Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090730a.jpg" align="left" border="0" height="265" width="353">
The rate of improvement in the job market again appears to
have slowed. The latest figures from the Labor Department indicate that
initial claims rose for the second consecutive week after sharp
declines early in the month. The latest increase to 584,000 from an
upwardly revised level during the prior period returned claims to near
where they started July. Nevertheless, so far this month the 559,000
average level of claims is down from the 616,000 averaged during June
and from the March high of 674,000. The four-week average of claims,
which smoothes out some of the volatility in the weekly numbers, fell
to 559,000 which was its lowest level since late-January. Claims of
580,000 had been expected during the latest week.
The Labor Department indicated that the largest increases in
initial claims for the week ending July 18 were in California (+4,290,
41.1% y/y), Michigan (+3,654, 21.0% y/y), Florida (+3,291, 41.2% y/y),
Connecticut (+749, 79.1% y/y), and Indiana (+526, -0.7% y/y)), while
the largest decreases were in New York (-22,052, 46.2% y/y), Wisconsin
(-6,791, 5.5% y/y), Missouri (-6,529, 63.1% y/y), Pennsylvania (-6,420,
60.2% y/y), and Ohio (-5,062, 28.5% y/y).
The rate of labor market improvement may have slowed, but a
trend improvement in conditions is clearly evident from the decline in
continuing claims for unemployment insurance. They fell a modest 54,000
last week after a similar decline during the prior week. However, the
average this month is down sharply from June and the weekly figure is
the lowest since mid-April. The continuing claims figures lag initial
claims by one week and provide an indication of workers' ability to
find employment. Despite the latest decline, however, the level of 6,197,000
claims still up sharply from the year ago level. The
four-week average of continuing claims fell back to 6,416,250 which was
the lowest since mid-May. The series dates back to 1966.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090730b.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
11 were in Puerto Rico (7.3 percent), Michigan (7.2), Oregon (6.7),
Pennsylvania (6.4), Nevada (6.2), Wisconsin (6.1), Connecticut (5.6),
New Jersey (5.6), Arkansas (5.5), California (5.5), North Carolina
(5.5), and South Carolina (5.5). The lowest rates were in Wyoming
(3.0), Texas (3.1), Maine (3.3), Colorado (3.4), Maryland (3.6),
Minnesota (3.9), Florida (4.4), Mississippi (4.4) and Georgia (4.6).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database
The Fed's latest Beige Book covering
regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090729/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">07/25/09</th>
<th scope="col">07/18/09</th>
<th scope="col">07/11/09</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>584</td>
<td>559</td>
<td>524</td>
<td>32.1%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,197</td>
<td>6,251</td>
<td>87.3%</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>2.4</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
EMU Recovery Continues 
by <a href="/comment/Brusca.html">
Robert
Brusca</a>July
30, 2009

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090730c.jpg" align="left" border="0" height="265" width="353">BETTER:
The EU commission indices for EU and EMU continue to show substantial
progress. The EU index rose to 75.0 from 71.1 while the EU index rose
to 76.0 from 73.2. The better showing in the EMU rise implies a better
rise in the month by non EMU members of EU. On a mo/mo basis the UK
index did rise sharply by 7.3% compared to Spain&#8217;s 5.3%, the best among
large EMU nations. 
&#8230;but still low: Overall the EU and EMU indices are standing the bottom
26% to 21% of their respective ranges. That is still a very low
reading. But the UK has bounced some 31% from its lowest level on this
overall index and Italy has risen by 25%. The least rebound by a major
EU/EMU economy is the 11.9% rises from its low reading posted by
Germany. Germany also has the lowest ranked sentiment index among large
EU/EMU economies (even though it is third highest by raw score).
 INDUSTRY: EU industry readings are only
in the
19th percentile of their range like services. But unfortunately the
worst reading on its components are from the selling prices expectation
that is in the bottom 7% of its historic range and from orders that are
in the bottom 3% of their range (both overall orders and export
orders). The production trend is in the 23rd percentile of its range
and production expectations are in the 35th percentile or their range -
despite the weaker reading in orders. Employment is a sort of neutral
17.8 percentile reading which is the same as for EMU industry
confidence overall. So we can&#8217;t say for industry that the problem is
jobs, it&#8217;s just demand.&nbsp;

