.7</td>
<td>155</td>
<td>26.5%</td>
</tr>
<tr>
<td class="firstcol">Next12 months</td>
<td>-2</td>
<td>-4</td>
<td>-5</td>
<td>-11</td>
<td>67.3</td>
<td>91</td>
<td>56.9%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HOUSEHOLD SAVINGS</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>60</td>
<td>60</td>
<td>59</td>
<td>60</td>
<td>72.7</td>
<td>13</td>
<td>93.8%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>-30</td>
<td>-25</td>
<td>-29</td>
<td>-29</td>
<td>38.3</td>
<td>170</td>
<td>19.4%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">MAJOR
Purchases</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>-40</td>
<td>-39</td>
<td>-43</td>
<td>-41</td>
<td>42.1</td>
<td>99</td>
<td>53.1%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>4</td>
<td>3</td>
<td>1</td>
<td>3</td>
<td>96.8</td>
<td>3</td>
<td>98.6%</td>
</tr>
<tr class="firstcol" colspan="8">
Total number of months: 211
</tr>
</tbody>
</table>
</body></html>

Confidence is UP! Consumer confidence in Italy is at its highest since November 2007. Still since January 1992 the reading stand is at the 40th to 41st percentile of its range and in terms of the ranking among all previous [...]

Italy's Recovery In Confidence Continues... Still A Ways To Go

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728c.jpg" width="353">
Signs that the worst of the downtrend in the U.S. economy may have passed helped stabilize the earlier weakness in the oil market. The pump price for regular gasoline increased last week to an average $2.50 per gallon, though that still was down nineteen cents from last month&#39;s high. The increase added to the eighty cent (55%) rise from the December low. At $1.87 per gallon in the cash market, gasoline prices yesterday continued to rally off the early-July low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Crude oil prices also recovered last week. Light sweet crude oil prices (WTI) increased to $64.99 per barrel, up $3.72 from the low. Yesterday the spot market price for light sweet crude oil recovered further to $68.38 per barrel. Prices had reached a daily high of $72.68 earlier in July.
Natural gas prices rose slightly for the second week. Last week&#39;s average price of $3.49 per mmbtu (-64.8% y/y) was down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu.
Financial Stress: What Is It, How Can It Be Measured, and Why Does It Matter? from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q2hakkio_keeton.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">07/27/09</th>
<th scope="col">07/20/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.50</td>
<td>2.46</td>
<td>-36.7%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>64.99</td>
<td>61.27</td>
<td>-48.5%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Signs that the worst of the downtrend in the U.S. economy may have passed helped stabilize the earlier weakness in the oil market. The pump price for regular gasoline increased last week to an average $2.50 per gallon, though that [...]

