Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429e.jpg" width="353">
In an anticipated move the Federal Open Market Committee today left the Federal funds rate in a &quot;range from 0 to 1/4 percent.&quot; The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever. The decision was unanimous amongst FOMC voters.
The Fed indicated that &quot;Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth and tight credit.&quot; Moreover, the Fed pointed out that while &quot;the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.&quot;
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429f.jpg" width="353"> Regarding inflation the same statement was offered as at the last meeting. &quot;... that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
In its effort to promote economic liquidity, the Fed used the same language as in March. &quot;As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.&quot;
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090429a.htm"> link</a>.
The Haver databases USECON, WEEKLY and DAILY contain the figures from the Federal Reserve Board.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
</body>
</html>

In an anticipated move the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever. The decision [...]

FOMC Leaves Rates Unchanged

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429a.jpg" align="left" border="0" height="265" width="353">
Businesses worked with a vengeance last quarter to reduce
levels of unwanted inventory. The 6.1% (AR) drop in real GDP was about
the same as during 4Q '08, but together the back-to-back declines were
the worst since early-1958. Consensus expectations had been for a 1Q
decline of roughly 5.0%.
Cutbacks of unwanted levels of inventory, which built up as
demand cratered during last year's second half, subtracted 2.8
percentage points from GDP growth. That was the most since the first
quarter of 2000 and it rivals the biggest negative contribution from
inventories since the early-1980s.
The correction followed an unwanted inventory buildup late
during 2008 as demand fell sharply. Real U.S. final sales to domestic
purchasers contracted at a 5.1% annual rate that was little different
from the 4Q decline. Together, these declines also were the sharpest
since 1958. However, the latest decline in overall demand took on
somewhat of a different composition. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429b.jpg" align="right" border="0" height="265" width="353">
Personal consumption expenditures actually rose at a 2.2%
annual rate (-1.2% y/y) last quarter and that reversed a bit of the
decline during the prior two periods. Spending on motor vehicles rose
moderately during the quarter (-18.5% y/y) after five consecutive down
periods. Business fixed investment fell at a 21.7% rate (-5.2% y/y) and
residential investment dropped at a 22.8% rate (-19.4% y/y) from
Q4.Spending on furniture also rose (-0.1% y/y) and reversed a piece of
the declines during the prior two quarters.
Elsewhere the pattern of severe weakness in activity continued
or intensified. Residential investment fell at a 38.0% annual rate
(-23.2% y/y) last quarter. Housing investment has fallen steadily since
its peak in late 2005 but the 1Q drop was the sharpest during the
period. Business investment also has fallen sharply but here again the
rate of decline intensified. The 37.9% (AR) drop last quarter (-16.3%
y/y) set a new record for the postwar period.
The shortfall in overall GDP growth last quarter owed much to
a 3.9% drop (+1.7% y/y) in expenditures by the government sector. It
was the first decline since late 2005 and it was led by a surprising
4.0% drop (+5.6% y/y) drop in Federal spending. That was paced by a
6.4% decline (+5.2% y/y) in defense expenditures. State and local
spending also fell at a 3.9% annual rate -0.6% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429c.jpg" align="left" border="0" height="265" width="353">
If there was any solace in the GDP report it was in the
foreign trade sector where net exports contributed 2.0 percentage
points to 1Q GDP growth. But there was no real positive news here
either, just that imports fell somewhat more than exports. Imports fell
at a 34.% annual rate (-16.5% y/y) while U.S. exports fell at a 3.0%
rate (-11.3% y/y).
Even the inflation news was not great. The 2.9% increase in
the GDP chain price index was up from the 0.5%
annual rate of increase during 4Q. The reason for the rise was that
import prices fell at a faster rate than export prices. Domestic
prices, however, reflected the weak economy. The PCE price index fell
at a 1.0% annual rate while the residential investment chain price
index fell at a 4.8% rate (-5.3% y/y). The weakness in business caused
the nonresidential investment price index also to slip at a 0.9% rate
(+2.5% y/y), the first decline since 2007.
The U.S. National Income &amp; Product Account data is
available in Haver's USECON and the USNA
databases.