SERVICE: Services Confidence in EMU stands
at it 12.1% percentile lower than for EU overall (19.0%). The weakest
reading for services is from current employment which is as low a
reading as it ever has seen. Current demand is the next lowest in the
bottom 10 percentile of its range. The business climate in services
ranks in the 12th percentile overall. Expected demand and expected
employment are more upbeat but still in only the 15th percentile of
their respective ranges. Despite some monthly improvement employment in
this sector is weak and expectations while improving are still very
weak. The weakest service sector by the relative measure of the
position of the index in its range is France followed closely by Spain;
the strongest is the UK.

RETAILING: Retailing ranks in the 28th
percentile of its range in EMU, making it relatively less strong than
in EU (35th percentile). The present situation is rated as in the 26th
percentile; the expected business situation is at a higher raw reading
but a lower position in its range at the 23rd range percentile.
Employment expectations are a weak 8% reading. The Italy has the
highest retail range reading in the 46th range percentile compared to
the UK in the 42nd percentile while Spain is at a 28 percentile
reading, worst reading for a large EMU country.&nbsp;

CONSUMER CONFIDENCE: Consumer confidence
ranks about the same as the retailing reading, in the 29th percentile
of its EMU range (below the 32.4 percentile for EU). Spain and Italy
have the highest relative consumer rankings at or above a 50 percentile
range reading; the UK reading is at the 42nd percentile. Germany stands
the lowest among large EMU nations at the 16th percentile. EU consumers
rate the past 12-months as in the bottom 5% of all readings
historically. While the next 12-months reading posted a much, much
higher 48th percentile reading.&nbsp;

