Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520d.jpg" align="left" border="0" height="265" width="353">
Japan is being lead lower by its trade dependence as much as
any large developed country. Exports are lower at a 70% annual rate Q/Q
and by 37% Yr/Yr. Imports meanwhile are dropping at a lesser but still
outsized 47% annual rate in q1 and are off by nearly 15% Yr/Yr. 
 

Japan&#8217;s import to GDP ratio has fallen by 6.2% Yr/Yr less than
in the US where that ratio has fallen by a huge 14%. But exports are a
much larger part of Japan&#8217;s economy, so the drop has hurt it more.
Import-to-GDP ratios have fallen sharply among the large developed
economies in general. 
 

Japan&#8217;s GDP drop at 15.2% Q/Q saar outstrips Germany&#8217;s drop of
14.4% and its Yr/Yr decline of 9.1% exceeds Germany&#8217;s 6.9%. It is no
coincidence that these large set backs -- the largest among G-7
countries by a long shot -- befall two of the most highly efficient
global economies that also are highly dependent on trade. 
 

Trade tends to be a highly income elastic GDP component.
Export and import growth rates are pro-cyclical. In good times trade
dependence will help to pump-up GDP growth, but in bad times
&#8211;recessions - it will drag it down as it is now. In the US, since it is
a trade deficit county, the trade setback actually boosts GDP. What we
are seeing in Japan is the mirror image of that relationship. 
 

In Japan domestic demand is down by less than GDP itself. But
housing and business capital formation are each down at a more rapid
pace than GDP. Japan will need world trade to recover before it can
mend its economy. Its economic structure means that some of its
required fixing it out of its control. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col">Japan GDP </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol" colspan="5">Consumption</td>
<td colspan="3">Capital Formation</td>
<td colspan="3">Trade Domestic</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Gross Fix Cap</td>
<td>Plnt&amp; Equip</td>
<td>Housing</td>
<td>X-M: lbns E</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr>
<td colspan="11" class="firstcol">% change Q/Q at annual
rates of change; X-M is Q/Q change in Blns of real yen</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-09</td>
<td>-15.2%</td>
<td>-4.2%</td>
<td>1.3%</td>
<td>-27.5%</td>
<td>-35.5%</td>
<td>-20.0%</td>
<td>-11.2</td>
<td>-70.1%</td>
<td>-47.7%</td>
<td>-9.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-08</td>
<td>-14.4%</td>
<td>-3.1%</td>
<td>6.4%</td>
<td>-14.6%</td>
<td>-24.2%</td>
<td>23.7%</td>
<td>-15.6</td>
<td>-47.1%</td>
<td>13.1%</td>
<td>-2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-08</td>
<td>-2.5%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>-9.7%</td>
<td>-16.4%</td>
<td>13.2%</td>
<td>0.0</td>
<td>4.0%</td>
<td>6.3%</td>
<td>-2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-08</td>
<td>-3.5%</td>
<td>-3.8%</td>
<td>-3.1%</td>
<td>-9.5%</td>
<td>-11.2%</td>
<td>-7.7%</td>
<td>1.9</td>
<td>-3.2%</td>
<td>-15.7%</td>
<td>-5.7%</td>
</tr>
<tr>
<td colspan="11" class="firstcol">% change Yr/Yr; X-M is
Yr/Yr change in Gap in Blns of real yen</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-09</td>
<td>-9.1%</td>
<td>-2.7%</td>
<td>0.9%</td>
<td>-15.7%</td>
<td>-22.4%</td>
<td>0.8%</td>
<td>-24.9</td>
<td>-36.8%</td>
<td>-14.7%</td>
<td>-5.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-08</td>
<td>-4.5%</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-7.8%</td>
<td>-12.0%</td>
<td>11.8%</td>
<td>-13.1</td>
<td>-12.5%</td>
<td>2.8%</td>
<td>-1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-08</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>0.4%</td>
<td>-4.9%</td>
<td>-4.5%</td>
<td>-5.5%</td>
<td>4.0</td>
<td>4.5%</td>
<td>0.1%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-08</td>
<td>0.6%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-3.6%</td>
<td>0.5%</td>
<td>-16.5%</td>
<td>6.7</td>
<td>6.3%</td>
<td>-2.1%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">5-Yrs</td>
<td>-0.4%</td>
<td>0.5%</td>
<td>1.2%</td>
<td>-2.8%</td>
<td>-0.7%</td>
<td>-3.5%</td>
<td>na</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>-0.1%</td>
</tr>
</tbody>
</table>
</body></html>

Japan is being lead lower by its trade dependence as much as any large developed country. Exports are lower at a 70% annual rate Q/Q and by 37% Yr/Yr. Imports meanwhile are dropping at a lesser but still outsized 47% annual rate in q1 [...]

