Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709g.jpg" align="left" border="0">
The UK trade balance shrank to 6.26bln sterling in May from
7.14bln in April. Exports edged lower, while imports fell by 4% in May.
Export and import trends do not show very dramatic signs of change.
Exports are declining by a bit less than imports and their rate of
decline is more persistently losing that negative edge, but that
remains a very gradual process. For imports the declines over various
horizons are still large. The pace of decline over three months is less
than for six months; the drop over six months shows acceleration in the
drop compared to 12 months. Import trends are still a chaotic. 
 

Exports and imports of road vehicles have picked up, perhaps
in response to various vehicle purchase plans in effect in the UK and
around Europe. Vehicle sales have picked up because of such incentives. 
 

Trends for capital goods shipments are worsening for exports
and for imports over 12- 6- and 3-months. 
 

For other groups of exports and imports the patterns are still
too varying to categorize. 
 

German trade reported a bounce in exports with imports still
falling in May. German orders (especially foreign orders) and
industrial output have been on the mend in other recent reports. Still,
it is too soon to throw the UK figures in with that lot and call them
positive. The UK trade accounts still have divergent trends and the
improvement in trade has given way to deterioration and then to more
improvement. It is too much in flux to be sure of. Both export and
import trends are still under clear downward pressure Yr/Yr. There is
no solid sign of trade flows returning to an expansion path any time
soon for the UK. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="6"> UK Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td> May-09</td>
<td> Apr-09</td>
<td> 3M</td>
<td> 6M</td>
<td> 12M</td>
</tr>
<tr class="grey3">
<td class="firstcol">Balance*</td>
<td>- 	&#163; 	&#163;6.26</td>
<td>- 	&#163; 	&#163; 7.14</td>
<td>- 	&#163; 	&#163;6.62</td>
<td>- 	&#163; 	&#163; 6.89</td>
<td>- 	&#163; 	&#163; 7.34</td>
</tr>
<tr class="grey2">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">All Exp</td>
<td>-0.8%</td>
<td>-1.5%</td>
<td> -12.3%</td>
<td> -13.7%</td>
<td>-14.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital gds</td>
<td>-2.8%</td>
<td>-8.0%</td>
<td>-34.3%</td>
<td>-28.1%</td>
<td>-16.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Road Vehicles</td>
<td>14.5%</td>
<td>-8.3%</td>
<td> -10.6%</td>
<td>-39.8%</td>
<td>-35.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Basic Materials</td>
<td>-22.2%</td>
<td>11.6%</td>
<td>-33.3%</td>
<td> -3.6%</td>
<td>-44.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food Feed Bev &amp; Tbco</td>
<td>-0.6%</td>
<td>4.2%</td>
<td>11.9%</td>
<td> 17.5%</td>
<td>9.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">All IMP</td>
<td>-4.0%</td>
<td>1.5%</td>
<td> -16.1%</td>
<td>-20.1%</td>
<td>-15.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital gds</td>
<td>-7.5%</td>
<td>-0.7%</td>
<td>-42.6%</td>
<td>-37.1%</td>
<td>-19.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Road Vehicles</td>
<td>5.5%</td>
<td>-5.6%</td>
<td> -9.4%</td>
<td> -22.5%</td>
<td>-38.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Basic Materials</td>
<td>-2.0%</td>
<td>-2.0%</td>
<td> -16.5%</td>
<td>-39.8%</td>
<td>-36.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food Feed Bev &amp; Tbco</td>
<td>-2.1%</td>
<td>5.5%</td>
<td> 8.2%</td>
<td>5.7%</td>
<td>9.3%</td>
</tr>
<tr class="grey1">
<td colspan="6"> *Stg Blns; mo or period
average</td>
</tr>
</tbody>
</table>
</body></html>

The UK trade balance shrank to 6.26bln sterling in May from 7.14bln in April. Exports edged lower, while imports fell by 4% in May. Export and import trends do not show very dramatic signs of change. Exports are declining by a bit [...]

UK Trade Picture: Better In Month But In Flux

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709e.jpg" width="353">
The consumer continued to deleverage this spring. The Federal Reserve reported late yesterday that consumer credit outstanding during May fell for the fourth straight month and for the eighth month since last summer. The $3.3B decline was the shallowest of the unprecedented streak, but it followed huge double-digit drops during the prior three months. The decline in credit usage has been just one factor behind the recent retrenchment in retail spending though the May drop was short of expectations for a $7.1B decline.
Usage of revolving credit fell a sharp $2.9B during May following an even sharper decline of $8.7B during April. The latest was the eighth decline in as many months and it lowered usage by 3.6% versus one year ago. Non-revolving credit (autos &amp; other consumer durables), which accounts for nearly two-thirds of the total, ticked lower by $0.4B in May but the decline was quite a bit shallower than during the prior two months. Compared to the decline in revolving credit usage, the drop here has been less dramatic. The 0.7% y/y shortfall compares to a 6.8% drop after the 1990-91 recession but it is similar to the pullbacks during 1975 and even the &quot;credit crunch&quot; recession of 1980.
These figures are the major input to the Fed&#39;s quarterly Flow of Funds accounts for the household sector.
Credit data are available in Haver&#39;s USECON database. The Flow of Funds data are in Haver&#39;s FFUNDS database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709f.jpg" width="353">
Commercial real estate is the topic of today&#39;s testimony by Jon D. Greenlee, Associate Director, Division of Banking Supervision and Regulation at the Federal Reserve and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/greenlee20090709a.htm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Credit (m/m Chg, SAAR)</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&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-3.3B</td>
<td>&nbsp;$-16.5B</td>
<td>-1.8%</td>
<td>1.7%</td>
<td>5.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-2.9B</td>
<td>$-8.7B</td>
<td>-3.6%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-0.4B</td>
<td>$-7.8B</td>
<td>-0.7%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
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The consumer continued to deleverage this spring. The Federal Reserve reported late yesterday that consumer credit outstanding during May fell for the fourth straight month and for the eighth month since last summer. The $3.3B decline [...]

