Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618a.jpg" width="353">
The Conference Board&#39;s leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases recovered the declines during the prior several months and left the index at its highest level since last September. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
Nearly three quarters of the ten components of the leading index increased last month with the largest positive contributions coming from higher stock prices, a higher money supply, a more positively sloped interest rate yield curve and vendor performance (slower delivery speeds). Initial unemployment insurance claims, weekly hours worked and factory orders made negative contributions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618b.jpg" width="353">
Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2% for the second month and that compared with 0.6% to 1.1% monthly declines since last September. The negative contributions from lower employment and production eased. Half of the four component series rose during May led by gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the fifth month in the last six. The ratio of coincident-to-lagging indicators (a measure of economic excess) was unchanged m/m at the highest level this year.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
IMF Asked to Aid G-8 With Exit Strategies For Crisis Policies can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW061309A.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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Feb. 6-Month % (AR)</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">Leading</td>
<td>1.2</td>
<td>1.1</td>
<td>-0.3</td>
<td>2.4</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.3</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.8</td>
<td>-0.6</td>
<td>-4.0</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


</html>

The Conference Board's leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases [...]

U.S. Leading Indicators Rise Sharply For A Second Month

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618a.jpg" width="353">
The Conference Board&#39;s leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases recovered the declines during the prior several months and left the index at its highest level since last September. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
Nearly three quarters of the ten components of the leading index increased last month with the largest positive contributions coming from higher stock prices, a higher money supply, a more positively sloped interest rate yield curve and vendor performance (slower delivery speeds). Initial unemployment insurance claims, weekly hours worked and factory orders made negative contributions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618b.jpg" width="353">
Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2% for the second month and that compared with 0.6% to 1.1% monthly declines since last September. The negative contributions from lower employment and production eased. Half of the four component series rose during May led by gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the fifth month in the last six. The ratio of coincident-to-lagging indicators (a measure of economic excess) was unchanged m/m at the highest level this year.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
IMF Asked to Aid G-8 With Exit Strategies For Crisis Policies can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW061309A.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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Feb. 6-Month % (AR)</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">Leading</td>
<td>1.2</td>
<td>1.1</td>
<td>-0.3</td>
<td>2.4</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.3</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.8</td>
<td>-0.6</td>
<td>-4.0</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Improves Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 18, 2009


<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>
U.S. Initial Jobless Insurance Claims Trend Lower But Edge Up In Latest Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 18, 2009


<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>


</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617d.jpg" width="353">
The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 billion was deeper than the Consensus expectation for a reading of $85.0 billion. 
As a percentage of GDP, the shrinkage of the U.S. deficit was dramatic. The 2.9% 1Q figure was the smallest since early-1999. This percentage is sharply reduced from the 6.6% peak reached late in 2005.
Recession in the U.S. worked with the decline in oil prices to drop the 1Q deficit on traded goods to $124.0 billion, its lowest since 2004. Though growth in goods exports was a negative 21.0% y/y, imports fell by a greater 30.1% spurred by the drop in oil prices. 
Fewer U.S. citizens went abroad this year and more came here. As a result, the balance on services trade narrowed as exports fell more then imports. The 1Q surplus of $32.8 billion compared to a peak surplus of $40.0 billion late during 2007. That decline came as exports fell 7.2% y/y against a 6.4% decline in imports.
From the capital account side of the ledger, the U.S. balance on private direct investment remained stable and slightly positive q/q. That compares with deficits during the last three years. U.S. investment abroad rose while foreign investment here fell sharply.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617e.jpg" width="353"> 
Ties that bind: bilateral trade&#39;s role in synchronizing business cycles from the Federal Reserve Bank of Dallas can be found here.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Balance of Payments</a> SA</th>
<th scope="col">1Q &#39;09</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">Year Ago</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">Current Account Balance ($ Bil.)</td>
<td>-101.5</td>
<td>-154.9</td>
<td>-179.3</td>
<td>-706.1</td>
<td>-726.6</td>
<td>-803.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Deficit % of GDP</td>
<td>2.9</td>
<td>4.4</td>
<td>5.1</td>
<td>5.0</td>
<td>5.3</td>
<td>6.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Goods ($ Bil.)</td>
<td>-124.0</td>
<td>-178.8</td>
<td>-218.8</td>
<td>-840.3</td>
<td>-831.0</td>
<td>-847.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports&nbsp;</td>
<td>-14.2%</td>
<td>-14.0%</td>
<td>-21.0%</td>
<td>12.2%</td>
<td>12.1%</td>
<td>13.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports&nbsp;</td>
<td>-20.4%</td>
<td>-16.0%</td>
<td>-30.1%</td>
<td>7.5%</td>
<td>5.7%</td>
<td>10.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Private Services ($ Bil.)</td>
<td>32.8</td>
<td>34.3</td>
<td>36.2</td>
<td>144.3</td>
<td>129.6</td>
<td>86.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>-5.7</td>
<td>-4.7%</td>
<td>-7.2%</td>
<td>8.9%</td>
<td>15.8%</td>
<td>12.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>-6.2</td>
<td>-5.4%</td>
<td>-6.4%</td>
<td>8.0%</td>
<td>7.5%</td>
<td>11.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Income ($ Bil.)</td>
<td>19.3</td>
<td>21.1</td>
<td>36.7</td>
<td>118.2</td>
<td>90.8</td>
<td>48.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers ($ Bil.)</td>
<td>-29.6</td>
<td>-31.5</td>
<td>-33.3</td>
<td>-128.4</td>
<td>-116.0</td>
<td>-91.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 [...]

