Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701k.jpg" width="353">
Construction outlays fell 0.9% in May, reverting to a decline after April&#39;s limp 0.6% increase. That was revised from a 0.8% rise and March was revised to a 0.4% decrease from a 0.4% increase reported last month. This report included annual revisions, which began in January 2007; the level in 2007 was revised up slightly. For 2008, several months are lower than before, but the steepness of the late-year decline was moderated, leaving recent levels basically unchanged from previous reports.
Private nonresidential building outlays remain a main support to overall construction, with a 0.5% gain in May following 1.3% in April. However, the historical revisions cut earlier months, and the sector has shown year-to-year declines now since January. May was down 3.3% from a year ago.This masks divergent trends among divisions: communications are off 28.3% from May 2008 but transportation is now up 5.9%, its first year/year increase this year after a steep drop during the winter. Office construction, with a tiny 0.1% rise in May, may be stabilizing after a continuous month/month contraction since last September; year-on-year, it is off 18.2%. The most traditional forms of private nonresidential construction, power plants and manufacturing facilities, are expanding, with power up 12.0% from a year ago and manufacturing a strong 55.6%. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701l.jpg" width="353">
Residential building activity continues weak. It fell 3.4% month-to-month in May and April&#39;s previously reported 0.7% increase was revised to a 0.3% cut. Year-on-year, it is off 33.9%. The best we can say is that this last figure is a bit less severe than April&#39;s initially reported 35% drop. Single-family home construction is down 54.1% y/y, although May&#39;s monthly performance was down &quot;just&quot; 4.5%, the smallest decline since last August.
Public construction edged down in May by 0.6%, while April&#39;s previously reported 0.6% decrease was revised to a 0.2% rise and March&#39;s 1.0% increase is now calculated at 2.2%. Year-on-year, public sector activity is up 3.4%, little different from the prior report of 3.3%. By type, spending on highways and streets is ratcheting lower, with May down 1.3% from April and 0.5% from May 2008. Education, the other big category, has, by contrast, been gaining in most months so far this year; May was up 0.4% on the month and 4.7% on the year. School-building has, with occasional interruption, sustained an uptrend through much of the last five or six years.
The construction put-in-place figures are available in Haver&#39;s USECON database.

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<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Construction (%)</th>
<th scope="col">May</th>
<th scope="col">April</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 class="odd">
<td class="firstcol">Total</td>
<td>-0.9</td>
<td>0.6</td>
<td>-0.4</td>
<td>-11.6</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.0</td>
<td>0.8</td>
<td>-1.6</td>
<td>-17.4</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-3.4</td>
<td>-0.3</td>
<td>-4.6</td>
<td>-33.9</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.5</td>
<td>0.2</td>
<td>0.4</td>
<td>-3.3</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.6</td>
<td>-0.6</td>
<td>2.2</td>
<td>3.4</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
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Construction outlays fell 0.9% in May, reverting to a decline after April's limp 0.6% increase. That was revised from a 0.8% rise and March was revised to a 0.4% decrease from a 0.4% increase reported last month. This report included [...]

