Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090608b.jpg" align="left" border="0" height="265" width="353">
For the second month in a row there was a rise in the April
estimate of the OECD composite leading indicator for all 29 countries,
suggesting that, on average, the pace of economic deterioration may be
slowing in the major industrialized countries. (Not all of the 29
countries have reported.)Among those that have reported, there are,
however, considerable differences in the CLI's for individual
countries.In general western Europe is doing better than Central and
Eastern Europe. The leading indicators of Canada, Italy, France and the
United Kingdom were up in March and April, as shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090608c.jpg" align="left" border="0" height="265" width="353">
Although data for April are not yet available for South Korea, it has
shown increases in its CLI in every month from November, 2008 to March
of this year. The CLI's in Germany, Japan and the United States posted
their first increases in this cycle in April, as shown in the second
chart.
The OECD also computes composite leading indicators for six
transition economies. Among them are the BRIC countries, Brazil,
Russia, India and China. The CLI for China has increased in March and
April, while that for India first increased in April. The CLI's for
Brazil and Russia are still declining, although at somewhat lower rates.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090608a.jpg" align="right" border="0" height="265" width="353">
The Composite Leading Indicators (amplitude adjusted) are the
series generally quoted in the press. These are designed to provide
early signals of turning points in business cycles. Their construction
is complicated and a complete description of the methodology can be
found<a href="http://www.oecd.org/dataoecd/26/39/41629509.pdf">here</a>.Essentially,
a selection is made of times series that have similar cyclical
fluctuations to those of the business cycle ,but importantly, precede
those of the business cycle. These series are filtered in a number of
processes, de-trended and finally normalized. The normalization process
involves subtracting from the "filtered " observations the mean of the
series, and dividing this by the mean absolute deviation of the series,
and by adding 100 to each observation. According to the OECD, their
composite leading indicators provide qualitative rather than
quantitative information on short-term economic movements. Four
cyclical phases form the basis of this qualitative approach. Expansion:
CLI increasing and above 100. Downturn:
CLI decreasing and above 100. Slowdown:
CLI decreasing and below 100. Recovery:
CLI increasing and below 100.
The CLI's of South Korea, Canada, France Italy, United Kingdom
and China suggest that these countries may to be in the early stages of
recovery. United States, Germany Japan and India may be in an even
earlier stage.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"> OECD
LEADING INDICATORS</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar&nbsp; 09</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan 09</th>
<th scope="col">Apr/Mar&nbsp; Points&nbsp;</th>
<th scope="col">Mar/Feb
Points</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">30 Members of OECD</td>
<td>93.2</td>
<td>92.7</td>
<td>92.6</td>
<td>92.9</td>
<td>0.5</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Canada</td>
<td>93.6</td>
<td>93.2</td>
<td>93.0</td>
<td>93.2</td>
<td>0.4</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>99.0</td>
<td>97.8</td>
<td>96.7</td>
<td>96.2</td>
<td>1.2</td>
<td>1.1</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>99.4</td>
<td>97.3</td>
<td>96.3</td>
<td>96.7</td>
<td>2.1</td>
<td>1.0</td>
</tr>
<tr>
<td class="firstcol">U. K.&nbsp;</td>
<td>97.4</td>
<td>96.7</td>
<td>96.3</td>
<td>96.1</td>
<td>0.7</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>90.3</td>
<td>90.2</td>
<td>90.3</td>
<td>90.8</td>
<td>0.1</td>
<td>-0.1</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>89.5</td>
<td>89.4</td>
<td>90.2</td>
<td>91.3</td>
<td>0.1</td>
<td>-0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">U.S.&nbsp;&nbsp;</td>
<td>90.9</td>
<td>90.7</td>
<td>90.9</td>
<td>91.5</td>
<td>0.2</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">India</td>
<td>93.9</td>
<td>93.5</td>
<td>93.6</td>
<td>93.8</td>
<td>0.4</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">China</td>
<td>94.3</td>
<td>93.4</td>
<td>92.6</td>
<td>92.2</td>
<td>0.9</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Brazil</td>
<td>92.9</td>
<td>93.6</td>
<td>95.0</td>
<td>96.7</td>
<td>-0.7</td>
<td>-1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Russia</td>
<td>85.9</td>
<td>86.2</td>
<td>87.0</td>
<td>88.4</td>
<td>-0.3</td>
<td>-0.8</td>
</tr>
</tbody>
</table>
</body></html>