SUMMING UP: The consumer confidence results
epitomize the EU/EMU results. Current conditions have improved from
their worst. Yet the quantitative measures that look forward are not
yet very strong. Still expectations for the future are advancing
strongly in Europe. There seems to be a much more &#8216;hard to pin down&#8217;
blanket optimism about the future that is in existence.&nbsp; 
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol" colspan="13">EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Percentile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>By Queue rank%</td>
<td>R-SQ 
w/Overall</td>
</tr>
<tr>
<td class="firstcol">Overall</td>
<td>75</td>
<td>71.1</td>
<td>67.9</td>
<td>64</td>
<td>26.3</td>
<td>242</td>
<td>116</td>
<td>60</td>
<td>56</td>
<td>100</td>
<td>3.6%</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-30</td>
<td>-33</td>
<td>-34</td>
<td>-36</td>
<td>19.6</td>
<td>244</td>
<td>7</td>
<td>-39</td>
<td>46</td>
<td>-7</td>
<td>2.8%</td>
<td>0.90</td>
</tr>
<tr>
<td class="firstcol">Consumer Confid</td>
<td>-21</td>
<td>-23</td>
<td>-26</td>
<td>-28</td>
<td>32.4</td>
<td>224</td>
<td>2</td>
<td>-32</td>
<td>34</td>
<td>-11</td>
<td>10.8%</td>
<td>0.86</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-14</td>
<td>-17</td>
<td>-17</td>
<td>-21</td>
<td>35.5</td>
<td>232</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-5</td>
<td>7.6%</td>
<td>0.66</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-37</td>
<td>-37</td>
<td>-39</td>
<td>-38</td>
<td>10.9</td>
<td>232</td>
<td>4</td>
<td>-42</td>
<td>46</td>
<td>-16</td>
<td>7.6%</td>
<td>0.47</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-19</td>
<td>-23</td>
<td>-26</td>
<td>-30</td>
<td>19.0</td>
<td>242</td>
<td>32</td>
<td>-31</td>
<td>63</td>
<td>11</td>
<td>3.6%</td>
<td>0.75</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>Jul-09</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>3.8%</td>
<td>4.3%</td>
<td>4.3%</td>
<td>76.0</td>
<td>21.7</td>
<td>236</td>
<td>117</td>
<td>65</td>
<td>53</td>
<td>100</td>
<td>6.0%</td>
<td>0.95</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>4.1%</td>
<td>4.3%</td>
<td>1.5%</td>
<td>80.8</td>
<td>17.6</td>
<td>235</td>
<td>121</td>
<td>72</td>
<td>49</td>
<td>100</td>
<td>6.4%</td>
<td>0.70</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.4%</td>
<td>4.4%</td>
<td>3.9%</td>
<td>81.2</td>
<td>19.8</td>
<td>236</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>6.0%</td>
<td>0.84</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>4.4%</td>
<td>1.4%</td>
<td>7.3%</td>
<td>83.7</td>
<td>30.1</td>
<td>228</td>
<td>122</td>
<td>67</td>
<td>55</td>
<td>100</td>
<td>9.2%</td>
<td>0.83</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>5.2%</td>
<td>2.0%</td>
<td>2.1%</td>
<td>79.0</td>
<td>24.7</td>
<td>230</td>
<td>117</td>
<td>67</td>
<td>50</td>
<td>100</td>
<td>8.4%</td>
<td>0.73</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>7.3%</td>
<td>4.1%</td>
<td>7.8%</td>
<td>73.8</td>
<td>24.5</td>
<td>242</td>
<td>128</td>
<td>56</td>
<td>72</td>
<td>100</td>
<td>3.6%</td>
<td>0.59</td>
</tr>
<tr>
<td class="firstcol">Since April 1988</td>
<td></td>
<td></td>
<td>251</td>
<td>-Count</td>
<td>Services:</td>
<td>251</td>
<td>-Count</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="9">Sentiment is an index, sector
readings are net balance diffusion measures</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>


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The rate of improvement in the job market again appears to have slowed. The latest figures from the Labor Department indicate that initial claims rose for the second consecutive week after sharp declines early in the month. The latest [...]

U.S. Weekly Claims For JoblessInsurance Rise, But Falling Trend Suggests Improved Labor Market

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729d.jpg" align="left" border="0" height="265" width="353">
Japan retail sales fell in June but June caps a three-month
period in which sales have expanded. Still, in the quarter-to-date
Japan&#8217;s retail sales are falling but only slightly. 
 

Over 12-months retail sales are off by about 3%, led by
declines in fabric and apparel and the rest of retail which dropped by
4.2%. Auto sales are only off by 0.5% Yr/Yr. Food and beverage sales
are off by 1.2%. Sales at department stores and supermarkets slipped
6.7% on the year, and after those figures are adjusted for the number
of stores (same-store sales), sales posted their 15th straight monthly
decline, according to METI. 
 

This is hardly a robust picture of activity yet today the MoF
upgraded its assessment of Japan&#8217;s economy for the first time in five
years. The Ministry of Economy, Trade and Industry said. The
government's massive stimulus measures, which include tax-cut programs
such as incentives to buy new cars, may help to boost retail sales in
the future. For now the consumer is in the doldrums and spending habits
remain subdued. Leading indicators for Japan have not turned the corner
to signal positive trends yet. 
 