<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/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">1Q '09 (Advance)</th>
<th scope="col">4Q '08</th>
<th scope="col">1Q 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">GDP</td>
<td>-6.1</td>
<td>-6.3</td>
<td>-2.6</td>
<td>1.1</td>
<td>2.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-2.8</td>
<td>-0.1</td>
<td>-0.9</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-3.4</td>
<td>-6.2</td>
<td>-1.7</td>
<td>1.4</td>
<td>2.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>2.0</td>
<td>-0.2</td>
<td>-1.3</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-5.1</td>
<td>-5.8</td>
<td>-3.0</td>
<td>-0.0</td>
<td>1.8</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.9</td>
<td>0.5</td>
<td>2.1</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
</tr>
</tbody>
</table>
</body></html>

Businesses worked with a vengeance last quarter to reduce levels of unwanted inventory. The 6.1% (AR) drop in real GDP was about the same as during 4Q '08, but together the back-to-back declines were the worst since early-1958. [...]

U.S. GDP Declines 6.1% In 1Q As Inventory Cutbacks Weigh Heavily

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429a.jpg" align="left" border="0" height="265" width="353">
Businesses worked with a vengeance last quarter to reduce
levels of unwanted inventory. The 6.1% (AR) drop in real GDP was about
the same as during 4Q '08, but together the back-to-back declines were
the worst since early-1958. Consensus expectations had been for a 1Q
decline of roughly 5.0%.
Cutbacks of unwanted levels of inventory, which built up as
demand cratered during last year's second half, subtracted 2.8
percentage points from GDP growth. That was the most since the first
quarter of 2000 and it rivals the biggest negative contribution from
inventories since the early-1980s.
The correction followed an unwanted inventory buildup late
during 2008 as demand fell sharply. Real U.S. final sales to domestic
purchasers contracted at a 5.1% annual rate that was little different
from the 4Q decline. Together, these declines also were the sharpest
since 1958. However, the latest decline in overall demand took on
somewhat of a different composition. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429b.jpg" align="right" border="0" height="265" width="353">
Personal consumption expenditures actually rose at a 2.2%
annual rate (-1.2% y/y) last quarter and that reversed a bit of the
decline during the prior two periods. Spending on motor vehicles rose
moderately during the quarter (-18.5% y/y) after five consecutive down
periods. Business fixed investment fell at a 21.7% rate (-5.2% y/y) and
residential investment dropped at a 22.8% rate (-19.4% y/y) from
Q4.Spending on furniture also rose (-0.1% y/y) and reversed a piece of
the declines during the prior two quarters.
Elsewhere the pattern of severe weakness in activity continued
or intensified. Residential investment fell at a 38.0% annual rate
(-23.2% y/y) last quarter. Housing investment has fallen steadily since
its peak in late 2005 but the 1Q drop was the sharpest during the
period. Business investment also has fallen sharply but here again the
rate of decline intensified. The 37.9% (AR) drop last quarter (-16.3%
y/y) set a new record for the postwar period.
The shortfall in overall GDP growth last quarter owed much to
a 3.9% drop (+1.7% y/y) in expenditures by the government sector. It
was the first decline since late 2005 and it was led by a surprising
4.0% drop (+5.6% y/y) drop in Federal spending. That was paced by a
6.4% decline (+5.2% y/y) in defense expenditures. State and local
spending also fell at a 3.9% annual rate -0.6% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429c.jpg" align="left" border="0" height="265" width="353">
If there was any solace in the GDP report it was in the
foreign trade sector where net exports contributed 2.0 percentage
points to 1Q GDP growth. But there was no real positive news here
either, just that imports fell somewhat more than exports. Imports fell
at a 34.% annual rate (-16.5% y/y) while U.S. exports fell at a 3.0%
rate (-11.3% y/y).
Even the inflation news was not great. The 2.9% increase in
the GDP chain price index was up from the 0.5%
annual rate of increase during 4Q. The reason for the rise was that
import prices fell at a faster rate than export prices. Domestic
prices, however, reflected the weak economy. The PCE price index fell
at a 1.0% annual rate while the residential investment chain price
index fell at a 4.8% rate (-5.3% y/y). The weakness in business caused
the nonresidential investment price index also to slip at a 0.9% rate
(+2.5% y/y), the first decline since 2007.
The U.S. National Income &amp; Product Account data is
available in Haver's USECON and the USNA
databases.

