Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723c.jpg" 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>
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.
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&#39; 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&#39;s supply of homes on the market, near the lowest since 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723d.jpg" width="353">
The data on existing home sales, prices and affordability can be found in Haver&#39;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>


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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 [...]

U.S. Existing Home Sales And Prices Rise

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623h.jpg" align="left" border="0" height="265" width="353">
Markit PMIs composite index rises - The
Euro Area FLASH PMI for MFG rose in June but that happy event was
partly offset by a decline in the region&#8217;s services survey. The
composite index comprised of both MFG and Services rose to 44.4, its
highest reading since September of 2008. The composite index stood at
44 in May. 
 
In Manufacturing 

In Germany the country level index for MFG rose to 40.5 from
39.58 in May, its highest level since October of last year. 
 

In France the MFG index moved up to 45.5 from 43.32 in May,
reaching its highest point since August of 2008. 
 

The moving averages for MFG show levels are still below those
of 12 months ago but the EMU trend has been improving and the current
level of the MFG index is above the 12-mo 6-mo and 3-mo moving
averages. That is very good for momentum. 
 
The Service Sector 

The services gauge for all of EMU fell in June but remains
above the level for April having only seen backsliding for one month&#8217;s
worth of gains. The same is true of the services slippage in France and
in Germany; each lost only one month&#8217;s worth of gains. Still, in
Germany the service index stands at 44.3 in the just the 15th
percentile of its historic range. For France the index is at 47.5 and
stands in the 32nd percentile of its range. In contrast Germany&#8217;s MFG
index stands in the 31st percentile of its range, not nearly as low as
for services; France&#8217;s MFG index stands in the 47th percentile of its
range also superior to its relative reading for services. For all of
EMU the services index stands near the 25th percentile of its range
compared to a standing at the 34th percentile for MFG. The
manufacturing sector is now beginning to be more of an engine of growth
after the services sector had provided the role of support when the
economic scene was unraveling in Europe. 
 
A note on MFG/Services comparison 

Note that absolute reading for services is superior to that
for MFG but that for MFG the current reading is at a higher percentile
in its range. The percentile reading is a better gauge to use to
compare one index to another since MFG indices span a broader range of
values and since the Services index has higher reading on average. The
services reading average nearly FOUR points higher than the MFG
readings. So on several bases the MFG index now is relatively stronger
than services despite the higher absolute monthly reading for services.
Over comparable periods the standard deviation of the MFG index is 5.41
compared to 4.72 for services making the MFG sector some 14% more
variable than services and 20% more volatile relative to its mean. The
service index is relatively sluggish compared to the MFG index, as we
well know. Not surprising then that MFG is the best DIRECTIONAL index.
Fortunately it is moving UP now. 
 
Perspective 

Manufacturing is now on the strongest rising gradients for
EMU. The service sector index has paused and lost some momentum. Still
the overall picture and trend remains positive. 
 

Another sign of progress this morning came from the Belgian
National Bank index which trimmed its negative reading to -23.6 in June
from -27.6 in May. For that index it is the best reading since November
2008. 
 

In terms of these index readings, we see in the Markit PMIs
the best MFG and Services (for services based on the May reading)
readings since August &#8211; October of last year and in the Belgian series
the best reading since November. On balance it is looking like a
reasonably well balanced rebound is taking place across the Zone in
these countries and across their various sectors, at least as judged by
the measures presented here. Of course, all the respective measures
still point to continuing losses. But these indices speak to the fact
that the speed of the loss has been cut sharply from the lows showing
that the pace of decline is back to the pace last seen in early Q4 or
late Q3 of 2008. 
 

The MFG ands Services PMIs each were last above 50 in May of
2008. The Belgian bank index was last positive in May of 2008 as well.
How soon we get back there depends on quickly this incipient recovery
traces its own steps. For now it is on the right path and the pace of
recovery is a good one, service sector (perhaps) excepted. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
<tr class="even">
<th colspan="3" scope="col">Markit
PMIs for the Euro
Area</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jun-09</td>
<td>42.37</td>
<td>44.49</td>
</tr>
<tr>
<td class="firstcol">May-09</td>
<td>40.68</td>
<td>44.82</td>
</tr>
<tr>
<td class="firstcol">Apr-09</td>
<td>36.83</td>
<td>43.76</td>
</tr>
<tr>
<td class="firstcol">Mar-09</td>
<td>33.93</td>
<td>40.95</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>37.15</td>
<td>44.10</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>35.55</td>
<td>42.29</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>39.92</td>
<td>44.22</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">127-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>32.8%</td>
<td>22.7%</td>
</tr>
</tbody>
</table>
</body></html>

Markit PMIs composite index rises - The Euro Area FLASH PMI for MFG rose in June but that happy event was partly offset by a decline in the region’s services survey. The composite index comprised of both MFG and Services rose to 44.4, [...]

