Tom Moeller

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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>

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 IndexDecline Eases

Robert Brusca

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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>

</body></html>

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

Carol Stone, CBE

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724d.jpg" align="left" border="0" height="265" width="353">
UK forecasters were looking for Q2 GDP to be down 0.3% from
Q1, so they were surprised today at the -0.8% preliminary estimate
published by ONS. Press reports emphasize the magnitude of the overall
decline, 5.6% year-on-year, and 5.7% from the peak in Q1 2008. The
year-on-year figure is the weakest of comparable GDP performances in
the 54-year history of these quarterly series, and the peak-to-latest
is perhaps tied with the 1979-81 recession as the largest total
contraction in any recession.
Forecasters apparently put the most store in the manufacturing
sector, which is doing better. Output there is reported down just 0.3%
in the quarter, a marked improvement from the 5.5% during Q1. Within
the monthly data, March was actually higher by 0.2% and April held
steady with that before a renewed decline in May, 0.5%, also reported
this morning. But that most cyclical sector seems to be on the verge of
turning around.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724e.jpg" align="right" border="0" height="265" width="353">
However, some service industries and construction remain
feeble, even though they declined less that in prior recent periods.
Construction had been down 5.0% and 6.9% in Q4 and Q1, respectively, so
in one sense 2.2% in Q2 is "better". In an absolute sense, though,
that's still quite weak. Similarly, services contracted 0.6%, somewhat
less than 1.6% in Q1 and 1.0% in Q4. [All these growth rates are
period-to-period, not annualized].
Within services, business services and finance apparently had
the largest negative contribution, as they contracted 0.7%, with a
weight of more than 30% in the total. The biggest single decline in a
sector was 2.1% in transport, storage and communication, where activity
fell 2.1% in Q2, but the industry group has only a 7% weight.
In such a severe recession as there's been, it might not be
surprising that weakness has spilled more into services than we're used
to. Further, the recession's origin in the over-extended financial
sector suggests that it might well stay down longer than has been
customary.
All this said, the 0.8% decrease in Q2 GDP is still much
better than the prior two periods, and while the recession continues,
the stabilization of manufacturing may well be a sign that recovery is
developing.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="1" rowspan="2" scope="col" class="firstcol">% Changes (not
annualized), SA</th>
<th scope="col">2005 Weight</th>
<th scope="col" colspan="2">Q2 2009</th>
<th scope="col" colspan="2">Q1 2009</th>
<th scope="col" colspan="2">Q4 2008</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td></td>
<td> </td>
<td>Q/Q</td>
<td>Y/Y</td>
<td>Q/Q</td>
<td>Y/Y</td>
<td>Q/Q</td>
<td>Y/Y</td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>1000</td>
<td>-0.8</td>
<td>-5.6</td>
<td>-2.4</td>
<td>-4.9</td>
<td>-1.8</td>
<td>-1.8</td>
<td>0.7</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>133</td>
<td>-0.3</td>
<td>-12.6</td>
<td>-5.5</td>
<td>-13.8</td>
<td>-5.2</td>
<td>-8.2</td>
<td>-2.8</td>
<td>0.6</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>63</td>
<td>-2.2</td>
<td>-14.7</td>
<td>-6.9</td>
<td>-13.2</td>
<td>-5.0</td>
<td>-5.3</td>
<td>0.2</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>759</td>
<td>-0.6</td>
<td>-3.8</td>
<td>-1.6</td>
<td>-3.1</td>
<td>-1.0</td>
<td>-0.7</td>
<td>1.3</td>
<td>3.5</td>
</tr>
<tr>
<td class="firstcol">Business &amp;
Finance</td>
<td>304</td>
<td>-0.7</td>
<td>-4.4</td>
<td>-2.5</td>
<td>-3.4</td>
<td>-0.6</td>
<td>0.3</td>
<td>2.4</td>
<td>5.5</td>
</tr>
<tr>
<td class="firstcol">Transport, Storage
&amp;&nbsp; Communication</td>
<td>72</td>
<td>-2.1</td>
<td>-7.0</td>
<td>-3.0</td>
<td>-4.5</td>
<td>-1.4</td>
<td>0.5</td>
<td>2.0</td>
<td>3.5</td>
</tr>
</tbody>
</table>
</body></html>

UK forecasters were looking for Q2 GDP to be down 0.3% from Q1, so they were surprised today at the -0.8% preliminary estimate published by ONS. Press reports emphasize the magnitude of the overall decline, 5.6% year-on-year, and 5.7% [...]