<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/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">1Q '09 (Advance)</th>
<th scope="col">4Q '08</th>
<th scope="col">1Q 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">GDP</td>
<td>-6.1</td>
<td>-6.3</td>
<td>-2.6</td>
<td>1.1</td>
<td>2.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-2.8</td>
<td>-0.1</td>
<td>-0.9</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-3.4</td>
<td>-6.2</td>
<td>-1.7</td>
<td>1.4</td>
<td>2.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>2.0</td>
<td>-0.2</td>
<td>-1.3</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-5.1</td>
<td>-5.8</td>
<td>-3.0</td>
<td>-0.0</td>
<td>1.8</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.9</td>
<td>0.5</td>
<td>2.1</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
</tr>
</tbody>
</table>
FOMC Leaves Rates Unchanged 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 29, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429e.jpg" align="left" border="0" height="265" width="353">
In an anticipated move the Federal Open Market Committee today
left the Federal funds rate in a "range from 0 to 1/4 percent." The
discount also was left unchanged at 0.50%. The Fed funds rate remained
the lowest ever. The decision was unanimous amongst FOMC voters.
The Fed indicated that "Household spending has shown signs of
stabilizing but remains constrained by ongoing job losses, lower
housing wealth and tight credit." Moreover, the Fed pointed out that
while "the economic outlook has improved modestly since the March
meeting, partly reflecting some easing of financial market conditions,
economic activity is likely to remain weak for a time. Nonetheless, the
Committee continues to anticipate that policy actions to stabilize
financial markets and institutions, fiscal and monetary stimulus, and
market forces will contribute to a gradual resumption of sustainable
economic growth in a context of price stability."
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429f.jpg" align="right" border="0" height="265" width="353"> Regarding
inflation the same statement was offered as at the last meeting. "...
that inflation will remain subdued. Moreover, the Committee sees some
risk that inflation could persist for a time below rates that best
foster economic growth and price stability in the longer term.
In its effort to promote economic liquidity, the Fed used the
same language as in March. "As previously announced, to provide support
to mortgage lending and housing markets and to improve overall
conditions in private credit markets, the Federal Reserve will purchase
a total of up to $1.25 trillion of agency mortgage-backed securities
and up to $200 billion of agency debt by the end of the year. In
addition, the Federal Reserve will buy up to $300 billion of Treasury
securities by autumn."
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090429a.htm">
link</a>.
The Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
U.S. Weekly Mortgage Applications
Fall As Refinancings Lag 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 29, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429g.jpg" align="left" border="0" height="265" width="353">
As evidence that the mortgage refinancing boom has lost steam,
the Mortgage Bankers Association reported that mortgage applications
fell sharply for the second week in the last three. The 18.1% decline
last week lowered applications by nearly one-quarter from their
early-April peak.
The index of applications to refinance a home mortgage fell by
21.9% just last week and the decline pulled them 25.0% below the peak
in early April. Nevertheless, applications for all of this month are
still more than double the year-ago level.
Whatever strength there may be in refinancings is hardly
evident in mortgage applications to purchase a home. They had risen
earlier this month but the forward momentum lost steam, falling in each
of the last three weeks. Overall these applications are down by
one-quarter from the year ago level, a decline which is greater than
the y/y decline in new plus existing home sales of 9.3% through March.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429h.jpg" align="right" border="0" height="265" width="353">
Falling again, the effective interest rate on a conventional
15-year mortgage dropped last week to 4.69%. For a 30-year mortgage,
rates also were near their recent lows at 4.85%. Interest rates on 15-
and 30-year mortgages are closely correlated (&gt;90%) with the
rate on 10-year Treasury securities. For an adjustable 1-Year mortgage
the rate has been fairly stable this year near 6.25% but the rate still
was down 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.
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>.

