Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707d.jpg" align="right" border="0" height="265" width="353">The volume
of new orders in German Manufacturing rose 4.4% in May after a small
rise of 0.1% in April and a 3.7% rise in March.&nbsp; The three
month rise has brought the level of new orders to 84.5
(2005=100).&nbsp; This is still 33% below the peak of 126.1
recorded in November, 2007.&nbsp; Sales of German Manufacturing and
Mining product rose 4.5% in May after a decline of 2.0% in April and a
1.6% rise in March. Sales are now at an index level of 91.8, 21% below
the peak of 115.7 reached in January, 2008.&nbsp; To put the recent
improvements in perspective, the volume of new orders and sales over
the 8 plus years are shown in the first chart. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707e.jpg" align="right" border="0" height="265" width="353">Much of the
improvement in both orders and sales was due to a jump in foreign
sales.&nbsp; While domestic new orders rose 3.9% in May, new orders
from the Euro Area countries rose, 5.2% and from the non Euro Area
countries, 8.2%.&nbsp; The comparable figures for sales were 2.9%,
3.9% and 9.4%.&nbsp;&nbsp; The month to month percent changes
in domestic new orders, Euro Area countries new orders and Non Euro
Area countries new orders are shown in the second chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707f.jpg" align="right" border="0" height="265" width="353">Signs of
recovery in new orders and sales in the manufacturing sector are
particularly important for Germany as manufacturing plays such an
important role in the German economy.&nbsp; Manufacturing accounts
for about 25% of Germany's GDP in contrast to the United States where
manufacturing accounts for about 14% of the economy.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMAN
MANUFACTURING ORDERS AND SALES (2005=100)</th>
<th scope="col">May 09</th>
<th scope="col">Apr&nbsp; 09</th>
<th scope="col">May 08</th>
<th scope="col">M/M% Chg&nbsp;</th>
<th scope="col">Y/Y % Chg</th>
<th scope="col">2008 </th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">New Orders,&nbsp;</td>
<td>84.5</td>
<td>80.9</td>
<td>118.6</td>
<td>4.45</td>
<td>-28.75</td>
<td>111.3</td>
<td>119.7</td>
<td>108.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>86.2</td>
<td>83.0</td>
<td>113.8</td>
<td>3.86</td>
<td>-24.25</td>
<td>108.3</td>
<td>114.8</td>
<td>106.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>83.1</td>
<td>79.0</td>
<td>122.8</td>
<td>5.19</td>
<td>-32.33</td>
<td>113.9</td>
<td>124.0</td>
<td>110.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>88.5</td>
<td>81.8</td>
<td>124.8</td>
<td>8.19</td>
<td>-29.09</td>
<td>118.0</td>
<td>125.0</td>
<td>113.4</td>
</tr>
<tr class="even">
<td class="firstcol">Sales</td>
<td>91.8</td>
<td>87.8</td>
<td>113.1</td>
<td>4.56</td>
<td>-18.83</td>
<td>111.2</td>
<td>111.6</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>92.2</td>
<td>89.6</td>
<td>107.7</td>
<td>2.90</td>
<td>-14.39</td>
<td>106.7</td>
<td>106.4</td>
<td>102.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>88.5</td>
<td>85.2</td>
<td>116.8</td>
<td>3.87</td>
<td>-24.23</td>
<td>113.6</td>
<td>116.1</td>
<td>107.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>93.8</td>
<td>85.7</td>
<td>122.8</td>
<td>9.45</td>
<td>-23.62</td>
<td>121.1</td>
<td>119.9</td>
<td>110.9</td>
</tr>
</tbody>
</table>

</body></html>

The volume of new orders in German Manufacturing rose 4.4% in May after a small rise of 0.1% in April and a 3.7% rise in March. The three month rise has brought the level of new orders to 84.5 (2005=100). This is still 33% below the [...]