UK GDP Surprises with 0.8% Fall in Q2

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724a.jpg" align="left" border="0" height="265" width="353">Worries
about the prospects for the economy persisted late this month, but they
eased somewhat from earlier. The University of Michigan's full-month
reading of July consumer sentiment came in at 66.0 versus the mid-month
reading of 64.6. Despite the improvement, however, sentiment was at its
lowest level since May. Consensus expectations had been for a slightly
lower July reading of 65.0. During the last ten years, there has been a
72% correlation between the level of sentiment and the growth in real
consumer spending during the next five months.The expectations
component of the sentiment index deteriorated the most this month, but
less than the mid-month read. It posted an 8.7% m/m decline. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724b.jpg" align="right" border="0" height="265" width="353">
That
nevertheless left the index up sharply y/y. Expectations for personal
finances fell m/m to the lowest level since March (+4.8% y/y). Expected
business conditions during the next year held steady at the June level
(+64.3% y/y) but expectations for conditions during the next five years
fell sharply (+12.3% y/y). Inflation expectations for the next year
slipped to 3.6% from 3.9% during June. That compares to a low of 1.7%
last December but remained down from a reading which was as high as
7.0% during May of last year. The highest expectations were for 5.3%
price inflation while the lowest were for 0.3%.

The
reading of current
economic conditions gave back roughly half of its improvement during
June. As at mid-month, the decline was led by a reversal of the June
rise in the index of current buying conditions for large household
goods. The reading of current personal finances rose for the second
month with higher stock market prices and reduced levels of personal
debt. It has returned to the April level.
The opinion of government
policy, which may eventually influence economic expectations, fell for
the second month to its lowest level since February. An increased 32%
of respondents thought that a poor job was being done by government
while a reduced 23% thought that a good job was being done.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724c.jpg" align="left" border="0" height="265" width="353">The
University of Michigan survey data is not seasonally adjusted.
&nbsp;The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews.&nbsp; The summary indexes are in Haver's USECON
database with details in the proprietary UMSCA database.
Regulatory restructuring is today's House
testimony by Fed Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090724a.htm">here</a>.
Macroeconomic Models for Monetary Policy: Conference
Summary from the Federal Reserve Bank of San Francisco is
available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-23.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">July</th>
<th scope="col">Mid-July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">July 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 Sentiment</td>
<td>66.0</td>
<td>64.6</td>
<td>70.8</td>
<td>68.7</td>
<td>5.8%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>70.5</td>
<td>70.4</td>
<td>73.2</td>
<td>67.7</td>
<td>-3.6</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>63.2</td>
<td>60.9</td>
<td>69.2</td>
<td>69.4</td>
<td>18.1</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>


</body></html>

Worries about the prospects for the economy persisted late this month, but they eased somewhat from earlier. The University of Michigan's full-month reading of July consumer sentiment came in at 66.0 versus the mid-month reading of [...]

Full-Month Michigan Consumer Sentiment Reading Eases

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724a.jpg" align="left" border="0" height="265" width="353">Worries
about the prospects for the economy persisted late this month, but they
eased somewhat from earlier. The University of Michigan's full-month
reading of July consumer sentiment came in at 66.0 versus the mid-month
reading of 64.6. Despite the improvement, however, sentiment was at its
lowest level since May. Consensus expectations had been for a slightly
lower July reading of 65.0. During the last ten years, there has been a
72% correlation between the level of sentiment and the growth in real
consumer spending during the next five months.
The expectations
component of the sentiment index deteriorated the most this month, but
less than the mid-month read. It posted an 8.7% m/m decline. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724b.jpg" align="right" border="0" height="265" width="353">
That
nevertheless left the index up sharply y/y. Expectations for personal
finances fell m/m to the lowest level since March (+4.8% y/y). Expected
business conditions during the next year held steady at the June level
(+64.3% y/y) but expectations for conditions during the next five years
fell sharply (+12.3% y/y). Inflation expectations for the next year
slipped to 3.6% from 3.9% during June. That compares to a low of 1.7%
last December but remained down from a reading which was as high as
7.0% during May of last year. The highest expectations were for 5.3%
price inflation while the lowest were for 0.3%.