Gasoline Prices Stabilize With The Rise In Crude Oil Costs

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728a.jpg" align="right" border="0" height="265" width="353">The
declines
in home prices are moderating. That's the message from May's 0.2%
seasonally adjusted decline in the S&amp;P/Case-Shiller
Home Price Composite Index of twenty metro-markets. The moderation
eased the y/y drop to 17.1% but prices still were
down by nearly one-third since the peak in May 2006. The May decline in
prices was less than the expected 17.9% y/y drop, and not seasonally
adjusted, prices even posted an increase of 0.5% for the month.
The
Case-Shiller index of 20 U.S. cities and their surrounding areas is
value-weighted. A greater index weight is assigned to more expensive
homes and the series dates back only to 2001. The
S&amp;P/Case-Shiller home price series can be found in Haver's USECON
database and the city data highlighted below is in the REGIONAL
database. Here is a <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_063055.pdf">link</a>
to the latest press release from Standard &amp; Poor's. An overview
of the S&amp;P/Case-Shiller home price series can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
pThe
Case-Shiller composite index of home prices in 10 metropolitan
areas, which has a longer history and dates back to 1987, also fell a
lessened 0.2% last month and was down 16.8% year-to-year. This measure
also was down by nearly one-third since the 2006 peak.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728b.jpg" align="left" border="0" height="265" width="353">Less
Weak Regions:&nbsp;&nbsp; Home prices in some areas
of the country have firmed lately though they remain down year-to-year.&nbsp;
In Cleveland, Ohio prices rose for the second month
(-6.2% y/y) and in Dallas prices rose slightly m/m as well (-4.2% y/y).
Prices ticked up 0.3% in Denver (-4.6% y/y).&nbsp; Boston prices
also ticked higher during the month (-7.2% y/y) and in Chicago home
prices rose slightly (-17.5% y/y). In New York prices slipped m/m
(-12.2% y/y) and are off roughly 20% from their 2006 peak. In
Charlotte, North Carolina prices also continued down but just
moderately (-10.1% y/y.).Weakest Regions: Home
prices in Phoenix, Nevada were quite weak and fell another 1.7% m/m
(-34.2% y/y. Home prices in Las Vegas, Nevada continued their rapid
rate of decline with a 3.1% m/m drop (-32.0% y/y, and also were down by
roughly one-half from their peak. Home prices in Miami again fell a
hard 1.1% (-25.1% y/y while home prices in Los Angeles continued to
fall sharply (-19.8% y/y). In Tampa, the rate of monthly price decline
slowed slightly to just 0.5% but prices still were off 20.8% y/y. In
Detroit, the monthly rate of price decline also eased considerably
(-24.5% y/y) but prices were off by early one-half from the
peak.&nbsp;In San Francisco prices rose 0.7%, but remained off
26.1% y/y.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728g.jpg" align="right" border="0" height="265" width="353">Released
last week was the
House Price Index (HPH) from the
Federal Housing and Finance Agency (FHFA). The index rose 0.9% from
April for just the third monthly increase since 2005. Year-to-year,
that was enough to lessen the decline in the nationwide average of home
prices to 5.6% from its worst reading of -8.9% last November. The FHFA
uses data provided by Fannie Mae and Freddie Mac. The series differs
from Case-Shiller in that it is not value-weighted, it covers a greater
area and it has a shorter history.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">May</th>
<th scope="col">April</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">20 City Composite
Index</td>
<td>140.05</td>
<td>140.28</td>
<td>-17.1%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>


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The declines in home prices are moderating. That's the message from May's 0.2% seasonally adjusted decline in the S&P/Case-Shiller Home Price Composite Index of twenty metro-markets. The moderation eased the y/y drop to 17.1% but [...]

Case-Shiller Home Price Index Decline Eases

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728a.jpg" align="right" border="0" height="265" width="353">The
declines
in home prices are moderating. That's the message from May's 0.2%
seasonally adjusted decline in the S&amp;P/Case-Shiller
Home Price Composite Index of twenty metro-markets. The moderation
eased the y/y drop to 17.1% but prices still were
down by nearly one-third since the peak in May 2006. The May decline in
prices was less than the expected 17.9% y/y drop, and not seasonally
adjusted, prices even posted an increase of 0.5% for the month.
The
Case-Shiller index of 20 U.S. cities and their surrounding areas is
value-weighted. A greater index weight is assigned to more expensive
homes and the series dates back only to 2001. The
S&amp;P/Case-Shiller home price series can be found in Haver's USECON
database and the city data highlighted below is in the REGIONAL
database. Here is a <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_063055.pdf">link</a>
to the latest press release from Standard &amp; Poor's. An overview
of the S&amp;P/Case-Shiller home price series can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
pThe
Case-Shiller composite index of home prices in 10 metropolitan
areas, which has a longer history and dates back to 1987, also fell a
lessened 0.2% last month and was down 16.8% year-to-year. This measure
also was down by nearly one-third since the 2006 peak.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728b.jpg" align="left" border="0" height="265" width="353">Less
Weak Regions:&nbsp;&nbsp; Home prices in some areas
of the country have firmed lately though they remain down year-to-year.&nbsp;
In Cleveland, Ohio prices rose for the second month
(-6.2% y/y) and in Dallas prices rose slightly m/m as well (-4.2% y/y).
Prices ticked up 0.3% in Denver (-4.6% y/y).&nbsp; Boston prices
also ticked higher during the month (-7.2% y/y) and in Chicago home
prices rose slightly (-17.5% y/y). In New York prices slipped m/m
(-12.2% y/y) and are off roughly 20% from their 2006 peak. In
Charlotte, North Carolina prices also continued down but just
moderately (-10.1% y/y.).
Weakest Regions: Home
prices in Phoenix, Nevada were quite weak and fell another 1.7% m/m
(-34.2% y/y. Home prices in Las Vegas, Nevada continued their rapid
rate of decline with a 3.1% m/m drop (-32.0% y/y, and also were down by
roughly one-half from their peak. Home prices in Miami again fell a
hard 1.1% (-25.1% y/y while home prices in Los Angeles continued to
fall sharply (-19.8% y/y). In Tampa, the rate of monthly price decline
slowed slightly to just 0.5% but prices still were off 20.8% y/y. In
Detroit, the monthly rate of price decline also eased considerably
(-24.5% y/y) but prices were off by early one-half from the
peak.&nbsp;In San Francisco prices rose 0.7%, but remained off
26.1% y/y.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728g.jpg" align="right" border="0" height="265" width="353">Released
last week was the
House Price Index (HPH) from the
Federal Housing and Finance Agency (FHFA). The index rose 0.9% from
April for just the third monthly increase since 2005. Year-to-year,
that was enough to lessen the decline in the nationwide average of home
prices to 5.6% from its worst reading of -8.9% last November. The FHFA
uses data provided by Fannie Mae and Freddie Mac. The series differs
from Case-Shiller in that it is not value-weighted, it covers a greater
area and it has a shorter history.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">May</th>
<th scope="col">April</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">20 City Composite
Index</td>
<td>140.05</td>
<td>140.28</td>
<td>-17.1%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>


