Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723a.jpg" align="left" border="0" height="265" width="353">
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 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'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'
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 src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723b.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment remained at 4.7% which was
the lowest level since mid-April. During the last ten years, there has
been a 93% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.
The highest insured unemployment rates in the week ending July
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'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>
U.S. Existing Home Sales And
Prices Rise 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723c.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors reported that sales of
existing homes rose 3.6% from May to the highest level since
last October. Recent sales have been helped by a tax credit for
first-time home buyers. The latest increase to 4.89M (AR) units beat
Consensus expectations for sales of 4.85M homes. Total sales include
sales of condos and co-ops. Sales of existing single-family homes alone
increased 2.4% last month and they were up 6.7% from the January low.
Despite the recent gains, however, sales remained near the lowest level
since July 1997. (These data have a longer history than the total sales
series).
The recently enacted tax credit is for first-time home buyers
of either a new or a pre-owned home. The credit of up to $8,000 extends
through the rest of this year. The full details of the home-buyer tax
credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>
<blockquote>

Home affordability fell somewhat from its record high to the
lowest level this year. The decline was the result of the second
consecutive, 4%+ m/m increase in home prices to a median $181,800.
Nevertheless, affordability remained up by one-third from the year ago
level as home prices remained down 20% from the 2007 peak. The series
dates back to 1971.
</blockquote>

The number of unsold homes (condos &amp; single-family) on
the market fell again, posting a 0.7% decline during June. Year-to-year
inventories are down 14.9%. At the current sales rate there was a 9.4
months' supply on the market which was near the lowest since late-2007.
For single-family homes the inventory was unchanged m/m (-17.9% y/y).
At the current sales rate there was an 8.9 month's supply of homes on
the market, near the lowest since 2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723d.jpg" align="right" border="0" height="265" width="353">
The data on existing home sales, prices and affordability can
be found in Haver's USECON database. The regional
price, affordability and inventory data is available in the REALTOR
database.
What Do We Know (And Not Know) About Potential Output
from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/09/07/Basu.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">Existing
Home Sales (Thous)</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</td>
<td>4,890</td>
<td>4,720</td>
<td>-0.2%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>820</td>
<td>800</td>
<td>-4.7</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>1,090</td>
<td>-1.8</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,810</td>
<td>1,740</td>
<td>-3.7</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,160</td>
<td>1,090</td>
<td>11.5</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,320</td>
<td>4,220</td>
<td>0.2</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>181,800</td>
<td>174,700</td>
<td>-15.4</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</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 InsuranceTick Higher Last Week Yet Remain Off Peak

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090722a.jpg">
In its latest report, the Mortgage Bankers Association indicated that mortgage applications overall increased 2.8% but that was the weakest increase in the last three weeks. As a result, applications remained near the lowest level since last November.
Earlier indications of improved home buying activity faded this month. Purchase applications rose just 1.3% last week after the 9.4% decline during the prior period. For the month so far applications are down slightly after the 3.2% increase during June. Nevertheless, since the early-February low purchase applications have risen 14% as new and existing home sales have recovered.
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.
Though it ticked up in the latest week or two, the interest in refinancing an existing mortgage remained quite low. Applications to refinance rose 4.0% after even stronger increases during the prior two weeks. Despite these gains, however, refinancings for July so far are down 5.6% from June and near the lowest level since November. Since their peak in January, refinance applications have fallen by three-quarters.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090722b.jpg">
Since the beginning of this year, fixed-rate mortgage applications have fallen by slightly more than one-half while adjustable-rate mortgages have doubled. The number of conventional loans has fallen roughly two-thirds while gov&#39;t backed loans have fallen nearly 40%.
The end of the mortgage financing boom can be traced, in part, to the rise in interest rates. The effective interest rate on a conventional 15-year mortgage rose last week to 5.06% and for the month has averaged 5.00%, up from the April low of 4.69%. For a 30-year mortgage, the rate also rose last week to 5.55%. Though down slightly from June, rates were up from the 4.81% March low. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Rates on adjustable 1-Year mortgages averaged 6.55% this month versus the low near 6.0% during January. Nevertheless, the rate remained down from the 7.07% peak reached last fall.
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>.The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
Has Greater Globalization Made Forecasting Inflation More Difficult? from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2009/el0905.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/17/09</th>
<th scope="col">07/10/09</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>528.9</td>
<td>514.4</td>
<td>8.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>262.1</td>
<td>258.8</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>2,089.7</td>
<td>2,009.4</td>
<td>50.0%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

In its latest report, the Mortgage Bankers Association indicated that mortgage applications overall increased 2.8% but that was the weakest increase in the last three weeks. As a result, applications remained near the lowest level [...]