German Manufacturing Orders And Sales Recovering From Their Steep Declines

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707c.jpg" width="353">
The Fourth of July seems to have prompted consumer spending this year. During the latest week, chain store sales ticked up all of 0.1%. That, however, was enough to pull the y/y change up to +0.5% after a y/y gain of 0.6% last week. Maybe the consumer is finding his footing? These are the first positive comparisons since late last year. But the consumer definitely isn&#39;t spending with wild abandonee. The latest gains fall well short of the three-to-seven percent growth rates logged during the last several years.
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.
In tandem with the idea that the consumer isn&#39;t yet spending freely, the leading indicator of sales ticked up all of 0.1% during the latest week. That uptick left the indicator down 2.5% y/y 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">07/04/09</th>
<th scope="col">06/27/09</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>493.8</td>
<td>493.4</td>
<td>0.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

The Fourth of July seems to have prompted consumer spending this year. During the latest week, chain store sales ticked up all of 0.1%. That, however, was enough to pull the y/y change up to +0.5% after a y/y gain of 0.6% last week. [...]

Weekly Chain Store Sales Recover Around The Holiday

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707a.jpg">
The energy markets continued to reflect the recent and developing worry that forward momentum in the U.S. economy has faded. Yesterday, the cash market price for a gallon of regular gasoline fell to $1.71 versus the daily high of $2.04 reached in the middle of June. For the full week, the average price fell to $1.84. Retail gas prices have followed these declines, but to a lesser extent. The pump price for regular gasoline fell last week to an average $2.61 per gallon, down eight cents from the high. Nevertheless prices remained up by one dollar from the December low and were at the highest level since late-October. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Lower crude oil prices have led the decline in refined product prices. Yesterday the one-month futures price for light sweet crude oil dropped to $64.05 from an average $69.36 last week. Prices had reached a daily high of $72.68.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707b.jpg">
The weakness in energy prices is against the backdrop of soft demand. The ongoing recession reduced the demand for motor gasoline by 1.8% y/y during the last four weeks. There is good news, however. The rate of decline has moderated from the 4.8% shortfall this past autumn. Demand for distillate also is off sharply though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.5% y/y rise in inventories of crude oil &amp; petroleum products. Inventories of gasoline are flat y/y but crude oil inventories less the SPR are up by 16.8%. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Finally, natural gas prices did recover during the last two weeks, but the trend since April has definitely been sideways. Last week&#39;s average price of $3.69 per mmbtu (-72.1% y/y) was down from a recent high of $4.02. Current prices are down by two-thirds from the high reached in early-July of $13.19/mmbtu.
Time variation in the inflation passthrough of energy prices from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/RWP09-06.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">07/06/09</th>
<th scope="col">06 /29/09</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>2.61</td>
<td>2.64</td>
<td>-36.5%</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>69.36</td>
<td>68.76</td>
<td>-51.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

The energy markets continued to reflect the recent and developing worry that forward momentum in the U.S. economy has faded. Yesterday, the cash market price for a gallon of regular gasoline fell to $1.71 versus the daily high of [...]