Europe Continues to Make a Turn Higher: Sector Results Turn Mixed in June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623d.jpg" width="353">
The latest data from the Mortgage Bankers Association strongly suggest that the refinancing boom has reached an end. Overall, mortgage applications dropped sharply last week to the lowest level since last November. The moderate increase in interest rates is behind the lessened attractiveness of refinancing. The 15.8% w/w drop in overall mortgage applications was led by a collapse in refis. Last week, they dropped by one-quarter from the prior week and they are off by 80% during just the last two months.
While still low by historical standards, rates indeed have moved off the lows. And it&#39;s at the margin that activity is affected most. The effective interest rate on a conventional 15-year mortgage jumped last week to 5.24% and the rate is up by more than 50 basis points from the April low. For a 30-year mortgage, rates also rose to 5.68% versus the 4.81% low. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Up also were adjustable 1-Year mortgage rates at 6.56% versus the low close to 6.0% during January. The rate still was down, however, sharply from the 7.07% peak reached this past fall.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623e.jpg" width="353">
Despite the drop in re-fis, the interest in home buying appears intact. Purchase applications slipped last week but for June so far applications are 1.6% higher than during May. That follows the trend in new plus existing home sales.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<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">06/12/09</th>
<th scope="col">06/05/09</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>514.4</td>
<td>611.0</td>
<td>1.2%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>261.2</td>
<td>270.7</td>
<td>-27.5%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,998.1</td>
<td>2,605.7</td>
<td>44.9%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
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The latest data from the Mortgage Bankers Association strongly suggest that the refinancing boom has reached an end. Overall, mortgage applications dropped sharply last week to the lowest level since last November. The moderate [...]

U.S. Mortgage Applications Collapse As Higher Rates Stymie Refinancing

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623f.jpg" align="left" border="0" height="265" width="353">
While the World Bank has down graded its forecast for Euro
area growth this year to -4.5% from its earlier forecast of -2.7%,
indicators of French and German Business confidence have become less
pessimistic, although they are still negative. Yesterday, the German
IFO reported an improvement in its Business Climate indicator and
today, France's INSEE (National Institute of Statistics and Economic
Studies) reports that its Composite Business Indicator has risen to 73
in June from 71 in May and 68 in April. Both the Industry and Services
components of the Composite Indicator, show similar rises and the
Construction component has held steady at 92. The components of the
Composite Indicator are shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623g.jpg" align="right" border="0" height="265" width="353">
The June preliminary or "flash" result from the Markit
Economics Purchasing Managers' Survey for France, released today, also
suggests that business is becoming less pessimistic. The diffusion
index for the purchasing managers' views on the total economy is 47.7,
close to the 50 mark above which expansion is indicated.
The second chart shows the INSEE indicator against its long
term average* and the results of the Markit Economics Purchasing
Managers' Survey against the 50% line that divides expansion and
contraction. The purchasing managers appear to be the less pessimistic.
The INSEE indicator is so constructed that its long term
average is 100 and its standard deviation, 10.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;
&nbsp;</th>
<th scope="col">Jun 09</th>
<th scope="col">May&nbsp; 09</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar 09&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Business Indicator
(LT Ave = 100)</td>
<td>73</td>
<td>71</td>
<td>68</td>
<td>69</td>
<td>70</td>
<td>78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Industry</td>
<td>75</td>
<td>73</td>
<td>71</td>
<td>68</td>
<td>69</td>
<td>75</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Construction</td>
<td>92</td>
<td>92</td>
<td>92</td>
<td>95</td>
<td>93</td>
<td>96</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Services</td>
<td>67</td>
<td>64</td>
<td>60</td>
<td>60</td>
<td>66</td>
<td>68</td>
</tr>
</tbody>
</table>
</body></html>

While the World Bank has down graded its forecast for Euro area growth this year to -4.5% from its earlier forecast of -2.7%, indicators of French and German Business confidence have become less pessimistic, although they are still [...]