U.S. 1Q'09 Current Account Deficit Shrinks To Smallest Since 2001

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617a.jpg" width="353">
The recession continued to weigh on pricing power last month according to the Bureau of Labor Statistics. The May report on consumer prices indicated a less-than-expected rise of 0.1% which followed the unchanged reading for April. The eye-catching news, however, was that the y/y change of -1.3% was the weakest since early-1950.
Though energy prices have ticked up recently, the decline of 26.3% versus last year is responsible for much of the overall weakness in pricing power. Gasoline prices during May reversed their earlier decline and rose 3.1%, yet they still were down 39.4% y/y. Conversely, fuel oil prices continued downward with a 3.1% drop (-38.1% y/y). The latest was the tenth consecutive monthly drop. Finally, prices for natural gas &amp; electricity have fallen in all but one of the last ten months and year-to-year they are down 5.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617b.jpg" width="353">
Lower food &amp; beverage prices also continue to restrain overall pricing pressure. Prices slipped for the fourth straight month during May and the y/y gain of 2.7% was the weakest since January 2007. It&#39;s down from a peak of 6.1% last fall. Recent weakness has been led by lower dairy product prices (-5.6% y/y). Moreover, price gains for meats, poultry &amp; fish (1.4% y/y), cereals &amp; bakery products (3.5% y/y) as well as fruits &amp; vegetables (-0.8% y/y) have eased sharply.
Finally, &quot;core&quot; pricing remains tame. The CPI less food &amp; energy ticked up just 0.1% last month, the weakest increase this year. So far in 2009, core prices have risen at a 2.3% annual rate. That is up from their recent low; but the annual gain of 1.8% is nearly the smallest since 2004.
So far this year gains in core goods prices actually have firmed versus last year. The 0.2% gain in May capped a five-month stint during which prices rose at a 3.9% annual rate versus a 0.1% uptick during all of last year. While tobacco prices slipped 0.3% last month, higher sales taxes have lifted prices by one-quarter from 2008. There also has been modest firming of prices elsewhere. Prices of new &amp; used motor vehicles have risen at a 4.1% rate during the last five months and the y/y change of -1.1% compares to a rate of decline of 3.5% as of yearend 2008. Prices for household furnishings &amp; operations have risen 1.6% y/y following price deflation early last year. Apparel prices are up 0.8% y/y but that owes almost entirely to a price jump this past February.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617c.jpg" width="353">
Working the other way, gains in core services prices continue to moderate. The 0.1% uptick last month left the y/y change of 2.3% at its weakest since 1983. So far this year, prices have risen at a 1.6% rate. Weakness in the housing market accounts for much of that moderation. Last month shelter prices ticked up just 0.1% and the annual gain of 1.5% was the weakest since 1983. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, ticked up just 0.1% (2.1% y/y). Conversely, the increase in medical care services prices of 3.2% y/y is off the low and so far this year prices have risen at a 4.0% rate. Education costs also have been firm and were up 0.5% last month (5.5% y/y). Conversely, public transportation prices have been falling since last summer -9.0% y/y.
The chained CPI, which adjusts for shifts in consumption patterns, gained 0.3% in May while year-to-year prices fell 1.4%. The increase in chained prices less food and energy eased to 0.2% last month.
The consumer price data is available in Haver&#39;s USECON database while detailed figures can be found in the CPIDATA database.
Health Care Reform and the Federal Budget from the Congressional Budget Office can be found <a href="http://www.cbo.gov/ftpdocs/103xx/doc10311/06-16-HealthReformAndFederalBudget.pdf"> here</a>.
Why Did FDR&#39;s Bank Holiday Succeed? from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/epr/forthcoming/0906silb.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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>0.1</td>
<td>0.0</td>
<td>-1.3</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.1</td>
<td>0.3</td>
<td>1.8</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.2</td>
<td>0.5</td>
<td>1.2</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Services less Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.1</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>0.2</td>
<td>-2.4</td>
<td>-26.3</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp; Beverages</td>
<td>-0.2</td>
<td>-0.2</td>
<td>2.7</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.3</td>
<td>0.3</td>
<td>-1.4 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>-0.0</td>
<td>0.2</td>
<td>1.4</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The recession continued to weigh on pricing power last month according to the Bureau of Labor Statistics. The May report on consumer prices indicated a less-than-expected rise of 0.1% which followed the unchanged reading for April. [...]