 


Japan Retail Sales Trends
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
</tr>
</thead>
<tbody>
<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>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr>
<td class="firstcol">Total SA</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>2.1%</td>
<td>-1.6%</td>
<td>-2.9%</td>
<td>1.2%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Not
seasonally adjusted</td>
<td>&nbsp;</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">Total: Nominal</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>1.1%</td>
<td>-0.8%</td>
<td>-3.0%</td>
<td>0.7%</td>
<td>-0.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Motor Vehicles</td>
<td>-1.9%</td>
<td>-4.1%</td>
<td>7.5%</td>
<td>4.7%</td>
<td>-5.7%</td>
<td>-0.5%</td>
<td>-3.2%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Food&amp;
Beverage</td>
<td>-1.4%</td>
<td>2.0%</td>
<td>-1.0%</td>
<td>-2.0%</td>
<td>-3.7%</td>
<td>-1.2%</td>
<td>14.8%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fabric
apparel&amp; access</td>
<td>-4.5%</td>
<td>1.4%</td>
<td>1.5%</td>
<td>-6.5%</td>
<td>-1.0%</td>
<td>-5.7%</td>
<td>-6.6%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rest of Retail</td>
<td>1.1%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>3.5%</td>
<td>2.3%</td>
<td>-4.2%</td>
<td>-5.0%</td>
<td>-1.9%</td>
</tr>
</tbody>
</table>
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Japan retail sales fell in June but June caps a three-month period in which sales have expanded. Still, in the quarter-to-date Japan’s retail sales are falling but only slightly. Over 12-months retail sales are off by about 3%, led by [...]

Japan Retail Sales Remain Sour

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729a.jpg">
The recent improvement in factory sector activity stuttered last month as June durable goods orders fell. The 2.5% decline reversed nearly all of the increases during the prior two months. Moreover, the May increase was revised weaker. Consensus expectations had been for a lesser 0.6% drop. That&#39;s not to say that the recent improvement in factory sector orders was totally reversed last month. Most of the latest decline was due to lower orders for aircraft. On a three-month basis durable goods orders less the transportation sector overall have risen at a 7.2% annual rate.
Perhaps setting the stage for an orders rebound is the lower level of factory inventories. Inventories of durable goods fell for the sixth consecutive month. The 0.9% decline (-4.3% y/y) followed a 1.1% May decline that was deeper than reported initially. Notable, though, has been the vigor of the recent cutback of unwanted inventories On a three-month basis, decumulation of durable goods inventories continued last month at a near-record 12.3% annual rate. Decumulation of inventories has been notable across industries, but especially so in the metals, machinery and motor vehicle sectors. <img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729b.jpg">
Lower new orders for transportation equipment paced last month&#39;s decline in the total. The 12.8% m/m decline followed a 2.7% gain during May. Notably weak were orders for commercial aircraft which fell 38.5% (-61.0% y/y), reversing all of the strong gain during May. In addition, orders for motor vehicles &amp; parts fell 1.0% (-31.8% y/y) following the 8.7% May decline, prompted by lower sales. Adding to this weakness was a 2.5% decline in orders for computers &amp; electronic products (-15.1% y/y) which returned them to the lowest level since January. Computer orders slipped just 1.2% (-17.3% y/y) after a strong May but orders for communications equipment fell a hard 10.8% (-26.2% y/y) to their lowest level since late-2005. Moving the other way were machinery orders which posted a 4.4% increase (-26.3% y/y) after a firm May gain. Orders for primary metals were even stronger as they posted an 8.9% increase but that nevertheless left them off by nearly one-half from their year ago level. Electrical equipment orders were up just 0.9% (-31.1% y/y) following large declines during May and April.<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729c.jpg">
The recent improvement in the capital goods sector indeed stuttered last month. Orders for nondefense capital goods fell 3.4% as aircraft orders plunged. Conversely, orders excluding aircraft rose for a second month. The 1.4% increase followed a stronger May gain and that was enough to raise orders to their highest level this year. During the last ten years there has been an 80% correlation between the y/y change in nondefense capital goods orders and the change in equipment &amp; software spending in the GDP accounts. The correlation of the GDP figure with capital goods shipments is, as one would expect, a larger 92%.
Despite the improvement in orders, shipments of durable goods continued to languish. Shipments of durable goods slipped 0.2% (-21.0% y/y) last month and have fallen in each month since February of last year. That y/y decline in shipments has been accompanied by a 21.9% y/y drop in industrial production of durable goods which has shown little or no sign of turning around. During the last ten years, there has been an 80% correlation between the change in shipments of durable goods and the change in durables industrial production.
The durable goods figures are available in Haver&#39;s USECON database.
Monetary Policy in the 2008--2009 Recession from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/spring/pdf/hetzel2.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/@ED0101.HTM">NAICS Classification</a> (%)</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">Durable Goods Orders</td>
<td>-2.5</td>
<td>1.3</td>
<td>-26.8</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>1.1</td>
<td>0.8</td>
<td>-24.1</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-3.4</td>
<td>9.1</td>
<td>-28.8</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.4</td>
<td>4.3</td>
<td>-22.8</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
</body>
</html>