French Business Confidence: Viewed By Entrepreneurs And Purchasing Managers

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623c.jpg" align="left" border="0" height="265" width="353">
Tentative signs of recovery in the U.S. economy have recently
become more vague. The immediate effect of this backpedaling is evident
in energy markets where the cash market price for a gallon of regular
gasoline is down roughly twenty-five cents during just the last week.
Yesterday, the cash market price for a gallon of regular gasoline was
$1.79 versus the daily high of $2.04 last week and the weekly average
of $1.98. If sustained these declines likely be reflected in the retail
price for regular gasoline which last week rose
slightly to an average $2.69 per gallon of regular. That increase
pulled prices up by more than $1.00 per gallon, or by more than
one-half, from the December low to 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.
The tenuous nature of the recovery also is reflected in a
lower price for crude oil. Crude prices dropped
yesterday to $66.93 from last week's high of $71.37 and from an average
$70.61 last week for a barrel of West Texas Intermediate. The
speculation of weaker demand came against the backdrop of a 3.8%
year-to-year rise in crude oil production during the latest four weeks.
In addition, oil is plentiful as evidenced by a 13.4% y/y rise in
inventories of crude oil &amp; petroleum products. The figures on
crude oil production and inventories are available in Haver's OILWKLY
database.
Finally, an earlier plateau of natural gas prices was
sustained. The Monday price of $3.96 per mmbtu (-69.4% y/y) held
roughly steady with last week but that price was up slightly from the
earlier low of 3.56. Current prices are down by two-thirds from the
high reached in early-July of $13.19/mmbtu.
Fighting Downturns with Fiscal Policy from
the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-20.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">06/22/09</th>
<th scope="col">06/15/09</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>2.69</td>
<td>2.67</td>
<td>-34.0%</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>70.61</td>
<td>70.83</td>
<td>-47.5%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body></html>

Tentative signs of recovery in the U.S. economy have recently become more vague. The immediate effect of this backpedaling is evident in energy markets where the cash market price for a gallon of regular gasoline is down roughly [...]

Gasoline Prices Off Sharply With Weaker Economic News

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623a.jpg" width="353">
The National Association of Realtors reported that sales of existing homes homes benefited last month from continued gains in home affordability as well as an $8,000 tax credit for first-time home buyers. Sales rose 2.4% last month, the same as they did during April, to 4.77M (AR). Consensus expectations had been for April sales of 4.80M homes. Total sales include sales of condos and co-ops.
Home affordability recovered most of its April slip and rose to near its record high. The increase came despite a modest m/m gain in home prices from an April level that was revised sharply lower. Home prices remained down by one-quarter from the 2007 peak. The series dates back to 1971.
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><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623b.jpg" width="353">
Sales of existing single-family homes alone increased 1.9% last month and they were up 4.9% from the January low. Nevertheless, sales remained near the lowest level since July 1997. (These data have a longer history than the total series).
The number of unsold homes (condos &amp; single-family) on the market reversed roughly half of a sharp April increase with a 3.5% decline and year-to-year inventories are down 15.3%. At the current sales rate there was a 9.6 months&#39; supply on the market which was near the lowest since 2007. For single-family homes the inventory also fell 3.3% (-15.8% y/y). At the current sales rate there was a 9.0 month&#39;s supply, near the lowest since 2007.
The data on existing home sales, prices and affordability can be found in Haver&#39;s USECON database. The regional price, affordability and inventory data is available in the REALTOR database.
Why has home ownership fallen among the young? from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/workingpapers/wp2009_01.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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,770</td>
<td>4,660</td>
<td>-3.6%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>800</td>
<td>770</td>
<td>-10.1</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,090</td>
<td>1,000</td>
<td>-4.4</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>1,740</td>
<td>-8.9</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,140</td>
<td>1,150</td>
<td>11.8</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,250</td>
<td>4,170</td>
<td>-3.0</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>173,000</td>
<td>166,600</td>
<td>-16.8</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>


</html>

The National Association of Realtors reported that sales of existing homes homes benefited last month from continued gains in home affordability as well as an $8,000 tax credit for first-time home buyers. Sales rose 2.4% last month, [...]