Consumer Credit Usage Falls For An Unprecedented Fourth Straight Month

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709c.jpg">
The current recession started over eighteen months ago and roughly eight billion dollars are being paid each month in unemployment benefits under state programs. For the jobless who have exhausted their unemployment benefits, recent discussion in Washington of extending the duration of benefits may come too late. For those receiving benefits, the news is welcome in this tough job environment. Data in Haver&#39;s USECON database focuses on the magnitude of the labor market difficulties, not only by dollars paid and the duration of unemployment but by which industries and states have been most affected.
The average duration of unemployment recently has been running 15.7 weeks. That is up by one full week from the beginning of the year and, given the severity of this recession, it likely will rise further. During the severe recessions of 1973-75 and 1981-82, the peaks in average duration were above 17 weeks. Notable this cycle has been the jump in the benefit exhaustion rate to a record 49.2%. (The exhaustion rate is the percent of claimants who collect all of their unemployment.) Past cycle highs were nearer to 40%. As this recession has now lasted so long, the higher rate is no surprise. The states with the higher benefit exhaustion rates include New Jersey (57.3%), California (55.5%), Massachusetts (48.8%) and New York (46.5%). (These figures are available in Haver&#39;s REGIONAL database.)<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709d.jpg">
Also under current discussion is raising the level of weekly dollars paid in insurance. The current average of $315.71 is up 6.2% from last year and up from an average $212.13 ten years ago. Adjusted for inflation using the CPI, benefits have risen 18% over those ten years helped by the recent decline in oil prices.
The industry breakout of continued unemployment claims indicates that roughly one-third of all continuing unemployment insurance benefits are being collected by workers in the manufacturing (20.3%) and construction (13.6%) industries. The factory sector&#39;s share of all claims being paid is up to 20% from 13% early last year. The administration &amp; support sectors follow with 10.0% of workers collecting, but that rate has been stable since 2005. The retail trade sector follows with a steady 8.0% collecting while 5.4% of workers in the professional/scientific and tech services area collect. Surprisingly, perhaps, workers in the health care &amp; social services industry account for 4.7% of those collecting, but that is down from an 8.0% 2007 peak. Finally, 3.0% of workers in the finance &amp; insurance industries collect but that is down from a 4.8% share late in 2007.
The elasticity of the unemployment rate with respect to benefits from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/working-papers//2008/wp08-15.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/@W5/@W507/@W507.HTM">Unemployment Insurance Benefits</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Average Duration (Weeks)</td>
<td>15.68</td>
<td>15.21</td>
<td>15.18</td>
<td>15.19</td>
<td>15.14</td>
<td>15.38</td>
</tr>
<tr>
<td class="firstcol">Exhaustion Rate (%)</td>
<td>49.23</td>
<td>47.06</td>
<td>36.80</td>
<td>37.84</td>
<td>35.22</td>
<td>35.42</td>
</tr>
</tbody>
</table>
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The current recession started over eighteen months ago and roughly eight billion dollars are being paid each month in unemployment benefits under state programs. For the jobless who have exhausted their unemployment benefits, recent [...]

U.S. Pays $8 Billion In Unemployment Benefits

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<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709a.jpg" width="353">
The labor market may have given another sign of improvement in the U.S. economy. Initial claims for unemployment insurance fell a surprisingly sharp 52,000 last week to 565,000 after a slightly revised 13,000 decline during the prior week. The latest level was off from the March peak of 674,000 and it was the lowest level since mid-January. The four-week average of claims, which smoothes out some of the volatility in the weekly numbers, also fell to 606,000. The latest weekly level was quite a bit lower than Consensus expectations for 610,000.
The Labor Department indicated that the largest increases in initial claims for the week ending June 27 were in New Jersey (+7,876), Massachusetts (+4,730), Kansas (+4,469), Kentucky (+3,614), and New York (+3,019), while the largest decreases were in Florida (-12,493), Illinois (-5,321), Pennsylvania (-3,949), California (-2,919), and Tennessee (-2,743).
Continuing claims for unemployment insurance jumped 159,000 to a new record high, though these figures do lag the initial claims by one week. Continuing claims provide an indication of workers&#39; ability to find employment. At 6,883,000 claims were more than double the year ago level. The four-week average of continuing claims also touched a new record high. The series dates back to 1966.<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709b.jpg" width="353">
The insured rate of unemployment inched up just slightly to 5.1%, essentially where it has been for the last eight weeks. It was, however, the highest rate since 1983. 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 June 20 were in Michigan (6.8 percent), Puerto Rico (6.8), Oregon (6.7), Pennsylvania (6.4), Nevada (6.2), Wisconsin (5.7), California (5.3), Illinois (5.3), North Carolina (5.3), and South Carolina (5.3).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Federal Reserve&#39;s Initiatives to Support Minority-Owned Institutions is the title of today&#39;s speech by Fed Governor Elizabeth A. Duke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/duke20090709a.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">07/04/09</th>
<th scope="col">06/27/09</th>
<th scope="col">06/20/09</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>
<td class="firstcol">Initial Claims</td>
<td>565</td>
<td>617</td>
<td>630</td>
<td>54.0%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,883</td>
<td>6,724</td>
<td>113.9%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
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The labor market may have given another sign of improvement in the U.S. economy. Initial claims for unemployment insurance fell a surprisingly sharp 52,000 last week to 565,000 after a slightly revised 13,000 decline during the prior [...]