Japan GDP In Record Drop As Trade Collapses

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521d.jpg" width="353">
Perhaps foreshadowing economic recovery was a report from the Conference Board showing that the April composite index of leading economic indicators jumped 1.0%. The rise recovered the declines during the prior several months and left the index at its highest level since last November.
Nearly three quarters of the ten components of the leading index increased last month with the largest contributions coming from higher stock prices, improved consumer expectations and a more positively sloped interest rate yield curve.
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521e.jpg" width="353">
Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell another 0.2% which was the smallest decline since last July. The negative contributions from lower employment and production eased. Half of the four component series rose during April led by gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the fourth month in the last five. The ratio of coincident-to-lagging indicators (a measure of economic excess) rose modestly to the highest level this year.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Jan. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>1.0</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-1.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.6</td>
<td>-0.6</td>
<td>-4.9</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.5</td>
<td>-0.5</td>
<td>-0.6</td>
<td>-1.9</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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Perhaps foreshadowing economic recovery was a report from the Conference Board showing that the April composite index of leading economic indicators jumped 1.0%. The rise recovered the declines during the prior several months and left [...]

U.S. Leading Indicators Improve Sharply To The Highest Level Since November

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521f.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated that economic activity in the region continued to contract during May but that the rate of decline slowed. The Index of General Business conditions in the manufacturing sector came in at -22.6 which was the least negative reading since last September. The latest figure, nonetheless, was weaker than an expected reading of -18.
Though the latest figure remained negative it indicates that the decline in economic activity is moderating. During the last ten years there has been a 77% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 68% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub-indexes. The business conditions index reflects a separate survey question.
Amongst the sub-indexes shipments, inventories and unfilled orders rose. The new orders index fell slightly, however, and has been moving erratically sideways this year. Showing much improvement was the employment index which rose significantly to the highest level since last November. A reduced thirty-four percent of respondents expected to lower employment levels and an improved eight percent expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521g.jpg" width="353">
The prices paid index remained low at -22.8. Only one percent of respondents planned to raise prices while twenty-four percent expected to lower them. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months improved to its highest level since 2004. The expectations index for new orders, shipments and employment surged.
The figures from the Philadelphia Federal Reserve can be found in Haver&#39;s SURVEYS database.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0509.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Philadelphia Fed (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May&nbsp; &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-22.6</td>
<td>-24.4</td>
<td>-16.3</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-22.8</td>
<td>&nbsp;-31.5</td>
<td>&nbsp;52.2</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank indicated that economic activity in the region continued to contract during May but that the rate of decline slowed. The Index of General Business conditions in the manufacturing sector came in at [...]

Philadelphia Fed Index Indicates A Slowing Rate Of Decline In Economic Activity

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521a.jpg" width="353">
Job creation remains unambiguously weak even as the latest figures on U.S. initial claims gave another indication of tenuous improvement. Jobs weakness is evident in continuing claims for unemployment insurance, which provide an indication of workers&#39; ability to find employment. Signaling greater inability to secure work, they increased to another record high of 6,662,000, more than twice the year ago level. The series dates back to 1966. Further indicating that the job market remains weak, the four-week average of continuing claims also rose to another record of 6,480,500.
The lack of hiring continued to push the insured unemployment rate higher to 5.0%. That level was more than double last April 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 2 were in Oregon (7.4 percent), Michigan (6.9), Puerto Rico (6.6), Nevada (6.4), Pennsylvania (6.3), Wisconsin (6.2), Idaho (6.0), California (5.6), Alaska (5.5), New Jersey (5.4), and North Carolina (5.4).
A sign of tenuous improvement in the labor market was the fall in initial claims for unemployment insurance, down a modest 12,000 to 631,000. That followed an upwardly revised gain during the prior week. Though still relatively high, initial claims are down from their March high of 674,000. The four-week average of claims, which smoothes out some of the volatility in the weekly numbers, ticked down to 628,500, still near the lowest level since mid-February. The Consensus expectation was for 630,000 claims last week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521b.jpg" width="353">
The Labor Department indicated that the largest increases in initial claims for the week ending May 9 were in Michigan (+16,817), North Carolina (+3,783), Virginia (+2,871), Kentucky (+2,768), and Pennsylvania (+2,444), while the largest decreases were in California (-10,052), Wisconsin (-1,691), Kansas (-1,415), Oklahoma (-1,084), and Washington (-843).
The latest initial claims figures cover the survey week for May nonfarm payrolls and claims fell 14,000 (-2.2%) from the April survey period. For April, a modest increase in initial claims was accompanied by a 539,000 decline in nonfarm payrolls. During the last ten tears there has been an 87% negative correlation between the level of initial claims and the change in nonfarm payrolls.
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database.
The minutes from the latest meeting of the Federal Open Market Committee are available <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090520a.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">05/16/09</th>
<th scope="col">05/09/09</th>
<th scope="col">05/02/09</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>631</td>
<td>643</td>
<td>605</td>
<td>68.7%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,662</td>
<td>6,587</td>
<td>117.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