Gasoline Prices Stabilize With The
Rise In Crude Oil Costs 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 28, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728c.jpg" align="left" border="0" height="265" width="353">
Signs that the worst of the downtrend in the U.S. economy may
have passed helped stabilize the earlier weakness in the oil market.
The pump price for regular gasoline increased last
week to an average $2.50 per gallon, though that still was down
nineteen cents from last month's high. The increase added to the eighty
cent (55%) rise from the December low. At $1.87 per gallon in the cash
market, gasoline prices yesterday continued to rally off the early-July
low of $1.60. The figures are reported by the U.S. Department of Energy
and can be found in Haver's WEEKLY &amp; DAILY databases.
Crude oil prices also recovered last week.
Light sweet crude oil prices (WTI) increased to $64.99 per barrel, up
$3.72 from the low. Yesterday the spot market price for light sweet
crude oil recovered further to $68.38 per barrel. Prices had reached a
daily high of $72.68 earlier in July.
Natural gas prices rose slightly for the second week. Last
week's average price of $3.49 per mmbtu (-64.8% y/y) was down by
three-quarters from the high reached in early-July of last year of
$13.19/mmbtu.
Financial Stress: What Is It, How Can It Be
Measured, and Why Does It Matter? from the Federal
Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q2hakkio_keeton.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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">07/27/09</th>
<th scope="col">07/20/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.50</td>
<td>2.46</td>
<td>-36.7%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>64.99</td>
<td>61.27</td>
<td>-48.5%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
Italy's Recovery In Confidence
Continues... Still A Ways To Go 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 28, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728d.jpg" align="left" border="0" height="265" width="353">
Confidence is UP! Consumer confidence in
Italy is at its highest since November 2007. Still since January 1992
the reading stand is at the 40th to 41st percentile of its range and in
terms of the ranking among all previous observations. This it is some
10 percentage points below its middle position in terms of range or
ranking percentiles. Ranking percentiles position a reading in a queue
of values while range percentiles position the reading in a range
bounded by the high and low readings. Both readings have some merit. 
 

Past 12 month - Rating the past twelve
months, the overall situation is rates as a -68 which puts it in the
55th percentile in terms of rankings. Prices trends at -48 are the
worst in this period by either range of ranking methods. 
 