For the second month in a row there was a rise in the April estimate of the OECD composite leading indicator for all 29 countries, suggesting that, on average, the pace of economic deterioration may be slowing in the major [...]

OECD Leading Indicators: Signs ofRecovery

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605e.jpg" align="left" border="0" height="265" width="353">
Shifting trends - The chart above is a
classic example of shifting trends. While the central banks tend to
focus on yr/yr prices viewing those changes are more &#8216;reliable,&#8217; there
is no doubt that shorter measures give more up to data. The Yr/Yr UK
PPI has just fallen for the first time since 2002. Yet the real story
is that prices are moving up again. Over three-months and six months
seasonally adjusted prices are accelerating sharply &#8211;yes from lower
lows than the Yr/Yr series but the key signal here is the acceleration.
Prices are not falling any more that is the sky. 
 

The Worm has Turned - Clearly the story
of falling prices told from the headline is yesterday&#8217;s news. Prices
are turning and the UK is on the cusp of change. It is the first
country in Europe to have its service sector survey say that activity
in that sector is expanding. Beware what you take as a barometer of
health I don&#8217;t think inflation is surging again but the worm has
turned. So don&#8217;t tail gate it. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> UK PPI _Ex Construction</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr class="even">
<td class="firstcol">MFG</td>
<td>0.3%</td>
<td>0.3%</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>-0.3%</td>
<td>9.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>2.3%</td>
</tr>
<tr class="even">
<td class="firstcol">1-MO Lagged Core</td>
<td>--</td>
<td>--</td>
<td>---</td>
<td>2.9%</td>
<td>7.2%</td>
<td>6.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Core: ex food beverages,
tobacco &amp; Petroleum</td>
</tr>
</tbody>
</table>
</body></html>

Shifting trends - The chart above is a classic example of shifting trends. While the central banks tend to focus on yr/yr prices viewing those changes are more ‘reliable,’ there is no doubt that shorter measures give more up to data. [...]

UK PPI Prices: Decelerating Even As They Accelerate!