Gasoline Prices Decline As Economic Momentum Fades Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707a.jpg" align="left" border="0">
The energy markets continued to reflect the recent and
developing worry that forward momentum in the U.S. economy has faded.
Yesterday, the cash market price for a gallon of regular gasoline fell
to $1.71 versus the daily high of $2.04 reached in the middle of June.
For the full week, the average price fell to $1.84. Retail gas prices
have followed these declines, but to a lesser extent. The pump
price for regular gasoline fell last week to an average
$2.61 per gallon, down eight cents from the high. Nevertheless prices
remained up by one dollar from the December low and were at the highest
level since late-October. The figures are reported by the U.S.
Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
Lower crude oil prices have led the
decline in refined product prices. Yesterday the one-month futures
price for light sweet crude oil dropped to $64.05 from an average
$69.36 last week. Prices had reached a daily high of $72.68.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707b.jpg" align="right" border="0">
The weakness in energy prices is against the backdrop of soft
demand. The ongoing recession reduced the demand for motor gasoline by
1.8% y/y during the last four weeks. There is good news, however. The
rate of decline has moderated from the 4.8% shortfall this past autumn.
Demand for distillate also is off sharply though residual fuel oil
demand has moved higher. Finally, oil remains plentiful as evidenced by
a 13.5% y/y rise in inventories of crude oil &amp; petroleum
products. Inventories of gasoline are flat y/y but crude oil
inventories less the SPR are up by 16.8%. The figures on crude oil
production and inventories are available in Haver's OILWKLY database.
Finally, natural gas prices did recover during the last two
weeks, but the trend since April has definitely been sideways. Last
week's average price of $3.69 per mmbtu (-72.1% y/y) was down from a
recent high of $4.02. Current prices are down by two-thirds from the
high reached in early-July of $13.19/mmbtu.
Time variation in the inflation passthrough of energy
prices from the Federal Reserve Bank of Kansas City can be
found <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/RWP09-06.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">07/06/09</th>
<th scope="col">06 /29/09</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>2.61</td>
<td>2.64</td>
<td>-36.5%</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>69.36</td>
<td>68.76</td>
<td>-51.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Recover
Around The Holiday 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707c.jpg" align="left" border="0" height="265" width="353">
The Fourth of July seems to have prompted consumer spending
this year. During the latest week, chain store sales ticked up all of
0.1%. That, however, was enough to pull the y/y change up to +0.5%
after a y/y gain of 0.6% last week. Maybe the consumer is finding his
footing? These are the first positive comparisons since late last year.
But the consumer definitely isn't spending with wild abandonee. The
latest gains fall well short of the three-to-seven percent growth rates
logged during the last several years.
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.


In tandem with the idea that the consumer isn't yet spending
freely, the leading indicator of sales ticked up all of 0.1% during the
latest week. That uptick left the indicator down 2.5% y/y 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">07/04/09</th>
<th scope="col">06/27/09</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>493.8</td>
<td>493.4</td>
<td>0.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
German Manufacturing Orders And
Sales Recovering From Their Steep Declines 
by <a href="/comment/Curley.html">Louise
Curley</a> July 7, 2009

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707d.jpg" align="right" border="0" height="265" width="353">The volume
of new orders in German Manufacturing rose 4.4% in May after a small
rise of 0.1% in April and a 3.7% rise in March.&nbsp; The three
month rise has brought the level of new orders to 84.5
(2005=100).&nbsp; This is still 33% below the peak of 126.1
recorded in November, 2007.&nbsp; Sales of German Manufacturing and
Mining product rose 4.5% in May after a decline of 2.0% in April and a
1.6% rise in March. Sales are now at an index level of 91.8, 21% below
the peak of 115.7 reached in January, 2008.&nbsp; To put the recent
improvements in perspective, the volume of new orders and sales over
the 8 plus years are shown in the first chart. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707e.jpg" align="right" border="0" height="265" width="353">Much of
the
improvement in both orders and sales was due to a jump in foreign
sales.&nbsp; While domestic new orders rose 3.9% in May, new orders
from the Euro Area countries rose, 5.2% and from the non Euro Area
countries, 8.2%.&nbsp; The comparable figures for sales were 2.9%,
3.9% and 9.4%.&nbsp;&nbsp; The month to month percent changes
in domestic new orders, Euro Area countries new orders and Non Euro
Area countries new orders are shown in the second chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707f.jpg" align="right" border="0" height="265" width="353">Signs of
recovery in new orders and sales in the manufacturing sector are
particularly important for Germany as manufacturing plays such an
important role in the German economy.&nbsp; Manufacturing accounts
for about 25% of Germany's GDP in contrast to the United States where
manufacturing accounts for about 14% of the economy.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMAN
MANUFACTURING ORDERS AND SALES (2005=100)</th>
<th scope="col">May 09</th>
<th scope="col">Apr&nbsp; 09</th>
<th scope="col">May 08</th>
<th scope="col">M/M% Chg&nbsp;</th>
<th scope="col">Y/Y % Chg</th>
<th scope="col">2008 </th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">New Orders,&nbsp;</td>
<td>84.5</td>
<td>80.9</td>
<td>118.6</td>
<td>4.45</td>
<td>-28.75</td>
<td>111.3</td>
<td>119.7</td>
<td>108.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>86.2</td>
<td>83.0</td>
<td>113.8</td>
<td>3.86</td>
<td>-24.25</td>
<td>108.3</td>
<td>114.8</td>
<td>106.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>83.1</td>
<td>79.0</td>
<td>122.8</td>
<td>5.19</td>
<td>-32.33</td>
<td>113.9</td>
<td>124.0</td>
<td>110.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>88.5</td>
<td>81.8</td>
<td>124.8</td>
<td>8.19</td>
<td>-29.09</td>
<td>118.0</td>
<td>125.0</td>
<td>113.4</td>
</tr>
<tr class="even">
<td class="firstcol">Sales</td>
<td>91.8</td>
<td>87.8</td>
<td>113.1</td>
<td>4.56</td>
<td>-18.83</td>
<td>111.2</td>
<td>111.6</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>92.2</td>
<td>89.6</td>
<td>107.7</td>
<td>2.90</td>
<td>-14.39</td>
<td>106.7</td>
<td>106.4</td>
<td>102.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>88.5</td>
<td>85.2</td>
<td>116.8</td>
<td>3.87</td>
<td>-24.23</td>
<td>113.6</td>
<td>116.1</td>
<td>107.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>93.8</td>
<td>85.7</td>
<td>122.8</td>
<td>9.45</td>
<td>-23.62</td>
<td>121.1</td>
<td>119.9</td>
<td>110.9</td>
</tr>
</tbody>
</table>

