Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090622a.jpg" align="left" border="0" height="265" width="353">
Germany's IFO institute reported today that its business
climate index rose to 85.9 (2000=100) in June up from 84.3 in May. This
was the third month of improvement. The business climate index is made
up of the business community's appraisal of current conditions and the
economic outlook six months ahead. There was a small decline in the
appraisal of current conditions, from 82.5 to 82.4 which was more than
offset by a significant improvement in the outlook six months ahead
from 86.0 to 89.5.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090622b.jpg" align="right" border="0">
Although these signs are encouraging, business confidence
remains subdued. The business climate index is lower than the 100 mark,
which represents conditions back in 2000 and even much lower than the
recent peak of 109.1, reached in December 2006. There are still many
more pessimists than optimists--38.3%-- regarding current conditions.
While the outlook for the next six months has improved, there are still
18.8% more of the respondents who are pessimistic about the outcome
than those who are optimistic. The percent balances for the Business
Climate, Current Conditions and Outlook for the next six months are
shown in the first chart.
Just last week the ZEW survey revealed that the financial
community was decidedly more optimistic about the future of the
economy. Since April optimists in the financial community have
outweighed pessimists regarding the six months outlook. In June the
excess was 44.8%, up from 31.1% in May and 13.0% in April. The second
chart compares the percent balances of opinions on expectations for the
business and financial communities. Expectations of both communities
tend to move in the same direction but the expectations of the
financial community tend to be much more volatile than those of the
business community. Part of the greater volatility of the ZEW survey
may be due, in part, to its small sample size. The ZEW sample in June
consisted of 271 institutional investors and financial analysts, while
the IFO sample consisted of some 7000 representatives of manufacturing,
construction and wholesaling and retailing.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">German
Business Confidence</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">Feb 09</th>
<th scope="col">Jan 09&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">IFO (2000=100)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Business Climate</td>
<td>85.9</td>
<td>84.3</td>
<td>83.7</td>
<td>82.2</td>
<td>82.6</td>
<td>83.1</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Current Conditions</td>
<td>82.4</td>
<td>82.5</td>
<td>83.5</td>
<td>82.7</td>
<td>84.3</td>
<td>86.7</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Expectations</td>
<td>89.5</td>
<td>86.0</td>
<td>&nbsp;84.0</td>
<td>81.7</td>
<td>81.0</td>
<td>79.6</td>
</tr>
<tr class="grey4">
<td class="firstcol">IFO ( % Percent
Balance)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Business Climate</td>
<td>-28.9</td>
<td>-32.1</td>
<td>-33.1</td>
<td>-36.2</td>
<td>-35.4</td>
<td>-34.4</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Current Conditions</td>
<td>-38.3</td>
<td>-38.0</td>
<td>-36.1</td>
<td>-37.8</td>
<td>-34.7</td>
<td>-29.8</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Expectations</td>
<td>-18.8</td>
<td>-25.9</td>
<td>-30.1</td>
<td>-34.7</td>
<td>-36.1</td>
<td>-38.9</td>
</tr>
<tr class="grey1">
<td class="firstcol">ZEW (% Percent Balance)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Expectations</td>
<td>44.8</td>
<td>31.1</td>
<td>13.0</td>
<td>-3.5</td>
<td>-5.8</td>
<td>-31.0</td>
</tr>
</tbody>
</table>
</body></html>

Germany's IFO institute reported today that its business climate index rose to 85.9 (2000=100) in June up from 84.3 in May. This was the third month of improvement. The business climate index is made up of the business community's [...]