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605a.jpg" align="left" border="0" height="265" width="353">
The May figures from the Bureau of Labor Statistics indicated
moderation in the rate of job loss, though the labor market remains
quite weak. Nonfarm payrolls fell 345,000 last
month and that was the smallest monthly decline since last September.
The drop certainly compared favorably to Consensus expectations for a
520,000 decline and declines in employment during the prior two months
were revised shallower. During this recession so far employment has
fallen a total of 6.1 million, the record for a 17-month period. In
percentage terms, jobs are down 4.3% since the 2007 peak.
The unemployment rate continued to
reflect the labor market's distress with a rise to 9.4%, the highest
level since August of 1983. The cycle low in the rate occurred in
October 2006 (4.4%). Pumping up the rate last month was a 437,000
(-3.7% y/y) decline in employment versus a 130,000 (0.4% y/y) rise in
the labor force. These household sector figures additionally show that
long-term unemployment rose further. The average duration of
unemployment rose during May to a new record of 22.5 weeks from an
average of 17.8 weeks during 2008.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605b.jpg" align="right" border="0" height="265" width="353">
Also from the household survey was an indication that 5.9
million people want a job now but are not in the labor force. That
figure is up 21.8% from last May and near the highest since 1995. In
tandem, the labor force participation rate, i.e., the number of
eligible workers who are in the labor force stands at 65.9% versus the
2000 high of 67.1%.
The latest data from the payroll survey give insight into real
GDP growth last quarter. Combined with the lessened decline in
employment is a slightly shorter length of the average workweek.
Aggregate hours worked fell at a 6.9% annual rate versus an 8.9% 1Q
drop. That drop was associated with a real GDP decline of 5.7%,.
Therefore, the 2Q GDP rate of decline likely eased. During the last
twenty years, there has been a 68% correlation between growth in hours
worked and in real GDP.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605c.jpg" align="right" border="0" height="265" width="353">
The easing in the rate of job loss last month was due to
lessened declines in construction and in services jobs. After having
shed more than roughly 100,000 jobs during each of the prior six
months, the construction sector lost just 59,000 workers last month.
Service sector job loss moderated as well with a decline of 120,000.
That compares to declines between 196,000 and 399,000 since last
September. Losses eased sharply in the professional &amp; business
services sector, in the retail trade area and in the financial sector.
In contrast, the rate of job loss in the factory sector has barely
changed. Though the latest decline is improved from a slash of 262,000
jobs during January, the latest drop of 156,000 is close to the average
monthly losses since October. In the government sector, 7,000 jobs were
shed after a 92,000 worker gain during April.
Overall, 32.7% of industries posted job gains last month, up
from the March low of 19.6%. Over the last six months, however, just
14.6% posted job growth, a record low since 1990. In the factory sector
just 12.0% posted job gains and only 6.0% did over the last six months.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605d.jpg" align="right" border="0" height="265" width="353">
The weakness in the job market has naturally lessened the
growth in workers' earning power. Average hourly earnings last month
inched up just 0.1%, the same as during April. These readings dropped
the year-to-year growth to 3.1%, the lowest since late 2005. However,
further slowing already has occurred as the three-month rate of growth
was just 1.7% (AR), its lowest since early-2004. Three-month growth in
factory sector earnings has dropped to 0.2% from a late-2008 rate of
5%. Growth in the nondurable sector's earnings has turned negative.
The figures referenced above are available in Haver's USECON
database. Additional detail can be found in the LABOR and
in the EMPL databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Employment:
000s</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">Payroll Employment</td>
<td>-345</td>
<td>-504</td>
<td>-652</td>
<td>-3.9%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-539</td>
<td>-699</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-156</td>
<td>-154</td>
<td>-172</td>
<td>-11.6%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-59</td>
<td>-108</td>
<td>-123</td>
<td>-13.6%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-120</td>
<td>-230</td>
<td>-340</td>
<td>-2.4%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.1</td>
<td>33.2</td>
<td>33.1</td>
<td>33.7 (May '08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.1%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.4%</td>
<td>8.9%</td>
<td>8.5%</td>
<td>5.5% (May '08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
</body></html>

The May figures from the Bureau of Labor Statistics indicated moderation in the rate of job loss, though the labor market remains quite weak. Nonfarm payrolls fell 345,000 last month and that was the smallest monthly decline since [...]