Job creation remains unambiguously weak even as the latest figures on U.S. initial claims gave another indication of tenuous improvement. Jobs weakness is evident in continuing claims for unemployment insurance, which provide an [...]

U.S. Continuing Claims For Unemployment Insurance Reach Another Record While Initial Claims Dip

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521d.jpg" align="left" border="0" height="265" width="353">
Perhaps foreshadowing economic recovery was a report from the
Conference Board showing that the April composite index of leading
economic indicators jumped 1.0%. The rise recovered the declines during
the prior several months and left the index at its highest level since
last November.
Nearly three quarters of the ten components of the leading
index increased last month with the largest contributions coming from
higher stock prices, improved consumer expectations and a more
positively sloped interest rate yield curve.
The leading index is based on actual reports for eight
economic data series. The Conference Board initially estimates two
series, orders for consumer goods and orders for capital goods.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521e.jpg" align="right" border="0" height="265" width="353">
Suggesting that the rate of decline in the economy is slowing
were the coincident indicators. They fell another 0.2% which was the
smallest decline since last July. The negative contributions from lower
employment and production eased. Half of the four component series rose
during April led by gains in real disposable income and business sales.
Over the last ten years there has been a 76% correlation between this
y/y change and real GDP.
In a sign that excesses in the U.S. economy are diminishing,
the lagging index fell for the fourth month in the last five. The ratio
of coincident-to-lagging indicators (a measure of economic excess) rose
modestly to the highest level this year.
The Conference Board figures are available in Haver's BCI
database. Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Jan. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>1.0</td>
<td>-0.2</td>
<td>-0.5</td>
<td>-1.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.6</td>
<td>-0.6</td>
<td>-4.9</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.5</td>
<td>-0.5</td>
<td>-0.6</td>
<td>-1.9</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Indicates A
Slowing Rate Of Decline In Economic Activity 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521f.jpg" align="left" border="0" height="265" width="353">
The Philadelphia Federal Reserve Bank indicated that economic
activity in the region continued to contract during May but that the
rate of decline slowed. The Index of General Business conditions in the
manufacturing sector came in at -22.6 which was the least negative
reading since last September. The latest figure, nonetheless, was
weaker than an expected reading of -18.
Though the latest figure remained negative it indicates that
the decline in economic activity is moderating. During the last ten
years there has been a 77% correlation between the level of the
Philadelphia Fed Business Conditions Index and the three-month growth
in factory sector industrial production. There has been a 68%
correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total
business activity and each of the sub-indexes. The business conditions
index reflects a separate survey question.
Amongst the sub-indexes shipments, inventories and unfilled
orders rose. The new orders index fell slightly, however, and has been
moving erratically sideways this year. Showing much improvement was the
employment index which rose significantly to the highest level since
last November. A reduced thirty-four percent of respondents expected to
lower employment levels and an improved eight percent expected to raise
them. During the last ten years there has been a 79% correlation
between the index level and the m/m change in manufacturing sector
payrolls.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521g.jpg" align="right" border="0" height="265" width="353">
The prices paid index remained low at -22.8. Only one percent
of respondents planned to raise prices while twenty-four percent
expected to lower them. During the last ten years there has been a 74%
correlation between the prices paid index and the three-month growth in