The recent improvement in factory sector activity stuttered last month as June durable goods orders fell. The 2.5% decline reversed nearly all of the increases during the prior two months. Moreover, the May increase was revised [...]

U.S. Durable Goods Orders Decline Led By Aircraft & Computers; Lower Inventories May Set Stage for Rebound

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729a.jpg" align="left" border="0">
The recent improvement in factory sector activity stuttered
last month as June durable goods orders fell. The 2.5% decline reversed
nearly all of the increases during the prior two months. Moreover, the
May increase was revised weaker. Consensus expectations had been for a
lesser 0.6% drop. That's not to say that the recent improvement in
factory sector orders was totally reversed last month. Most of the
latest decline was due to lower orders for aircraft. On a three-month
basis durable goods orders less the transportation sector overall have
risen at a 7.2% annual rate.
Perhaps setting the stage for an orders rebound is the lower
level of factory inventories. Inventories of durable goods fell for the
sixth consecutive month. The 0.9% decline (-4.3% y/y) followed a 1.1%
May decline that was deeper than reported initially. Notable, though,
has been the vigor of the recent cutback of unwanted inventories
On a three-month basis, decumulation of durable goods
inventories continued last month at a near-record 12.3% annual rate.
Decumulation of inventories has been notable across industries, but
especially so in the metals, machinery and motor vehicle sectors. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729b.jpg" align="right" border="0">
Lower new orders for transportation equipment paced last
month's decline in the total. The 12.8% m/m decline followed a 2.7%
gain during May. Notably weak were orders for commercial aircraft which
fell 38.5% (-61.0% y/y), reversing all of the strong gain during May.
In addition, orders for motor vehicles &amp; parts fell 1.0%
(-31.8% y/y) following the 8.7% May decline, prompted by lower sales.
Adding to this weakness was a 2.5% decline in orders for computers
&amp; electronic products (-15.1% y/y) which returned them to the
lowest level since January. Computer orders slipped just 1.2% (-17.3%
y/y) after a strong May but orders for communications equipment fell a
hard 10.8% (-26.2% y/y) to their lowest level since late-2005. Moving
the other way were machinery orders which posted a 4.4% increase
(-26.3% y/y) after a firm May gain. Orders for primary metals were even
stronger as they posted an 8.9% increase but that nevertheless left
them off by nearly one-half from their year ago level. Electrical
equipment orders were up just 0.9% (-31.1% y/y) following large
declines during May and April.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729c.jpg" align="left" border="0">
The recent improvement in the capital goods sector indeed
stuttered last month. Orders for nondefense capital goods fell 3.4% as
aircraft orders plunged. Conversely, orders excluding aircraft rose for
a second month. The 1.4% increase followed a stronger May gain and that
was enough to raise orders to their highest level this year. During the
last ten years there has been an 80% correlation between the y/y change
in nondefense capital goods orders and the change in equipment
&amp; software spending in the GDP accounts. The correlation of the
GDP figure with capital goods shipments is, as one would expect, a
larger 92%.
Despite the improvement in orders, shipments of durable goods
continued to languish. Shipments of durable goods slipped 0.2% (-21.0%
y/y) last month and have fallen in each month since February of last
year. That y/y decline in shipments has been accompanied by a 21.9% y/y
drop in industrial production of durable goods which has shown little
or no sign of turning around. During the last ten years, there has been
an 80% correlation between the change in shipments of durable goods and
the change in durables industrial production.
The durable goods figures are available in Haver's USECON
database.
Monetary Policy in the 2008--2009 Recession from
the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/spring/pdf/hetzel2.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/@ED0101.HTM">NAICS
Classification</a> (%)</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">Durable Goods Orders</td>
<td>-2.5</td>
<td>1.3</td>
<td>-26.8</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>1.1</td>
<td>0.8</td>
<td>-24.1</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-3.4</td>
<td>9.1</td>
<td>-28.8</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.4</td>
<td>4.3</td>
<td>-22.8</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
Japan Retail Sales Remain Sour
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 29, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729d.jpg" align="left" border="0" height="265" width="353">
Japan retail sales fell in June but June caps a three-month
period in which sales have expanded. Still, in the quarter-to-date
Japan&#8217;s retail sales are falling but only slightly. 
 