U.S. Payroll Losses Slow As Unemployment Rate Jumps

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605a.jpg" align="left" border="0" height="265" width="353">
The May figures from the Bureau of Labor Statistics indicated
moderation in the rate of job loss, though the labor market remains
quite weak. Nonfarm payrolls fell 345,000 last
month and that was the smallest monthly decline since last September.
The drop certainly compared favorably to Consensus expectations for a
520,000 decline and declines in employment during the prior two months
were revised shallower. During this recession so far employment has
fallen a total of 6.1 million, the record for a 17-month period. In
percentage terms, jobs are down 4.3% since the 2007 peak.
The unemployment rate continued to
reflect the labor market's distress with a rise to 9.4%, the highest
level since August of 1983. The cycle low in the rate occurred in
October 2006 (4.4%). Pumping up the rate last month was a 437,000
(-3.7% y/y) decline in employment versus a 130,000 (0.4% y/y) rise in
the labor force. These household sector figures additionally show that
long-term unemployment rose further. The average duration of
unemployment rose during May to a new record of 22.5 weeks from an
average of 17.8 weeks during 2008.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605b.jpg" align="right" border="0" height="265" width="353">
Also from the household survey was an indication that 5.9
million people want a job now but are not in the labor force. That
figure is up 21.8% from last May and near the highest since 1995. In
tandem, the labor force participation rate, i.e., the number of
eligible workers who are in the labor force stands at 65.9% versus the
2000 high of 67.1%.
The latest data from the payroll survey give insight into real
GDP growth last quarter. Combined with the lessened decline in
employment is a slightly shorter length of the average workweek.
Aggregate hours worked fell at a 6.9% annual rate versus an 8.9% 1Q
drop. That drop was associated with a real GDP decline of 5.7%,.
Therefore, the 2Q GDP rate of decline likely eased. During the last
twenty years, there has been a 68% correlation between growth in hours
worked and in real GDP.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605c.jpg" align="right" border="0" height="265" width="353">
The easing in the rate of job loss last month was due to
lessened declines in construction and in services jobs. After having
shed more than roughly 100,000 jobs during each of the prior six
months, the construction sector lost just 59,000 workers last month.
Service sector job loss moderated as well with a decline of 120,000.
That compares to declines between 196,000 and 399,000 since last
September. Losses eased sharply in the professional &amp; business
services sector, in the retail trade area and in the financial sector.
In contrast, the rate of job loss in the factory sector has barely
changed. Though the latest decline is improved from a slash of 262,000
jobs during January, the latest drop of 156,000 is close to the average
monthly losses since October. In the government sector, 7,000 jobs were
shed after a 92,000 worker gain during April.
Overall, 32.7% of industries posted job gains last month, up
from the March low of 19.6%. Over the last six months, however, just
14.6% posted job growth, a record low since 1990. In the factory sector
just 12.0% posted job gains and only 6.0% did over the last six months.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605d.jpg" align="right" border="0" height="265" width="353">
The weakness in the job market has naturally lessened the
growth in workers' earning power. Average hourly earnings last month
inched up just 0.1%, the same as during April. These readings dropped
the year-to-year growth to 3.1%, the lowest since late 2005. However,
further slowing already has occurred as the three-month rate of growth
was just 1.7% (AR), its lowest since early-2004. Three-month growth in
factory sector earnings has dropped to 0.2% from a late-2008 rate of
5%. Growth in the nondurable sector's earnings has turned negative.
The figures referenced above are available in Haver's USECON
database. Additional detail can be found in the LABOR and
in the EMPL databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Employment:
000s</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">Payroll Employment</td>
<td>-345</td>
<td>-504</td>
<td>-652</td>
<td>-3.9%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-539</td>
<td>-699</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-156</td>
<td>-154</td>
<td>-172</td>
<td>-11.6%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-59</td>
<td>-108</td>
<td>-123</td>
<td>-13.6%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-120</td>
<td>-230</td>
<td>-340</td>
<td>-2.4%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.1</td>
<td>33.2</td>
<td>33.1</td>
<td>33.7 (May '08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.1%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.4%</td>
<td>8.9%</td>
<td>8.5%</td>
<td>5.5% (May '08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
UK PPI Prices: Decelerating Even
As They Accelerate! 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 5, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605e.jpg" align="left" border="0" height="265" width="353">
Shifting trends - The chart above is a
classic example of shifting trends. While the central banks tend to
focus on yr/yr prices viewing those changes are more &#8216;reliable,&#8217; there
is no doubt that shorter measures give more up to data. The Yr/Yr UK
PPI has just fallen for the first time since 2002. Yet the real story
is that prices are moving up again. Over three-months and six months
seasonally adjusted prices are accelerating sharply &#8211;yes from lower
lows than the Yr/Yr series but the key signal here is the acceleration.
Prices are not falling any more that is the sky. 
 

