Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090603a.jpg" width="353">
Consumers still are shying away from big-ticket expenditures. The added evidence of that trend is that unit sales of light vehicles during May increased just 6.4% m/m to make up an April decline. Year-to-date, total May vehicle sales remained down 3.8% at 9.91 million units (SAAR).
U.S. unit sales of light vehicles rebounded 7.0% to 7.26M units, still near the lowest since 1982 according to the Autodata Corporation and Ward&#39;s Automotive News. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). Sales of domestically made light trucks rose 9.1% to 4.01M units while auto sales rose a lesser 4.5% to 3.25M units. Sales of domestic vehicles YTD are down 5.6%.
Imported light vehicle sales also rose but they made up only about one-third of their 14.0% m/m April decline. At 2.66M units they remained near their lowest level in roughly ten years. Sales of imported light truck sales rose 9.4% to 0.91M units while sales of imported autos rose a modest 2.7% returning only to their February level. Sales of imported vehicles YTD increased 1.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090603b.jpg" width="353">
Overall, import&#39;s share of the U.S. light vehicle market fell again, last month to 26.8% which was their lowest level of this year. Nevertheless, the figure remained up from the 2008 average of 26.3%. (Imported vehicles are those produced outside the United States.) Imports&#39; share of the U.S. car market totaled 34.9%, up slightly from the 2008 average, while the share of the light truck market was 18.6%, roughly equal to last year.
The U.S. vehicle sales figures can be found in Haver&#39;s USECON database.
The Financial Crisis - Toward an Explanation and Policy Response from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/annual_report/2008/pdf/article.pdf"> 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/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>9.91</td>
<td>9.32</td>
<td>9.86</td>
<td>-30.5%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>4.99</td>
<td>4.81</td>
<td>5.09</td>
<td>-36.4</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>3.25</td>
<td>3.11</td>
<td>3.23</td>
<td>-37.1</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.74</td>
<td>1.70</td>
<td>1.86</td>
<td>-35.0</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>4.92</td>
<td>4.51</td>
<td>4.78</td>
<td>-23.3</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.01</td>
<td>3.67</td>
<td>3.70</td>
<td>-22.6</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>0.91</td>
<td>0.84</td>
<td>1.08</td>
<td>-26.0</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>


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Consumers still are shying away from big-ticket expenditures. The added evidence of that trend is that unit sales of light vehicles during May increased just 6.4% m/m to make up an April decline. Year-to-date, total May vehicle sales [...]

U.S. May Light Vehicle Sales Recover Only To Low March Level

Improvement in service sector activity is accompanying the factory sector's recent rise. The May Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 44.0 last month from an unrevised [...]

U.S. ISM Nonmanufacturing Index Improves Further

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602f.jpg" align="left" border="0" height="265" width="353">
Unemployment rates are on the rise around the world. In EMU
the new rate jumped up to 9.2%; the highest rate for the Area in 9-1/2
years (Sept 1999). There have been 3.1million jobs losses since the
recession began. The US has seen a sharp rise in its rate of
unemployment over the past year, a gain of 3.9%. This surpasses the
1.9% point rise in EMU and the 1% point rise in Japan. However, the
rise in Spain as been of a whopping 8.1 percentage points, bringing in
its overall rate to 18.1%. And that spells e-Zone trouble. 
 

Since the start of the US recession in December of 2007 the
German rate of unemployment has dropped &#8211; dropped - by 0.2% points. The
French rate has risen by 0.2% points. Spain&#8217;s U-rate is up by 9.2%
points. The US unemployment rate is higher by 4% points. In Japan the
U-rate is up by 1.3% points. 
 

Spain&#8217;s rate has jumped as the property market has collapsed.
The rise there appears to have a very large structural element. In the
US the rise seems to be mostly cyclical but it is a substantial rise: a
gain of four percentage points compared to a level of 4.9% in December
of 2007. 
 