Over 12-months retail sales are off by about 3%, led by
declines in fabric and apparel and the rest of retail which dropped by
4.2%. Auto sales are only off by 0.5% Yr/Yr. Food and beverage sales
are off by 1.2%. Sales at department stores and supermarkets slipped
6.7% on the year, and after those figures are adjusted for the number
of stores (same-store sales), sales posted their 15th straight monthly
decline, according to METI. 
 

This is hardly a robust picture of activity yet today the MoF
upgraded its assessment of Japan&#8217;s economy for the first time in five
years. The Ministry of Economy, Trade and Industry said. The
government's massive stimulus measures, which include tax-cut programs
such as incentives to buy new cars, may help to boost retail sales in
the future. For now the consumer is in the doldrums and spending habits
remain subdued. Leading indicators for Japan have not turned the corner
to signal positive trends yet. 
 
 


Japan Retail Sales Trends
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
</tr>
</thead>
<tbody>
<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>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr>
<td class="firstcol">Total SA</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>2.1%</td>
<td>-1.6%</td>
<td>-2.9%</td>
<td>1.2%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Not
seasonally adjusted</td>
<td>&nbsp;</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">Total: Nominal</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>1.1%</td>
<td>-0.8%</td>
<td>-3.0%</td>
<td>0.7%</td>
<td>-0.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Motor Vehicles</td>
<td>-1.9%</td>
<td>-4.1%</td>
<td>7.5%</td>
<td>4.7%</td>
<td>-5.7%</td>
<td>-0.5%</td>
<td>-3.2%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Food&amp;
Beverage</td>
<td>-1.4%</td>
<td>2.0%</td>
<td>-1.0%</td>
<td>-2.0%</td>
<td>-3.7%</td>
<td>-1.2%</td>
<td>14.8%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fabric
apparel&amp; access</td>
<td>-4.5%</td>
<td>1.4%</td>
<td>1.5%</td>
<td>-6.5%</td>
<td>-1.0%</td>
<td>-5.7%</td>
<td>-6.6%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rest of Retail</td>
<td>1.1%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>3.5%</td>
<td>2.3%</td>
<td>-4.2%</td>
<td>-5.0%</td>
<td>-1.9%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Durable Goods Orders DeclineLed By Aircraft & Computers; Lower Inventories May Set Stage for Rebound

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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>
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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

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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%">
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<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>


</body></html>

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

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

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

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

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

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

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

260205C15.jpg

260205D15.jpg

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

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

Sandy Batten

260205A2.jpg

260205B2.jpg

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

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

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

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

260205C2.jpg

260205D2.jpg

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

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

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

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

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

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

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

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

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