The
reading of current
economic conditions gave back roughly half of its improvement during
June. As at mid-month, the decline was led by a reversal of the June
rise in the index of current buying conditions for large household
goods. The reading of current personal finances rose for the second
month with higher stock market prices and reduced levels of personal
debt. It has returned to the April level.
The opinion of government
policy, which may eventually influence economic expectations, fell for
the second month to its lowest level since February. An increased 32%
of respondents thought that a poor job was being done by government
while a reduced 23% thought that a good job was being done.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724c.jpg" align="left" border="0" height="265" width="353">The
University of Michigan survey data is not seasonally adjusted.
&nbsp;The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews.&nbsp; The summary indexes are in Haver's USECON
database with details in the proprietary UMSCA database.
Regulatory restructuring is today's House
testimony by Fed Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090724a.htm">here</a>.
Macroeconomic Models for Monetary Policy: Conference
Summary from the Federal Reserve Bank of San Francisco is
available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-23.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">July</th>
<th scope="col">Mid-July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">July 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 Sentiment</td>
<td>66.0</td>
<td>64.6</td>
<td>70.8</td>
<td>68.7</td>
<td>5.8%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>70.5</td>
<td>70.4</td>
<td>73.2</td>
<td>67.7</td>
<td>-3.6</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>63.2</td>
<td>60.9</td>
<td>69.2</td>
<td>69.4</td>
<td>18.1</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>


UK GDP Surprises with 0.8% Fall in
Q2 
by <a href="/comment/Stone.html">Carol
Stone</a> July 24, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724d.jpg" align="left" border="0" height="265" width="353">
UK forecasters were looking for Q2 GDP to be down 0.3% from
Q1, so they were surprised today at the -0.8% preliminary estimate
published by ONS. Press reports emphasize the magnitude of the overall
decline, 5.6% year-on-year, and 5.7% from the peak in Q1 2008. The
year-on-year figure is the weakest of comparable GDP performances in
the 54-year history of these quarterly series, and the peak-to-latest
is perhaps tied with the 1979-81 recession as the largest total
contraction in any recession.
Forecasters apparently put the most store in the manufacturing
sector, which is doing better. Output there is reported down just 0.3%
in the quarter, a marked improvement from the 5.5% during Q1. Within
the monthly data, March was actually higher by 0.2% and April held
steady with that before a renewed decline in May, 0.5%, also reported
this morning. But that most cyclical sector seems to be on the verge of
turning around.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090724e.jpg" align="right" border="0" height="265" width="353">
However, some service industries and construction remain
feeble, even though they declined less that in prior recent periods.
Construction had been down 5.0% and 6.9% in Q4 and Q1, respectively, so
in one sense 2.2% in Q2 is "better". In an absolute sense, though,
that's still quite weak. Similarly, services contracted 0.6%, somewhat
less than 1.6% in Q1 and 1.0% in Q4. [All these growth rates are
period-to-period, not annualized].
Within services, business services and finance apparently had
the largest negative contribution, as they contracted 0.7%, with a
weight of more than 30% in the total. The biggest single decline in a
sector was 2.1% in transport, storage and communication, where activity
fell 2.1% in Q2, but the industry group has only a 7% weight.
In such a severe recession as there's been, it might not be
surprising that weakness has spilled more into services than we're used
to. Further, the recession's origin in the over-extended financial
sector suggests that it might well stay down longer than has been
customary.
All this said, the 0.8% decrease in Q2 GDP is still much
better than the prior two periods, and while the recession continues,
the stabilization of manufacturing may well be a sign that recovery is
developing.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="1" rowspan="2" scope="col" class="firstcol">% Changes (not
annualized), SA</th>
<th scope="col">2005 Weight</th>
<th scope="col" colspan="2">Q2 2009</th>
<th scope="col" colspan="2">Q1 2009</th>
<th scope="col" colspan="2">Q4 2008</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td></td>
<td> 
</td>
<td>Q/Q</td>
<td>Y/Y</td>
<td>Q/Q</td>
<td>Y/Y</td>
<td>Q/Q</td>
<td>Y/Y</td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>1000</td>
<td>-0.8</td>
<td>-5.6</td>
<td>-2.4</td>
<td>-4.9</td>
<td>-1.8</td>
<td>-1.8</td>
<td>0.7</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>133</td>
<td>-0.3</td>
<td>-12.6</td>
<td>-5.5</td>
<td>-13.8</td>
<td>-5.2</td>
<td>-8.2</td>
<td>-2.8</td>
<td>0.6</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>63</td>
<td>-2.2</td>
<td>-14.7</td>
<td>-6.9</td>
<td>-13.2</td>
<td>-5.0</td>
<td>-5.3</td>
<td>0.2</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>759</td>
<td>-0.6</td>
<td>-3.8</td>
<td>-1.6</td>
<td>-3.1</td>
<td>-1.0</td>
<td>-0.7</td>
<td>1.3</td>
<td>3.5</td>
</tr>
<tr>
<td class="firstcol">Business &amp;
Finance</td>
<td>304</td>
<td>-0.7</td>
<td>-4.4</td>
<td>-2.5</td>
<td>-3.4</td>
<td>-0.6</td>
<td>0.3</td>
<td>2.4</td>
<td>5.5</td>
</tr>
<tr>
<td class="firstcol">Transport, Storage
&amp;&nbsp; Communication</td>
<td>72</td>
<td>-2.1</td>
<td>-7.0</td>
<td>-3.0</td>
<td>-4.5</td>
<td>-1.4</td>
<td>0.5</td>
<td>2.0</td>
<td>3.5</td>
</tr>
</tbody>
</table>
</body></html>