U.S. May CPI Ticks Up, But 1.2% Drop Y/Y Is Largest Since April 1950

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617a.jpg" width="353">
The recession continued to weigh on pricing power last month according to the Bureau of Labor Statistics. The May report on consumer prices indicated a less-than-expected rise of 0.1% which followed the unchanged reading for April. The eye-catching news, however, was that the y/y change of -1.3% was the weakest since early-1950.
Though energy prices have ticked up recently, the decline of 26.3% versus last year is responsible for much of the overall weakness in pricing power. Gasoline prices during May reversed their earlier decline and rose 3.1%, yet they still were down 39.4% y/y. Conversely, fuel oil prices continued downward with a 3.1% drop (-38.1% y/y). The latest was the tenth consecutive monthly drop. Finally, prices for natural gas &amp; electricity have fallen in all but one of the last ten months and year-to-year they are down 5.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617b.jpg" width="353">
Lower food &amp; beverage prices also continue to restrain overall pricing pressure. Prices slipped for the fourth straight month during May and the y/y gain of 2.7% was the weakest since January 2007. It&#39;s down from a peak of 6.1% last fall. Recent weakness has been led by lower dairy product prices (-5.6% y/y). Moreover, price gains for meats, poultry &amp; fish (1.4% y/y), cereals &amp; bakery products (3.5% y/y) as well as fruits &amp; vegetables (-0.8% y/y) have eased sharply.
Finally, &quot;core&quot; pricing remains tame. The CPI less food &amp; energy ticked up just 0.1% last month, the weakest increase this year. So far in 2009, core prices have risen at a 2.3% annual rate. That is up from their recent low; but the annual gain of 1.8% is nearly the smallest since 2004.
So far this year gains in core goods prices actually have firmed versus last year. The 0.2% gain in May capped a five-month stint during which prices rose at a 3.9% annual rate versus a 0.1% uptick during all of last year. While tobacco prices slipped 0.3% last month, higher sales taxes have lifted prices by one-quarter from 2008. There also has been modest firming of prices elsewhere. Prices of new &amp; used motor vehicles have risen at a 4.1% rate during the last five months and the y/y change of -1.1% compares to a rate of decline of 3.5% as of yearend 2008. Prices for household furnishings &amp; operations have risen 1.6% y/y following price deflation early last year. Apparel prices are up 0.8% y/y but that owes almost entirely to a price jump this past February.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617c.jpg" width="353">
Working the other way, gains in core services prices continue to moderate. The 0.1% uptick last month left the y/y change of 2.3% at its weakest since 1983. So far this year, prices have risen at a 1.6% rate. Weakness in the housing market accounts for much of that moderation. Last month shelter prices ticked up just 0.1% and the annual gain of 1.5% was the weakest since 1983. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, ticked up just 0.1% (2.1% y/y). Conversely, the increase in medical care services prices of 3.2% y/y is off the low and so far this year prices have risen at a 4.0% rate. Education costs also have been firm and were up 0.5% last month (5.5% y/y). Conversely, public transportation prices have been falling since last summer -9.0% y/y.
The chained CPI, which adjusts for shifts in consumption patterns, gained 0.3% in May while year-to-year prices fell 1.4%. The increase in chained prices less food and energy eased to 0.2% last month.
The consumer price data is available in Haver&#39;s USECON database while detailed figures can be found in the CPIDATA database.
Health Care Reform and the Federal Budget from the Congressional Budget Office can be found <a href="http://www.cbo.gov/ftpdocs/103xx/doc10311/06-16-HealthReformAndFederalBudget.pdf"> here</a>.
Why Did FDR&#39;s Bank Holiday Succeed? from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/epr/forthcoming/0906silb.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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>0.1</td>
<td>0.0</td>
<td>-1.3</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.1</td>
<td>0.3</td>
<td>1.8</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.2</td>
<td>0.5</td>
<td>1.2</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Services less Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.1</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>0.2</td>
<td>-2.4</td>
<td>-26.3</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp; Beverages</td>
<td>-0.2</td>
<td>-0.2</td>
<td>2.7</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.3</td>
<td>0.3</td>
<td>-1.4 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>-0.0</td>
<td>0.2</td>
<td>1.4</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
U.S. 1Q'09 Current Account Deficit Shrinks To Smallest Since 2001 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 17, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617d.jpg" width="353">
The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 billion was deeper than the Consensus expectation for a reading of $85.0 billion. 
As a percentage of GDP, the shrinkage of the U.S. deficit was dramatic. The 2.9% 1Q figure was the smallest since early-1999. This percentage is sharply reduced from the 6.6% peak reached late in 2005.