the intermediate goods PPI. There has been an 83% correlation with the
change in core intermediate goods prices.
The separate index of expected business conditions in six
months improved to its highest level since 2004. The expectations index
for new orders, shipments and employment surged.
The figures from the Philadelphia Federal Reserve can be found
in Haver's SURVEYS database.
The latest Business Outlook Survey from the Federal
Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0509.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May&nbsp; '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-22.6</td>
<td>-24.4</td>
<td>-16.3</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-22.8</td>
<td>&nbsp;-31.5</td>
<td>&nbsp;52.2</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
U.S. Continuing Claims For
Unemployment Insurance Reach Another Record While Initial Claims Dip 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521a.jpg" align="left" border="0" height="265" width="353">
Job creation remains unambiguously weak even as the latest
figures on U.S. initial claims gave another indication of tenuous
improvement. Jobs weakness is evident in continuing claims for
unemployment insurance, which provide an indication of workers' ability
to find employment. Signaling greater inability to secure work, they
increased to another record high of 6,662,000, more than
twice the year ago level. The series dates back to 1966.
Further indicating that the job market remains weak, the four-week
average of continuing claims also rose to another record of 6,480,500.
The lack of hiring continued to push the insured unemployment
rate higher to 5.0%. That level was more than double last April 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 2 were in Oregon (7.4 percent), Michigan (6.9), Puerto
Rico (6.6), Nevada (6.4), Pennsylvania (6.3), Wisconsin (6.2), Idaho
(6.0), California (5.6), Alaska (5.5), New Jersey (5.4), and North
Carolina (5.4).
A sign of tenuous improvement in the labor market was the fall
in initial claims for unemployment insurance, down a modest 12,000 to
631,000. That followed an upwardly revised gain during the prior week.
Though still relatively high, initial claims are down from their March
high of 674,000. The four-week average of claims, which smoothes out
some of the volatility in the weekly numbers, ticked down to 628,500,
still near the lowest level since mid-February. The Consensus
expectation was for 630,000 claims last week.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090521b.jpg" align="right" border="0" height="265" width="353">
The Labor Department indicated that the largest increases in
initial claims for the week ending May 9 were in Michigan (+16,817),
North Carolina (+3,783), Virginia (+2,871), Kentucky (+2,768), and
Pennsylvania (+2,444), while the largest decreases were in California
(-10,052), Wisconsin (-1,691), Kansas (-1,415), Oklahoma (-1,084), and
Washington (-843).
The latest initial claims figures cover the survey week for
May nonfarm payrolls and claims fell 14,000 (-2.2%) from the April
survey period. For April, a modest increase in initial claims was
accompanied by a 539,000 decline in nonfarm payrolls. During the last
ten tears there has been an 87% negative correlation between the level
of initial claims and the change in nonfarm payrolls.
The unemployment insurance claims data is available in Haver's
WEEKLY database.
The minutes from the latest meeting of the Federal
Open Market Committee are available <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090520a.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">05/16/09</th>
<th scope="col">05/09/09</th>
<th scope="col">05/02/09</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>631</td>
<td>643</td>
<td>605</td>
<td>68.7%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,662</td>
<td>6,587</td>
<td>117.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
Japan GDP In Record Drop As Trade
Collapses&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> May 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520d.jpg" align="left" border="0" height="265" width="353">
Japan is being lead lower by its trade dependence as much as
any large developed country. Exports are lower at a 70% annual rate Q/Q
and by 37% Yr/Yr. Imports meanwhile are dropping at a lesser but still
outsized 47% annual rate in q1 and are off by nearly 15% Yr/Yr. 
 