The Worm has Turned - Clearly the story
of falling prices told from the headline is yesterday&#8217;s news. Prices
are turning and the UK is on the cusp of change. It is the first
country in Europe to have its service sector survey say that activity
in that sector is expanding. Beware what you take as a barometer of
health I don&#8217;t think inflation is surging again but the worm has
turned. So don&#8217;t tail gate it. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> UK PPI
_Ex Construction</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr class="even">
<td class="firstcol">MFG</td>
<td>0.3%</td>
<td>0.3%</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>-0.3%</td>
<td>9.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>2.3%</td>
</tr>
<tr class="even">
<td class="firstcol">1-MO Lagged Core</td>
<td>--</td>
<td>--</td>
<td>---</td>
<td>2.9%</td>
<td>7.2%</td>
<td>6.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Core:
ex food beverages,
tobacco &amp; Petroleum</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Payroll Losses Slow AsUnemployment Rate Jumps

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604e.jpg" align="left" border="0" height="265" width="353">
EMU area retail sales volume is still eroding but at a slow
pace. The volume drop in the past three months was just 0.2% per month
Retail sales have been declining in the Area but have not been as weak
as in the US. Passenger car registrations in Europe have begun to take
off as several nations&#8217; scrappage plans have encouraged consumers to
buy new vehicles. 
 

Europe&#8217;s consumers still face hurdles. Unemployment is rising
and is still probably in is early sages of increasing; France reported
a surge in unemployment in Q1 just today as its rate jumped to 9.1%
from 8% in Q4. Spain&#8217;s rate has climbed up over 18% to nearly 19%.
Consumer confidence is low throughout the Area, although it has been
edging up. Income preservation polices have helped consumers to hold
the line on spending. Sensitive cyclical surveys in the form of
purchaser indices show that MFG and Service sectors are coming up from
their lows. With these positive pulses in train any further damage to
consumption from rising unemployment could be limited. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> Euro Area Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Zone Total</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.5%</td>
<td>-2.9%</td>
<td>-2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Beverage, and Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicle Reg</td>
<td>5.9%</td>
<td>-1.7%</td>
<td>20.4%</td>
<td>146.8%</td>
<td>8.4%</td>
<td>-8.1%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Non-Food Country detail:
Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-1.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU)</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-2.1%</td>
<td>-0.4%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
</body></html>

EMU area retail sales volume is still eroding but at a slow pace. The volume drop in the past three months was just 0.2% per month Retail sales have been declining in the Area but have not been as weak as in the US. Passenger car [...]