Full-Month Michigan ConsumerSentiment Reading Eases

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723a.jpg" width="353">
Positive growth in jobs may not have yet begun, but the rate of job loss has slowed. The Labor Department&#39;s report on employment insurance claims indicated a moderate, and expected, 30,000 increase in initial claims. The gain to 554,000 only reversed, however, a piece of the cumulative 106,000 drop during the prior three weeks. As a result, the latest level remained near the lowest since early January and it was off from the March peak of 674,000. The four-week average of claims, which smoothes out some of the volatility in the weekly numbers, fell to 566,000 which was its lowest level since late-January.
The latest initial claims figure covers the survey week for July nonfarm payrolls. There was a 58,000 (9.5%) drop from the June survey period. During the last ten years there has been and 86% correlation between the level of initial claims and the m/m change in nonfarm payrolls.
The Labor Department indicated that the largest increases in initial claims for the week ending July 11 were in New York (+12,504), North Carolina (+10,382), Florida (+10,043), Missouri (+8,293), and Tennessee (+6,943), while the largest decreases were in Michigan (-6,648), Massachusetts (-2,910), New Jersey (-2,888), Indiana (-2,497), and California (-1,755).
Confirming the labor market&#39;s improvement was an 88,000 drop in continuing claims for unemployment insurance which added to a revised 591,000 decline during the prior week. The latest figure was the lowest level since mid-April. The continuing claims figures lag initial claims by one week and provide an indication of workers&#39; ability to find employment. Despite the latest decline, however, the level of 6,225,000 claims was nearly double the year ago level. The four-week average of continuing claims fell back to 6,541,500 which was the lowest since mid-May. The series dates back to 1966.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723b.jpg" 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 4 were in Puerto Rico (6.9 percent), Michigan (6.8), Oregon (6.8), Pennsylvania (6.4), Nevada (6.2), Wisconsin (6.1), South Carolina (5.7), New Jersey (5.6), North Carolina (5.5), and Connecticut (5.4). The lowest rates were in Texas (3.0), Wyoming (3.0), Colorado (3.3), Maine (3.3), Maryland (3.7), Minnesota (4.1), Florida (4.2), Georgia (4.6) and Mississippi (4.5).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Trends in the Aggregate Labor Force from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/09/07/Matheny.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">07/18/09</th>
<th scope="col">07/11/09</th>
<th scope="col">07/04/09</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>554</td>
<td>524</td>
<td>569</td>
<td>34.1%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,225</td>
<td>6,313</td>
<td>96.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td></td>
<td>4.7</td>
<td>4.7</td>
<td>2.4</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Positive growth in jobs may not have yet begun, but the rate of job loss has slowed. The Labor Department's report on employment insurance claims indicated a moderate, and expected, 30,000 increase in initial claims. The gain to [...]

U.S. Claims For Jobless Insurance Tick Higher Last Week Yet Remain Off Peak

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.

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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

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

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

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

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

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

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

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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