Japan&#8217;s import to GDP ratio has fallen by 6.2% Yr/Yr less than
in the US where that ratio has fallen by a huge 14%. But exports are a
much larger part of Japan&#8217;s economy, so the drop has hurt it more.
Import-to-GDP ratios have fallen sharply among the large developed
economies in general. 
 

Japan&#8217;s GDP drop at 15.2% Q/Q saar outstrips Germany&#8217;s drop of
14.4% and its Yr/Yr decline of 9.1% exceeds Germany&#8217;s 6.9%. It is no
coincidence that these large set backs -- the largest among G-7
countries by a long shot -- befall two of the most highly efficient
global economies that also are highly dependent on trade. 
 

Trade tends to be a highly income elastic GDP component.
Export and import growth rates are pro-cyclical. In good times trade
dependence will help to pump-up GDP growth, but in bad times
&#8211;recessions - it will drag it down as it is now. In the US, since it is
a trade deficit county, the trade setback actually boosts GDP. What we
are seeing in Japan is the mirror image of that relationship. 
 

In Japan domestic demand is down by less than GDP itself. But
housing and business capital formation are each down at a more rapid
pace than GDP. Japan will need world trade to recover before it can
mend its economy. Its economic structure means that some of its
required fixing it out of its control. 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">Japan
GDP </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol" colspan="5">Consumption</td>
<td colspan="3">Capital
Formation</td>
<td colspan="3">Trade Domestic</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Gross 
Fix Cap</td>
<td>Plnt&amp; 
Equip</td>
<td>Housing</td>
<td>X-M: 
lbns E</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr>
<td colspan="11" class="firstcol">% change Q/Q at
annual
rates of change; X-M is Q/Q change in Blns of real yen</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-09</td>
<td>-15.2%</td>
<td>-4.2%</td>
<td>1.3%</td>
<td>-27.5%</td>
<td>-35.5%</td>
<td>-20.0%</td>
<td>-11.2</td>
<td>-70.1%</td>
<td>-47.7%</td>
<td>-9.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-08</td>
<td>-14.4%</td>
<td>-3.1%</td>
<td>6.4%</td>
<td>-14.6%</td>
<td>-24.2%</td>
<td>23.7%</td>
<td>-15.6</td>
<td>-47.1%</td>
<td>13.1%</td>
<td>-2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-08</td>
<td>-2.5%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>-9.7%</td>
<td>-16.4%</td>
<td>13.2%</td>
<td>0.0</td>
<td>4.0%</td>
<td>6.3%</td>
<td>-2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-08</td>
<td>-3.5%</td>
<td>-3.8%</td>
<td>-3.1%</td>
<td>-9.5%</td>
<td>-11.2%</td>
<td>-7.7%</td>
<td>1.9</td>
<td>-3.2%</td>
<td>-15.7%</td>
<td>-5.7%</td>
</tr>
<tr>
<td colspan="11" class="firstcol">% change Yr/Yr; X-M
is
Yr/Yr change in Gap in Blns of real yen</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-09</td>
<td>-9.1%</td>
<td>-2.7%</td>
<td>0.9%</td>
<td>-15.7%</td>
<td>-22.4%</td>
<td>0.8%</td>
<td>-24.9</td>
<td>-36.8%</td>
<td>-14.7%</td>
<td>-5.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-08</td>
<td>-4.5%</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-7.8%</td>
<td>-12.0%</td>
<td>11.8%</td>
<td>-13.1</td>
<td>-12.5%</td>
<td>2.8%</td>
<td>-1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-08</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>0.4%</td>
<td>-4.9%</td>
<td>-4.5%</td>
<td>-5.5%</td>
<td>4.0</td>
<td>4.5%</td>
<td>0.1%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-08</td>
<td>0.6%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-3.6%</td>
<td>0.5%</td>
<td>-16.5%</td>
<td>6.7</td>
<td>6.3%</td>
<td>-2.1%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">5-Yrs</td>
<td>-0.4%</td>
<td>0.5%</td>
<td>1.2%</td>
<td>-2.8%</td>
<td>-0.7%</td>
<td>-3.5%</td>
<td>na</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>-0.1%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520d.jpg" align="left" border="0" height="265" width="353">
Japan is being led lower by its trade dependence as much as
any large developed country. Exports are lower at a 70% annual rate Q/Q
and by 37% Yr/Yr. Imports meanwhile are dropping at a lesser but still
outsized 47% annual rate in Q1 and are off by nearly 15% Yr/Yr. 
 

Japan&#8217;s import to GDP ratio has fallen by 6.2% Yr/Yr less than
in the US where that ratio has fallen by a huge 14%. But exports are a
much larger part of Japan&#8217;s economy, so the drop has hurt it more.
Import-to-GDP ratios have fallen sharply among the large developed
economies in general. 
 

Japan&#8217;s GDP drop at 15.2% Q/Q saar outstrips Germany&#8217;s drop of
14.4% and its Yr/Yr decline of 9.1% exceeds Germany&#8217;s 6.9%. It is no
coincidence that these large set backs -- the largest among G-7
countries by a long shot -- befall two of the most highly efficient
global economies that also are highly dependent on trade. 
 

Trade tends to be a highly income elastic GDP component.
Export and import growth rates are pro-cyclical. In good times trade
dependence will help to pump-up GDP growth, but in bad times &#8211;
recessions - it will drag it down as it is now. In the US, since it is
a trade deficit county, the trade setback actually boosts GDP. What we
are seeing in Japan is the mirror image of that relationship. 
 

In Japan domestic demand is down by less than GDP itself. But
housing and business capital formation are each down at a more rapid
pace than GDP. Japan will need world trade to recover before it can
mend its economy. Its economic structure means that some of its
required fixing it out of its control. 