U.S. Existing Home Sales Rise With Affordability And Tax Credit

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090622c.jpg" align="left" border="0" height="265" width="353">
The EMU (16-country) consolidated balance of trade with
countries outside the region fell to eru336mln in April from eur1.7bln
in March. The Year-to-date deficit of eur2.5BLn is below the YTD
average for the same period of a year ago that stood at eur 1.1bln. 
 

Over the last year and the last six months exports and imports
are declining at about the same speed in percentage terms. But over the
last three months exports have stabilized dropping at just a 0.5%
annual rate compared to imports whose decline is at a 17% annual rate.
So the export decline has been out ahead of the import decline until
this month when more stable exports allowed imports to catch up with
the export Yr/Yr and six month trends. 
 

The bar chart shows that the goods deficit has been on an
improving trend for the last four months but before that the
performance had been somewhat erratic. Year-over-Year export and import
declines now are very much in step. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Ezone 16-Trade trends for goods </th>
</tr>
</thead>
<tbody>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; (336)</td>
<td>&#8364;&#8364; (1,780)</td>
<td>&#8364;&#8364; (1,396)</td>
<td>&#8364;&#8364; (2,432)</td>
<td>&#8364;&#8364; 399</td>
<td>&#8364;&#8364; (183)</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">Exports</td>
</tr>
<tr class="grey2">
<td class="firstcol">All Exp</td>
<td>-1.3%</td>
<td>1.5%</td>
<td>-0.5%</td>
<td>-36.6%</td>
<td>-24.3%</td>
<td>12.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food and Drinks</td>
<td>-1.3%</td>
<td>2.9%</td>
<td>4.7%</td>
<td>-21.3%</td>
<td>-12.1%</td>
<td>18.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Raw materials</td>
<td>0.6%</td>
<td>10.6%</td>
<td>66.7%</td>
<td>-31.8%</td>
<td>-26.9%</td>
<td>19.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Other</td>
<td>-1.4%</td>
<td>1.2%</td>
<td>-2.1%</td>
<td>-37.7%</td>
<td>-25.1%</td>
<td>11.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; MFG</td>
<td>-2.2%</td>
<td>3.1%</td>
<td>2.7%</td>
<td>-35.7%</td>
<td>-24.3%</td>
<td>10.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">IMPORTS</td>
</tr>
<tr class="grey2">
<td class="firstcol">All IMP</td>
<td>-2.7%</td>
<td>0.6%</td>
<td>-17.4%</td>
<td>-38.1%</td>
<td>-24.3%</td>
<td>12.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food and Drinks</td>
<td>-6.8%</td>
<td>6.5%</td>
<td>1.1%</td>
<td>-11.2%</td>
<td>-8.3%</td>
<td>14.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Raw materials</td>
<td>-7.9%</td>
<td>-0.8%</td>
<td>-44.3%</td>
<td>-63.2%</td>
<td>-40.7%</td>
<td>8.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Other</td>
<td>-2.1%</td>
<td>0.3%</td>
<td>-17.2%</td>
<td>-38.1%</td>
<td>-24.4%</td>
<td>12.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; MFG</td>
<td>-5.9%</td>
<td>2.7%</td>
<td>-25.4%</td>
<td>-34.7%</td>
<td>-23.5%</td>
<td>6.7%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">*Eur mlns; mo or period average</td>
</tr>
</tbody>
</table>
</body></html>

The EMU (16-country) consolidated balance of trade with countries outside the region fell to eru336mln in April from eur1.7bln in March. The Year-to-date deficit of eur2.5BLn is below the YTD average for the same period of a year ago [...]

EMU Trade Balance Deficit For Goods Shrinks

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Winnie Tapasanun

260116R23.jpg

260116S23.jpg

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

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

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

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

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

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

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

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

260116T23.jpg

260116U23.jpg

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

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

260116E.jpg

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

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

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

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

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

260115Z5.jpg

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

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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.

Economy in Brief

Jump to:

U.S. Existing Home Sales And Prices Rise

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French Business Confidence: Viewed By Entrepreneurs And Purchasing Managers

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