U.S. Initial Claims For Unemployment Insurance Fall Sharply But Continuing Claims Reach A New Record

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709c.jpg" align="left" border="0">
The current recession started over eighteen months ago and roughly
eight billion dollars are being paid each month in unemployment
benefits under state programs. For the jobless who have exhausted their
unemployment benefits, recent discussion in Washington of extending the
duration of benefits may come too late. For those receiving benefits,
the news is welcome in this tough job environment. Data in Haver's USECON
database focuses on the magnitude of the labor market difficulties, not
only by dollars paid and the duration of unemployment but by which
industries and states have been most affected.
The average duration of unemployment recently has been running 15.7
weeks. That is up by one full week from the beginning of the year and,
given the severity of this recession, it likely will rise further.
During the severe recessions of 1973-75 and 1981-82, the peaks in
average duration were above 17 weeks. Notable this cycle has been the
jump in the benefit exhaustion rate to a record 49.2%. (The exhaustion
rate is the percent of claimants who collect all of their
unemployment.) Past cycle highs were nearer to 40%. As this recession
has now lasted so long, the higher rate is no surprise. The states with
the higher benefit exhaustion rates include New Jersey (57.3%),
California (55.5%), Massachusetts (48.8%) and New York (46.5%). (These
figures are available in Haver's REGIONAL database.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709d.jpg" align="right" border="0">
Also under current discussion is raising the level of weekly dollars
paid in insurance. The current average of $315.71 is up 6.2% from last
year and up from an average $212.13 ten years ago. Adjusted for
inflation using the CPI, benefits have risen 18% over those ten years
helped by the recent decline in oil prices.
The industry breakout of continued unemployment claims indicates
that roughly one-third of all continuing unemployment insurance
benefits are being collected by workers in the manufacturing (20.3%)
and construction (13.6%) industries. The factory sector's share of all
claims being paid is up to 20% from 13% early last year. The
administration &amp; support sectors follow with 10.0% of workers
collecting, but that rate has been stable since 2005. The retail trade
sector follows with a steady 8.0% collecting while 5.4% of workers in
the professional/scientific and tech services area collect.
Surprisingly, perhaps, workers in the health care &amp; social services
industry account for 4.7% of those collecting, but that is down from an
8.0% 2007 peak. Finally, 3.0% of workers in the finance &amp; insurance
industries collect but that is down from a 4.8% share late in 2007.
The elasticity of the unemployment rate with respect to benefits from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/working-papers//2008/wp08-15.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/@W5/@W507/@W507.HTM">Unemployment Insurance Benefits</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Average Duration (Weeks)</td>
<td>15.68</td>
<td>15.21</td>
<td>15.18</td>
<td>15.19</td>
<td>15.14</td>
<td>15.38</td>
</tr>
<tr>
<td class="firstcol">Exhaustion Rate (%)</td>
<td>49.23</td>
<td>47.06</td>
<td>36.80</td>
<td>37.84</td>
<td>35.22</td>
<td>35.42</td>
</tr>
</tbody>
</table>
 U.S. Initial Claims For Unemployment Insurance Fall Sharply But Continuing Claims Reach A New Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 9, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709a.jpg" align="left" height="265" width="353">
The labor market may have given another sign of improvement in the
U.S. economy. Initial claims for unemployment insurance fell a
surprisingly sharp 52,000 last week to 565,000 after a slightly revised
13,000 decline during the prior week. The latest level was off from the
March peak of 674,000 and it was the lowest level since mid-January.
The four-week average of claims, which smoothes out some of the
volatility in the weekly numbers, also fell to 606,000. The latest
weekly level was quite a bit lower than Consensus expectations for
610,000.
The Labor Department indicated that the largest increases in initial
claims for the week ending June 27 were in New Jersey (+7,876),
Massachusetts (+4,730), Kansas (+4,469), Kentucky (+3,614), and New
York (+3,019), while the largest decreases were in Florida (-12,493),
Illinois (-5,321), Pennsylvania (-3,949), California (-2,919), and
Tennessee (-2,743).
Continuing claims for unemployment insurance jumped 159,000 to a new
record high, though these figures do lag the initial claims by one
week. Continuing claims provide an indication of workers' ability to
find employment. At 6,883,000 claims were more than double the year ago level. The four-week average of continuing claims also touched a new record high. The series dates back to 1966.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709b.jpg" align="right" height="265" width="353">
The insured rate of unemployment inched up just slightly to 5.1%,
essentially where it has been for the last eight weeks. It was,
however, the highest rate since 1983. 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 June 20
were in Michigan (6.8 percent), Puerto Rico (6.8), Oregon (6.7),
Pennsylvania (6.4), Nevada (6.2), Wisconsin (5.7), California (5.3),
Illinois (5.3), North Carolina (5.3), and South Carolina (5.3).
The unemployment insurance claims data is available in Haver's WEEKLY database and the state data is in the REGIONW database.
Federal Reserve's Initiatives to Support Minority-Owned Institutions is the title of today's speech by Fed Governor Elizabeth A. Duke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/duke20090709a.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">07/04/09</th>
<th scope="col">06/27/09</th>
<th scope="col">06/20/09</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>
<td class="firstcol">Initial Claims</td>
<td>565</td>
<td>617</td>
<td>630</td>
<td>54.0%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,883</td>
<td>6,724</td>
<td>113.9%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
 Consumer Credit Usage Falls For An Unprecedented Fourth Straight Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 9, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709e.jpg" align="left" border="0" height="265" width="353">
The consumer continued to deleverage this spring. The Federal
Reserve reported late yesterday that consumer credit outstanding during
May fell for the fourth straight month and for the eighth month since
last summer. The $3.3B decline was the shallowest of the unprecedented
streak, but it followed huge double-digit drops during the prior three
months. The decline in credit usage has been just one factor behind the
recent retrenchment in retail spending though the May drop was short of
expectations for a $7.1B decline.
Usage of revolving credit fell a sharp $2.9B during May following an
even sharper decline of $8.7B during April. The latest was the eighth
decline in as many months and it lowered usage by 3.6% versus one year
ago. Non-revolving credit (autos &amp; other consumer durables), which
accounts for nearly two-thirds of the total, ticked lower by $0.4B in
May but the decline was quite a bit shallower than during the prior two
months. Compared to the decline in revolving credit usage, the drop
here has been less dramatic. The 0.7% y/y shortfall compares to a 6.8%
drop after the 1990-91 recession but it is similar to the pullbacks
during 1975 and even the "credit crunch" recession of 1980.
These figures are the major input to the Fed's quarterly Flow of Funds accounts for the household sector.
Credit data are available in Haver's USECON database. The Flow of Funds data are in Haver's FFUNDS database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709f.jpg" align="right" border="0" height="265" width="353">
Commercial real estate is the topic of today's testimony by
Jon D. Greenlee, Associate Director, Division of Banking Supervision
and Regulation at the Federal Reserve and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/greenlee20090709a.htm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Credit (m/m Chg, SAAR)</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&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-3.3B</td>
<td>&nbsp;$-16.5B</td>
<td>-1.8%</td>
<td>1.7%</td>
<td>5.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-2.9B</td>
<td>$-8.7B</td>
<td>-3.6%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-0.4B</td>
<td>$-7.8B</td>
<td>-0.7%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
 UK Trade Picture: Better In Month But In Flux 
by <a href="/comment/Brusca.html">Robert Brusca</a> July 9, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709g.jpg" align="left" border="0">
The UK trade balance shrank to 6.26bln sterling in May from 7.14bln
in April. Exports edged lower, while imports fell by 4% in May. Export
and import trends do not show very dramatic signs of change. Exports
are declining by a bit less than imports and their rate of decline is
more persistently losing that negative edge, but that remains a very
gradual process. For imports the declines over various horizons are
still large. The pace of decline over three months is less than for six
months; the drop over six months shows acceleration in the drop
compared to 12 months. Import trends are still a chaotic. 
Exports and imports of road vehicles have picked up, perhaps in
response to various vehicle purchase plans in effect in the UK and
around Europe. Vehicle sales have picked up because of such incentives. 
Trends for capital goods shipments are worsening for exports and for imports over 12- 6- and 3-months. 
For other groups of exports and imports the patterns are still too varying to categorize. 
German trade reported a bounce in exports with imports still falling
in May. German orders (especially foreign orders) and industrial output
have been on the mend in other recent reports. Still, it is too soon to
throw the UK figures in with that lot and call them positive. The UK
trade accounts still have divergent trends and the improvement in trade
has given way to deterioration and then to more improvement. It is too
much in flux to be sure of. Both export and import trends are still
under clear downward pressure Yr/Yr. There is no solid sign of trade
flows returning to an expansion path any time soon for the UK. 