<table border="0" cellspacing="0" width="100%">
</table>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> Japan GDP</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Consumption</td>
<td colspan="3">Capital Formation</td>
<td colspan="3">Trade Domestic</td>
<td>Domestic&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Gross Fixed Capital</td>
<td>Plant&amp; Eqpt</td>
<td>Housing</td>
<td>X-M</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">% change Q/Q at annual
rates of change; X-M is Q/Q change in Billions of real yen</td>
</tr>
<tr>
<td class="firstcol">Q1-09</td>
<td>-15.2%</td>
<td>-4.2%</td>
<td>1.3%</td>
<td>-27.5%</td>
<td>-35.5%</td>
<td>-20.0%</td>
<td>-11.2</td>
<td>-70.1%</td>
<td>-47.7%</td>
<td>-9.8%</td>
</tr>
<tr>
<td class="firstcol">Q4-08</td>
<td>-14.4%</td>
<td>-3.1%</td>
<td>6.4%</td>
<td>-14.6%</td>
<td>-24.2%</td>
<td>23.7%</td>
<td>-15.6</td>
<td>-47.1%</td>
<td>13.1%</td>
<td>-2.3%</td>
</tr>
<tr>
<td class="firstcol">Q3-08</td>
<td>-2.5%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>-9.7%</td>
<td>-16.4%</td>
<td>13.2%</td>
<td>0.0</td>
<td>4.0%</td>
<td>6.3%</td>
<td>-2.3%</td>
</tr>
<tr>
<td class="firstcol">Q2-08</td>
<td>-3.5%</td>
<td>-3.8%</td>
<td>-3.1%</td>
<td>-9.5%</td>
<td>-11.2%</td>
<td>-7.7%</td>
<td>1.9</td>
<td>-3.2%</td>
<td>-15.7%</td>
<td>-5.7%</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">% change Yr/Yr; X-M is
Yr/Yr change in Gap in Billions of real yen</td>
</tr>
<tr>
<td class="firstcol">Q1-09</td>
<td>-9.1%</td>
<td>-2.7%</td>
<td>0.9%</td>
<td>-15.7%</td>
<td>-22.4%</td>
<td>0.8%</td>
<td>-24.9</td>
<td>-36.8%</td>
<td>-14.7%</td>
<td>-5.1%</td>
</tr>
<tr>
<td class="firstcol">Q4-08</td>
<td>-4.5%</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-7.8%</td>
<td>-12.0%</td>
<td>11.8%</td>
<td>-13.1</td>
<td>-12.5%</td>
<td>2.8%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">Q3-08</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>0.4%</td>
<td>-4.9%</td>
<td>-4.5%</td>
<td>-5.5%</td>
<td>4.0</td>
<td>4.5%</td>
<td>0.1%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">Q2-08</td>
<td>0.6%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-3.6%</td>
<td>0.5%</td>
<td>-16.5%</td>
<td>6.7</td>
<td>6.3%</td>
<td>-2.1%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">5-Yrs</td>
<td>-0.4%</td>
<td>0.5%</td>
<td>1.2%</td>
<td>-2.8%</td>
<td>-0.7%</td>
<td>-3.5%</td>
<td>na</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>-0.1%</td>
</tr>
</tbody>
</table>
</body></html>

Japan is being led lower by its trade dependence as much as any large developed country. Exports are lower at a 70% annual rate Q/Q and by 37% Yr/Yr. Imports meanwhile are dropping at a lesser but still outsized 47% annual rate in Q1 [...]

Japan GDP in Record Drop As Trade Collapses

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520a.jpg" width="353">
The week-to-week volatility in mortgage applications can cloud the underlying trends. Such was the case with the latest report from the Mortgage Bankers Association. The bottom line of the latest report is that low interest rates continue to spur mortgage refinancings but they have done just little to lift home sales.
Last week, overall mortgage applications recovered roughly one-third of the prior week&#39;s decline with a 2.3% increase and applications remained higher by nearly one-half from the year ago level. Despite these increases applications remained down sharply from their early-April peak.
The strength in applications versus last year is wholly the result of continuing gains in mortgage refinancings. While they have fallen from the January peak, refinancings last week were more than double the year-ago level as interest rates remain down sharply. During last week the index of applications to refinance a home mortgage rose 4.5% and applications this month are still more than double the year-ago level. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520b.jpg" width="353">
Whatever strength there may be in refinancings is just partially evident in mortgage applications to purchase a home. Purchase applications fell 4.4% from the prior week&#39;s level and they remained down by more than one-quarter from the year ago level. The downtrend, however, seems to be bottoming. So far this year purchase applications have moved erratically sideways with a slight upward tilt. That mirrors the trend in new plus existing home sales.
Falling again last week was the effective interest rate on a conventional 15-year mortgage. It dropped to 4.69% from an average that was well over 6.0% last Fall. For a 30-year mortgage rates also were near their recent low at 4.92%. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Moving up slightly was the rate for an adjustable 1-Year mortgage to 6.41% from the low close to 6.0% during January. The rate still was down, however, sharply from the 7.07% peak reached this past Fall.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520c.jpg" width="353">
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Fed&#39;s announcement yesterday concerning the Term Asset-Backed Securities Loan Facility (TALF) can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090519b.htm"> here</a>.
Seeking Stability: What&#146;s Next for Banking Regulation? from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0903.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/15/09</th>
<th scope="col">05/08/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>915.9</td>
<td>895.6</td>
<td>47.3%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>254.0</td>
<td>265.7</td>
<td>-27.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4,794.4</td>
<td>4,588.6</td>
<td>116.9%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
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The week-to-week volatility in mortgage applications can cloud the underlying trends. Such was the case with the latest report from the Mortgage Bankers Association. The bottom line of the latest report is that low interest rates [...]