Europe seems to have forestalled much of the rise in the rate
of unemployment &#8211; Spain excepted, of course. That leads to the
conclusion that despite a substantial social safety net in Europe, the
rise in unemployment is still in progress and will hit Europe later.
Moreover, Europe has different sorts of stresses as the social safety
net is uneven and spreads stress unevenly, across the Area. EMU is only
a common currency area with some economic harmonization rules; fiscal
policy is left to local custom and practice with two overall metrics in
place to constrain aggregate usage. That lack of commonality is now a
problem for the Area. 
 

For the moment the e-Area&#8217;s MFG PMI indices are rising on only
a slight lag with the index in the US. This is with a relatively small
hike in the rate of unemployment in Europe (much of that in Spain) and
a substantial jump in the US. If the unemployment problem in Europe
grows worse, the European recovery that now seems to be on the heels of
the US could suffer substantial erosion. There is also a possibility of
political tensions in Europe as the recessions hit the various EMU
nations unevenly. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> Unemployment rate and changes</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> Level</td>
<td colspan="3"> Simple Changes</td>
</tr>
<tr class="odd">
<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>
<td class="firstcol">EU-Urate</td>
<td>8.6</td>
<td>8.4</td>
<td>8.1</td>
<td>0.7</td>
<td>1.3</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">EMU-Urate</td>
<td>9.2</td>
<td>8.9</td>
<td>8.7</td>
<td>0.8</td>
<td>1.4</td>
<td>1.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> m/m%</td>
<td colspan="3"> % changes (ar)</td>
</tr>
<tr>
<td class="firstcol">EU-U 000s</td>
<td>2.7%</td>
<td>3.2%</td>
<td>3.5%</td>
<td>9.7%</td>
<td>19.0%</td>
<td>28.8%</td>
</tr>
<tr>
<td class="firstcol">EMU-U 000s</td>
<td>2.8%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>9.1%</td>
<td>17.7%</td>
<td>27.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">U-Rates</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>
<td class="firstcol">&nbsp; Germany</td>
<td>7.7</td>
<td>7.6</td>
<td>7.4</td>
<td>0.4</td>
<td>0.6</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France</td>
<td>8.9</td>
<td>8.8</td>
<td>8.6</td>
<td>0.4</td>
<td>0.9</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Spain</td>
<td>18.1</td>
<td>17.3</td>
<td>16.5</td>
<td>2.5</td>
<td>4.9</td>
<td>8.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; USA</td>
<td>8.9</td>
<td>8.5</td>
<td>8.1</td>
<td>1.3</td>
<td>2.3</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Japan</td>
<td>5</td>
<td>4.8</td>
<td>4.4</td>
<td>0.9</td>
<td>1.2</td>
<td>1</td>
</tr>
</tbody>
</table>
</body></html>

Unemployment rates are on the rise around the world. In EMU the new rate jumped up to 9.2%; the highest rate for the Area in 9-1/2 years (Sept 1999). There have been 3.1million jobs losses since the recession began. The US has seen a [...]

U-Rates On The Rise

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602d.jpg" width="353">
The National Association of Realtors reported that pending sales of existing homes during April rose for the third consecutive month. The 6.7% m/m rise was to the highest level since last September and doubled the unrevised 3.2% March gain. Consensus expectations had been for a slight 0.5% increase in April sales.
Last month&#39;s gain in home sales was spread across the country except in the South where they fell slightly from March (+3.6% y/y). In the West (-3.0%y/y) sales recovered a piece of March&#39;s decline but remained down sharply from the highs of last summer. Elsewhere, sales in the Northeast jumped by nearly one-third from the March level but they were roughly unchanged from one year earlier. Sales in the Midwest jumped 9.8% from March and have rebounded 11.1% versus 2008.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602e.jpg" width="353">
The latest monthly gains in home sales have been accompanied by a rise in home prices. The median sales price of an existing home increased a slight 0.2% in April (-15.4% y/y). The rise followed firm increases during the prior two months. The latest gains in home prices did lower housing affordability slightly but just slightly. Therefore, combined with lower interest rates, the affordability index of a home remained up by 29.2% year-to-year and by three quarters from the 2006 low. The latest level was a record high for the series which extends back to 1970.
As the Spring selling season began, the Realtors Association indicated in an earlier report that the number of homes on the market and available for sale rose 8.8% during April but were down 12.8% versus one year earlier. At the current sales rate there was a 10.2 months&#39; supply of homes on the market and there was a 10.4 months&#39; supply during all of last year, up from the 8.9 months supply during 2007 and 6.5 months during 2006. For single family homes, there was a 9.6 months&#39; supply in April versus a full-year figure of 10.0 months during 2008.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">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&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>90.3</td>
<td>84.6</td>
<td>&nbsp;&nbsp; 3.2%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>78.9</td>
<td>59.5</td>
<td>0.8</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>90.4</td>
<td>82.3</td>
<td>11.1</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>93.0</td>
<td>93.2</td>
<td>3.6</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>94.8</td>
<td>93.1</td>
<td>-3.0</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
</body>
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The National Association of Realtors reported that pending sales of existing homes during April rose for the third consecutive month. The 6.7% m/m rise was to the highest level since last September and doubled the unrevised 3.2% March [...]