German Business Confidence Improving But Still Subdued

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090622a.jpg" align="left" border="0" height="265" width="353">
Germany's IFO institute reported today that its business
climate index rose to 85.9 (2000=100) in June up from 84.3 in May. This
was the third month of improvement. The business climate index is made
up of the business community's appraisal of current conditions and the
economic outlook six months ahead. There was a small decline in the
appraisal of current conditions, from 82.5 to 82.4 which was more than
offset by a significant improvement in the outlook six months ahead
from 86.0 to 89.5.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090622b.jpg" align="right" border="0">
Although these signs are encouraging, business confidence
remains subdued. The business climate index is lower than the 100 mark,
which represents conditions back in 2000 and even much lower than the
recent peak of 109.1, reached in December 2006. There are still many
more pessimists than optimists--38.3%-- regarding current conditions.
While the outlook for the next six months has improved, there are still
18.8% more of the respondents who are pessimistic about the outcome
than those who are optimistic. The percent balances for the Business
Climate, Current Conditions and Outlook for the next six months are
shown in the first chart.
Just last week the ZEW survey revealed that the financial
community was decidedly more optimistic about the future of the
economy. Since April optimists in the financial community have
outweighed pessimists regarding the six months outlook. In June the
excess was 44.8%, up from 31.1% in May and 13.0% in April. The second
chart compares the percent balances of opinions on expectations for the
business and financial communities. Expectations of both communities
tend to move in the same direction but the expectations of the
financial community tend to be much more volatile than those of the
business community. Part of the greater volatility of the ZEW survey
may be due, in part, to its small sample size. The ZEW sample in June
consisted of 271 institutional investors and financial analysts, while
the IFO sample consisted of some 7000 representatives of manufacturing,
construction and wholesaling and retailing.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">German
Business Confidence</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">Feb 09</th>
<th scope="col">Jan 09&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">IFO (2000=100)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Business Climate</td>
<td>85.9</td>
<td>84.3</td>
<td>83.7</td>
<td>82.2</td>
<td>82.6</td>
<td>83.1</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Current Conditions</td>
<td>82.4</td>
<td>82.5</td>
<td>83.5</td>
<td>82.7</td>
<td>84.3</td>
<td>86.7</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Expectations</td>
<td>89.5</td>
<td>86.0</td>
<td>&nbsp;84.0</td>
<td>81.7</td>
<td>81.0</td>
<td>79.6</td>
</tr>
<tr class="grey4">
<td class="firstcol">IFO ( % Percent
Balance)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Business Climate</td>
<td>-28.9</td>
<td>-32.1</td>
<td>-33.1</td>
<td>-36.2</td>
<td>-35.4</td>
<td>-34.4</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Current Conditions</td>
<td>-38.3</td>
<td>-38.0</td>
<td>-36.1</td>
<td>-37.8</td>
<td>-34.7</td>
<td>-29.8</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Expectations</td>
<td>-18.8</td>
<td>-25.9</td>
<td>-30.1</td>
<td>-34.7</td>
<td>-36.1</td>
<td>-38.9</td>
</tr>
<tr class="grey1">
<td class="firstcol">ZEW (% Percent Balance)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Expectations</td>
<td>44.8</td>
<td>31.1</td>
<td>13.0</td>
<td>-3.5</td>
<td>-5.8</td>
<td>-31.0</td>
</tr>
</tbody>
</table>
EMU Trade Balance Deficit For
Goods Shrinks 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> June 22, 2009


<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>

German Business ConfidenceImproving But Still Subdued

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619d.jpg" align="left" border="0" height="265" width="353">
UK retail sales fell unexpectedly in May and, combined with
news of greater public sector borrowing, markets sold off with
particular pressure on the pound sterling. The UK has been posting some
of the best economic numbers in Europe but with the slippage in retail
sales some of that optimism has faded. Still there are upbeat signs in
the UK economy. 
 

One sign of optimism is still retail sales themselves.
Although the Yr/Yr figures are worsening the six months trends have
barely turned lower and three-month trends are sill quite strong and
advancing. Perhaps the disappointment is more about markets getting
ahead of themselves than about any real disappointment in retail sales
trends themselves. 
 

The UK housing market is showing some signs of stirring.
Mortgage lending still fell in the recent month (May) but lenders
suspect that demand for purchases has been increasing. It is mostly
re-mortgaging activity that has been slackening off. It is reported
that for every home for sale there are four who are looking to buy
according to a survey by the U.K.'s National Association of Estate
Agents on Thursday. There are still signs of an upswing in the UK. 
 

The CBI industrial trend survey is still very weak but its
index moved up to -51 from -56 in May as well. 
 