U.S. Mortgage Applications Firm As Refinancings Remain High But Purchase Apps Lag

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520a.jpg" align="left" border="0" height="265" width="353">
The week-to-week volatility in mortgage applications can cloud
the underlying trends. Such was the case with the latest report from
the Mortgage Bankers Association. The bottom line of the latest report
is that low interest rates continue to spur mortgage refinancings but
they have done just little to lift home sales.
Last week, overall mortgage applications recovered roughly
one-third of the prior week's decline with a 2.3% increase and
applications remained higher by nearly one-half from the year ago
level. Despite these increases applications remained down sharply from
their early-April peak.
The strength in applications versus last year is wholly the
result of continuing gains in mortgage refinancings. While they have
fallen from the January peak, refinancings last week were more than
double the year-ago level as interest rates remain down sharply. During
last week the index of applications to refinance a home mortgage rose
4.5% and applications this month are still more than double the
year-ago level. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520b.jpg" align="right" border="0" height="265" width="353">
Whatever strength there may be in refinancings is just
partially evident in mortgage applications to purchase a home. Purchase
applications fell 4.4% from the prior week's level and they remained
down by more than one-quarter from the year ago level. The downtrend,
however, seems to be bottoming. So far this year purchase applications
have moved erratically sideways with a slight upward tilt. That mirrors
the trend in new plus existing home sales.
Falling again last week was the effective interest rate on a
conventional 15-year mortgage. It dropped to 4.69% from an average that
was well over 6.0% last Fall. For a 30-year mortgage rates also were
near their recent low at 4.92%. Interest rates on 15- and 30-year
mortgages are closely correlated (&gt;90%) with the rate on 10-year
Treasury securities. Moving up slightly was the rate for an adjustable
1-Year mortgage to 6.41% from the low close to 6.0% during January. The
rate still was down, however, sharply from the 7.07% peak reached this
past Fall.
During the last ten years there has been a (negative) 79%
correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage. Moreover, during the
last ten years there has been a 61% correlation between the y/y change
in purchase applications and the change in new plus existing single
family home sales.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520c.jpg" align="left" border="0" height="265" width="353">
The figures for weekly mortgage applications are available in
Haver's SURVEYW database.
The Mortgage Bankers Association surveys between 20 to 35 of
the top lenders in the U.S. housing industry to derive its refinance,
purchase and market indexes. The weekly survey covers roughly 50% of
all U.S. residential mortgage applications processed each week by
mortgage banks, commercial banks and thrifts. Visit the Mortgage
Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Fed's announcement yesterday concerning the Term
Asset-Backed Securities Loan Facility (TALF) can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090519b.htm">
here</a>.
Seeking Stability: What&#8217;s Next for Banking
Regulation? from the Federal Reserve Bank of Dallas is
available <a href="http://dallasfed.org/research/eclett/2009/el0903.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/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/15/09</th>
<th scope="col">05/08/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>915.9</td>
<td>895.6</td>
<td>47.3%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>254.0</td>
<td>265.7</td>
<td>-27.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4,794.4</td>
<td>4,588.6</td>
<td>116.9%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
Japan GDP in Record Drop As Trade
Collapses 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 20, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090520d.jpg" align="left" border="0" height="265" width="353">
Japan is being led lower by its trade dependence as much as
any large developed country. Exports are lower at a 70% annual rate Q/Q
and by 37% Yr/Yr. Imports meanwhile are dropping at a lesser but still
outsized 47% annual rate in Q1 and are off by nearly 15% Yr/Yr. 
 