UK Trade trends for goods<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>

</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="grey3">
<td class="firstcol">Balance*</td>
<td>-££ 6.26</td>
<td>-££ 7.14</td>
<td>-££ 6.62</td>
<td>-££ 6.89</td>
<td>-££ 7.34</td>
</tr>
<tr class="grey2">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">All Exp</td>
<td>-0.8%</td>
<td>-1.5%</td>
<td>-12.3%</td>
<td>-13.7%</td>
<td>-14.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital gds</td>
<td>-2.8%</td>
<td>-8.0%</td>
<td>-34.3%</td>
<td>-28.1%</td>
<td>-16.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Road Vehicles</td>
<td>14.5%</td>
<td>-8.3%</td>
<td>-10.6%</td>
<td>-39.8%</td>
<td>-35.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Basic Materials</td>
<td>-22.2%</td>
<td>11.6%</td>
<td>-33.3%</td>
<td>-3.6%</td>
<td>-44.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food Feed Bev &amp; Tbco</td>
<td>-0.6%</td>
<td>4.2%</td>
<td>11.9%</td>
<td>17.5%</td>
<td>9.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">All IMP</td>
<td>-4.0%</td>
<td>1.5%</td>
<td>-16.1%</td>
<td>-20.1%</td>
<td>-15.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital gds</td>
<td>-7.5%</td>
<td>-0.7%</td>
<td>-42.6%</td>
<td>-37.1%</td>
<td>-19.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Road Vehicles</td>
<td>5.5%</td>
<td>-5.6%</td>
<td>-9.4%</td>
<td>-22.5%</td>
<td>-38.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Basic Materials</td>
<td>-2.0%</td>
<td>-2.0%</td>
<td>-16.5%</td>
<td>-39.8%</td>
<td>-36.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food Feed Bev &amp; Tbco</td>
<td>-2.1%</td>
<td>5.5%</td>
<td>8.2%</td>
<td>5.7%</td>
<td>9.3%</td>
</tr>
<tr class="grey1">
<td colspan="6">*Stg Blns; mo or period average</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708c.jpg" align="left" border="0" height="265" width="353">
German industrial production rose by 3.7% in May from April.
It has risen in two of the last three-months. IP is accelerating,
rising at a 5.4% annual rate over three-months compared to a rate of
minus 22.2% over six-months and minus 18.1% over twelve-months. Still in the quarter to date IP is
contracting at a pace of 6.1%. Two months into the second quarter,
despite the stirring in the industrial sector, IP is still a
subtraction from growth. 
Construction is showing a steady acceleration and positive
growth rates over 3-months, 6-months and 12-months. Manufacturing is up
at a strong 10% annual rate over three-months but still falling at a
6.6% pace in the current quarter.
Industrial orders are rising on a much more explosive path
over this period. But orders are a precursor to increases in output.
Among large EMU countries Spain and the UK also have reported
industrial output measures for May. For each of them the May result for
MFG output was negative. But MFG output in Spain and in the UK had
risen in April. In the UK
output is falling at a 0.9% pace in Q2. In Spain output is dropping at
a 3% pace in Q2. 
These trends have the trappings of a bottoming in progress but
not here yet. The German chemicals industry reported that it had made a
recession bottom already. For Germany , as a whole, capital goods
orders are leading the way out. In May these orders surged by 8.3%
compared to April, but that was after a 6.9% plunge in April output
itself. Intermediate goods output was up by 4.3% in May. The consumer
is not a major factor in the rebound. Output from consumer goods
industries is up by 0.6% in May, the second monthly rise in a row, but
it is still falling at a pace of 5.4% in Q2. Capital goods output is
declining at an 11.5% pace in Q2 and intermediate goods output is
falling at a 2.1% pace. There
are signs of stirring but no evidence that the real positive thrust is
here yet.
Overall there is evidence of the drop in output and the
decline in GDP slowing or of a bottom forming and tentative signs of a
rise from the lows being put in place for industrial output. The UK reported consumer sentiment
rose in June as another sign of optimism in Europe . The G-8 is getting
ready to meet and tell us that we have not turned the corner yet. The
message from that is for countries not to reverse the stimulus that is
in place but a further subtle message is not to commence any new
stimulus either.