On balance the reaction to retail sales may prove to be
excessively pessimistic since improving trends still seem to the rule,
not the exception, in the UK. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">UK Real and Nominal Retail Sales </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>Quarter 2-date</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>1.2%</td>
<td>6.3%</td>
<td>2.4%</td>
<td>-1.1%</td>
<td>6.4%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>0.6%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>6.6%</td>
<td>4.8%</td>
<td>3.8%</td>
<td>8.3%</td>
<td>7.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>1.3%</td>
<td>-7.9%</td>
<td>1.7%</td>
<td>-8.5%</td>
<td>8.5%</td>
<td>-9.3%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">&nbsp;</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Real</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Ex Auto</td>
<td>-0.7%</td>
<td>1.0%</td>
<td>1.2%</td>
<td>6.0%</td>
<td>2.0%</td>
<td>-1.7%</td>
<td>6.1%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
</body></html>

UK retail sales fell unexpectedly in May and, combined with news of greater public sector borrowing, markets sold off with particular pressure on the pound sterling. The UK has been posting some of the best economic numbers in Europe [...]

UK Retail Sales Fall And Markets Quiver

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619a.jpg" width="353">
New figures available in Haver&#39;s SURVEYS database point up how chain store sales have been influenced this year by sales at Wal-Mart. The International Council of Shopping Centers (ICSC) along with Goldman Sachs produce monthly chain store sales figures with and without this big, value-priced retailer. Both data sets paint a picture of recovery in consumer spending; however, sales minus Wal-Mart have been less vibrant. Estimates suggest that Wal-Mart boosted sales growth by four percentage points or more during the depths of the recession. Before this recession began, the sales gains were more comparable to one another -- except in the 2001 recession, when a differential also opened up.
Wal-Mart does not currently report monthly sales along with the other retailers; instead, it reports just quarterly. Therefore, the monthly figures must be interpolated as they are by ICSC and are available only with a lag. These numbers show that from June to December, sales without Wal-Mart fell 6.8% but with Wal-Mart they were down a lesser 2.5%. The quest for value was acute. Now that consumer spending seems to be recovering from last year&#39;s slump, bargain hunting has become less intense. Sales excluding the retail giant rose 3.2% from January through April while sales with Wal-Mart rose a comparable 1.8%. Sales without Wal-Mart during May slipped 0.5% and Wal-Mart&#39;s sales will be available shortly.
The lesson clearly is that value matters a lot when times get tough. What sales patterns might we continue to see into the recovery? The historical evidence shows that the inroads made by Wal-Mart may be sustained, but that the growth differentials between sales with or without this big retailer will narrow. During the whole year following the recession of 2001, for instance, overall chain store sales rose by 2.3%, but without Wal-Mart they increased 1.8%.It will be useful to continue to watch both series for the fullest perspective of consumers&#39; spending patterns.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619b.jpg" width="353">
Regardless of which chain store sales series is observed, consumer spending currently is under pressure. Gains in store sales are just moderate versus last year. Furniture &amp; appliance store sales are lower though apparel store sales have risen slightly. The consumer spending prospects do, however, look brighter. Consumer confidence and consumer sentiment have been rising this year along with after-tax incomes due to recent tax cuts. Moreover, weakness in pricing power has enabled real after-tax incomes to grow this year at a 6.3% annual rate following their measly 1.3% gain during 2008. Even the job market has improved marginally as first time claims for unemployment insurance have fallen.
The chain store figures sighted above are comparable-store, or same-store, sales figures. As such they are similar to the weekly chain store sales values reported by ICSC/Goldman Sachs. These are available in Haver&#39;s SURVEYW database.
From 1996, this article from the Federal Reserve Bank of New York concludes that chain store sales can significantly improve the accuracy of predictions for several measures of consumer spending. It can be found <a href="http://www.newyorkfed.org/research/epr/96v02n2/9610harr.pdf">here.</a>
Oil prices and consumer spending from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2005/summer/pdf/mehrapetersen.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">ICSC/Goldman Sachs Chain Store Sales (SA, 1977=100)</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">March</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</td>
<td>--</td>
<td>--</td>
<td>486.9</td>
<td>-0.3%</td>
<td>478.0</td>
<td>-0.8%</td>
<td>1.0%</td>
<td>2.3%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">Excluding Wal-Mart</td>
<td>104.4</td>
<td>-4.6%</td>
<td>104.9</td>
<td>-2.8%</td>
<td>103.5</td>
<td>-5.2%</td>
<td>-0.6%</td>
<td>3.0%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

New figures available in Haver's SURVEYS database point up how chain store sales have been influenced this year by sales at Wal-Mart. The International Council of Shopping Centers (ICSC) along with Goldman Sachs produce monthly chain [...]