</body></html>

Gasoline Prices Decline AsEconomic Momentum Fades Further

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706f.jpg" align="left" border="0" height="265" width="353">
Special programs to incentivize new car purchases are having
success in spurring new passenger car registrations in Europe. European
Commission President Jose Manuel Barroso said Monday that the recession
in Europe will extend throughout 2009. Yet the auto sector is doing
much better now. 
 

These key large European economies show momentum building from
12-months to six months to three-months. Although most of retails sales
is languishing, the special incentives have prompted auto sales to
revive. In Germany the strongest growth is over six months as the three
month growth rate has backed off. France exhibits the same sort of
pattern but with much less strength over six months and three months. 
 

Sales in Spain over three-months are exploding despite the
ongoing crash in the housing market there. Sales in the UK have finally
showing some growth over three-months buts sales there are still lower
on six months and 12-months. 
 

Auto sales alone will not be enough to turn around the sagging
European economy. Much of Europe depends on export sales reviving; that
will require a more balanced rebound and for recovery to spread to the
surrounding area in Eastern Europe as well. For now, sales inventive
plans seem to be working for autos and that will help to spread some
optimism and growth and should combine with other programs to help to
get growth back on track in 2010. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol" colspan="10">E
Area Car Registrations</th>
</tr>
</thead>
<tbody>
<tr>
<td style="padding-left: 0.25em; padding-right: 0.25em;"></td>
<td colspan="3" style="padding-left: 0.25em; padding-right: 0.25em;"></td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">3-Mo
Trend 
From</td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">6-Mo
Trend 
From</td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">12-Mo
Trend 
From</td>
</tr>
<tr class="odd">
<td style="padding-left: 0.25em; padding-right: 0.25em;">All Seasons
 
Adjusted</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Apr-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Germany:</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">6.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-6.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">15.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">79.1%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">2.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">128.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">125.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">40.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">39.4%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">France
(&amp;WDA)</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-10.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">17.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-2.4%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">11.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">123.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">19.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">48.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">6.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">14.6%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Italy</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">20.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-12.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">9.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">79.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">34.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">12.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">20.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">11.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.4%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Spain</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">25.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">15.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">206.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-12.4%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">22.1%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-16.0%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-39.1%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">UK</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">9.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-6.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">10.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">62.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-20.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">17.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-16.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-25.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Base
Month of
Calculation</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Apr-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Mar-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Mar-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Feb-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Dec-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Nov-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-08</td>
</tr>
</tbody>
</table>
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Special programs to incentivize new car purchases are having success in spurring new passenger car registrations in Europe. European Commission President Jose Manuel Barroso said Monday that the recession in Europe will extend [...]