U.S. Weekly Mortgage Applications Rise But Trend Is Weak

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721a.jpg" align="right" border="0" height="265" width="353">
The Chicago Federal Reserve Bank reported that its June
National Activity Index rose further to the highest level since July of
last year. The reading of -1.80 was up from May and both figures were
higher than the series' low of -3.99 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP.
The three-month moving average of the index also
improved to its highest level since August.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_july2009.pdf">here.</a><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721b.jpg" align="right" border="0" height="265" width="353">
The production and income components made the largest positive
contributions to the JUnel CFNAI. Twenty-two of the index components
had a positive influence while 63 made a negative contribution.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during May to its lowest level since
1994. Indicators for the auto, steel, and machinery each fell. The
Chicago Federal Reserve figures are available in Haver's SURVEYS
database.
Today's testimony by Fed Chairman Ben S. Bernanke is available
<a href="http://www.federalreserve.gov/newsevents/testimony/DBBB5C9F26B6440AA4A21E104A61577A.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.80</td>
<td>-2.30</td>
<td>-0.98</td>
<td>-1.76</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-2.12</td>
<td>-2.65</td>
<td>-1.07</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Chicago Federal Reserve Bank reported that its June National Activity Index rose further to the highest level since July of last year. The reading of -1.80 was up from May and both figures were higher than the series' low of -3.99 [...]

Chicago Fed Index Indicates That Economic Activity Improved Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721e.jpg" width="353">
The strengthening of chain store sales around the July 4th holiday faded as the month progressed. During the latest week, chain store sales rose 0.5% but that recovered just half of the prior week&#39;s decline. So far in July sales have increased 0.7% since June after that month&#39;s 0.3% decline and a 0.2% May downtick.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Prospects for improvement in sales seems limited. The leading indicator of sales ticked up 0.3% (-2.4% y/y) during the latest week and it has been flat-to-lower all this year.
Exit Strategies for the Federal Reserve from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/econ/bullard/PhiladelphiaGIC28june2009FINAL653pm.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/18/09</th>
<th scope="col">07/11/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>491.7</td>
<td>489.4</td>
<td>-0.3%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

The strengthening of chain store sales around the July 4th holiday faded as the month progressed. During the latest week, chain store sales rose 0.5% but that recovered just half of the prior week's decline. So far in July sales have [...]

Weekly Chain Store Sales Remain Flat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721c.jpg" width="353">
Recession in the U.S. economy prompted a lower retail price for gasoline last week. The pump price for regular gasoline fell to an average $2.46 per gallon, down twenty-three cents from last month&#39;s high. Nevertheless, prices remained up by eighty-five cents (53%) from the December low. In the cash market, gasoline prices yesterday continued to rally off last week&#39;s low. At $1.75 per gallon the price was up from the low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721d.jpg" width="353">
Crude oil prices also fell last week, but not by as much as gasoline costs. Light sweet crude oil prices (WTI) fell to $61.27 per barrel, off nearly ten dollars from last week&#39;s high of $70.83. Yesterday the one-month futures price for light sweet crude oil recovered and moved up to $63.98 per barrel. Prices had reached a daily high of $72.68.
The ongoing recession lowered the demand for motor gasoline by 2.2% y/y during the last four weeks. The rate of decline has moderated from the 4.8% shortfall this past autumn. Demand for distillate also is off by a sharp 21.5% though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.7% y/y rise in inventories of crude oil &amp; petroleum products. The figures on crude oil inventories are available in Haver&#39;s OILWKLY database.
The weakening of natural gas prices stabilized last week at the seven-year low. Last week&#39;s average price of $3.28 per mmbtu (-70.8% y/y) was down by three-quarters from the high reached in early-July of $13.19/mmbtu.

<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">07/20/09</th>
<th scope="col">07/13/09</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>2.46</td>
<td>2.53</td>
<td>-39.4%</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>61.27</td>
<td>61.48</td>
<td>-54.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Recession in the U.S. economy prompted a lower retail price for gasoline last week. The pump price for regular gasoline fell to an average $2.46 per gallon, down twenty-three cents from last month's high. Nevertheless, prices remained [...]

