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/090417e.jpg" align="left" border="0" height="265" width="353">
Trends are getting worse.
The EMU trade deficit improved in February on a tiny rise in exports as
imports continued to drop. Even though both exports and imports put in
an &#8216;improved performance&#8217; in February compared to January the trends in
trade for exports and imports are still deteriorating and nearly in
step. Export and import annual growth rates are accelerating in a
downward direction as three-month growth rates show faster decline than
six-month rates and six-month growth rates are declining faster than
the 12-month rates. The pace of decline over three months for both
exports and imports is over 40%. It is far from clear that the
abatement in the pace of decline for exports and imports in February is
for real. It may simply be a partial recovery from the deep decline in
January.
A balanced blow. The chart shows how rapidly trade
flows decelerated after September of last year. But that impact was
BALANCED, hitting exports and imports nearly equally. Deficit
deterioration had already reached its then-worst level in July of 2008.
The slowdown is global in nature; it has hit growth within the e-Zone
as well as outside of it more or less equally. Trade trends show that.
The monthly growth rates show a hint of slowing. The year/year rates of
growth have improved, but the sequential growth rates are still
deteriorating for both exports and imports. It will take a few more
months to see if we have reached low enough levels that export and
imports can begin to build a base for improved future growth.
No improvement in the fundamentals. Certainly there are no economic signs
yet that point to improvement. PMI surveys have made very modest
improvements from their worst levels but even they continue to signal
contraction. Industrial production and orders continue to show sharp
deterioration. Unemployment is still rising. Retail spending remains
weak. There is no grass-roots European growth. European fiscal plans
have been less ambitious than in the US . So, there is little basis for
optimism. For now we are left to watch the trends in the trade flows
themselves. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">E- Area 16-Trade trends for goods
</th></tr>
</thead>
<tbody>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; (3,961)</td>
<td>&#8364;&#8364; (5,356)</td>
<td>&#8364;&#8364; (3,507)</td>
<td>&#8364;&#8364; (3,265)</td>
<td>&#8364;&#8364; 1,010</td>
<td>&#8364;&#8364; (1,119)</td>
</tr>
<tr class="grey3">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; All Exp</td>
<td>0.5%</td>
<td>-11.9%</td>
<td>-44.3%</td>
<td>-37.6%</td>
<td>-23.3%</td>
<td>9.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Food and Drinks</td>
<td>-2.9%</td>
<td>-5.2%</td>
<td>-28.1%</td>
<td>-19.4%</td>
<td>-13.8%</td>
<td>13.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Raw materials</td>
<td>-2.8%</td>
<td>-6.9%</td>
<td>-34.3%</td>
<td>-53.1%</td>
<td>-33.8%</td>
<td>18.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Other</td>
<td>0.8%</td>
<td>-12.5%</td>
<td>-45.6%</td>
<td>-38.4%</td>
<td>-23.7%</td>
<td>9.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>0.7%</td>
<td>-12.9%</td>
<td>-42.6%</td>
<td>-37.6%</td>
<td>-25.2%</td>
<td>7.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; All IMP</td>
<td>-0.8%</td>
<td>-8.3%</td>
<td>-43.9%</td>
<td>-36.9%</td>
<td>-19.8%</td>
<td>8.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Food and Drinks</td>
<td>-0.2%</td>
<td>-5.7%</td>
<td>-18.8%</td>
<td>-17.3%</td>
<td>-9.6%</td>
<td>8.4%&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Raw materials</td>
<td>-5.3%</td>
<td>-26.2%</td>
<td>-81.1%</td>
<td>-60.8%</td>
<td>-35.1%</td>
<td>1.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Other</td>
<td>-0.7%</td>
<td>-7.4%</td>
<td>-42.3%</td>
<td>-36.6%</td>
<td>-19.7%</td>
<td>9.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-3.5%</td>
<td>-6.1%</td>
<td>-42.0%</td>
<td>-33.6%</td>
<td>-20.3%</td>
<td>-0.5%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">*Eur mlns; mo or period average</td>
</tr>
</tbody>
</table>
</body></html>

Trends are getting worse. The EMU trade deficit improved in February on a tiny rise in exports as imports continued to drop. Even though both exports and imports put in an ‘improved performance’ in February compared to January the [...]