Recession in the U.S. worked with the decline in oil prices to drop the 1Q deficit on traded goods to $124.0 billion, its lowest since 2004. Though growth in goods exports was a negative 21.0% y/y, imports fell by a greater 30.1% spurred by the drop in oil prices. 
Fewer U.S. citizens went abroad this year and more came here. As a result, the balance on services trade narrowed as exports fell more then imports. The 1Q surplus of $32.8 billion compared to a peak surplus of $40.0 billion late during 2007. That decline came as exports fell 7.2% y/y against a 6.4% decline in imports.
From the capital account side of the ledger, the U.S. balance on private direct investment remained stable and slightly positive q/q. That compares with deficits during the last three years. U.S. investment abroad rose while foreign investment here fell sharply.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617e.jpg" width="353"> 
Ties that bind: bilateral trade&#39;s role in synchronizing business cycles from the Federal Reserve Bank of Dallas can be found here.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Balance of Payments</a> SA</th>
<th scope="col">1Q &#39;09</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">Year Ago</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">Current Account Balance ($ Bil.)</td>
<td>-101.5</td>
<td>-154.9</td>
<td>-179.3</td>
<td>-706.1</td>
<td>-726.6</td>
<td>-803.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Deficit % of GDP</td>
<td>2.9</td>
<td>4.4</td>
<td>5.1</td>
<td>5.0</td>
<td>5.3</td>
<td>6.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Goods ($ Bil.)</td>
<td>-124.0</td>
<td>-178.8</td>
<td>-218.8</td>
<td>-840.3</td>
<td>-831.0</td>
<td>-847.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports&nbsp;</td>
<td>-14.2%</td>
<td>-14.0%</td>
<td>-21.0%</td>
<td>12.2%</td>
<td>12.1%</td>
<td>13.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports&nbsp;</td>
<td>-20.4%</td>
<td>-16.0%</td>
<td>-30.1%</td>
<td>7.5%</td>
<td>5.7%</td>
<td>10.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Private Services ($ Bil.)</td>
<td>32.8</td>
<td>34.3</td>
<td>36.2</td>
<td>144.3</td>
<td>129.6</td>
<td>86.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>-5.7</td>
<td>-4.7%</td>
<td>-7.2%</td>
<td>8.9%</td>
<td>15.8%</td>
<td>12.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>-6.2</td>
<td>-5.4%</td>
<td>-6.4%</td>
<td>8.0%</td>
<td>7.5%</td>
<td>11.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Income ($ Bil.)</td>
<td>19.3</td>
<td>21.1</td>
<td>36.7</td>
<td>118.2</td>
<td>90.8</td>
<td>48.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers ($ Bil.)</td>
<td>-29.6</td>
<td>-31.5</td>
<td>-33.3</td>
<td>-128.4</td>
<td>-116.0</td>
<td>-91.3</td>
</tr>
</tbody>
</table>
</body>
</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090616j.jpg" width="353">
Speculation that the U.S. economic recovery is taking hold drove regular gasoline prices even higher last week to an average $2.67 per gallon of regular. Gasoline prices now have risen more than $1.00 per gallon, or by more than one-half, from the December low to the highest level since late-October. Yesterday, the cash market price for a gallon of regular gas rose further to $2.02 per gallon versus $1.96 averaged last week. These also were the highest prices since last October. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Evidence that the economic rebound is finally taking hold may be evidenced in the figures for vehicle-miles driven. The year-to-year change in miles driven still is negative, but the y/y change of -0.7% is the least since March and is well improved from the -5% comparisons of this past fall. The change in demand is measured using the latest four weeks versus the same four weeks in 2008. Demand for all petroleum products was down 6.9% y/y in the latest week led by a 19.7% drop in demand for residual fuel oil and a 12.8% drop in distillate demand. These numbers are available in Haver&#39;s OILWKLY database.
Higher crude oil prices are behind the rise in gasoline costs. Crude prices averaged $70.83 last week for a barrel of West Texas Intermediate, up from the December low of $32.37 per barrel. Yesterday, crude oil prices held steady at $70.62 and prices reached a high of $145.66 last July. The latest price increases occurred despite a 3.9% year-to-year rise in crude oil production during the latest four weeks. Further more, they have occurred despite a 13.7% y/y rise in inventories of crude oil &amp; petroleum products. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Finally, the gains in the price of natural gas paused again last week and it fell back to $3.56 per mmbtu (-71.8% y/y). The latest price was nearly the lowest since 2002 and is down by two-thirds from the high reached in early-July of $13.19/mmbtu.
Economic and Environmental Impacts of U.S. Corn Ethanol Production and Use from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/red/2009/01/Tiffany.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">06/15/09</th>
<th scope="col">06/08/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.67</td>
<td>2.62</td>
<td>-34.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>70.83</td>
<td>68.10</td>
<td>-47.4%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Speculation that the U.S. economic recovery is taking hold drove regular gasoline prices even higher last week to an average $2.67 per gallon of regular. Gasoline prices now have risen more than $1.00 per gallon, or by more than one- [...]