The expected future - Looking ahead the
next twelve months overall situation is assigned a value of +2 leaving
it in the top 92nd percentile by ranking, but only the 65th percentile
according to the position of the reading in its range. Obviously among
all rankings this reading is relatively strong but there must be a
strong reading that lies at a much, much higher level to depress the
range reading so much. That would be a reading from June 2001, as from
April to Sept of 2001 readings on this score soared then dipped back to
a more normal range. Unemployment readings are still elevated at a +8
reading. That leaves the reading in the moderated 55th percentile by
range but at a much higher 94th percentile by ranking. Those two
readings tell us that the unemployment reading is rarely higher than
this but it has spiked much higher in the past. The response to the
household budget situation remains weak by any measure at a +1. 
 

Current/Future comparisons - Households
assess their current and future situations as about to be much improved
in the next twelve months with their range and ranking percentile
readings rising from a bottom quarter or third position currently to a
50% to two-thirds position in the outlook. Current savings are
considered high, future savings are expected to be low. Similarly,
major purchase environment was construed as middling over the past
12-months abut is expected to improve sharply to top 4% or better in
the future. 
 

Summing up - On balance these responses by
Italian households show a clear disappointment with past trends. In
that respect the expected future improvement is harder to read. Some of
the future readings are more middling some are strong. It is still not
clear if consumers simply are optimistic that things will improve from
the dregs of the last 12 months or if things are expected to improved
to true strong readings. As current conditions improve we will monitor
these future readings and see if they continue to show the strength
that some of the categories currently exhibit. If much better
conditions are expected then as the current readings improve the future
readings should remain high. If the future is simply expected to be
&#8216;normal&#8217; as the current situation normalizes the expectations readings
in the survey will recede to a region of boredom. 


Total number of months: 211
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jul-09</th>
<th scope="col">Jun-09</th>
<th scope="col">May-09</th>
<th scope="col">Apr-09</th>
<th scope="col">Percentile</th>
<th scope="col">Rank</th>
<th scope="col">percentile</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>107.5</td>
<td>105.4</td>
<td>104.9</td>
<td>104.9</td>
<td>41.3</td>
<td>126</td>
<td>40.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Last 12 months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">OVERALL SITUATION</td>
<td>-68</td>
<td>-68</td>
<td>-73</td>
<td>-74</td>
<td>63.2</td>
<td>93</td>
<td>55.9%</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>-48</td>
<td>-40.5</td>
<td>-45</td>
<td>-43</td>
<td>0.0</td>
<td>211</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">OVERALL SITUATION</td>
<td>2</td>
<td>-8</td>
<td>-17</td>
<td>-26</td>
<td>65.1</td>
<td>16</td>
<td>92.4%</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>1.5</td>
<td>8.5</td>
<td>10</td>
<td>9.5</td>
<td>3.1</td>
<td>112</td>
<td>46.9%</td>
</tr>
<tr>
<td class="firstcol">UNEMPLOYMENT</td>
<td>8</td>
<td>15</td>
<td>17</td>
<td>21</td>
<td>55.9</td>
<td>11</td>
<td>94.8%</td>
</tr>
<tr>
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>1</td>
<td>0</td>
<td>5</td>
<td>1</td>
<td>17.0</td>
<td>199</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HOUSEHOLD
FIN SITUATION</td>
</tr>
<tr>
<td class="firstcol">Last 12 months</td>
<td>-40</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>32.7</td>
<td>155</td>
<td>26.5%</td>
</tr>
<tr>
<td class="firstcol">Next12 months</td>
<td>-2</td>
<td>-4</td>
<td>-5</td>
<td>-11</td>
<td>67.3</td>
<td>91</td>
<td>56.9%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HOUSEHOLD
SAVINGS</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>60</td>
<td>60</td>
<td>59</td>
<td>60</td>
<td>72.7</td>
<td>13</td>
<td>93.8%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>-30</td>
<td>-25</td>
<td>-29</td>
<td>-29</td>
<td>38.3</td>
<td>170</td>
<td>19.4%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">MAJOR
Purchases</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>-40</td>
<td>-39</td>
<td>-43</td>
<td>-41</td>
<td>42.1</td>
<td>99</td>
<td>53.1%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>4</td>
<td>3</td>
<td>1</td>
<td>3</td>
<td>96.8</td>
<td>3</td>
<td>98.6%</td>
</tr>
<tr class="firstcol" colspan="8">
</tr>
</tbody>
</table>
</body></html>

Case-Shiller Home Price IndexDecline Eases

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090727c.jpg" align="right" border="0" height="265" width="353">BANKS,
MONEY, CREDIT- A number of reports are in the news today
about banking sector issues in lending. With the EMU money and credit
measures just out it&#8217;s an appropriate time to survey the background for
lending. The German Zew survey of lending institutions in Germany finds
that larger companies are having the harder time getting credit. Mutual
and cooperative style banks in Germany have been feeding credit more
easily to smaller institutions there. 