U.S. Pending Home Sales Rise To Their Highest Level Since September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602c.jpg" width="353">
Consumers lost their mood for spending at the end of last month. According to the International Council of Shopping Centers-Goldman Sachs Index, store sales last week gave back with a 0.6% decline virtually all of the prior week&#39;s increase. That left sales for the entire month of May down 0.2% from April after that month&#39;s 1.4% rise from the March average.
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. These weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Prospects for spending also were tepid last week as indicated by the leading indicator of sales. It fell a modest 0.3% in the latest week. The May average stands just below April.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/30/09</th>
<th scope="col">05/23/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>487.4</td>
<td>490.5</td>
<td>0.6%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


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Consumers lost their mood for spending at the end of last month. According to the International Council of Shopping Centers-Goldman Sachs Index, store sales last week gave back with a 0.6% decline virtually all of the prior week's [...]

U.S. Chain Store Sales Backpedal

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602a.jpg" width="353">
News of a rebound in the U.S. economy has generated the suspicion that more consumers will take to the roads on longer journeys. So far, the evidence of a recovery in driving is limited, but the energy market nevertheless has reacted in advance with higher prices. Regular gasoline prices last week moved even higher to an average $2.52 per gallon of regular. The gains have taken prices up by 91 cents, 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 $1.90 per gallon versus $1.85 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.
So far the evidence of a rebound in driving is limited. The figures for miles driven have rebounded from this past winter but that&#39;s usual as the weather warms. Year-to-year, economic weakness continues to lower gasoline demand, last week by 2.1%. That is, however, a less severe shortfall than during last autumn&#39;s 5% y/y decline. 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 7.3% y/y in the latest week led by a 38.5% drop in demand for residual fuel oil and a 13.4% drop in distillate demand. These numbers also are available in Haver&#39;s OILWKLY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602b.jpg" width="353">
Higher crude oil prices have accompanied the rise in gasoline costs. Crude prices averaged $64.32 last week for a barrel of West Texas Intermediate, up from the December low of $32.37 per barrel. Yesterday, crude oil prices rose even further to $68.58. Prices reached a high of $145.66 last July. The latest price increases occurred despite a 3.1% year-to-year rise in crude oil production during the latest four weeks. In addition, they have occurred despite a 12.3% 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 last week and it fell back to $3.60 per mmbtu (-69.2% 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.
U.S. Treasury Secretary Timothy F. Geithner&#39;s speech titled The United States and China, Cooperating for Recovery and Growth is available <a href="http://www.ustreas.gov/press/releases/tg152.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">06/01/09</th>
<th scope="col">05/25/09</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>2.52</td>
<td>2.44</td>
<td>-36.5%</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>64.32</td>
<td>60.48</td>
<td>-49.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
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News of a rebound in the U.S. economy has generated the suspicion that more consumers will take to the roads on longer journeys. So far, the evidence of a recovery in driving is limited, but the energy market nevertheless has reacted [...]