<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7">Total German IP </th>
<th>Quarter</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>3.7%</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>5.4%</td>
<td>-22.2%</td>
<td>-18.1%</td>
<td>-8.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.6%</td>
<td>0.5%</td>
<td>-1.0%</td>
<td>0.4%</td>
<td>-5.7%</td>
<td>-5.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>8.3%</td>
<td>-6.9%</td>
<td>3.7%</td>
<td>19.1%</td>
<td>-31.2%</td>
<td>-22.6%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">Intermed</td>
<td>4.3%</td>
<td>-1.0%</td>
<td>-1.7%</td>
<td>6.4%</td>
<td>-23.5%</td>
<td>-21.8%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</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">Construction</td>
<td>-3.2%</td>
<td>0.0%</td>
<td>6.0%</td>
<td>11.2%</td>
<td>5.0%</td>
<td>1.3%</td>
<td>14.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>4.9%</td>
<td>-3.1%</td>
<td>0.8%</td>
<td>10.1%</td>
<td>-24.6%</td>
<td>-19.5%</td>
<td>-6.6%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>4.4%</td>
<td>0.1%</td>
<td>0.0</td>
<td>38.4%</td>
<td>-17.4%</td>
<td>-28.8%</td>
<td>19.4%</td>
</tr>
</tbody>
</table>
</body></html>

German industrial production rose by 3.7% in May from April. It has risen in two of the last three-months. IP is accelerating, rising at a 5.4% annual rate over three-months compared to a rate of minus 22.2% over six-months and minus [...]

German IP Follows Orders Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708a.jpg" width="353">
The Mortgage Bankers Association latest report on mortgage applications provided further evidence that home purchases are recovering but that the refinancing boom is most assuredly over. Overall, mortgage applications recovered 10.9% last week and recovered most of the prior week&#39;s decline. However, applications nevertheless remained near the lowest level since last November.
The interest in home buying has improved, in part due to distress sales. Purchase applications rose 6.7% last week to the highest level since they spiked in early April. Since the early-February low, purchase application have risen 21.1% as new and existing home sales have recovered.
The interest in refinancing an existing mortgage, conversely, has virtually dried up. Applications to refinance did rise 15.2% last week. However, that made up just half of the prior week&#39;s decline and left them at the lowest level since November. Since their peak in January, refinance applications have fallen by three quarters.
Since the beginning of this year, fixed-rate mortgage applications have fallen by slightly more than one half while adjustable-rate mortgages have doubled.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708b.jpg" width="353">
The end of the refinancing boom can be traced, in part, to the rise in interest rates. The effective interest rate on a conventional 15-year mortgage slipped last week to 5.09% but that remained up from the April low of 4.69%. For a 30-year mortgage, the rate also slipped last week to 5.57% but remained up from the 4.81% low. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Up also were adjustable 1-Year mortgage rates which remained stable at 6.61% versus the low near 6.0% during January. Nevertheless, the rate remained down from the 7.07% peak reached last fall.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
IMF Moves to Boost Resources to Combat Global Crisis from the International Monetary can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW070609A.htm"> 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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/03/09</th>
<th scope="col">06/26/09</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>493.1</td>
<td>444.8</td>
<td>-4.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>285.6</td>
<td>267.7</td>
<td>-21.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,707.1</td>
<td>1,482.2</td>
<td>23.8%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Mortgage Bankers Association latest report on mortgage applications provided further evidence that home purchases are recovering but that the refinancing boom is most assuredly over. Overall, mortgage applications recovered 10.9% [...]