Outside EMU liquidity is expanding - The
table and charts at the top of this presentation reveal several the
trends. While UK money supply has boomed and busted, its rate of
monetary expansion remains the highest among this group of countries
and is still barely below its previous recent peak pace in 2006. The US
M2 pace spurted in 2008 and has since been locked in an erratic
declining growth rate phase. Japan&#8217;s money growth hit its low point in
2006 and has since been in a very gradual accelerating trend that
recently seems to have flattened out its growth. Japan is still the
weakest trend, however.
Special circumstances- In the UK there is a
push on to funnel credit to smaller businesses and that seems to be
working. In Japan there may be demand side pressures at work as the
corporate services price index fell sharply hinting at another round of
deflation in Japan. If that takes hold lending in Japan will suffer but
mostly from demand side weakness. 
ECB is tighter: Europe shows money supply
growth peaking in later 2007/early 2008 then steadily decelerating.
This is for a period when the rest of the countries were pushing out
liquidity at a faster pace. Despite its rate cuts, ECB liquidity in the
hands of the public has been consistently squeezed. Europe has its
lowest money supply growth since 2004, but it was last persistently
weaker than this back in 2001. Despite all its rhetoric about easing
and easy money, the ECB has been tightening its monetary grip in
quantity terms. 
Various horizons: The sequential growth
rates for money supply and for credit (in EMU) in the table above make
the point. Only EMU has one year money and credit growth so much weaker
than the annual rates over two years and three years. For the US, UK
and Japan over the recent one year money growth is stronger compared to
those earlier horizons. But over six months and three months the US and
the UK are seeing weaker money growth than over the longer the periods
as is EMU (same goes for credit in EMU). Only Japan is showing stronger
money growth more recently.
Real balances: Real balances turn the
tables on many of these trends. In terms of real balances Europe&#8217;s
growth in money is as strong - or stronger - than in the US and the UK
over the less than one year horizons. Japan&#8217;s growth is the strongest
of all over three-and &#8211;six months. But the better growth in real
balances in Europe is not having the desired impact on credit as
residential &#8216;real&#8217; credit growth has slowed to a crawl while overall
loan growth is shrinking in real terms. 
Risks still loom: Despite the fact that
some lending spreads are back to more of a normal configuration the
banking sector is having lingering troubles. We know that housing
credit issues like foreclosures usually lag the cycle. Traditionally
banks are still involved in dealing with credit hangovers even as the
economy improves. But in this instance the degree of economic and
credit improvement is not even in train. We are talking about less
weakness and better economic signals not of economic growth- at least
not yet. While there are some signs of economic and financial
stabilization the credit quality and lending scene has continued to
deteriorate. So even as we get more optimistic over the results of
recent economic indictors we must remain cognizant- as the central
banks do &#8211; that the banking sector is still in the midst of its big
chill. Financial stocks may have recovered from their deathbed
valuations and a few banks may have posted large corporate earnings for
a quarter, but for the sector at large, substantial risks still loom
and some cases the adverse pressures are getting worse.
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8">Look at Global and Euro
Liquidity Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<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="grey3">
<td class="firstcol">&nbsp;</td>
<td>&#8364;&#8364;-Supply M2</td>
<td>Credit: Resid</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="grey2">
<td class="firstcol">3-MO</td>
<td>2.9%</td>
<td>1.0%</td>
<td>0.0%</td>
<td>1.7%</td>
<td>-3.7%</td>
<td>3.3%</td>
<td>355.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-MO</td>
<td>2.9%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>5.4%</td>
<td>6.1%</td>
<td>3.7%</td>
<td>162.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-MO</td>
<td>5.8%</td>
<td>4.1%</td>
<td>1.8%</td>
<td>9.0%</td>
<td>13.1%</td>
<td>2.5%</td>
<td>-47.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">2Yr</td>
<td>8.1%</td>
<td>7.7%</td>
<td>5.8%</td>
<td>7.6%</td>
<td>12.3%</td>
<td>2.3%</td>
<td>1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">3Yr</td>
<td>8.7%</td>
<td>8.9%</td>
<td>7.4%</td>
<td>7.0%</td>
<td>12.5%</td>
<td>2.1%</td>
<td>-0.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">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>0.2%</td>
<td>-0.9%</td>
<td>-1.6%</td>
<td>-5.8%</td>
<td>5.4%</td>
<td>340.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-MO</td>
<td>2.5%</td>
<td>0.9%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>3.7%</td>
<td>5.4%</td>
<td>155.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-MO</td>
<td>5.9%</td>
<td>4.2%</td>
<td>2.0%</td>
<td>10.3%</td>
<td>11.1%</td>
<td>4.1%</td>
<td>-47.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">2Yr</td>
<td>6.1%</td>
<td>5.7%</td>
<td>3.8%</td>
<td>5.8%</td>
<td>9.2%</td>
<td>2.1%</td>
<td>0.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">3Yr</td>
<td>6.7%</td>
<td>6.9%</td>
<td>5.4%</td>
<td>4.9%</td>
<td>9.5%</td>
<td>2.1%</td>
<td>-2.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Japan CPI for June is an estimate;
it uses the May value to produce the real balance figure.</td>
</tr>
</tbody>
</table>