Auto Registrations Lead Recovery In Europe

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706e.jpg" align="left" border="0" height="265" width="353">
The accompanying chart makes the point that US rate of
unemployment has risen a lot and Europe&#8217;s has risen by a little. Still
the higher US rate of unemployment will fall sharply in recovery
whereas Europe&#8217;s history suggests that its rate will remain above the
rate of unemployment in America even when it falls. Europe&#8217;s labor
markets are more insulated and less flexible. That will be the next
challenge for Europe. 
 

In Europe a few statistics show us how disparate conditions
can be even within the EMU portion of Europe. German unemployment is up
by just 0.3% points over the last 12 months. French unemployment is up
by 1.7 percentage points. Spain&#8217;s unemployment is up by 8.2 percentage
points, accounting for the bulk of the rise of the rate of unemployment
in EMU over the past year. Over the same period the US rate is up by
3.9 percentage points, and Japan&#8217;s rate is up by 1.2 percentage points.
While there are regional disparities in most large countries,
especially in the US and in Japan. But because of its single monetary
structure and split fiscal structure, regional disparities of the sort
EMU is bearing put a great deal more pressure on the system than would
be the case in a true single independent nation. 
 

For the US, a period like this offer the economy the
opportunity to reinvent itself as old businesses are killed off and new
opportunities and needs reveal themselves. Of course, in this cycle
some old US industries were bailed out because the government thought
they were still worthwhile. Europe has had same the same experience. 
 

Both Europe and the US will be leaving this episode of
recession with much higher levels of debt. This will be a challenge for
the period ahead. The US has showed an ability to get strong growth and
rebuild tax revenues in recoveries. Europe has not showed that same
sort of dynamism. Certain European countries, EMU members (plus the UK)
have the added burden of Maastricht criterion that quantitatively
restricts their debt levels relative to GDP. As recovery sets in, most
EMU nations will be in violation of this rule and it is not clear how
much time the authorities will allow for the rule to be put back in
force. An early imposition of the rule will lead to fiscal contraction
and could hamper recovery. 
 

That will be an extra problems facing Europe once we turn the
corner into recovery. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="7" class="firstcol">Unemployment
rate and changes</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Level</td>
<td colspan="3">Simple Changes</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</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>
</tr>
<tr>
<td class="firstcol">EU-Urate</td>
<td>8.9</td>
<td>8.7</td>
<td>8.5</td>
<td>0.6</td>
<td>1.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">EMU-Urate</td>
<td>9.5</td>
<td>9.3</td>
<td>9.0</td>
<td>0.7</td>
<td>1.5</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m%</td>
<td colspan="3">% changes (ar)</td>
</tr>
<tr>
<td class="firstcol">EU-U 000s</td>
<td>1.8%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.8%</td>
<td>19.8%</td>
<td>31.3%</td>
</tr>
<tr>
<td class="firstcol">EMU-U 000s</td>
<td>1.9%</td>
<td>2.8%</td>
<td>3.0%</td>
<td>7.9%</td>
<td>18.6%</td>
<td>29.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">U-Rates</td>
<td colspan="3">Level</td>
<td colspan="3">Simple Changes</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>7.7</td>
<td>7.7</td>
<td>7.5</td>
<td>0.3</td>
<td>0.6</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>9.3</td>
<td>9.1</td>
<td>9</td>
<td>0.5</td>
<td>1.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>18.7</td>
<td>18</td>
<td>17.3</td>
<td>2.2</td>
<td>4.7</td>
<td>8.2</td>
</tr>
<tr>
<td class="firstcol">USA</td>
<td>9.4</td>
<td>8.9</td>
<td>8.5</td>
<td>1.3</td>
<td>2.6</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>5.2</td>
<td>5</td>
<td>4.8</td>
<td>0.8</td>
<td>1.2</td>
<td>1.2</td>
</tr>
</tbody>
</table>
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The accompanying chart makes the point that US rate of unemployment has risen a lot and Europe’s has risen by a little. Still the higher US rate of unemployment will fall sharply in recovery whereas Europe’s history suggests that its [...]

Worse Vs Much Worse...