U.S. Mortgage Applications For Purchase Rise But Applications To Refinance Remain Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708a.jpg" align="left" border="0" height="265" width="353">
The Mortgage Bankers Association latest report on mortgage
applications provided further evidence that home purchases are
recovering but that the refinancing boom is most assuredly over.
Overall, mortgage applications recovered 10.9% last week and recovered
most of the prior week's decline. However, applications nevertheless
remained near the lowest level since last November.
The interest in home buying has improved, in part due to
distress sales. Purchase applications rose 6.7% last week to the
highest level since they spiked in early April. Since the
early-February low, purchase application have risen 21.1% as new and
existing home sales have recovered.
The interest in refinancing an existing mortgage, conversely,
has virtually dried up. Applications to refinance did rise 15.2% last
week. However, that made up just half of the prior week's decline and
left them at the lowest level since November. Since their peak in
January, refinance applications have fallen by three quarters.
Since the beginning of this year, fixed-rate mortgage
applications have fallen by slightly more than one half while
adjustable-rate mortgages have doubled.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708b.jpg" align="right" border="0" height="265" width="353">
The end of the refinancing boom can be traced, in part, to the
rise in interest rates. The effective interest rate on a conventional
15-year mortgage slipped last week to 5.09% but that remained up from
the April low of 4.69%. For a 30-year mortgage, the rate also slipped
last week to 5.57% but remained up from the 4.81% low. Interest rates
on 15- and 30-year mortgages are closely correlated (&gt;90%) with
the rate on 10-year Treasury securities. Up also were adjustable 1-Year
mortgage rates which remained stable at 6.61% versus the low near 6.0%
during January. Nevertheless, the rate remained down from the 7.07%
peak reached last fall.
During the last ten years there has been a (negative) 79%
correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage. Moreover, during the
last ten years there has been a 61% correlation between the y/y change
in purchase applications and the change in new plus existing single
family home sales.
The figures for weekly mortgage applications are available in
Haver's SURVEYW database.
The Mortgage Bankers Association surveys between 20 to 35 of
the top lenders in the U.S. housing industry to derive its refinance,
purchase and market indexes. The weekly survey covers roughly 50% of
all U.S. residential mortgage applications processed each week by
mortgage banks, commercial banks and thrifts. Visit the Mortgage
Bankers Association site <a href="http://www.mbaa.org">here</a>.
IMF Moves to Boost Resources to Combat Global Crisis
from the International Monetary can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW070609A.htm">
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/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/03/09</th>
<th scope="col">06/26/09</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>493.1</td>
<td>444.8</td>
<td>-4.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>285.6</td>
<td>267.7</td>
<td>-21.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,707.1</td>
<td>1,482.2</td>
<td>23.8%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
 German IP Follows Orders
Higher 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> July 8, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708c.jpg" align="left" border="0" height="265" width="353">
German industrial production rose by 3.7% in May from April.
It has risen in two of the last three-months. IP is accelerating,
rising at a 5.4% annual rate over three-months compared to a rate of
minus 22.2% over six-months and minus 18.1% over twelve-months. Still in the quarter to date IP is
contracting at a pace of 6.1%. Two months into the second quarter,
despite the stirring in the industrial sector, IP is still a
subtraction from growth. 
Construction is showing a steady acceleration and positive
growth rates over 3-months, 6-months and 12-months. Manufacturing is up
at a strong 10% annual rate over three-months but still falling at a
6.6% pace in the current quarter.
Industrial orders are rising on a much more explosive path
over this period. But orders are a precursor to increases in output.
Among large EMU countries Spain and the UK also have reported
industrial output measures for May. For each of them the May result for
MFG output was negative. But MFG output in Spain and in the UK had
risen in April. In the UK
output is falling at a 0.9% pace in Q2. In Spain output is dropping at
a 3% pace in Q2. 
These trends have the trappings of a bottoming in progress but
not here yet. The German chemicals industry reported that it had made a
recession bottom already. For Germany , as a whole, capital goods
orders are leading the way out. In May these orders surged by 8.3%
compared to April, but that was after a 6.9% plunge in April output
itself. Intermediate goods output was up by 4.3% in May. The consumer
is not a major factor in the rebound. Output from consumer goods
industries is up by 0.6% in May, the second monthly rise in a row, but
it is still falling at a pace of 5.4% in Q2. Capital goods output is
declining at an 11.5% pace in Q2 and intermediate goods output is
falling at a 2.1% pace. There
are signs of stirring but no evidence that the real positive thrust is
here yet.
Overall there is evidence of the drop in output and the
decline in GDP slowing or of a bottom forming and tentative signs of a
rise from the lows being put in place for industrial output. The UK reported consumer sentiment
rose in June as another sign of optimism in Europe . The G-8 is getting
ready to meet and tell us that we have not turned the corner yet. The
message from that is for countries not to reverse the stimulus that is
in place but a further subtle message is not to commence any new
stimulus either.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7">Total German IP </th>
<th>Quarter</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>3.7%</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>5.4%</td>
<td>-22.2%</td>
<td>-18.1%</td>
<td>-8.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.6%</td>
<td>0.5%</td>
<td>-1.0%</td>
<td>0.4%</td>
<td>-5.7%</td>
<td>-5.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>8.3%</td>
<td>-6.9%</td>
<td>3.7%</td>
<td>19.1%</td>
<td>-31.2%</td>
<td>-22.6%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">Intermed</td>
<td>4.3%</td>
<td>-1.0%</td>
<td>-1.7%</td>
<td>6.4%</td>
<td>-23.5%</td>
<td>-21.8%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</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">Construction</td>
<td>-3.2%</td>
<td>0.0%</td>
<td>6.0%</td>
<td>11.2%</td>
<td>5.0%</td>
<td>1.3%</td>
<td>14.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>4.9%</td>
<td>-3.1%</td>
<td>0.8%</td>
<td>10.1%</td>
<td>-24.6%</td>
<td>-19.5%</td>
<td>-6.6%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>4.4%</td>
<td>0.1%</td>
<td>0.0</td>
<td>38.4%</td>
<td>-17.4%</td>
<td>-28.8%</td>
<td>19.4%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Mortgage Applications ForPurchase Rise But Applications To Refinance Remain Low

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

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Winnie Tapasanun

260116R23.jpg

260116S23.jpg

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

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

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

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

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

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

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

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

260116T23.jpg

260116U23.jpg

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

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

260116E.jpg

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

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

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

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

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

**The growth consensus for 2026** 
Consensus growth forecasts for 2026 have continued to firm over the past six months, with upward revisions most pronounced in economies that are more directly exposed to the global AI investment cycle. Taiwan stands out, reflecting its central role in advanced semiconductor manufacturing and the spillovers from sustained AI-related capex across the global tech supply chain. The US has also seen a sizeable upgrade, consistent with strong domestic investment in AI infrastructure and data-centre capacity, alongside resilient demand for high-value tech services. Elsewhere in Asia, upgrades to South Korea and, to a lesser extent, China and India point to a broader regional benefit from the AI-driven electronics and capital-goods cycle, even as underlying macro conditions remain mixed. Canada has also seen modest upward revisions, likely reflecting its close integration with US investment trends. By contrast, revisions across much of Europe and Japan have been more muted, while forecasts for Russia remain under downward pressure.