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BANKS, MONEY, CREDIT- A number of reports are in the news today about banking sector issues in lending. With the EMU money and credit measures just out it’s an appropriate time to survey the background for lending. The German Zew [...]

Tight Money Isn’t Funny: EMU Money Growth Continues To Decelerate

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090727a.jpg">
Home buyers know a good deal when they see it, and looks like that&#39;s what buoyed sales of new homes last month. June sales of new single-family homes increased 11.0% from May to 384,000 after two months of modest increase. Though the latest sales level was the highest since last November, sales remained down by nearly one-quarter from last June and by nearly three-quarters since the 2005 peak. June sales outpaced Consensus expectations for sales of 352,000 units. The new home sales figures are available in Haver&#39;s USECON database.
The firming of home sales last month came as the median sales price fell 5.8% from May to $206,200. That decline reversed virtually all of the gains during the prior two months and left prices down 21.5% from their 2007 high.
The increase in home sales last month was led by a 43.1% increase in sales in the Midwest. That came on top of a firm gain during May. Sales in the Northeast also jumped. The 29.2% m/m increase brought them to the highest level this year. In the West sales also were quite strong and they rose 22.6% to their highest since July of last year. Sales in the South did not share the good news. They fell 5.3% to near the record low.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090727b.jpg">
Price weakness again helped move the inventory of unsold homes which is off by one-half since the peak during 2006. In each of the country&#39;s regions, inventories are down by roughly one-third just during the last year.Moreover, the month&#39;s supply of new homes for sale also has dropped. Despite the low sales rate, in June the months&#39; supply of inventories fell to its lowest level since last July of 2007.
IMF Plans to Inject $250 Billion Into Global Economy from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/POL072009A.htm">here.</a>
The current economy and the outlook from the Federal Reserve Bank of San Francisco is available <a href="http:/www.frbsf.org/publications/economics/fedviews/index.html">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</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">Total Sales (SAAR, 000s)</td>
<td>384</td>
<td>346</td>
<td>-21.3%</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>31</td>
<td>24</td>
<td>&nbsp;-11.4</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>73</td>
<td>51</td>
<td>5.8</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>177</td>
<td>187</td>
<td>-34.4</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>103</td>
<td>84</td>
<td>-9.6</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>206,200</td>
<td>219,000</td>
<td>-3.4</td>
<td>230,408</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>
</body>
</html>

Home buyers know a good deal when they see it, and looks like that's what buoyed sales of new homes last month. June sales of new single-family homes increased 11.0% from May to 384,000 after two months of modest increase. Though the [...]