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<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706c.jpg" width="353">
Despite the week-to-week gyration, initial claims for unemployment insurance have moved sideways since April, trending slightly downward. Reported Thursday, claims edged down last week by 16,000 to 614,000 after an upwardly revised 18,000 increase during the week prior. The latest level 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, also fell slightly to 615,250 which was its lowest level since mid-February. The latest weekly level roughly matched Consensus expectations.
The Labor Department indicated that the largest increases in initial claims for the week ending June 20 were in California (+14,570), New Jersey (+3,170), Oregon (+3,062), Maryland (+2,342), and Michigan (+2,032), while the largest decreases were in Missouri (-5,753), Pennsylvania (-3,037), Texas (-2,759), Alabama (-1,926), and Florida (-1,894).<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706d.jpg" width="353">
Also suggesting improvement in the job market was a 53,000 decline in continuing claims for unemployment insurance which reversed all of the prior week&#39;s gain. Weekly claims were down slightly from their May high. Continuing claims provide an indication of workers&#39; ability to find employment. At 6,702,000, however, claims remained more than twice the year ago level. The four-week average of continuing claims again fell just slightly from their record high. The series dates back to 1966.
These improvements in the weekly claims figures have led to a leveling out of the insured unemployment rate. It slipped to 5.0% where it has been for the last seven weeks. Nevertheless, job market distress is evidenced by the fact that the level remained more than double that of June 2008 and the highest 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 13 were in Michigan (7.5 percent), Oregon (6.7), Puerto Rico (6.6), Nevada (6.3), Pennsylvania (6.2), Wisconsin (5.7), California (5.4), South Carolina (5.3), Arkansas (5.2), Illinois (5.2), and North Carolina (5.2).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Reply to Generalizing the Taylor Principle: A Comment from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/rwp09-09.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">06/27/09</th>
<th scope="col">06/20/09</th>
<th scope="col">06/13/09</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>614</td>
<td>630</td>
<td>612</td>
<td>51.6%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,702</td>
<td>6,755</td>
<td>112.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
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Despite the week-to-week gyration, initial claims for unemployment insurance have moved sideways since April, trending slightly downward. Reported Thursday, claims edged down last week by 16,000 to 614,000 after an upwardly revised [...]

U.S. Initial Unemployment Insurance Claims Continue To Move Sideways

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706a.jpg" width="353">
The service sector continued to show signs of improvement during June. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 47.0 from an unrevised reading of 44.0 during May. Though still below the break-even level of 50, the latest was the highest level since September of last year and it beat Consensus expectations for a reading of 46.0. A level of the ISM index below 50 indicates declining activity. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the business activity index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
That latest rise came as the employment index jumped to its highest level (43.4) since September. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706b.jpg" width="353">
The overall business activity index for the service sector rose to 49.8 which was its highest level since September. Also rising to a nine-month high was the new orders series. The gain to 48.6 pulled it well above from last November&#39;s low of 35.6. Continuing to suggest that some slack remains in the service sector was a decline in the supplier deliveries component which fell back to near the series&#39; lowest level.
With an upside breakout, the price index rose about as it did during May. The strong 6.8 point gain to 53.7 was also the highest level since last September. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here.</a>
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.
Lessons Learned from the Financial Crisis from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/newsevents/speeches/2009/dud090702.html">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;08</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">Composite Index</td>
<td>47.0</td>
<td>43.7</td>
<td>48.8</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business Activity</td>
<td>49.8</td>
<td>42.4</td>
<td>50.7</td>
<td>47.4</td>
<td>56.0</td>
<td>58.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>43.4</td>
<td>39.0</td>
<td>45.2</td>
<td>43.8</td>
<td>52.0</td>
<td>53.8</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>53.7</td>
<td>46.9</td>
<td>82.1</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


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The service sector continued to show signs of improvement during June. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 47.0 from an unrevised reading of 44.0 during May. [...]

U.S. ISM Nonmanufacturing Index Improves To The Highest Level Since Last September

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

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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.

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- 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

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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.

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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

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

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

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

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

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

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

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

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

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

Import & Export Prices: Generally Modest Changes

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

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

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

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

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

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

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

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

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