260115Z1.jpg

**The next steps for central bank policy** 
Based on responses to the special questions in the latest Blue Chip survey, the chart highlights how uncertain panelists remain about the precise timing of the next policy move, even where there is broad agreement on direction. Expectations for both the Fed and the Bank of England are now loosely centred on March 2026 as the most likely window for the next easing step, but the spread of responses points to limited conviction and a high sensitivity to incoming data. By contrast, panelists continue to see the ECB as largely through its easing cycle, with a clear majority expecting any further move only later, if at all. The Bank of Japan remains the clear outlier: while further tightening is still the central expectation, views are split on timing, with panelists divided between a March move and a hike pushed beyond April 2026—highlighting ongoing uncertainty over the durability of domestic inflation and wage dynamics.

260115Z2.jpg

**The UK economy and BoE policy** 
While Blue Chip panelists remain divided on the precise timing of the Bank of England’s next policy cut, the latest run of UK data is tilting market expectations toward an earlier move. Economic releases have increasingly fallen short of expectations, a pattern that has coincided with a steady decline in short-dated gilt yields. The negative surprise profile reflects a combination of weak household demand and softer labour-market indicators. This has generated downside momentum in the data, reinforcing the case—at least from a market perspective—for earlier or deeper policy easing.

260115Z3.jpg

**The impact of Artificial Intelligence**
Responses to the special questions in the latest Blue Chip survey also suggest that panelists are divided over the timing of AI’s macroeconomic impact in the US. A sizeable share already reports seeing noticeable effects, consistent with the rapid pace of AI-related investment and adoption over the past year. At the same time, a similarly large group expects AI’s impact to become more evident only over the next one to three years, implying a belief that productivity and growth effects will materialise with a lag. These views are notable given that a majority of panelists continue to judge anticipated AI-related gains as being overstated in financial markets, underscoring the risk of disappointment—and potential equity market volatility—if realised outcomes fail to match elevated expectations.

260115Z4.jpg

**US business formation and productivity growth**
The chart points to a renewed pick-up in US productivity growth alongside a marked step-up in business applications, a combination that has naturally fuelled interest in the role of AI. The acceleration in output per hour over the past year coincides with a surge in corporate formations, potentially reflecting both heightened investment in new technologies and the emergence of new, AI-enabled business models. That said, productivity growth has historically been highly cyclical, often strengthening late in the cycle or during periods of labour hoarding and cost discipline, before fading again. As such, while AI may be contributing at the margin, it remains too early to conclude that the recent improvement marks a durable, technology-driven shift rather than another cyclical upswing.

260115Z5.jpg

**China’s export growth**
This week’s China trade data revealed that its export growth has continued to rotate away from the US and toward Europe and ASEAN, a pattern that has become more pronounced over the past year. While exports to the US have fallen sharply on a year-on-year basis, shipments to both Europe and ASEAN have held up markedly better, and in recent months have returned to positive growth. This divergence is consistent with the tightening of US trade policy toward China, including higher tariffs, expanded export controls and broader efforts to “de-risk” supply chains. By contrast, trade with Europe and ASEAN appears to be benefiting from trade diversion and re-routing, as Chinese firms redirect exports toward markets where barriers remain lower and supply-chain integration is deeper.

260115Z6.jpg

The global backdrop remains unsettled, reflected in rising gold prices amid geopolitical tensions—most recently around Venezuela—and renewed political noise, including questions over Federal Reserve independence. At the same time, however, many major equity indices remain at or close to all-time highs, buoyed by optimism around AI and reinforced by a run of relatively benign US inflation readings. Against this mixed backdrop, the charts this week point to a global outlook that is becoming more differentiated rather than uniformly weaker. Blue Chip forecasts for 2026 growth have edged higher over the past six months, with upgrades concentrated in economies most exposed to the AI investment cycle, notably the US and parts of Asia (chart 1). Central bank expectations remain fluid: while panelists broadly anticipate easing by the Fed and Bank of England, conviction around timing is limited, and the Bank of Japan remains an outlier with further tightening still expected (chart 2). In the UK, that uncertainty sits alongside a deteriorating data flow, with negative economic surprises increasingly tilting market expectations toward an earlier BoE rate cut (chart 3). Turning to the US, special questions highlight a divide over whether AI is already having a noticeable macro impact or whether its effects will emerge more gradually, a tension that mirrors concerns about over-optimism in financial markets (chart4). That debate is echoed in the recent pick-up in US productivity growth and the step-change in business formation—developments that may reflect AI-related dynamics but which also warrant caution given the historically cyclical nature of productivity (chart 5). Finally, China’s trade data point to a continued re-orientation of export growth away from the US and toward Europe and ASEAN, consistent with evolving US trade policy and broader supply-chain realignment (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2mhM227WWeJJ6kRv7sJMiE?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

260115J.jpg

260115K.jpg

The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October to include with the November report. The charts above have a gap in October, and the November figures are represented by a small dot.

Import prices have been remarkably stable in the past three years, as shown by the sideways movement in the level of the import price index (left chart). Focusing on percent changes (i.e. inflation rates) rather than the level of the index shows deflation in 2023 and early 2024 followed by higher prices more recently (right chart). Still, the net change in the past 12 months has totaled only 0.1% and the cumulative change in the past three years amounted to a decline of 0.4%.

A calm environment in the energy sector has helped to restrain import prices, as the price of crude oil showed little change in 2023 and 2024 and declined in 2025. Import prices excluding petroleum products have increased in recent years, but the changes have been modest: 0.9 in the past 12 months and 1.3% in the past three years.

The non-oil components of import prices have traced various patterns in recent years, but shifts have been largely offsetting. Prices of food and autos increased noticeably in 2023 and 2024, but they gave back much of those increases in 2025. Prices of capital goods were stable in 2023 and 2024, but they started to increase in 2025. Prices of consumer goods have been volatile, showing bursts of higher prices followed by discounting, leaving a modest net increase in the past three years.