<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">04/24/09</th>
<th scope="col">04/17/09</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>960.6</td>
<td>1,172.2</td>
<td>69.4%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>251.6</td>
<td>253.0</td>
<td>-26.0%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>5,108.2</td>
<td>6,540.7</td>
<td>168.1%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428c.jpg" align="left" border="0" height="265" width="353">
The Year-over-year the drop in Japan&#8217;s retail sales is
worsening. But overall seasonally adjusted sales while down by a sharp
1.1% m/m in March are not accelerating their drop over three months
compared to six months. The 5.6% annual rate of decline over three
months is less than the 7.6% pace of decline over six months but still
much greater than the 3.7% pace of decline over 12-months. There is not
much good news in those trends. In the just-completed quarter, sales
are still falling at a rapid 7% annual rate compared to Q4. With Japan
poised for its traditional Golden Week holiday, consumer spending is
again set to be tested. While the US and Europe have showed some
sporadic signs of improvement in data trends, there has been little in
the way of constructive data from Japan as of yet. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Japan
Retail Sales Trends
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total SA</td>
<td>-1.1%</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>-5.6%</td>
<td>-7.6%</td>
<td>-3.7%</td>
<td>3.2%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Not
seasonally adjusted</td>
</tr>
<tr class="odd">
<td class="firstcol">Total: Nominal</td>
<td>-0.4%</td>
<td>-1.2%</td>
<td>0.9%</td>
<td>-3.1%</td>
<td>-6.6%</td>
<td>-3.9%</td>
<td>4.2%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>-2.0%</td>
<td>-6.1%</td>
<td>3.7%</td>
<td>-17.0%</td>
<td>-10.9%</td>
<td>-6.3%</td>
<td>10.0%</td>
<td>-1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food&amp; Beverage</td>
<td>0.7%</td>
<td>-1.5%</td>
<td>-0.5%</td>
<td>-5.1%</td>
<td>-0.6%</td>
<td>0.4%</td>
<td>2.1%</td>
<td>-7.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Fabric apparel &amp; access</td>
<td>-0.9%</td>
<td>0.0%</td>
<td>1.7%</td>
<td>2.9%</td>
<td>-5.7%</td>
<td>-5.6%</td>
<td>-1.3%</td>
<td>-6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rest of Retail</td>
<td>-0.7%</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>0.7%</td>
<td>-9.3%</td>
<td>-5.6%</td>
<td>5.0%</td>
<td>-7.2%</td>
</tr>
</tbody>
</table>
</body></html>

The Year-over-year the drop in Japan’s retail sales is worsening. But overall seasonally adjusted sales while down by a sharp 1.1% m/m in March are not accelerating their drop over three months compared to six months. The 5.6% annual [...]

Japan Retail Sales Continue to Drop

Louise Curley

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428j.jpg" align="left" border="0" height="265" width="353">
There was some good news for the U.K. in the latest
Confederation of Business Industries (CBI) Survey of the Distributive
Trades. More respondents reported increases in retail sales over a year
ago than those reporting decreases. Although the balance was
small--3%--it was the first positive result since the 1% balance in
March 2008 and represented a dramatic reversal from the large negative
balances of 25%-55% recorded in the last four months. It was, moreover,
unexpected. The same respondents had expected April to show a negative
balance of 47% and they still expect a negative balance of 15% for May.
The first chart shows the reported and expected percent balances for
retail trade.
While still reporting negative balances for wholesale
business, the balance for April was -18% well below the negatives
balances recorded earlier in the year and below the -56% expected for
April. Wholesalers, however, continue pessimistic and are expecting
decreases in sales relative to a year ago will exceed increases by 23%
in May. The second chart shows the reported and expected percent
balances for wholesale trade.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428k.jpg" align="right" border="0" height="265" width="353">
Reported sales in the motor trades showed a negative balance
of 16%, compared with a negative balance of only 6% in March. The
reported figures have, in recent months, been much better than the
expected results. A negative balance of 48% was expected for April
versus the -16% that was reported. A negative balance of 62% is
expected for May. The third chart shows the reported and expected
percent balances for the motor trade.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Percent Balance</th>
<th scope="col">May 09</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb 09&nbsp;</th>
<th scope="col">Jan 09</th>
<th scope="col">Dec 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Reported&nbsp;</td>
<td>--</td>
<td>3</td>
<td>-44</td>
<td>-25</td>
<td>-47</td>
<td>-55</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Expected&nbsp;</td>
<td>-15</td>
<td>-47</td>
<td>-33</td>
<td>-52</td>
<td>-49</td>
<td>-40</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Reported</td>
<td>--</td>
<td>-18</td>
<td>-65</td>
<td>-47</td>
<td>-91</td>
<td>-25</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Expected</td>
<td>-23</td>
<td>-56</td>
<td>-46</td>
<td>-37</td>
<td>-30</td>
<td>-57</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Trades Reported</td>
<td>--</td>
<td>-16</td>
<td>-6</td>
<td>-50</td>
<td>-68</td>
<td>-100</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Expected</td>
<td>-62</td>
<td>-48</td>
<td>-59</td>
<td>-57</td>
<td>-87</td>
<td>-98</td>
</tr>
</tbody>
</table>
</body></html>

There was some good news for the U.K. in the latest Confederation of Business Industries (CBI) Survey of the Distributive Trades. More respondents reported increases in retail sales over a year ago than those reporting decreases. [...]