EMU Trade Deficit Improves But Picture Does Not

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/090417c.jpg" width="353">
The manufacturing sector will remain distressed. That is the message reported yesterday in the Manufacturers Alliance/MAPI survey of the factory sector. Their composite index of activity fell to a record low level as it dropped to 21 from 28 in 4Q08. Both these readings were down substantially from early last year when the index stood at 57. (The figures are diffusion indexes thus any level below 50 indicates declining activity.)
The component series measuring prospective shipments fell to a record low level of 5 as only 2 percent of survey respondents expected shipments to rise. That low reading was backed up by a record low level of the orders index. It fell to 4 as only 2 percent of respondents expected higher orders. And the low level of activity is drawing down the level of order backlogs. As the index fell to a record low reading of 14 it reflected only 8 percent of respondents reporting higher unfilled orders but 80 percent reporting a lower level.
Lower factory sector activity has weighed heavily on profitability. Fully 75 percent of respondents indicated that profit margins fell versus early last year while just 13 percent reported a higher reading. The overall diffusion index fell to a low 19, or one-third the level of last year, as business activity has fallen faster than costs. And lower profits weighed heavily capital spending. Fully 79 percent of respondents cut spending while just 8 percent raised it versus one year ago. The index of R&amp;D spending similarly fell to a record low.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090417d.jpg" width="353">
The MAPI data is not seasonally adjusted and the diffusion indexes measure activity in the current quarter versus the same quarter one year earlier. The component weights in the composite are given below in parentheses. The data can be found in Haver&#39;s SURVEYS database.
After the Crisis is yesterday&#39;s speech by Dennis P. Lockhart, President and Chief Executive Officer, Federal Reserve Bank of Atlanta and it can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=AF96FA39-5056-9F12-12BC9C84CF8DC2AF&amp;method=display">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">Manufacturers Alliance/MAPI Survey</a> (NSA)</th>
<th scope="col">1Q 2009</th>
<th scope="col">4Q 2008</th>
<th scope="col">1Q 2008</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">Composite Business Index</td>
<td>21</td>
<td>28</td>
<td>57</td>
<td>46</td>
<td>63</td>
<td>66</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Prospective Shipments (0.4)</td>
<td>5</td>
<td>14</td>
<td>62</td>
<td>44</td>
<td>75</td>
<td>77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Backlogs Index (0.2)</td>
<td>14</td>
<td>21</td>
<td>21</td>
<td>46</td>
<td>66</td>
<td>70</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Inventories Index (0.2)</td>
<td>37</td>
<td>50</td>
<td>54</td>
<td>58</td>
<td>69</td>
<td>70</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Profit Margin Index (0.2</td>
<td>19</td>
<td>43</td>
<td>60</td>
<td>53</td>
<td>67</td>
<td>73</td>
</tr>
</tbody>
</table>
</body>
</html>

The manufacturing sector will remain distressed. That is the message reported yesterday in the Manufacturers Alliance/MAPI survey of the factory sector. Their composite index of activity fell to a record low level as it dropped to 21 [...]