U.S. Consumers' Quest For Value

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619c.jpg" width="353">
Commentary has been offered regularly on Haver.com about weekly chain store sales. That begs the question of how these figures differ from the monthly? The answer is that the weekly figures are based on a survey of sales taken by ICSC-Goldman Sachs while the monthly figures are based on reports directly from the retailers. And the tallies can differ. After the weekly figures are aggregated, during the last ten years there has been a not-perfect 73% correlation between the y/y change in the two series. Moreover, on a three-month basis that correlation shrinks to 14%. The one-month correlation is even smaller.
What the weekly figures indicate is that sales have lost their upward momentum. Weekly store sales declined in the latest period for the third week in the last five. The 0.6% decline lowered sales so far in June 0.5% below the May average after that month&#39;s 0.2% slip. Since the October &#39;08 low, however, sales remained up by 2.3%. We&#39;ll have to wait and see whether these figures foreshadow a similar trend in the monthly report.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Prospects for spending also seemed less than promising last week. Last week, the leading indicator of sales reversed all of the prior period&#39;s rise with a 0.7% decline. The decline lowered the indicator 0.4% from May and by 2.9% y/y.

<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">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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>485.6</td>
<td>488.6</td>
<td>-1.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

Commentary has been offered regularly on Haver.com about weekly chain store sales. That begs the question of how these figures differ from the monthly? The answer is that the weekly figures are based on a survey of sales taken by [...]