EMU Retail Sales Volumes Erode At Slow Pace

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604c.jpg" width="353">
Labor productivity in the nonfarm business sector was revised higher for last quarter to 1.5% (AR) from the initial estimate of a 0.8% increase. The Consensus expectation was for revision to 1.2% growth. (Earlier figures also were revised slightly.) Productivity growth has weakened sharply with the current economic downturn. During the last nine months productivity has risen just 0.8% which is the weakest performance since early-2007. Nevertheless, any positive growth during a recessionary period contrasts with the declines in during the downturns of the 1950s through the 1980s.
Though productivity growth has slowed dramatically, businesses were quick in responding to the output shortfall by cutting employment and hours-worked. Output fell at a 7.6% annual rate last quarter after falling 8.8% during 4Q &#39;08. These declines marked the quickest back-to-back since early 1958. However, businesses responded quickly by cutting employment &amp; hours worked at a 9.0% rate last quarter and by 8.3% during 4Q.
The drop in productivity growth has hurt corporations&#39; bottom lines due to the fact that growth in compensation costs has remained firm. It rose an upwardly revised 4.6% last quarter and that left y/y growth at 4.1%. Annually, growth in compensation has been roughly stable near the 4% level since 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604d.jpg" width="353">
The combination of recently diminished productivity growth and stable, firm gains in compensation has increased costs. However, for last quarter growth in unit labor costs was revised down slightly to 3.0% following the 5.1% jump during 4Q. The increases raised the six-month growth in costs to a downwardly revised 4.0% versus just 0.9% during all of last year.
In the factory sector, the pressure on corporations&#39; bottom lines has been more intense. Worker productivity was revised up slightly but it still fell 2.7% during 1Q (-3.2% y/y), down for the fourth consecutive quarter. Year-to-year, the drop in productivity came as output fell faster (-13.9%) than hours worked (-11.0%). That decline in productivity growth has outpaced firms&#39; ability to cut compensation costs. In fact, there&#39;s been no cut at all. Compensation growth of 13.4% last quarter lifted the y/y gain to 8.4%, nearly double last year&#39;s 4.1% advance. As a result, unit labor cost growth in the factory sector surged again. The 1Q increase of 16.6% lifted the annual gain to 12.0% which compares to just a 3.2% gain during all of last year.
The productivity &amp; cost figures are available in Haver&#39;s USECON database.
Today&#39;s remarks at the Federal Reserve Board Conference on Financial Markets and Monetary Policy by Fed Chairman Ben S. Bernanke are available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090604a.htm"> 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/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR, %)</th>
<th scope="col">1Q &#39;09 (Revised)</th>
<th scope="col">4Q &#39;08</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">Output per Hour</td>
<td>1.6</td>
<td>-0.6</td>
<td>1.9</td>
<td>2.8</td>
<td>1.4</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.6</td>
<td>4.5</td>
<td>4.1</td>
<td>3.7</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>3.0</td>
<td>5.1</td>
<td>2.2</td>
<td>0.9</td>
<td>2.7</td>
<td>2.8</td>
</tr>
</tbody>
</table>
</body>
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Labor productivity in the nonfarm business sector was revised higher for last quarter to 1.5% (AR) from the initial estimate of a 0.8% increase. The Consensus expectation was for revision to 1.2% growth. (Earlier figures also were [...]

U.S. Worker Productivity Increase Stronger, But Underlying Cost Pressures Mount

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604a.jpg" width="353">
The labor market is neither worsening nor improving significantly. It just remains quite soft. The latest indication of this is last week&#39;s slip in initial claims for unemployment insurance by 4,000 to 621,000 from an upwardly revised level of 625,000. Initial claims are down from their March peak of 674,000. However, the four-week average of claims, which smoothes out some of the volatility in the weekly numbers, rose slightly to 631,250. Though that was near the lowest level since mid-February it was up by two-thirds from the year ago level. The Consensus expectation was for 620,000 claims last week.
The Labor Department indicated that the largest increases in initial claims for the week ending May 23 were in Illinois (+3,881), Iowa (+2,312), South Carolina (+1,792), Texas (+1,548), and Wisconsin (+1,464), while the largest decreases were in North Carolina (-3,952), Michigan (-2,812), Ohio (-2,158), Tennessee (-2,053), and Connecticut (-1,320).
Continuing claims for unemployment insurance, which provide an indication of workers&#39; ability to find employment remained near the record high of 6,735,000, more than twice the year ago level. Further indicating that the job market remains weak, the four-week average of continuing claims also rose to another record of 6,687,500. The series dates back to 1966.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604b.jpg" width="353">
Another indication of the labor market&#39;s softness was that the insured unemployment rate held at 5.0% for the third consecutive week. That level was more than double last May and the highest level 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 16 were in Michigan (7.6 percent), Oregon (7.1), Puerto Rico (6.7), Nevada (6.4), Pennsylvania (6.2), Wisconsin (5.9), California (5.5), Arkansas (5.4), Idaho (5.4), and North Carolina (5.4). Even in states where the insured unemployment rate was relatively low such as Massachusetts (5.0), New York (4.3), Florida (3.9) Georgia (3.7), Texas (2.9), and Virginia (2.6), the level was double that of one year ago.
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Yesterday&#39;s testimony by Fed Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090603a.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">05/30/09</th>
<th scope="col">05/23/09</th>
<th scope="col">05/16/09</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>621</td>
<td>625</td>
<td>636</td>
<td>67.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,735</td>
<td>6,750</td>
<td>117.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>


</html>

The labor market is neither worsening nor improving significantly. It just remains quite soft. The latest indication of this is last week's slip in initial claims for unemployment insurance by 4,000 to 621,000 from an upwardly revised [...]