Gasoline Prices Fall Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721a.jpg" align="right" border="0" height="265" width="353">
The Chicago Federal Reserve Bank reported that its June
National Activity Index rose further to the highest level since July of
last year. The reading of -1.80 was up from May and both figures were
higher than the series' low of -3.99 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP.
The three-month moving average of the index also
improved to its highest level since August.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_july2009.pdf">here.</a>
The production and income components made the largest positive
contributions to the JUnel CFNAI. Twenty-two of the index components
had a positive influence while 63 made a negative contribution.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721b.jpg" align="right" border="0" height="265" width="353">
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during May to its lowest level since
1994. Indicators for the auto, steel, and machinery each fell. The
Chicago Federal Reserve figures are available in Haver's SURVEYS
database.
Today's testimony by Fed Chairman Ben S. Bernanke is available
<a href="http://www.federalreserve.gov/newsevents/testimony/DBBB5C9F26B6440AA4A21E104A61577A.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.80</td>
<td>-2.30</td>
<td>-0.98</td>
<td>-1.76</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-2.12</td>
<td>-2.65</td>
<td>-1.07</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721a.jpg" align="right" border="0" height="265" width="353">
The Chicago Federal Reserve Bank reported that its June
National Activity Index rose further to the highest level since July of
last year. The reading of -1.80 was up from May and both figures were
higher than the series' low of -3.99 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP.
The three-month moving average of the index also
improved to its highest level since August.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_july2009.pdf">here.</a>
The production and income components made the largest positive
contributions to the JUnel CFNAI. Twenty-two of the index components
had a positive influence while 63 made a negative contribution.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721b.jpg" align="right" border="0" height="265" width="353">
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during May to its lowest level since
1994. Indicators for the auto, steel, and machinery each fell. The
Chicago Federal Reserve figures are available in Haver's SURVEYS
database.
Today's testimony by Fed Chairman Ben S. Bernanke is available
<a href="http://www.federalreserve.gov/newsevents/testimony/DBBB5C9F26B6440AA4A21E104A61577A.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.80</td>
<td>-2.30</td>
<td>-0.98</td>
<td>-1.76</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-2.12</td>
<td>-2.65</td>
<td>-1.07</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
Gasoline Prices Fall Again 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721c.jpg" align="left" border="0" height="265" width="353">
Recession in the U.S. economy prompted a lower retail price
for gasoline last week. The pump price for regular gasoline fell
to an average $2.46 per gallon, down twenty-three cents from last
month's high. Nevertheless, prices remained up by eighty-five cents
(53%) from the December low. In the cash market, gasoline prices
yesterday continued to rally off last week's low. At $1.75 per gallon
the price was up from the 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.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721d.jpg" align="right" border="0" height="265" width="353">
Crude oil prices also fell last week, but
not by as much as gasoline costs. Light sweet crude oil prices (WTI)
fell to $61.27 per barrel, off nearly ten dollars from last week's high
of $70.83. Yesterday the one-month futures price for light sweet crude
oil recovered and moved up to $63.98 per barrel. Prices had reached a
daily high of $72.68.
The ongoing recession lowered the demand for motor gasoline by
2.2% y/y during the last four weeks. The rate of decline has moderated
from the 4.8% shortfall this past autumn. Demand for distillate also is
off by a sharp 21.5% though residual fuel oil demand has moved higher.
Finally, oil remains plentiful as evidenced by a 13.7% y/y rise in
inventories of crude oil &amp; petroleum products. The figures on
crude oil inventories are available in Haver's OILWKLY database.
The weakening of natural gas prices stabilized last week at
the seven-year low. Last week's average price of $3.28 per mmbtu
(-70.8% y/y) was down by three-quarters from the high reached in
early-July of $13.19/mmbtu.

<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">07/20/09</th>
<th scope="col">07/13/09</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>2.46</td>
<td>2.53</td>
<td>-39.4%</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>61.27</td>
<td>61.48</td>
<td>-54.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Remain
Flat 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721e.jpg" align="left" border="0" height="265" width="353">
The strengthening of chain store sales around the July 4th
holiday faded as the month progressed. During the latest week, chain
store sales rose 0.5% but that recovered just half of the prior week's
decline. So far in July sales have increased 0.7% since June after that
month's 0.3% decline and a 0.2% May downtick.
During the last ten years there has been a 69% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. The weekly figures are available
in Haver's SURVEYW database.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Prospects for improvement in sales seems limited. The leading
indicator of sales ticked up 0.3% (-2.4% y/y) during the latest week
and it has been flat-to-lower all this year.
Exit Strategies for the Federal Reserve
from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/econ/bullard/PhiladelphiaGIC28june2009FINAL653pm.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/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">07/18/09</th>
<th scope="col">07/11/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>491.7</td>
<td>489.4</td>
<td>-0.3%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

Chicago Fed Index Indicates ThatEconomic Activity Improved Further

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

Robert Brusca

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

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

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

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

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

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

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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.

Economy in Brief

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