Gasoline Prices Reach The Highest Level Since Last October

Louise Curley

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090616h.jpg" align="left" border="0" height="265" width="353">
Optimists regarding the outlook for the next six months among
German financial market professionals outweighed pessimists by 44.8% in
June according to the latest ZEW Survey (The Mannheim based Center for
European Economic Research). This represented an increase of 13.7
percentage points from May and was the largest margin of optimists
since June 2006. It was also well above the long term average of 26.3%.
The financial professionals also saw some slight improvement in current
conditions. The percent balance between pessimists and optimists
declined from 92.9%in May to 89.7% in June. The first chart shows the
ZEW appraisals of current conditions and expectation for the next six
months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090616i.jpg" align="right" border="0" height="265" width="353">
A part of the group's more optimistic appraisal of the outlook
can be attributed to their expectations of profit increases in both the
banking and insurance industries, as shown in the second chart.
Expectations of profits in the banking industry have risen from 2.0% in
April to 30.8% in June, and in the insurance industry from 5.1% in May
to 9.7% in June. Except for a 5.4% increase in Utilities' profits and
virtually no change in Information Technology profits, expectations for
all the other industry are still negative, although less so.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>

<th scope="col" class="firstcol"> ZEW SURVEY</th>
<th scope="col">Jun 09</th>
<th scope="col">May&nbsp;&nbsp;
09</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar&nbsp; 09</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09&nbsp;</th>
<th scope="col">Jun 06&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Expectation Next 6 Months (%
bal)</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>
<td>37.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions&nbsp;(%
bal)</td>
<td>-89.7</td>
<td>-92.8</td>
<td>-91.6</td>
<td>-89.4</td>
<td>-86.2</td>
<td>-77.1</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol" colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol" colspan="8">Profit
Expectations
Next 6 Months&nbsp; (%)</td>
</tr>
<tr class="odd">
<td class="firstcol">Banking</td>
<td>30.8</td>
<td>15.1</td>
<td>2.0</td>
<td>-31.6</td>
<td>-55.7</td>
<td>-65.7</td>
<td>46.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Insurance</td>
<td>9.7</td>
<td>5.1</td>
<td>-15.1</td>
<td>-34.2</td>
<td>-49.0</td>
<td>-56.5</td>
<td>46.3</td>
</tr>
</tbody>
</table>
</body></html>

Optimists regarding the outlook for the next six months among German financial market professionals outweighed pessimists by 44.8% in June according to the latest ZEW Survey (The Mannheim based Center for European Economic Research). [...]