Gains in Weekly Chain Store Sales Fade

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619a.jpg" align="left" border="0" height="265" width="353">
New figures available in Haver's SURVEYS
database point up how chain store sales have been influenced this year
by sales at Wal-Mart. The International Council of Shopping Centers
(ICSC) along with Goldman Sachs produce monthly chain store sales
figures with and without this big, value-priced retailer. Both data
sets paint a picture of recovery in consumer spending; however, sales
minus Wal-Mart have been less vibrant. Estimates suggest that Wal-Mart
boosted sales growth by four percentage points or more during the
depths of the recession. Before this recession began, the sales gains
were more comparable to one another -- except in the 2001 recession,
when a differential also opened up.
Wal-Mart does not currently report monthly sales along with
the other retailers; instead, it reports just quarterly. Therefore, the
monthly figures must be interpolated as they are by ICSC and are
available only with a lag. These numbers show that from June to
December, sales without Wal-Mart fell 6.8% but with Wal-Mart they were
down a lesser 2.5%. The quest for value was acute. Now that consumer
spending seems to be recovering from last year's slump, bargain hunting
has become less intense. Sales excluding the retail giant rose 3.2%
from January through April while sales with Wal-Mart rose a comparable
1.8%. Sales without Wal-Mart during May slipped 0.5% and Wal-Mart's
sales will be available shortly.
The lesson clearly is that value matters a lot when times get
tough. What sales patterns might we continue to see into the recovery?
The historical evidence shows that the inroads made by Wal-Mart may be
sustained, but that the growth differentials between sales with or
without this big retailer will narrow. During the whole year following
the recession of 2001, for instance, overall chain store sales rose by
2.3%, but without Wal-Mart they increased 1.8%.It will be useful to
continue to watch both series for the fullest perspective of consumers'
spending patterns.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619b.jpg" align="right" border="0" height="265" width="353">
Regardless of which chain store sales series is observed,
consumer spending currently is under pressure. Gains in store sales are
just moderate versus last year. Furniture &amp; appliance store
sales are lower though apparel store sales have risen slightly. The
consumer spending prospects do, however, look brighter. Consumer
confidence and consumer sentiment have been rising this year along with
after-tax incomes due to recent tax cuts. Moreover, weakness in pricing
power has enabled real after-tax incomes to grow this year at a 6.3%
annual rate following their measly 1.3% gain during 2008. Even the job
market has improved marginally as first time claims for unemployment
insurance have fallen.
The chain store figures sighted above are comparable-store, or
same-store, sales figures. As such they are similar to the weekly chain
store sales values reported by ICSC/Goldman Sachs. These are available
in Haver's SURVEYW database.
From 1996, this article from the Federal Reserve Bank of New
York concludes that chain store sales can significantly
improve the accuracy of predictions for several measures of
consumer spending. It can be found <a href="http://www.newyorkfed.org/research/epr/96v02n2/9610harr.pdf">here.</a>
Oil prices and consumer spending from the
Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2005/summer/pdf/mehrapetersen.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ICSC/Goldman
Sachs Chain Store Sales (SA, 1977=100)</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">March</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</td>
<td>--</td>
<td>--</td>
<td>486.9</td>
<td>-0.3%</td>
<td>478.0</td>
<td>-0.8%</td>
<td>1.0%</td>
<td>2.3%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">Excluding Wal-Mart</td>
<td>104.4</td>
<td>-4.6%</td>
<td>104.9</td>
<td>-2.8%</td>
<td>103.5</td>
<td>-5.2%</td>
<td>-0.6%</td>
<td>3.0%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
Gains in Weekly Chain Store Sales
Fade 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 19, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619c.jpg" align="left" border="0" height="265" width="353">
Commentary has been offered regularly on Haver.com
about weekly chain store sales. That begs the question of how these
figures differ from the monthly? The answer is that the weekly figures
are based on a survey of sales taken by ICSC-Goldman Sachs while the
monthly figures are based on reports directly from the retailers. And
the tallies can differ. After the weekly figures are aggregated, during
the last ten years there has been a not-perfect 73% correlation between
the y/y change in the two series. Moreover, on a three-month basis that
correlation shrinks to 14%. The one-month correlation is even smaller.
What the weekly figures indicate is that sales have lost their
upward momentum. Weekly store sales declined in the latest period for
the third week in the last five. The 0.6% decline lowered sales so far
in June 0.5% below the May average after that month's 0.2% slip. Since
the October '08 low, however, sales remained up by 2.3%. We'll have to
wait and see whether these figures foreshadow a similar trend in the
monthly report.
During the last ten years there has been a 69% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. The weekly figures are available
in Haver's SURVEYW database.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Prospects for spending also seemed less than promising last
week. Last week, the leading indicator of sales reversed all of the
prior period's rise with a 0.7% decline. The decline lowered the
indicator 0.4% from May and by 2.9% y/y.
<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">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>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>485.6</td>
<td>488.6</td>
<td>-1.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
UK Retail Sales Fall And Markets
Quiver 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 19, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619d.jpg" align="left" border="0" height="265" width="353">
UK retail sales fell unexpectedly in May and, combined with
news of greater public sector borrowing, markets sold off with
particular pressure on the pound sterling. The UK has been posting some
of the best economic numbers in Europe but with the slippage in retail
sales some of that optimism has faded. Still there are upbeat signs in
the UK economy. 
 

One sign of optimism is still retail sales themselves.
Although the Yr/Yr figures are worsening the six months trends have
barely turned lower and three-month trends are sill quite strong and
advancing. Perhaps the disappointment is more about markets getting
ahead of themselves than about any real disappointment in retail sales
trends themselves. 
 

The UK housing market is showing some signs of stirring.
Mortgage lending still fell in the recent month (May) but lenders
suspect that demand for purchases has been increasing. It is mostly
re-mortgaging activity that has been slackening off. It is reported
that for every home for sale there are four who are looking to buy
according to a survey by the U.K.'s National Association of Estate
Agents on Thursday. There are still signs of an upswing in the UK. 
 

The CBI industrial trend survey is still very weak but its
index moved up to -51 from -56 in May as well. 
 