Gasoline Prices Rise Further Reflecting Strength In Crude Oil Prices

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602d.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors reported that pending
sales of existing homes during April rose for the third consecutive
month. The 6.7% m/m rise was to the highest level since last September
and doubled the unrevised 3.2% March gain. Consensus expectations had
been for a slight 0.5% increase in April sales.
Last month's gain in home sales was spread across the country
except in the South where they fell slightly from March (+3.6% y/y). In
the West (-3.0%y/y) sales recovered a piece of March's decline but
remained down sharply from the highs of last summer. Elsewhere, sales
in the Northeast jumped by nearly one-third from the March level but
they were roughly unchanged from one year earlier. Sales in the Midwest
jumped 9.8% from March and have rebounded 11.1% versus 2008.
The home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602e.jpg" align="right" border="0" height="265" width="353">
The latest monthly gains in home sales have been accompanied
by a rise in home prices. The median sales price of an existing home
increased a slight 0.2% in April (-15.4% y/y). The rise followed firm
increases during the prior two months. The latest gains in
home prices did lower housing affordability slightly but just slightly.
Therefore, combined with lower interest rates, the affordability index
of a home remained up by 29.2% year-to-year and by three quarters from
the 2006 low. The latest level was a record high for the series which
extends back to 1970.
As the Spring selling season began, the Realtors Association
indicated in an earlier report that the number of homes on the market
and available for sale rose 8.8% during April but were down 12.8%
versus one year earlier. At the current sales rate there was a 10.2
months' supply of homes on the market and there was a 10.4 months'
supply during all of last year, up from the 8.9 months supply during
2007 and 6.5 months during 2006. For single family homes, there was a
9.6 months' supply in April versus a full-year figure of 10.0 months
during 2008.
The pending home sales data are available in Haver's PREALTOR
database. The number of homes on the market and prices are in
the REALTOR database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></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&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>90.3</td>
<td>84.6</td>
<td>&nbsp;&nbsp; 3.2%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>78.9</td>
<td>59.5</td>
<td>0.8</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>90.4</td>
<td>82.3</td>
<td>11.1</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>93.0</td>
<td>93.2</td>
<td>3.6</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>94.8</td>
<td>93.1</td>
<td>-3.0</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
Gasoline Prices Rise Further
Reflecting Strength In Crude Oil Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 2, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602a.jpg" align="left" border="0" height="265" width="353">
News of a rebound in the U.S. economy has generated the
suspicion that more consumers will take to the roads on longer
journeys. So far, the evidence of a recovery in driving is limited, but
the energy market nevertheless has reacted in advance with higher
prices. Regular gasoline prices last week moved
even higher to an average $2.52 per gallon of regular. The gains have
taken prices up by 91 cents, 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 $1.90 per
gallon versus $1.85 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's WEEKLY
&amp; DAILY databases.
So far the evidence of a rebound in driving is limited. The
figures for miles driven have rebounded from this past winter but
that's usual as the weather warms. Year-to-year, economic weakness
continues to lower gasoline demand, last week by
2.1%. That is, however, a less severe shortfall than during last
autumn's 5% y/y decline. 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 7.3% y/y in the latest week
led by a 38.5% drop in demand for residual fuel oil and a 13.4% drop in
distillate demand. These numbers also are available in Haver's OILWKLY
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602b.jpg" align="right" border="0" height="265" width="353">
Higher crude oil prices have accompanied
the rise in gasoline costs. Crude prices averaged $64.32 last week for
a barrel of West Texas Intermediate, up from the December low of $32.37
per barrel. Yesterday, crude oil prices rose even further to $68.58.
Prices reached a high of $145.66 last July. The latest price increases
occurred despite a 3.1% year-to-year rise in crude oil production
during the latest four weeks. In addition, they have occurred despite a
12.3% y/y rise in inventories of crude oil &amp; petroleum
products. The figures on crude oil production and inventories are
available in Haver's OILWKLY database.
Finally, the gains in the price of natural gas paused last
week and it fell back to $3.60 per mmbtu (-69.2% 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.
U.S. Treasury Secretary Timothy F. Geithner's speech titled The
United States and China, Cooperating for Recovery and Growth is
available <a href="http://www.ustreas.gov/press/releases/tg152.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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">06/01/09</th>
<th scope="col">05/25/09</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>2.52</td>
<td>2.44</td>
<td>-36.5%</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>64.32</td>
<td>60.48</td>
<td>-49.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Backpedal 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 2, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602c.jpg" align="left" border="0" height="265" width="353">
Consumers lost their mood for spending at the end of last
month. According to the International Council of Shopping
Centers-Goldman Sachs Index, store sales last week gave back with a
0.6% decline virtually all of the prior week's increase. That left
sales for the entire month of May down 0.2% from April after that
month's 1.4% rise from the March average.
During the last ten years there has been a 64% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. These weekly figures are
available in Haver's SURVEYW database.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Prospects for spending also were tepid last week as indicated
by the leading indicator of sales. It fell a modest 0.3% in the latest
week. The May average stands just below April.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">05/30/09</th>
<th scope="col">05/23/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>487.4</td>
<td>490.5</td>
<td>0.6%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
U-Rates On The Rise 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 2, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090602f.jpg" align="left" border="0" height="265" width="353">
Unemployment rates are on the rise around the world. In EMU
the new rate jumped up to 9.2%; the highest rate for the Area in 9-1/2
years (Sept 1999). There have been 3.1million jobs losses since the
recession began. The US has seen a sharp rise in its rate of
unemployment over the past year, a gain of 3.9%. This surpasses the
1.9% point rise in EMU and the 1% point rise in Japan. However, the
rise in Spain as been of a whopping 8.1 percentage points, bringing in
its overall rate to 18.1%. And that spells e-Zone trouble. 
 