Optimism Increases Among German Investors and Analysts

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090616f.jpg" width="353">
The Federal Reserve reported that the earlier letup in the factory sector recession was short-lived. Output, which includes mining and utilities, declined a greater-than-expected 1.1% last month following a 0.7% April drop that was larger than reported initially. During the last three months, output is off at a 13.7% rate, and off 13.5% in the last twelve, the sharpest drop y/y since 1946.
Output of consumer goods overall fell 0.9% (-7.2% y/y) and the declines were broad-based. Production of autos fell another 5.3%, though the year-to-year decline eased to -29.0%. Furniture, appliance &amp; carpeting output continued to reflect the weakness in the housing market and posted a 1.1% drop (-20.8% y/y) while apparel output slipped 0.3% (-10.6% y/y). In the capital goods sector, there&#39;s been no letup in output&#39;s rate of decline. Production of business equipment fell 1.4% last month and the three-month rate of change stands at -21.5% (AR), nearly the worst of this downturn. Finally, the downturn in the housing market continued to exact its toll on the output off construction supplies. It fell 1.0% and at a 19.2 rate during the last three months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090616g.jpg" width="353">
The high-tech sector continued to suffer. Industrial production here fell 1.9% last month but at a reduced 5.5% rate during the last three. Less high tech, overall industrial production fell 0.8% last month and the annual rate of change eased to -13.6%.
Excess capacity grew even further last month. Capacity utilization fell to 68.3%, a record low for the series which dates to 1966. Utilization in the factory sector dropped even harder to 65.0% from a peak near 80% back in 2007. The latest, again, was the lowest since WWII.
The industrial production data are available in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA, %)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output </td>
<td>-1.1</td>
<td>-0.7</td>
<td>-13.5</td>
<td>-2.2</td>
<td>1.5</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>-1.0</td>
<td>-0.6</td>
<td>-15.3</td>
<td>-3.2</td>
<td>1.4</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>-0.9</td>
<td>-0.2</td>
<td>-7.2</td>
<td>-2.6</td>
<td>0.9</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>-1.4</td>
<td>-1.9</td>
<td>-16.5</td>
<td>-1.1</td>
<td>2.7</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Construction Supplies</td>
<td>-1.0</td>
<td>-1.6</td>
<td>-21.5</td>
<td>-6.3</td>
<td>-2.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>-1.4</td>
<td>0.7</td>
<td>-3.4</td>
<td>0.3</td>
<td>3.4</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>68.3</td>
<td>69.0</td>
<td>78.9 (May &#39;08)</td>
<td>77.6</td>
<td>80.6</td>
<td>80.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Reserve reported that the earlier letup in the factory sector recession was short-lived. Output, which includes mining and utilities, declined a greater-than-expected 1.1% last month following a 0.7% April drop that was [...]

U.S. Factory Production Decline Resumes, Matching 1946 Yr/Yr Drop

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Winnie Tapasanun

260116R23.jpg

260116S23.jpg

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

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

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

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

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

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

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

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

260116T23.jpg

260116U23.jpg

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

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

Robert Brusca

260116E.jpg

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

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

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

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

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

260115Z5.jpg

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

260115Z6.jpg

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).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2mhM227WWeJJ6kRv7sJMiE?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

260115J.jpg

260115K.jpg

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.

260115L.jpg

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

260115J39.jpg

260115JK9.jpg

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.

260115L39.jpg

260115M39.jpg

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

Economy in Brief

Jump to:

U.S. Leading Indicators Rise Sharply For A Second Month

U.S. Leading Indicators Rise Sharply For A Second Month

U.S. 1Q'09 Current Account Deficit Shrinks To Smallest Since 2001

U.S. May CPI Ticks Up, But 1.2% Drop Y/Y Is Largest Since April 1950

U.S. May CPI Ticks Up, But 1.2% Drop Y/Y Is Largest Since April 1950

Gasoline Prices Reach The Highest Level Since Last October

Optimism Increases Among German Investors and Analysts

U.S. Factory Production Decline Resumes, Matching 1946 Yr/Yr Drop