U.S. Construction Spending Holding Steady

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701h.jpg" align="right" border="0" height="265" width="353">While
a turn to positive growth in employment still is not at hand, the June
report from the payroll processor ADP in their National Employment
Report again showed an easing in the rate of contraction. It indicated
that private nonfarm payrolls fell 473,000 last month after a revised
485,000 May decline that was shallower than reported initially. The
latest reading was the seventeenth consecutive monthly decline, but the
annualized rate of decline in payrolls eased somewhat to 5.2% during
the last three months from its peak of 7.1% in March.ADP compiled the estimate from its
database of individual companies' payroll information. Macroeconomic
Advisers, LLC, the St. Louis economic consulting firm, developed the
methodology for transforming the raw data into an economic
indicator.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701i.jpg" align="right" border="0" height="265" width="353">The
U.S. Bureau of Labor Statistics will report June payroll employment
tomorrow. For comparison, May's
485,000 worker decline in ADP's measure of private nonfarm payrolls was
accompanied by 338,000 job losses in the BLS measure of private sector
payrolls.According to
ADP and Macro-Advisers, the correlation between the monthly percentage
change in the ADP estimate and that in the BLS data is 0.90.
ADP reported that last month smaller
medium-sized payrolls remained in forefront of monthly job loss and
fell another 205,000 (-5.6% y/y) followed by a 177,000 (-4.2% y/y)
worker decline in small-sized payrolls. Large payrolls fell by 91,000
(-5.5% y/y). In the goods producing sector there were 250,000 fewer
jobs in June (-12.7% y/y). Details in the goods sector show that
medium-sized payrolls fell 108,000 (-13.2% y/y) followed by a 90,000
(-12.0% y/y) shortfall in small-sized payrolls. Large payrolls fell
52,000 (-12.8% y/y). In the manufacturing sector alone, payrolls fell
146,000 (-12.5% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701j.jpg" border="0" height="265" width="353">Declines in employment in
the service producing industry continued to
lag just slightly the factory sector's workforce contraction with a
223,000 (-3.1% y/y) decline, the fifteenth consecutive monthly decline.
Medium-sized service payrolls fell 97,000 (-3.5% y/y) and small-sized
payrolls dropped 87,000 (-2.7% y/y). Large service producing payrolls
dropped by 39,000 (-3.4% y/y).
The
ADP National Employment Report data is maintained in Haver's USECON
database; historical figures date back to December 2000. The figures in
this report cover only private sector jobs and exclude employment in
the public sector, which rose an average 11,083 during the last twelve
months.
The full ADP
National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/FINAL_Report_June_09.pdf">here</a>
,and the ADP methodology is
explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></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>
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<tr>
<td class="firstcol">Nonfarm Private Payroll
Employment (m/m Chg.)</td>
<td>-473,000</td>
<td>-485,000</td>
<td>-4.9%</td>
<td>-0.4</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>


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While a turn to positive growth in employment still is not at hand, the June report from the payroll processor ADP in their National Employment Report again showed an easing in the rate of contraction. It indicated that private [...]

ADP Report: Rate Of Job Loss Lessens A Bit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701f.jpg" width="353">
The moderate rebound in housing activity continued last month. The National Association of Realtors reported that May pending sales of existing homes held roughly stable with April at the highest level since last September. Consensus expectations had been for a slight 0.5% increase in May sales.
Last month&#39;s stability in overall home sales was reflective of gains in two of the country&#39;s regions and declines in the other two. In the Northeast sales rose slightly to the highest level since November of 2007. In the West sales recovered further from the February low. Elsewhere, sales in the Midwest fell slightly but were at their highest since mid-2007 while sales in the South fell as well m/m.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
The latest monthly gains in home sales have been accompanied by some stability in home prices. The median sales price of an existing home increased 3.8% in May (-16.8% y/y) and prices have been flat-to-up slightly so far this year. That latest increase reduced slightly the affordability index of a home but it nevertheless remained up by 32.2% year-to-year and by three quarters from the 2006 low. The latest level was near the record high for the series which extends back to 1970.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701g.jpg" width="353">
The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale slipped m/m and was down 15.3% versus one year earlier. At the current sales rate there was a 9.6 months&#39; supply of homes on the market which was near the lowest since August 2007 but still up from the 8.9 months supply during all of 2007 and 6.5 months during 2006. At the high, there was a 10.4 months supply during all of last year.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR database.
Bank Credit Standards from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_bank-credit-standards.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>90.7</td>
<td>90.6</td>
<td>&nbsp;&nbsp; 6.7%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>80.9</td>
<td>78.5</td>
<td>6.7</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>89.2</td>
<td>90.4</td>
<td>11.5</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>92.6</td>
<td>94.2</td>
<td>7.9</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>96.9</td>
<td>94.8</td>
<td>0.7</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
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The moderate rebound in housing activity continued last month. The National Association of Realtors reported that May pending sales of existing homes held roughly stable with April at the highest level since last September. Consensus [...]

U.S. Pending Home Sales Stable At Their Highest Level Since September

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701e.jpg" align="left" border="0" height="265" width="353">
The percentile readings on the far right of the table tell the
real story. A bottom 12 percentile range result is about the strongest
reading for any component except for the outlook surveys where the
standing is a 20% to 30% result or worse for small firms. These are
still very weak numbers for Japan. 
 