Since the start of the US recession in December of 2007 the
German rate of unemployment has dropped &#8211; dropped - by 0.2% points. The
French rate has risen by 0.2% points. Spain&#8217;s U-rate is up by 9.2%
points. The US unemployment rate is higher by 4% points. In Japan the
U-rate is up by 1.3% points. 
 

Spain&#8217;s rate has jumped as the property market has collapsed.
The rise there appears to have a very large structural element. In the
US the rise seems to be mostly cyclical but it is a substantial rise: a
gain of four percentage points compared to a level of 4.9% in December
of 2007. 
 

Europe seems to have forestalled much of the rise in the rate
of unemployment &#8211; Spain excepted, of course. That leads to the
conclusion that despite a substantial social safety net in Europe, the
rise in unemployment is still in progress and will hit Europe later.
Moreover, Europe has different sorts of stresses as the social safety
net is uneven and spreads stress unevenly, across the Area. EMU is only
a common currency area with some economic harmonization rules; fiscal
policy is left to local custom and practice with two overall metrics in
place to constrain aggregate usage. That lack of commonality is now a
problem for the Area. 
 

For the moment the e-Area&#8217;s MFG PMI indices are rising on only
a slight lag with the index in the US. This is with a relatively small
hike in the rate of unemployment in Europe (much of that in Spain) and
a substantial jump in the US. If the unemployment problem in Europe
grows worse, the European recovery that now seems to be on the heels of
the US could suffer substantial erosion. There is also a possibility of
political tensions in Europe as the recessions hit the various EMU
nations unevenly. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="7" scope="col"> Unemployment
rate and changes</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> Level</td>
<td colspan="3"> Simple Changes</td>
</tr>
<tr class="odd">
<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>
<td class="firstcol">EU-Urate</td>
<td>8.6</td>
<td>8.4</td>
<td>8.1</td>
<td>0.7</td>
<td>1.3</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">EMU-Urate</td>
<td>9.2</td>
<td>8.9</td>
<td>8.7</td>
<td>0.8</td>
<td>1.4</td>
<td>1.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> m/m%</td>
<td colspan="3"> % changes (ar)</td>
</tr>
<tr>
<td class="firstcol">EU-U 000s</td>
<td>2.7%</td>
<td>3.2%</td>
<td>3.5%</td>
<td>9.7%</td>
<td>19.0%</td>
<td>28.8%</td>
</tr>
<tr>
<td class="firstcol">EMU-U 000s</td>
<td>2.8%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>9.1%</td>
<td>17.7%</td>
<td>27.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">U-Rates</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>
<td class="firstcol">&nbsp; Germany</td>
<td>7.7</td>
<td>7.6</td>
<td>7.4</td>
<td>0.4</td>
<td>0.6</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France</td>
<td>8.9</td>
<td>8.8</td>
<td>8.6</td>
<td>0.4</td>
<td>0.9</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Spain</td>
<td>18.1</td>
<td>17.3</td>
<td>16.5</td>
<td>2.5</td>
<td>4.9</td>
<td>8.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; USA</td>
<td>8.9</td>
<td>8.5</td>
<td>8.1</td>
<td>1.3</td>
<td>2.3</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Japan</td>
<td>5</td>
<td>4.8</td>
<td>4.4</td>
<td>0.9</td>
<td>1.2</td>
<td>1</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;
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.grey3{
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.grey4{
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<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601i.jpg" width="353">