The calm energy environment also seemed to play a role on the export side, as the industrial supply category showed little net change in prices over 2023 and 2024 before jumping in early 2025. Food prices followed a similar pattern, showing two years of restraint before moving higher in 2025. These two categories account for much of the upward movement in overall export prices in 2025. Prices of consumer goods also started to move higher in 2025 after little net change in the prior two years. Prices of capital goods and automobiles have traced reasonably steady upward paths.

Many observers might try to use the import component of this report to gain insight into the effect of tariffs on prices. That will be difficult because the figures from this report are pre-tariff; there will be no independent upward pressure on prices in this report because of tariffs. In fact, one should look for lower import prices in searching for a tariff effect. That is, if a foreign exporter were to absorb the tariff burden, that would be accomplished by reducing the pre-tariff price in order to keep the after-tariff price steady.

260115L.jpg

Some exporters to the US may have made such efforts. The nearby chart shows the month-to-month change in import prices in 2025, and May and June both showed lower prices. These months were especially important because they followed the announcement by President Trump of marked increases in tariffs in April. Also, some of the downward pressure occurred in components that would be sensitive to price (autos and consumer goods). Of course, May and June might be too soon after the announcement of draconian tariffs for foreign exporters to assess and change their pricing strategy.

The chart on monthly changes ends in September because the absence of an October reading prevents the calculation of the month-to-month changes for October and November. However, the two-month change from September to November is easily calculated, and the increase of 0.4% suggests little or no effort to absorb the burden of tariffs.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

- Import prices have changed little in the past three years.
- Export prices were stable in 2023-24, but moved higher in 2025.

Import & Export Prices: Generally Modest Changes

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The Empire State Manufacturing Index of General Business Conditions rose to a higher-than-expected 7.7 in January following a 17.2-drop to -3.7 in December, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 1.0 for January had been expected in the Action Economics Forecast Survey. The positive January figure indicated that the business activity in New York State expanded for the third time in four months; it was an improvement from -7.4 in January 2025 and a low of -29.7 in January 2024, though still below a high of 16.8 in November 2024. The percentage of respondents reporting an increase in general business conditions was 34.2% in January, up from 31.7% in December; the percentage reporting a decrease was 26.5%, down from December’s 35.4%. The latest survey was conducted between January 2 and January 9.

The headline index reflects the answer to a single question concerning the state of economic activity and is not calculated from the components. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index increased to 51.2 in January following a 4.2-point decline to the neutral-level 50.0 in December (the lowest level since September); it was slightly up from 50.7 in January 2025 and well above a low of 43.0 in January 2024. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index rose to 6.6 in January after a 10.6-point drop to -1.0 in December, marking the third m/m gain in orders in four months and a sharp improvement from a low of -30.7 in January 2024. The shipments index jumped to 16.3 in January, the highest level since November 2024, following a 16.5-point fall to -5.0 in December; it was well above a low of -21.7 in April 2024. The unfilled orders index improved to -8.2 in January after a 9.1-point decrease to -14.9 in December, indicating that unfilled orders contracted for the eighth straight month but at a less severe pace; the index reached a low of -24.2 in January 2024. The inventories index fell to -2.1 in January, the lowest level since September, after a 2.7-point decline to 4.0 in December, signaling the first inventory contraction since October. Meanwhile, the delivery times index increased to 0.0 in January from -5.9 in December, with 12.4% of respondents reporting longer delivery times and an identical 12.4% reporting shorter times, indicating that delivery times were unchanged.

On the labor front, the number of employees index fell to -9.0 in January after a 1.0-point increase to 7.5 in December, indicating that employment contracted for the first time since September and reached its lowest level since January 2024. The index remained well below a peak of 24.9 in February 2022. In January, only 7.9% of respondents reported an increase in employment while a higher 16.8% reported a decline. The average workweek index dropped to -5.4 in January from 2.5 in December, turning negative for the first time since October and hitting the lowest level since April 2025.

Inflation pressures eased in January but remained high. The prices paid index fell to 42.8 in January, the lowest level since March 2025, after a 5.9-point decrease to 44.2 in December. Although still well below a peak of 84.9 in April 2022, the index remained above a low of 25.9 in December 2024 and a low of 20.8 in December 2023. In January, 44.5% of respondents reported higher prices paid while only 1.7% reported lower prices paid. The prices received index fell to 14.4 in January, the lowest reading since January 2025, from 25.4 in December. The index was up from a low of 7.5 in December 2024 and a low of 7.7 in July 2023 but far below a high of 51.9 in March 2022. In January, 18.9% of respondents reported higher prices received while 4.4% reported lower prices received.

Firms remained fairly optimistic about the future business outlook in the latest survey. The index for future business conditions eased to 30.3 in January after rising to 33.5 in December, with 50.6% of respondents expecting business conditions to improve over the next six months. Future new orders edged down to 33.3 in January from 34.5 in December, while future shipments rose to 34.9—the highest level since March 2022—from December’s 30.7. Growth in future employment strengthened to 14.9, the highest reading since November 2024, from December’s 7.8. Capital spending plans remained positive for the third consecutive month in January, with the future capital expenditures index rising to 10.3 from December’s 6.9. Expected prices paid fell to 52.6 in January from 55.4 in December and expected prices received fell to 36.5 from 41.6, with both measures at their lowest levels since December 2024.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- General Business Conditions Index up 11.4 pts. to 7.7 in January.
- Positive: Shipments (16.3, highest since Nov. ’24) and new orders (6.6).
- Negative: Employment (-9.0, lowest since Jan. ’24), unfilled orders (-8.2), and inventories (-2.1, a four-month low).
- Prices paid at a 10-month-low 42.8 and prices received at a one-year-low 14.4.
- Firms fairly optimistic: Future Business Conditions Index down to a still-positive 30.3; future prices paid at a one-year-low 52.6.

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