Large-, small- and medium-sized firms all show some
improvement in the quarter. For small firms the outlook mostly
deteriorated, in contrast with the other firms&#8217; views. The closely
watched large firm survey shows MFG firms are doing better than non MFG
firms in terms the their respective range percentile readings, although
the raw readings make it seem as though the non MFG firms are doing
better. Their raw response while higher than those for MFG, sit lower
in its range that the MFG response sits in its range. 
 

Three non MFG sectors, wholesale, retail, and transportation,
managed to improve quarter-to-quarter. MFG improved as well. The rest
worsened. It&#8217;s a poor showing despite the improvement in the quarter. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol" colspan="8">Tankan
Results Large Enterprises</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Readings</td>
<td colspan="2">Averages</td>
<td>PERCENTILES</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>-48.0</td>
<td>-58.0</td>
<td>-24.0</td>
<td>-3.0</td>
<td>-53.0</td>
<td>8.2</td>
<td>11.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG</td>
<td>-29.0</td>
<td>-31.0</td>
<td>-9.0</td>
<td>1.0</td>
<td>-30.0</td>
<td>9.6</td>
<td>3.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Total Industry</td>
<td>-39.0</td>
<td>-45.0</td>
<td>-16.0</td>
<td>0.0</td>
<td>-42.0</td>
<td>8.8</td>
<td>8.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Construction</td>
<td>-29.0</td>
<td>-27.0</td>
<td>-10.0</td>
<td>-7.0</td>
<td>-28.0</td>
<td>-5.4</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Real Estate</td>
<td>-24.0</td>
<td>-21.0</td>
<td>-7.0</td>
<td>5.0</td>
<td>-22.5</td>
<td>25.6</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Wholesale</td>
<td>-41.0</td>
<td>-44.0</td>
<td>-7.0</td>
<td>11.0</td>
<td>-42.5</td>
<td>10.7</td>
<td>4.4%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Retail</td>
<td>-39.0</td>
<td>-42.0</td>
<td>-18.0</td>
<td>-5.0</td>
<td>-40.5</td>
<td>0.7</td>
<td>5.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Transportation</td>
<td>-43.0</td>
<td>-46.0</td>
<td>-7.0</td>
<td>6.0</td>
<td>-44.5</td>
<td>8.3</td>
<td>4.3%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Services 4 Biz</td>
<td>-30.0</td>
<td>-21.0</td>
<td>-1.0</td>
<td>4.0</td>
<td>-25.5</td>
<td>17.4</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Personal Serv</td>
<td>-11.0</td>
<td>-9.0</td>
<td>-11.0</td>
<td>6.0</td>
<td>-10.0</td>
<td>7.6</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Restaurants &amp; Hotels</td>
<td>-46.0</td>
<td>-45.0</td>
<td>-32.0</td>
<td>-13.0</td>
<td>-45.5</td>
<td>-0.8</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="8">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG-OtLk</td>
<td>-30.0</td>
<td>-51.0</td>
<td>-36.0</td>
<td>-4.0</td>
<td>-30.3</td>
<td>7.9</td>
<td>28.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG -Otlk</td>
<td>-21.0</td>
<td>-30.0</td>
<td>-14.0</td>
<td>-1.0</td>
<td>-16.5</td>
<td>9.8</td>
<td>17.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Industry-Otlk</td>
<td>-26.0</td>
<td>-41.0</td>
<td>-25.0</td>
<td>-2.0</td>
<td>-23.5</td>
<td>8.7</td>
<td>23.8%</td>
</tr>
<tr class="grey1">
<td colspan="8">Tankan Results Medium
Enterprises</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>-55.0</td>
<td>-57.0</td>
<td>-24.0</td>
<td>-36.0</td>
<td>-36.0</td>
<td>-3.7</td>
<td>2.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG</td>
<td>-36.0</td>
<td>-37.0</td>
<td>-21.0</td>
<td>-26.5</td>
<td>-26.5</td>
<td>-6.3</td>
<td>2.2%</td>
</tr>
<tr class="grey2">
<td colspan="8">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG-OtLk</td>
<td>-46.0</td>
<td>-61.0</td>
<td>-45.0</td>
<td>-12.0</td>
<td>-41.0</td>
<td>-5.7</td>
<td>20.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG -Otlk</td>
<td>-32.0</td>
<td>-45.0</td>
<td>-32.0</td>
<td>-17.0</td>
<td>-31.5</td>
<td>-8.1</td>
<td>25.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Industry-Otlk</td>
<td>-39.0</td>
<td>-51.0</td>
<td>-38.0</td>
<td>-15.0</td>
<td>-35.8</td>
<td>-7.3</td>
<td>19.7%</td>
</tr>
<tr class="grey1">
<td colspan="8">Tankan Results Small
Enterprises</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>-57.0</td>
<td>-57.0</td>
<td>-29.0</td>
<td>-57.0</td>
<td>-57.0</td>
<td>-10.5</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG</td>
<td>-44.0</td>
<td>-42.0</td>
<td>-29.0</td>
<td>-43.0</td>
<td>-43.0</td>
<td>-17.6</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Total Industry</td>
<td>-44.0</td>
<td>-42.0</td>
<td>-29.0</td>
<td>-43.0</td>
<td>-43.0</td>
<td>-17.6</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="8">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG-OtLk</td>
<td>-53.0</td>
<td>-63.0</td>
<td>-48.0</td>
<td>-25.0</td>
<td>-47.3</td>
<td>-12.4</td>
<td>13.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG -Otlk</td>
<td>-45.0</td>
<td>-52.0</td>
<td>-42.0</td>
<td>-31.0</td>
<td>-42.5</td>
<td>-21.6</td>
<td>15.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Industry-Otlk</td>
<td>-48.0</td>
<td>-56.0</td>
<td>-44.0</td>
<td>-29.0</td>
<td>-44.3</td>
<td>-18.3</td>
<td>14.8%</td>
</tr>
</tbody>
</table>
</body></html>