More Retailers in the U.K. Report Increases in Sales versus a Year Ago than Those Reporting Decreases

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428d.jpg" align="left" border="0" height="265" width="353">
Although South Korea's real Gross Domestic Product improved
slightly in the first quarter of this year, the economy is still in
recession. GDP rose 0.21% at a seasonally adjusted annual rate (saar)
in the first quarter of 2009, but it is 18.6%%, saars, below the third
quarter of 2008. The fourth quarter of last year saw precipitous
declines in practically every sector of the economy--the exception
being an increase in Government Consumption expenditures.The table
below shows the saars for the major components of GDP and the attached
chart shows the saars for private consumption, gross capital formation
and exports of goods and services. Gross capital formation suffered the
biggest decline, 50.14% saar in the fourth quarter of 2008. Inventories
were cut by 914 billion chained 2005 Won while expenditures on
equipment declined at a saar of 45.80%. The decline in construction was
a saar of 11.42%. Exports of goods and services declined by 32.2% while
imports of goods and services declined at a saar of 45.8%
Government stimulus programs resulting in increased government
consumption expenditures and construction spending were largely
responsible for the increase in activity that took place in the first
quarter. Private consumption improved slightly but private business
spending on equipment continued to decline and there was a major
liquidation of inventories amounting to 8.5 trillion chained 2005 won.
The declines in exports and imports moderated in the first quarter but
were still significant.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Seasonally adjusted annual rates of return 
&nbsp;ex where noted</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007&nbsp;</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gross Domestic Product&nbsp;</td>
<td>0.21</td>
<td>-18.78</td>
<td>0.97</td>
<td>1.72</td>
<td>4.38</td>
<td>2.22</td>
<td>5.11</td>
<td>5.16</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>1.79</td>
<td>-17.29</td>
<td>-0.05</td>
<td>-0.65</td>
<td>4.29</td>
<td>0.92</td>
<td>4.06</td>
<td>4.73</td>
</tr>
<tr class="odd">
<td class="firstcol">Government Consumption</td>
<td>15.23</td>
<td>4.11</td>
<td>4.30</td>
<td>4.83</td>
<td>4.97</td>
<td>4.21</td>
<td>5.39</td>
<td>6.58</td>
</tr>
<tr>
<td class="firstcol">Gross Capital Formation</td>
<td>-40.34</td>
<td>-50.14</td>
<td>8.34</td>
<td>3.04</td>
<td>3.16</td>
<td>0.80</td>
<td>3.55</td>
<td>4.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Construction</td>
<td>23.06</td>
<td>-11.42</td>
<td>0.23</td>
<td>-1.23</td>
<td>-9.73</td>
<td>-2.10</td>
<td>1.44</td>
<td>0.53</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Equipment</td>
<td>-33.11</td>
<td>-45.80</td>
<td>0.68</td>
<td>1.55</td>
<td>-1.40</td>
<td>-1.99</td>
<td>9.29</td>
<td>8.19</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Inventory
Change&nbsp; (Bil. chained 2005 Won)</td>
<td>-8522</td>
<td>-914</td>
<td>6376</td>
<td>4979</td>
<td>4512</td>
<td>14958</td>
<td>7210</td>
<td>10017</td>
</tr>
<tr>
<td class="firstcol">Exports of
Goods&amp;Services</td>
<td>-15.64</td>
<td>-31.20</td>
<td>-1.62</td>
<td>-11.34</td>
<td>-0.11</td>
<td>5.73</td>
<td>12.61</td>
<td>11.37</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports of
Goods&amp;Services</td>
<td>-30.38</td>
<td>-45.83</td>
<td>4.29</td>
<td>12.31</td>
<td>-3.01</td>
<td>3.66</td>
<td>11.68</td>
<td>11.29</td>
</tr>
</tbody>
</table>
</body></html>

Although South Korea's real Gross Domestic Product improved slightly in the first quarter of this year, the economy is still in recession. GDP rose 0.21% at a seasonally adjusted annual rate (saar) in the first quarter of 2009, but it [...]

South Korea's GDP Increases in Q1 09, but is Still at Recession Levels

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428i.jpg" width="353">
Consumer spending firmed this month. Though chain store sales slipped 0.7% last week, the International Council of Shopping Centers-Goldman Sachs Index indicated that on average April sales so far rose 1.4% from the March average following that month&#39;s tepid 0.3% uptick. The year-to-year change in the indicator remained, however, negative.
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.
The outlook for sales continued cautiously optimistic. The leading indicator of sales has been moving sideways since early February.
Too big to fail from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/tbtf/index.cfm"> 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/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">04/24/09</th>
<th scope="col">04/17/09</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>488.0</td>
<td>491.3</td>
<td>-1.7%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

Consumer spending firmed this month. Though chain store sales slipped 0.7% last week, the International Council of Shopping Centers-Goldman Sachs Index indicated that on average April sales so far rose 1.4% from the March average [...]