U.S. Initial Unemployment Insurance Claims Slip

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604c.jpg" align="left" border="0" height="265" width="353">
Labor productivity in the nonfarm business sector was revised
higher for last quarter to 1.5% (AR) from the initial estimate of a
0.8% increase. The Consensus expectation was for revision to 1.2%
growth. (Earlier figures also were revised slightly.) Productivity
growth has weakened sharply with the current economic downturn. During
the last nine months productivity has risen just 0.8% which is the
weakest performance since early-2007. Nevertheless, any positive growth
during a recessionary period contrasts with the declines in during the
downturns of the 1950s through the 1980s.
Though productivity growth has slowed dramatically, businesses
were quick in responding to the output shortfall by cutting employment
and hours-worked. Output fell at a 7.6% annual rate last quarter after
falling 8.8% during 4Q '08. These declines marked the quickest
back-to-back since early 1958. However, businesses responded quickly by
cutting employment &amp; hours worked at a 9.0% rate last quarter
and by 8.3% during 4Q.
The drop in productivity growth has hurt corporations' bottom
lines due to the fact that growth in compensation costs has remained
firm. It rose an upwardly revised 4.6% last quarter and that left y/y
growth at 4.1%. Annually, growth in compensation has been roughly
stable near the 4% level since 2001.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604d.jpg" align="right" border="0" height="265" width="353">
The combination of recently diminished productivity growth and
stable, firm gains in compensation has increased costs. However, for
last quarter growth in unit labor costs was revised down slightly to
3.0% following the 5.1% jump during 4Q. The increases raised the
six-month growth in costs to a downwardly revised 4.0% versus just 0.9%
during all of last year.
In the factory sector, the pressure on corporations' bottom
lines has been more intense. Worker productivity was revised up
slightly but it still fell 2.7% during 1Q (-3.2% y/y), down for the
fourth consecutive quarter. Year-to-year, the drop in productivity came
as output fell faster (-13.9%) than hours worked (-11.0%). That decline
in productivity growth has outpaced firms' ability to cut compensation
costs. In fact, there's been no cut at all. Compensation growth of
13.4% last quarter lifted the y/y gain to 8.4%, nearly double last
year's 4.1% advance. As a result, unit labor cost growth in the factory
sector surged again. The 1Q increase of 16.6% lifted the annual gain to
12.0% which compares to just a 3.2% gain during all of last year.
The productivity &amp; cost figures are available in
Haver's USECON database.
Today's remarks at the Federal Reserve Board
Conference on Financial Markets and Monetary Policy by Fed
Chairman Ben S. Bernanke are available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090604a.htm">
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/@EC/@EC02/@EC02.HTM">Nonfarm
Business Sector</a> (SAAR, %)</th>
<th scope="col">1Q '09 (Revised)</th>
<th scope="col">4Q '08</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">Output per Hour</td>
<td>1.6</td>
<td>-0.6</td>
<td>1.9</td>
<td>2.8</td>
<td>1.4</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.6</td>
<td>4.5</td>
<td>4.1</td>
<td>3.7</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>3.0</td>
<td>5.1</td>
<td>2.2</td>
<td>0.9</td>
<td>2.7</td>
<td>2.8</td>
</tr>
</tbody>
</table>
U.S. Initial Unemployment
Insurance Claims Slip&nbsp; 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 4, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604a.jpg" align="left" border="0" height="265" width="353">
The labor market is neither worsening nor improving
significantly. It just remains quite soft. The latest indication of
this is last week's slip in initial claims for unemployment insurance
by 4,000 to 621,000 from an upwardly revised level of 625,000. Initial
claims are down from their March peak of 674,000. However, the
four-week average of claims, which smoothes out some of the volatility
in the weekly numbers, rose slightly to 631,250. Though that was near
the lowest level since mid-February it was up by two-thirds from the
year ago level. The Consensus expectation was for 620,000 claims last
week.
The Labor Department indicated that the largest increases in
initial claims for the week ending May 23 were in Illinois (+3,881),
Iowa (+2,312), South Carolina (+1,792), Texas (+1,548), and Wisconsin
(+1,464), while the largest decreases were in North Carolina (-3,952),
Michigan (-2,812), Ohio (-2,158), Tennessee (-2,053), and Connecticut
(-1,320).
Continuing claims for unemployment insurance, which provide an
indication of workers' ability to find employment remained near the