The percentile readings on the far right of the table tell the real story. A bottom 12 percentile range result is about the strongest reading for any component except for the outlook surveys where the standing is a 20% to 30% result [...]

Tankan Improves: Still In Slow-Motion

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701d.jpg" width="353">
For the fifth consecutive month the outplacement firm of Challenger, Grey &amp; Christmas indicated that job cut announcements eased. In fact, the number of layoff announcements of 74,393 was the least since March of last year. This cycle&#39;s largest layoff total occurred this past January when there were 241,749 cuts. Challenger also reported, however, that announced hiring plans remained near the cycle low.
Announcement of job cuts in the pharmaceutical industry fell even further to 515, the lowest level since early 2007. Announcements in the financial industry also fell as did cuts in the services, apparel and (sharply) in the chemical industries. Job cuts in the computer industry fell to the lowest level since December ad layoffs in the auto industry fell as well.
Picking up some steam were job cut announcements in the chemical and in the transportation industry.
During the last ten years there has been a 67% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment. Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
The Challenger figures are available in Haver&#39;s SURVEYS database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></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>
<td class="firstcol">Announced Job Cuts</td>
<td>74,393</td>
<td>111,182</td>
<td>-9.0%</td>
<td>1,223,993</td>
<td>768,264</td>
<td>839,822</td>
</tr>
</tbody>
</table>
</body>
</html>

For the fifth consecutive month the outplacement firm of Challenger, Grey & Christmas indicated that job cut announcements eased. In fact, the number of layoff announcements of 74,393 was the least since March of last year. This [...]