U.S. Chain Store Sales Firm During April

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428g.jpg" width="353">
Regular gasoline prices last week averaged $2.05 per gallon, steady with the level reached in late March and up 41 cents from the December low. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY database.
 Crude oil prices, however, slipped again due to soft economic news. The price for a barrel of West Texas Intermediate fell to $47.83 last week, down from the late-March high of $53.09. Prices remained up, however, from the December low of $32.37 per barrel. Prices reached a high of $145.66 last July. The figures on crude oil production and inventories are available in Haver&#39;s Weekly Oil Statistics database.
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428h.jpg" width="353">
In what has been a steady rate of decline, gasoline demand last week fell 2.5% y/y versus the 4.8% rate of decline seen last October. Less driving has been the result of higher gasoline prices and economic weakness. The change in demand is measured using the latest four weeks versus the same four weeks in 2008. Demand for all petroleum products was down 6.5% y/y led by a 40.1% drop in demand for residual fuel oil. These numbers are available in Haver&#39;s OILWKLY database.
The price of natural gas fell even further with the end to of winter heating season. Prices fell to $3.45 per mmbtu (-67.1% y/y) which was near the lowest level since 2002. The latest average price was down more than two-thirds from the high reached in early-July of $13.19/mmbtu.
Fed Confronts Financial Crisis by Expanding Its Role as Lender of Last Resort from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0902.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">04/27/09</th>
<th scope="col">04/20/09</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>2.05</td>
<td>2.06</td>
<td>-43.1%</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>47.83</td>
<td>49.80</td>
<td>-59.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Regular gasoline prices last week averaged $2.05 per gallon, steady with the level reached in late March and up 41 cents from the December low. The figures are reported by the U.S. Department of Energy and can be found in Haver's [...]

Gasoline Prices Continue To Hover Just Over $2.00 Per Gallon

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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

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


Privacy Policy

Disclaimer

Contact us

Service Health

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

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Tian Yong Woon

This week, we dive into several key developments across Asia. China’s Q4 GDP marked a further extension of its recent growth slowdown, yet full-year growth still came in exactly at the government’s 5% target for 2025 (chart 1). That said, the road ahead remains challenging, as December’s data delivered a mixed set of outcomes. Encouragingly, new external inroads, starting with Canada’s opening up of EV trade with China, could pave the way for additional opportunities (chart 2). In semiconductors, the latest US tariff measures proved far more limited in scope than initially feared, helping to explain the muted market reaction to the announcement (chart 3). Relatedly, commitments by major Taiwanese chipmakers to expand investment in the US have brought Washington and its largest chip supplier closer together, culminating in a US–Taiwan trade deal (chart 4).

In Japan, attention has turned to the possibility of a snap Lower House election in February. The interim political uncertainty, alongside expectations around future policy, has weighed on the yen and pushed Japanese yields higher (chart 5), with some observers increasingly concerned about the narrowing window to pass the FY2026 budget by April, given the likely dissolution of the Lower House. In South Korea, President Lee’s recent visits to China and Japan point to improving bilateral ties, although he continues to navigate a delicate balancing act amid still-elevated China–Japan tensions. Domestically, elevated house prices and high household debt continue to limit the scope for further monetary policy easing (chart 6).

**China**
Alongside its regular slate of monthly economic releases, China unveiled its Q4 GDP figures earlier today, with the economy expanding by 4.5% y/y during the quarter. While Q4 growth continues the recent trend of deceleration seen over the past few quarters, the outcome brings China’s full-year growth for 2025 right in line with the government’s 5% target (chart 1). This defied expectations among some investors that the economy would fall short. This outcome aligns with earlier discussions that China remained within reach of its growth target despite slowing momentum. That said, the outlook ahead remains challenging. December’s monthly data painted a mixed picture, with declines in fixed asset investment accelerating and retail sales growth cooling further, even as industrial production growth remained relatively resilient.

260119T1.jpg

On China’s external developments, another high-profile outcome followed Canadian Prime Minister Carney’s visit to Beijing. Canada and China unveiled a trade deal lowering tariffs on Canada’s imports of 49,000 Chinese EVs to 6.1% from 100%, in exchange for China easing tariffs on Canadian agricultural products. Carney remarked that China is now a “more predictable” trading partner than the US and that “a new world order” is taking hold. These comments likely reflect longstanding trade frictions between the US and Canada, as US President Trump has sought to renegotiate what he views as unfair trade arrangements. The new Canada–China agreement is also expected to catalyse significant Chinese joint-venture investment in Canada over the coming years. The move marks a notable shift for Canada, which has traditionally been an exceptionally close partner of the US, not only economically (chart 2). That Ottawa has inked a trade deal with Beijing while US–China tensions remain elevated represents a clear break from its previous stance and has, unsurprisingly, drawn criticism from Washington.