U.S. New Home Sales Gain As Prices Fall, Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090727a.jpg" align="left" border="0">
Home buyers know a good deal when they see it, and looks like
that's what buoyed sales of new homes last month. June sales of new
single-family homes increased 11.0% from May to 384,000 after two
months of modest increase. Though the latest sales level was the
highest since last November, sales remained down by nearly one-quarter
from last June and by nearly three-quarters since the 2005 peak. June
sales outpaced Consensus expectations for sales of 352,000 units. The
new home sales figures are available in Haver's USECON
database.
The firming of home sales last month came as the median sales
price fell 5.8% from May to $206,200. That decline reversed virtually
all of the gains during the prior two months and left prices down 21.5%
from their 2007 high.
The increase in home sales last month was led by a 43.1%
increase in sales in the Midwest. That came on top of a firm gain
during May. Sales in the Northeast also jumped. The 29.2% m/m increase
brought them to the highest level this year. In the West sales also
were quite strong and they rose 22.6% to their highest since July of
last year. Sales in the South did not share the good news. They fell
5.3% to near the record low.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090727b.jpg" align="right" border="0">
Price weakness again helped move the inventory of unsold homes
which is off by one-half since the peak during 2006. In each of the
country's regions, inventories are down by roughly one-third just
during the last year.Moreover, the month's supply of new homes for sale
also has dropped. Despite the low sales rate, in June the months'
supply of inventories fell to its lowest level since last July of 2007.
IMF Plans to Inject $250 Billion Into Global Economy
from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/POL072009A.htm">here.</a>
The current economy and the outlook from
the Federal Reserve Bank of San Francisco is available <a href="http:/www.frbsf.org/publications/economics/fedviews/index.html">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">US
New Homes</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">Total Sales
(SAAR, 000s)</td>
<td>384</td>
<td>346</td>
<td>-21.3%</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>31</td>
<td>24</td>
<td>&nbsp;-11.4</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>73</td>
<td>51</td>
<td>5.8</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>177</td>
<td>187</td>
<td>-34.4</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>103</td>
<td>84</td>
<td>-9.6</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price
(NSA, $)</td>
<td>206,200</td>
<td>219,000</td>
<td>-3.4</td>
<td>230,408</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>
Tight Money Isn&#8217;t Funny: EMU Money
Growth Continues To Decelerate 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 27, 2009

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090727c.jpg" align="right" border="0" height="265" width="353">BANKS,
MONEY, CREDIT- A number of reports are in the news today
about banking sector issues in lending. With the EMU money and credit
measures just out it&#8217;s an appropriate time to survey the background for
lending. The German Zew survey of lending institutions in Germany finds
that larger companies are having the harder time getting credit. Mutual
and cooperative style banks in Germany have been feeding credit more
easily to smaller institutions there. 