Challenger Layoffs Moderate Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701a.jpg" align="right" border="0" height="265" width="353">
The National Association of Purchasing Management indicated
that the recession in factory sector continued to moderate last month.
The June composite index for the factory sector rose to 44.8 from 42.8
in May. Though the latest figure still indicates a lower level of
activity, as does any below the break-even point of 50, the rate of
decline appears to be easing. The worst of the decline was at yearend
'08 when the index touched 32.9. The latest figure about matched
Consensus expectations.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701b.jpg" align="right" border="0" height="265" width="353">
Improvement in the components of the overall June ISM index
was broad-based. The production component pushed through the break-even
point for the first time since last summer with a rise to 52.5, up off
the low of 26.3 in December. During the last ten years there has been
an 84% correlation between the level of the production component of the
composite index and the three-month growth in factory sector industrial
production. It is appropriate to correlate the ISM index level
with factory sector output growth because the ISM
index is a diffusion index. It measures growth by using all of the
positive changes in activity added to one half of the zero change in
activity measures. The speed of supplier deliveries also
slowed for the third consecutive month.
 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701c.jpg" align="right" border="0" height="265" width="353">
Importantly, the employment index rose to its highest level
(40.7) since last September and it was up from the February low of
26.1. During the last ten years there has been an 89% correlation
between the index level and the one-month change in manufacturing
payrolls. The new orders figure retraced slightly its earlier
improvement with a decline to slightly below the break-even level of
50. Nevertheless, it remained near the highest level since last August
and up from the December low of 23.1. The export order index improved
further to 49.5 versus the December reading of 35.5. During the last
ten years there has been a 53% correlation between the index and the
q/q change in real exports of goods in the GDP accounts. The rate of
inventory destocking picked up as evidenced by a low reading of 30.8
which was the lowest level since 1982.
The separate index of prices paid again rose sharply with
improved activity levels. The reading at the break-even level of 50 was
its highest since last September and it's up from the December low of
18.0. During the last twenty years there has been a 79% correlation
between the price index and the three-month change in the PPI for
intermediate goods.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM
Mfg</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>44.8</td>
<td>42.8</td>
<td>49.5</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>49.2</td>
<td>51.1</td>
<td>49.3</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>40.7</td>
<td>34.3</td>
<td>44.1</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>50.0</td>
<td>43.5</td>
<td>91.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
</body></html>

The National Association of Purchasing Management indicated that the recession in factory sector continued to moderate last month. The June composite index for the factory sector rose to 44.8 from 42.8 in May. Though the latest figure [...]

ISM Factory Sector Index Rose Modestly While Prices Jump

ISM Factory Sector Index RoseModestly While Prices Jump

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630f.jpg" align="left" border="0" height="265" width="353">
According to the Conference Board, consumer confidence slipped
this month following gains during the prior three months. The slip did
not, however, alter the picture of improvement in consumer attitudes.
Confidence remained up by more than one-half from the February low and
roughly equal to the year ago level. The Conference Board data can be
found in Haver's CBDB database.
During the last ten years there has been an 86% correlation
between the level of consumer confidence and the y/y change in real
consumer spending.
The expectations component of confidence slipped the most last
month with an 8.4% decline following three strong monthly increases.
Still, the index remained near the highest level since late 2007. The
percentage of respondents expecting business conditions to improve
slipped to 21.2% but that remained near the highest level since 2004. A
much reduced 20.2% expected conditions to worsen. That improvement was
expected by 17.4 of respondents to generate more jobs, more than double
the percentage at the recent low.
Consumers' assessment of the current economic conditions also
slipped m/m and remained near its recent low. It remained off by nearly
two-thirds from a year earlier. Jobs were seen as hard to get by a
still-high 44.8% of respondents and jobs were seen as plentiful by only
4.5% of respondents. Business conditions were seen as good by just 8.0%
and that was near the 1991 low. Consumers who thought business
conditions were bad rose slightly to 45.6%, still near the highest
since 1983.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630g.jpg" align="right" border="0" height="265" width="353">
Expectations for the inflation rate in twelve months have been
roughly stable at 5.9%. That's down from last year's high of 7.7%.
Expectations about interest rates have increased sharply with 51.7% of
respondents expecting higher rates while 16.3% expect rates to fall. A
greatly increased 31.5% of respondents expected stock prices to rise.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</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">Consumer
Confidence Index</td>
<td>49.3</td>
<td>54.8</td>
<td>-3.3</td>
<td>57.9</td>
<td>103.4</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>24.8</td>
<td>29.7</td>
<td>-62.1</td>
<td>69.9</td>
<td>128.8</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>65.5</td>
<td>71.5</td>
<td>58.2</td>
<td>50.0</td>
<td>86.4</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

According to the Conference Board, consumer confidence slipped this month following gains during the prior three months. The slip did not, however, alter the picture of improvement in consumer attitudes. Confidence remained up by more [...]

U.S. Consumer Confidence Slips

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

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

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

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

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

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

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.