Japan&#8217;s import to GDP ratio has fallen by 6.2% Yr/Yr less than
in the US where that ratio has fallen by a huge 14%. But exports are a
much larger part of Japan&#8217;s economy, so the drop has hurt it more.
Import-to-GDP ratios have fallen sharply among the large developed
economies in general. 
 

Japan&#8217;s GDP drop at 15.2% Q/Q saar outstrips Germany&#8217;s drop of
14.4% and its Yr/Yr decline of 9.1% exceeds Germany&#8217;s 6.9%. It is no
coincidence that these large set backs -- the largest among G-7
countries by a long shot -- befall two of the most highly efficient
global economies that also are highly dependent on trade. 
 

Trade tends to be a highly income elastic GDP component.
Export and import growth rates are pro-cyclical. In good times trade
dependence will help to pump-up GDP growth, but in bad times &#8211;
recessions - it will drag it down as it is now. In the US, since it is
a trade deficit county, the trade setback actually boosts GDP. What we
are seeing in Japan is the mirror image of that relationship. 
 

In Japan domestic demand is down by less than GDP itself. But
housing and business capital formation are each down at a more rapid
pace than GDP. Japan will need world trade to recover before it can
mend its economy. Its economic structure means that some of its
required fixing it out of its control. 


<table border="0" cellspacing="0" width="100%"></table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> Japan
GDP</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Consumption</td>
<td colspan="3">Capital
Formation</td>
<td colspan="3">Trade Domestic</td>
<td>Domestic&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Gross 
Fixed 
Capital</td>
<td>Plant&amp; 
Eqpt</td>
<td>Housing</td>
<td>X-M</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">% change Q/Q at
annual
rates of change; X-M is Q/Q change in Billions of real yen</td>
</tr>
<tr>
<td class="firstcol">Q1-09</td>
<td>-15.2%</td>
<td>-4.2%</td>
<td>1.3%</td>
<td>-27.5%</td>
<td>-35.5%</td>
<td>-20.0%</td>
<td>-11.2</td>
<td>-70.1%</td>
<td>-47.7%</td>
<td>-9.8%</td>
</tr>
<tr>
<td class="firstcol">Q4-08</td>
<td>-14.4%</td>
<td>-3.1%</td>
<td>6.4%</td>
<td>-14.6%</td>
<td>-24.2%</td>
<td>23.7%</td>
<td>-15.6</td>
<td>-47.1%</td>
<td>13.1%</td>
<td>-2.3%</td>
</tr>
<tr>
<td class="firstcol">Q3-08</td>
<td>-2.5%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>-9.7%</td>
<td>-16.4%</td>
<td>13.2%</td>
<td>0.0</td>
<td>4.0%</td>
<td>6.3%</td>
<td>-2.3%</td>
</tr>
<tr>
<td class="firstcol">Q2-08</td>
<td>-3.5%</td>
<td>-3.8%</td>
<td>-3.1%</td>
<td>-9.5%</td>
<td>-11.2%</td>
<td>-7.7%</td>
<td>1.9</td>
<td>-3.2%</td>
<td>-15.7%</td>
<td>-5.7%</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">% change Yr/Yr; X-M
is
Yr/Yr change in Gap in Billions of real yen</td>
</tr>
<tr>
<td class="firstcol">Q1-09</td>
<td>-9.1%</td>
<td>-2.7%</td>
<td>0.9%</td>
<td>-15.7%</td>
<td>-22.4%</td>
<td>0.8%</td>
<td>-24.9</td>
<td>-36.8%</td>
<td>-14.7%</td>
<td>-5.1%</td>
</tr>
<tr>
<td class="firstcol">Q4-08</td>
<td>-4.5%</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-7.8%</td>
<td>-12.0%</td>
<td>11.8%</td>
<td>-13.1</td>
<td>-12.5%</td>
<td>2.8%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">Q3-08</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>0.4%</td>
<td>-4.9%</td>
<td>-4.5%</td>
<td>-5.5%</td>
<td>4.0</td>
<td>4.5%</td>
<td>0.1%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">Q2-08</td>
<td>0.6%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-3.6%</td>
<td>0.5%</td>
<td>-16.5%</td>
<td>6.7</td>
<td>6.3%</td>
<td>-2.1%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">5-Yrs</td>
<td>-0.4%</td>
<td>0.5%</td>
<td>1.2%</td>
<td>-2.8%</td>
<td>-0.7%</td>
<td>-3.5%</td>
<td>na</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>-0.1%</td>
</tr>
</tbody>
</table>
</body></html>

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

**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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