On balance the reaction to retail sales may prove to be
excessively pessimistic since improving trends still seem to the rule,
not the exception, in the UK. 
 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">UK Real
and Nominal Retail Sales </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>Quarter 2-date</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>1.2%</td>
<td>6.3%</td>
<td>2.4%</td>
<td>-1.1%</td>
<td>6.4%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>0.6%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>6.6%</td>
<td>4.8%</td>
<td>3.8%</td>
<td>8.3%</td>
<td>7.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>1.3%</td>
<td>-7.9%</td>
<td>1.7%</td>
<td>-8.5%</td>
<td>8.5%</td>
<td>-9.3%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">&nbsp;</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Real</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Ex Auto</td>
<td>-0.7%</td>
<td>1.0%</td>
<td>1.2%</td>
<td>6.0%</td>
<td>2.0%</td>
<td>-1.7%</td>
<td>6.1%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618e.jpg" width="353">
The decline in initial claims from their high is leading evidence of labor market improvement. Though initial claims for unemployment insurance edged up last week, they remained near the lowest level since late-January. Claims inched up by 3,000 to 608,000 after a revised 20,000 decline during the prior week which was revised a bit shallower. Initial claims were down from their March peak of 674,000. In addition, the four-week average of claims, which smoothes out some of the volatility in the weekly numbers, fell to 615,750 which was its lowest level since since mid-February. Still, the level remained up by two-thirds from the year ago level. The latest level about matched the Consensus expectation which was for 605,000 claims.
The latest claims figure is for the survey week for June nonfarm payrolls. Claims fell 28,000 (4.4%) from the May survey period. During the last ten years there has been an 86% correlation between the level of claims and the change in nonfarm payrolls.
The Labor Department indicated that the largest increases in initial claims for the week ending June 6 were in Pennsylvania (+6,861), Florida (+6,469), Ohio (+5,104), California (+4,894), and New York (+4,795), while the largest decreases were in Arkansas (-1,206), Puerto Rico (-1,131), Wisconsin (-707), Arizona (-693), and Nebraska (-450).
Modest improvement in the job market finally evidenced itself in a lower level of continuing claims for unemployment insurance. They fell for the first time since early January and the decline was a large 148,000 (2.2%). Continuing claims provide an indication of workers&#39; ability to find employment. At 6,687,000, however, claims remained more than twice the year ago level. Further suggesting that the job market&#39;s improvement is just modest was that the four-week average of continuing claims rose to another record of 6,757,500. The series dates back to 1966.<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618f.jpg" width="353">
Also indicating marginal labor market improvement was that the insured unemployment rate slipped to 5.0% from 5.1%. The level remained more than double June of 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.
Clearly, the latest weekly figure understates labor market distress in some states.The highest insured unemployment rates in the week ending May 30 were in Michigan (7.5 percent), Oregon (7.0), Nevada (6.3), Puerto Rico (6.3), Pennsylvania (6.2), Wisconsin (6.0), Arkansas (5.6), South Carolina (5.5), California (5.4), and North Carolina (5.4).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Community Development Financial Institutions: Challenges and Opportunities is the title of yesterday&#39;s speech by Fed Chairman Ben S, Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090617a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">06/13/09</th>
<th scope="col">06/06/09</th>
<th scope="col">05/30/09</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>608</td>
<td>605</td>
<td>625</td>
<td>55.9%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,687</td>
<td>6,835</td>
<td>115.9%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

The decline in initial claims from their high is leading evidence of labor market improvement. Though initial claims for unemployment insurance edged up last week, they remained near the lowest level since late-January. Claims inched [...]

U.S. Initial Jobless Insurance Claims Trend Lower But Edge Up In Latest Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618c.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the manufacturing sector came in at -2.2 versus Consensus expectations for a reading of -17.0. The This index reflects a question separate from the components which are surveyed separately.
During the last ten years there has been a 77% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 70% correlation with q/q growth in real GDP.
Amongst the sub-indexes shipments turned positive for the first time since May of last year. The new orders, inventory and employment indexes each rose sharply but were still negative. A reduced thirty-one percent of respondents expected to lower employment levels and an improved ten percent expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618d.jpg" width="353">
The prices paid index rose to a less-negative 13.0. Only five percent of respondents planned to raise prices while eighteen percent expected to lower them. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months improved to its highest level since 2003. The expectations index for new orders, shipments and employment each were up sharply from their winter lows. Expectations for prices also are sharply improved during the last six months
The figures from the Philadelphia Federal Reserve can be found in Haver&#39;s SURVEYS database.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0609.pdf">here</a>.
Residential Housing and Personal Bankruptcy from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_housing-and-bankruptcy.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">Philadelphia Fed (%)</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>
<td class="firstcol">General Activity Index</td>
<td>-2.2</td>
<td>-22.6</td>
<td>-17.7</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-13.0</td>
<td>&nbsp;-22.8</td>
<td>&nbsp;63.4</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the [...]

Philadelphia Fed Index Improves Sharply

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.

Economy in Brief

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