MAPI Survey Indicates Deepening Stress in the Factory Sector

<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/090417a.jpg" width="353">
Despite higher unemployment, the University of Michigan indicated that its mid-April reading of consumer sentiment rose for a second consecutive month. In fact, the index level of 61.9 was its highest since September of last year. The improvement, however, has been just creeping. The rise from last year&#39;s low leaves it still down 20.7% from early 2008 and down by 36.1% from early 2007.
The expectations component of consumer sentiment showed the largest improvement this month with a 10.1% rise on top of the 5.9% March improvement. Expectations for business conditions during the next five years moved up by 19.0% m/m to the highest level since September (+5.6% y/y). Expected conditions during the next year rose a lesser 9.1% though the reading was a sharply from that of last spring. Finally, the higher stock market lifted the expected change in personal finances. The reading made up declines early this year with a 7.7% increase.
The current economic conditions index made up the declines of the prior two months with a 5.2% rise. Buying conditions for large household goods recouped the declines of earlier this year while the view of current personal finances remained unchanged m/m, down by one-half from early 2007.
The opinion of government policy, which may eventually influence economic expectations, slipped m/m but remained near the highest level since January of 2007. Twenty percent of respondents thought that a good job was being done by government, up from the four percent low of last December, while a much reduced thirty percent thought that a poor job was being done.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090417b.jpg" width="353">
Probably reflecting the recent rise in oil prices, inflation expectations for the next year rose to 3.4% though they were as high as 7.0% last May. The median expected increase rose to 3.0% from 2.0%. The range of expectations is from slight price deflation to a 5.2% increase in prices. The expected inflation rate during the next five years reversed slipped to 2.8%.
The University of Michigan survey data is not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database with details in the proprietary UMSCA database. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April 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">Consumer Sentiment</td>
<td>61.9</td>
<td>57.3</td>
<td>56.3</td>
<td>-1.1%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>66.6</td>
<td>63.3</td>
<td>65.5</td>
<td>-13.5</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>58.9</td>
<td>53.5</td>
<td>50.5</td>
<td>10.5</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Despite higher unemployment, the University of Michigan indicated that its mid-April reading of consumer sentiment rose for a second consecutive month. In fact, the index level of 61.9 was its highest since September of last year. The [...]