260119T2.jpg

**US semiconductor tariffs**
Turning to US-originated developments, President Trump signed a proclamation last week imposing a 25% tariff on certain advanced computing chips, including Nvidia’s H200 and AMD’s MI325X. The tariff will not apply to chips imported to support the buildout of the US tech supply chain or to strengthen domestic manufacturing capacity for semiconductor derivatives. The move stops short of a blanket tariff on all AI chips and semiconductor imports, easing—at least for now—initial investor concerns and likely explaining the market’s relatively muted reaction to the announcement (chart 3). A broader tariff would have had far more severe implications, given the  US economy’s substantial imports of semiconductor goods. In the case of Nvidia’s H200—designed to comply with US export restrictions and primarily targeted at the Chinese market—the tariff appears intended to capture a 25% levy before the chips are shipped onward to China. That said, China’s demand response remains uncertain, particularly as the H200 is reportedly banned in China.

260119T3.jpg

Not long after the tariff announcement, the US and Taiwan — the largest source of US semiconductor imports, as shown in chart 4 — were reported to have reached a trade deal. Under the agreement, Taiwanese chipmakers such as TSMC that expand production in the US will face lower tariffs on semiconductors and related manufacturing equipment, with duty-free treatment applying to some imports. In addition, tariffs on most other Taiwanese exports to the US will be reduced to 15% from 20%. In return, Taiwanese companies will invest $250 billion in the US, including an expanded manufacturing footprint by TSMC in Arizona, aimed at boosting domestic production of semiconductors, energy, and AI. As illustrated in chart 4, Taiwan already dominates US semiconductor imports, with its share having risen sharply in recent years and far outstripping contributions from other major suppliers such as Southeast Asian economies and South Korea.

260119T4.gif

**Japan snap elections**
Turning to Japan, the country is drumming up for an anticipated February Lower House snap election as Prime Minister Takaichi looks poised to capitalize on her strong approval ratings to secure a firmer parliamentary footing. In reaction, opposition parties have already started galvanizing for the expected upcoming electoral fight, with the opposition Constitutional Democratic Party (CDP) and the ruling party’s former coalition partner, Komeito, having announced a plan to form a new Centrist Reform Alliance (CRA) to fight the current ruling bloc. Given this interim bout of uncertainty, there is now some doubt cast on whether Japan’s budget this year can be debated robustly and passed in time by April 2026 (when the new fiscal year starts), especially if the Lower House gets dissolved soon, meaning less parliamentary time will be available for the purpose. Tracking such developments, the yen had extended its recent slide, whilst Japanese yields have firmed further (chart 5).

260119T5.jpg

**South Korea**
Lastly, we turn to South Korea, where President Lee has embarked on visits to China and Japan that point to a warming of regional ties. In China, Lee’s meeting with President Xi yielded agreements to restore strategic dialogue channels and deepen cooperation in areas such as critical minerals, with Lee calling for a “full restoration” of bilateral relations. In Japan, his visit similarly signalled a thaw in ties following previous periods of tension. Overall, South Korea appears to be seeking closer relations with its two major Asian neighbours even as China–Japan tensions remain elevated. Domestically, however, while the semiconductor sector has benefited from the AI-driven upswing, South Korea continues to face challenges such as elevated house prices and high household debt. These factors have constrained the scope for further monetary policy easing (chart 6).