Outside EMU liquidity is expanding - The
table and charts at the top of this presentation reveal several the
trends. While UK money supply has boomed and busted, its rate of
monetary expansion remains the highest among this group of countries
and is still barely below its previous recent peak pace in 2006. The US
M2 pace spurted in 2008 and has since been locked in an erratic
declining growth rate phase. Japan&#8217;s money growth hit its low point in
2006 and has since been in a very gradual accelerating trend that
recently seems to have flattened out its growth. Japan is still the
weakest trend, however.
Special circumstances- In the UK there is a
push on to funnel credit to smaller businesses and that seems to be
working. In Japan there may be demand side pressures at work as the
corporate services price index fell sharply hinting at another round of
deflation in Japan. If that takes hold lending in Japan will suffer but
mostly from demand side weakness. 
ECB is tighter: Europe shows money supply
growth peaking in later 2007/early 2008 then steadily decelerating.
This is for a period when the rest of the countries were pushing out
liquidity at a faster pace. Despite its rate cuts, ECB liquidity in the
hands of the public has been consistently squeezed. Europe has its
lowest money supply growth since 2004, but it was last persistently
weaker than this back in 2001. Despite all its rhetoric about easing
and easy money, the ECB has been tightening its monetary grip in
quantity terms. 
Various horizons: The sequential growth
rates for money supply and for credit (in EMU) in the table above make
the point. Only EMU has one year money and credit growth so much weaker
than the annual rates over two years and three years. For the US, UK
and Japan over the recent one year money growth is stronger compared to
those earlier horizons. But over six months and three months the US and
the UK are seeing weaker money growth than over the longer the periods
as is EMU (same goes for credit in EMU). Only Japan is showing stronger
money growth more recently.
Real balances: Real balances turn the
tables on many of these trends. In terms of real balances Europe&#8217;s
growth in money is as strong - or stronger - than in the US and the UK
over the less than one year horizons. Japan&#8217;s growth is the strongest
of all over three-and &#8211;six months. But the better growth in real
balances in Europe is not having the desired impact on credit as
residential &#8216;real&#8217; credit growth has slowed to a crawl while overall
loan growth is shrinking in real terms. 
Risks still loom: Despite the fact that
some lending spreads are back to more of a normal configuration the
banking sector is having lingering troubles. We know that housing
credit issues like foreclosures usually lag the cycle. Traditionally
banks are still involved in dealing with credit hangovers even as the
economy improves. But in this instance the degree of economic and
credit improvement is not even in train. We are talking about less
weakness and better economic signals not of economic growth- at least
not yet. While there are some signs of economic and financial
stabilization the credit quality and lending scene has continued to
deteriorate. So even as we get more optimistic over the results of
recent economic indictors we must remain cognizant- as the central
banks do &#8211; that the banking sector is still in the midst of its big
chill. Financial stocks may have recovered from their deathbed
valuations and a few banks may have posted large corporate earnings for
a quarter, but for the sector at large, substantial risks still loom
and some cases the adverse pressures are getting worse.
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8">Look at Global and Euro
Liquidity Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<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="grey3">
<td class="firstcol">&nbsp;</td>
<td>&#8364;&#8364;-Supply M2</td>
<td>Credit: Resid</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="grey2">
<td class="firstcol">3-MO</td>
<td>2.9%</td>
<td>1.0%</td>
<td>0.0%</td>
<td>1.7%</td>
<td>-3.7%</td>
<td>3.3%</td>
<td>355.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-MO</td>
<td>2.9%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>5.4%</td>
<td>6.1%</td>
<td>3.7%</td>
<td>162.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-MO</td>
<td>5.8%</td>
<td>4.1%</td>
<td>1.8%</td>
<td>9.0%</td>
<td>13.1%</td>
<td>2.5%</td>
<td>-47.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">2Yr</td>
<td>8.1%</td>
<td>7.7%</td>
<td>5.8%</td>
<td>7.6%</td>
<td>12.3%</td>
<td>2.3%</td>
<td>1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">3Yr</td>
<td>8.7%</td>
<td>8.9%</td>
<td>7.4%</td>
<td>7.0%</td>
<td>12.5%</td>
<td>2.1%</td>
<td>-0.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">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>0.2%</td>
<td>-0.9%</td>
<td>-1.6%</td>
<td>-5.8%</td>
<td>5.4%</td>
<td>340.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-MO</td>
<td>2.5%</td>
<td>0.9%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>3.7%</td>
<td>5.4%</td>
<td>155.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-MO</td>
<td>5.9%</td>
<td>4.2%</td>
<td>2.0%</td>
<td>10.3%</td>
<td>11.1%</td>
<td>4.1%</td>
<td>-47.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">2Yr</td>
<td>6.1%</td>
<td>5.7%</td>
<td>3.8%</td>
<td>5.8%</td>
<td>9.2%</td>
<td>2.1%</td>
<td>0.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">3Yr</td>
<td>6.7%</td>
<td>6.9%</td>
<td>5.4%</td>
<td>4.9%</td>
<td>9.5%</td>
<td>2.1%</td>
<td>-2.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Japan CPI for June is an estimate;
it uses the May value to produce the real balance figure.</td>
</tr>
</tbody>
</table>

</body></html>

U.S. New Home Sales Gain As PricesFall, Again

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

260116R23.jpg

260116S23.jpg

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.

260116T23.jpg

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.

260116.jpg

**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.

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**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.

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**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.

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**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.