Michigan Consumer Sentiment Improves Again

<!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/090417c.jpg" align="left" border="0">
The manufacturing sector will remain distressed. That is the
message reported yesterday in the Manufacturers Alliance/MAPI survey of
the factory sector. Their composite index of activity fell to a record
low level as it dropped to 21 from 28 in 4Q08. Both these readings were
down substantially from early last year when the index stood at 57.
(The figures are diffusion indexes thus any level below 50 indicates
declining activity.)
The component series measuring prospective shipments fell to a
record low level of 5 as only 2 percent of survey respondents expected
shipments to rise. That low reading was backed up by a record low level
of the orders index. It fell to 4 as only 2 percent of respondents
expected higher orders. And the low level of activity is drawing down
the level of order backlogs. As the index fell to a record low reading
of 14 it reflected only 8 percent of respondents reporting higher
unfilled orders but 80 percent reporting a lower level.
Lower factory sector activity has weighed heavily on
profitability. Fully 75 percent of respondents indicated that profit
margins fell versus early last year while just 13 percent reported a
higher reading. The overall diffusion index fell to a low 19, or
one-third the level of last year, as business activity has fallen
faster than costs. And lower profits weighed heavily capital spending.
Fully 79 percent of respondents cut spending while just 8 percent
raised it versus one year ago. The index of R&amp;D spending
similarly fell to a record low.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090417d.jpg" align="right" border="0">
The MAPI data is not seasonally adjusted and the diffusion
indexes measure activity in the current quarter versus the same quarter
one year earlier. The component weights in the composite are given
below in parentheses. The data can be found in Haver's SURVEYS
database.
After the Crisis
is yesterday's speech by Dennis P. Lockhart, President and
Chief Executive Officer, Federal Reserve Bank of Atlanta and it can be
found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=AF96FA39-5056-9F12-12BC9C84CF8DC2AF&amp;method=display">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">Manufacturers
Alliance/MAPI Survey</a> (NSA)</th>
<th scope="col">1Q 2009</th>
<th scope="col">4Q 2008</th>
<th scope="col">1Q 2008</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">Composite Business Index</td>
<td>21</td>
<td>28</td>
<td>57</td>
<td>46</td>
<td>63</td>
<td>66</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Prospective Shipments (0.4)</td>
<td>5</td>
<td>14</td>
<td>62</td>
<td>44</td>
<td>75</td>
<td>77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Backlogs
Index (0.2)</td>
<td>14</td>
<td>21</td>
<td>21</td>
<td>46</td>
<td>66</td>
<td>70</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Inventories Index (0.2)</td>
<td>37</td>
<td>50</td>
<td>54</td>
<td>58</td>
<td>69</td>
<td>70</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Profit
Margin Index (0.2</td>
<td>19</td>
<td>43</td>
<td>60</td>
<td>53</td>
<td>67</td>
<td>73</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Improves Again 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 17, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090417a.jpg" align="left" border="0">
Despite higher unemployment, the University of Michigan
indicated that its mid-April reading of consumer sentiment rose for a
second consecutive month. In fact, the index level of 61.9 was its
highest since September of last year. The improvement, however, has
been just creeping. The rise from last year's low leaves it still down
20.7% from early 2008 and down by 36.1% from early 2007.
The expectations component of consumer sentiment showed the
largest improvement this month with a 10.1% rise on top of the 5.9%
March improvement. Expectations for business conditions during the next
five years moved up by 19.0% m/m to the highest level since September
(+5.6% y/y). Expected conditions during the next year rose a lesser
9.1% though the reading was a sharply from that of last spring.
Finally, the higher stock market lifted the expected change in personal
finances. The reading made up declines early this year with a 7.7%
increase.
The current economic conditions index made up the declines of
the prior two months with a 5.2% rise. Buying conditions for large
household goods recouped the declines of earlier this year while the
view of current personal finances remained unchanged m/m, down by
one-half from early 2007.
The opinion of government policy, which may eventually
influence economic expectations, slipped m/m but remained near the
highest level since January of 2007. Twenty percent of respondents
thought that a good job was being done by government, up from the four
percent low of last December, while a much reduced thirty percent
thought that a poor job was being done.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090417b.jpg" align="right" border="0">
Probably reflecting the recent rise in oil prices, inflation
expectations for the next year rose to 3.4% though they were as high as
7.0% last May. The median expected increase rose to 3.0% from 2.0%. The
range of expectations is from slight price deflation to a 5.2% increase
in prices. The expected inflation rate during the next five years
reversed slipped to 2.8%.
The University of Michigan survey data is not seasonally
adjusted. The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database
with details in the proprietary UMSCA database. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">Mid-April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April 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">Consumer Sentiment</td>
<td>61.9</td>
<td>57.3</td>
<td>56.3</td>
<td>-1.1%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>66.6</td>
<td>63.3</td>
<td>65.5</td>
<td>-13.5</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>58.9</td>
<td>53.5</td>
<td>50.5</td>
<td>10.5</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
EMU Trade Deficit Improves But
Picture Does Not&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 17, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090417e.jpg" align="left" border="0" height="265" width="353">
Trends are getting worse.