260119T6.jpg

Asia

Economic Letter from Asia: Shifting Gears

Winnie Tapasanun

260116R23.jpg

260116S23.jpg

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

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

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

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

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

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

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

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

260116T23.jpg

260116U23.jpg

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

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

260116E.jpg

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

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

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

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

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

260115Z5.jpg

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

260115Z6.jpg

The global backdrop remains unsettled, reflected in rising gold prices amid geopolitical tensions—most recently around Venezuela—and renewed political noise, including questions over Federal Reserve independence. At the same time, however, many major equity indices remain at or close to all-time highs, buoyed by optimism around AI and reinforced by a run of relatively benign US inflation readings. Against this mixed backdrop, the charts this week point to a global outlook that is becoming more differentiated rather than uniformly weaker. Blue Chip forecasts for 2026 growth have edged higher over the past six months, with upgrades concentrated in economies most exposed to the AI investment cycle, notably the US and parts of Asia (chart 1). Central bank expectations remain fluid: while panelists broadly anticipate easing by the Fed and Bank of England, conviction around timing is limited, and the Bank of Japan remains an outlier with further tightening still expected (chart 2). In the UK, that uncertainty sits alongside a deteriorating data flow, with negative economic surprises increasingly tilting market expectations toward an earlier BoE rate cut (chart 3). Turning to the US, special questions highlight a divide over whether AI is already having a noticeable macro impact or whether its effects will emerge more gradually, a tension that mirrors concerns about over-optimism in financial markets (chart4). That debate is echoed in the recent pick-up in US productivity growth and the step-change in business formation—developments that may reflect AI-related dynamics but which also warrant caution given the historically cyclical nature of productivity (chart 5). Finally, China’s trade data point to a continued re-orientation of export growth away from the US and toward Europe and ASEAN, consistent with evolving US trade policy and broader supply-chain realignment (chart 6).

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

Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

260115J.jpg

260115K.jpg

The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October to include with the November report. The charts above have a gap in October, and the November figures are represented by a small dot.

Import prices have been remarkably stable in the past three years, as shown by the sideways movement in the level of the import price index (left chart). Focusing on percent changes (i.e. inflation rates) rather than the level of the index shows deflation in 2023 and early 2024 followed by higher prices more recently (right chart). Still, the net change in the past 12 months has totaled only 0.1% and the cumulative change in the past three years amounted to a decline of 0.4%.

A calm environment in the energy sector has helped to restrain import prices, as the price of crude oil showed little change in 2023 and 2024 and declined in 2025. Import prices excluding petroleum products have increased in recent years, but the changes have been modest: 0.9 in the past 12 months and 1.3% in the past three years.

The non-oil components of import prices have traced various patterns in recent years, but shifts have been largely offsetting. Prices of food and autos increased noticeably in 2023 and 2024, but they gave back much of those increases in 2025. Prices of capital goods were stable in 2023 and 2024, but they started to increase in 2025. Prices of consumer goods have been volatile, showing bursts of higher prices followed by discounting, leaving a modest net increase in the past three years.

The calm energy environment also seemed to play a role on the export side, as the industrial supply category showed little net change in prices over 2023 and 2024 before jumping in early 2025. Food prices followed a similar pattern, showing two years of restraint before moving higher in 2025. These two categories account for much of the upward movement in overall export prices in 2025. Prices of consumer goods also started to move higher in 2025 after little net change in the prior two years. Prices of capital goods and automobiles have traced reasonably steady upward paths.

Many observers might try to use the import component of this report to gain insight into the effect of tariffs on prices. That will be difficult because the figures from this report are pre-tariff; there will be no independent upward pressure on prices in this report because of tariffs. In fact, one should look for lower import prices in searching for a tariff effect. That is, if a foreign exporter were to absorb the tariff burden, that would be accomplished by reducing the pre-tariff price in order to keep the after-tariff price steady.

260115L.jpg

Some exporters to the US may have made such efforts. The nearby chart shows the month-to-month change in import prices in 2025, and May and June both showed lower prices. These months were especially important because they followed the announcement by President Trump of marked increases in tariffs in April. Also, some of the downward pressure occurred in components that would be sensitive to price (autos and consumer goods). Of course, May and June might be too soon after the announcement of draconian tariffs for foreign exporters to assess and change their pricing strategy.

The chart on monthly changes ends in September because the absence of an October reading prevents the calculation of the month-to-month changes for October and November. However, the two-month change from September to November is easily calculated, and the increase of 0.4% suggests little or no effort to absorb the burden of tariffs.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

- Import prices have changed little in the past three years.
- Export prices were stable in 2023-24, but moved higher in 2025.

Economy in Brief

Jump to:

FOMC Leaves Rates Unchanged

U.S. GDP Declines 6.1% In 1Q As Inventory Cutbacks Weigh Heavily

U.S. GDP Declines 6.1% In 1Q As Inventory Cutbacks Weigh Heavily

Japan Retail Sales Continue to Drop

More Retailers in the U.K. Report Increases in Sales versus a Year Ago than Those Reporting Decreases

South Korea's GDP Increases in Q1 09, but is Still at Recession Levels

U.S. Chain Store Sales Firm During April

Gasoline Prices Continue To Hover Just Over $2.00 Per Gallon