There&#39;s no real upward momentum driving the recent gains in construction spending, but it seems that an interim stabilization of earlier declines occurred this Spring. How long it will last is the question. For the second consecutive month the value of construction put-in-place unexpectedly rose; during April by 0.8% after a little-revised 0.4% March uptick. The gains followed declines ranging from 2% to 4% during each of the prior four months. Consensus expectations had been for a 1.6% April drop.
Another strong gain in the value of nonresidential building activity paced the April surprise. The 1.8% rise followed a 2.6% March increase. Nevertheless, the y/y gain decelerated to 2.0% following double-digit growth during each of the prior three years. Much of April&#39;s upside surprise was due to a 2.4% increase in the lodging category. Regardless, spending in this area has turned negative y/y following gains ranging between 30% and 60% during each of the prior three years. Elsewhere, office construction continued lower (-17.8% y/y) as did building in the commercial (-25.4% y/y), educational (-4.8% y/y) and amusement &amp; recreation sectors (-18.0% y/y).
Residential building activity also bounced back by all of 0.7% during April. Nevertheless, it was still off by one-third over the last year and by two-thirds from the 2006 peak. Notably hard hit has been single-family construction activity which ticked up 0.7% after falling by three-quarters since 2006. Building activity on multi-family units fell 2.6% during April (-17.4% y/y) but spending on improvements rose 8.9% (-13.8% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601j.jpg" width="353">
In contrast to the private sector gains, public construction dipped 0.6% during April; and the recession&#39;s effect on tax revenues lowered the year-to-year growth to 3.3% from its 2007 peak of 18.6%. The value of spending on transportation facilities fell 4.6% year-to-year while spending on highways &amp; streets inched up just 0.2% y/y. The value of construction on highways &amp; streets is roughly one-third of the value of total public construction spending.
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002, and that constant-dollar data are no longer computed.
The construction put-in-place figures are available in Haver&#39;s USECON database.
Making affordable housing greener from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2009/spring/Connelly_Miller_New_Ecology.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/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8</td>
<td>0.4</td>
<td>-10.7</td>
<td>-5.7</td>
<td>-2.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.4</td>
<td>0.2</td>
<td>-16.1</td>
<td>-9.8</td>
<td>-6.9</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.7</td>
<td>-3.6</td>
<td>-35.0</td>
<td>-27.7</td>
<td>-19.8</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.8</td>
<td>2.6</td>
<td>2.0</td>
<td>14.9</td>
<td>19.6</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.6</td>
<td>1.0</td>
<td>3.3</td>
<td>6.7</td>
<td>12.3</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

There's no real upward momentum driving the recent gains in construction spending, but it seems that an interim stabilization of earlier declines occurred this Spring. How long it will last is the question. For the second consecutive [...]

U.S. Construction Spending Increases Modestly

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China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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