record high of 6,735,000, more than twice the year ago level.
Further indicating that the job market remains weak, the
four-week average of continuing claims also rose to another record of
6,687,500. The series dates back to 1966.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604b.jpg" align="right" border="0" height="265" width="353">
Another indication of the labor market's softness was that the
insured unemployment rate held at 5.0% for the third consecutive week.
That level was more than double last May and the highest level 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
16 were in Michigan (7.6 percent), Oregon (7.1), Puerto Rico (6.7),
Nevada (6.4), Pennsylvania (6.2), Wisconsin (5.9), California (5.5),
Arkansas (5.4), Idaho (5.4), and North Carolina (5.4). Even in states
where the insured unemployment rate was relatively low such as
Massachusetts (5.0), New York (4.3), Florida (3.9) Georgia (3.7), Texas
(2.9), and Virginia (2.6), the level was double that of one year ago.
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database.
Yesterday's testimony by Fed
Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090603a.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">05/30/09</th>
<th scope="col">05/23/09</th>
<th scope="col">05/16/09</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>621</td>
<td>625</td>
<td>636</td>
<td>67.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,735</td>
<td>6,750</td>
<td>117.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
EMU Retail Sales Volumes Erode At
Slow Pace 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 4, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604e.jpg" align="left" border="0" height="265" width="353">
EMU area retail sales volume is still eroding but at a slow
pace. The volume drop in the past three months was just 0.2% per month
Retail sales have been declining in the Area but have not been as weak
as in the US. Passenger car registrations in Europe have begun to take
off as several nations&#8217; scrappage plans have encouraged consumers to
buy new vehicles. 
 

Europe&#8217;s consumers still face hurdles. Unemployment is rising
and is still probably in is early sages of increasing; France reported
a surge in unemployment in Q1 just today as its rate jumped to 9.1%
from 8% in Q4. Spain&#8217;s rate has climbed up over 18% to nearly 19%.
Consumer confidence is low throughout the Area, although it has been
edging up. Income preservation polices have helped consumers to hold
the line on spending. Sensitive cyclical surveys in the form of
purchaser indices show that MFG and Service sectors are coming up from
their lows. With these positive pulses in train any further damage to
consumption from rising unemployment could be limited. 
 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Euro
Area Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Zone Total</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.5%</td>
<td>-2.9%</td>
<td>-2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Beverage, and Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicle Reg</td>
<td>5.9%</td>
<td>-1.7%</td>
<td>20.4%</td>
<td>146.8%</td>
<td>8.4%</td>
<td>-8.1%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Non-Food
Country detail:
Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-1.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU)</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-2.1%</td>
<td>-0.4%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
</body></html>

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Winnie Tapasanun

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

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

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

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

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

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

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

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

260116T23.jpg

260116U23.jpg

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

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

260116E.jpg

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

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

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

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

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

260115Z5.jpg

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

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

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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.

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

Economy in Brief

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