The EMU trade deficit improved in February on a tiny rise in exports as
imports continued to drop. Even though both exports and imports put in
an &#8216;improved performance&#8217; in February compared to January the trends in
trade for exports and imports are still deteriorating and nearly in
step. Export and import annual growth rates are accelerating in a
downward direction as three-month growth rates show faster decline than
six-month rates and six-month growth rates are declining faster than
the 12-month rates. The pace of decline over three months for both
exports and imports is over 40%. It is far from clear that the
abatement in the pace of decline for exports and imports in February is
for real. It may simply be a partial recovery from the deep decline in
January.
A balanced blow. The chart shows how rapidly trade
flows decelerated after September of last year. But that impact was
BALANCED, hitting exports and imports nearly equally. Deficit
deterioration had already reached its then-worst level in July of 2008.
The slowdown is global in nature; it has hit growth within the e-Zone
as well as outside of it more or less equally. Trade trends show that.
The monthly growth rates show a hint of slowing. The year/year rates of
growth have improved, but the sequential growth rates are still
deteriorating for both exports and imports. It will take a few more
months to see if we have reached low enough levels that export and
imports can begin to build a base for improved future growth.
No improvement in the fundamentals. Certainly there are no economic signs
yet that point to improvement. PMI surveys have made very modest
improvements from their worst levels but even they continue to signal
contraction. Industrial production and orders continue to show sharp
deterioration. Unemployment is still rising. Retail spending remains
weak. There is no grass-roots European growth. European fiscal plans
have been less ambitious than in the US . So, there is little basis for
optimism. For now we are left to watch the trends in the trade flows
themselves. 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">E- Area
16-Trade trends for goods
</th>
</tr>
</thead>
<tbody>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; (3,961)</td>
<td>&#8364;&#8364; (5,356)</td>
<td>&#8364;&#8364; (3,507)</td>
<td>&#8364;&#8364; (3,265)</td>
<td>&#8364;&#8364; 1,010</td>
<td>&#8364;&#8364; (1,119)</td>
</tr>
<tr class="grey3">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; All Exp</td>
<td>0.5%</td>
<td>-11.9%</td>
<td>-44.3%</td>
<td>-37.6%</td>
<td>-23.3%</td>
<td>9.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Food and Drinks</td>
<td>-2.9%</td>
<td>-5.2%</td>
<td>-28.1%</td>
<td>-19.4%</td>
<td>-13.8%</td>
<td>13.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Raw materials</td>
<td>-2.8%</td>
<td>-6.9%</td>
<td>-34.3%</td>
<td>-53.1%</td>
<td>-33.8%</td>
<td>18.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Other</td>
<td>0.8%</td>
<td>-12.5%</td>
<td>-45.6%</td>
<td>-38.4%</td>
<td>-23.7%</td>
<td>9.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>0.7%</td>
<td>-12.9%</td>
<td>-42.6%</td>
<td>-37.6%</td>
<td>-25.2%</td>
<td>7.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; All IMP</td>
<td>-0.8%</td>
<td>-8.3%</td>
<td>-43.9%</td>
<td>-36.9%</td>
<td>-19.8%</td>
<td>8.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Food and Drinks</td>
<td>-0.2%</td>
<td>-5.7%</td>
<td>-18.8%</td>
<td>-17.3%</td>
<td>-9.6%</td>
<td>8.4%&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Raw materials</td>
<td>-5.3%</td>
<td>-26.2%</td>
<td>-81.1%</td>
<td>-60.8%</td>
<td>-35.1%</td>
<td>1.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Other</td>
<td>-0.7%</td>
<td>-7.4%</td>
<td>-42.3%</td>
<td>-36.6%</td>
<td>-19.7%</td>
<td>9.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-3.5%</td>
<td>-6.1%</td>
<td>-42.0%</td>
<td>-33.6%</td>
<td>-20.3%</td>
<td>-0.5%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">*Eur mlns; mo or period average</td>
</tr>
</tbody>
</table>
</body></html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090416f.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated that economic activity in the region continued to contract during April. The Index of General Business conditions in the manufacturing sector came in at -24.4 versus a reading of -35.0 last month and a low of -41.3 in February. The latest beat expectations for a reading of -32
Though the latest figure remained negative it may indicate that the decline in economic activity is moderating. During the last ten years there has been a 70% 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 64% 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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090416g.jpg" width="353">
Amongst the sub-indexes the new orders component improved to the highest level since January as 19.8% of respondents reported higher orders. That was double the March low. The index of unfilled orders also rose to its highest since last September. Still under pressure, however, was the employment index which improved just slightly from the March record low. Forty-five percent of respondents expected to reduce employment levels, while only 0.2% 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.
The prices paid index at -31.5 was near the record low. Five percent of respondents planned to raise prices while thirty six percent expected to lower them. During the last ten years there has been a 73% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 82% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months improved its highest level since late 2007. The expectations index for new orders and shipments surged but expectations index for employment improved just moderately.
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/bos0409.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">Philadelphia Fed (%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April&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>-24.4</td>
<td>-35.0</td>
<td>-21.1</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-31.5</td>
<td>&nbsp;-31.3</td>
<td>&nbsp;53.8</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 April. The Index of General Business conditions in the manufacturing sector came in at -24.4 versus a reading of -35.0 [...]

Philadelphia Fed Index Indicates Further Economic Contraction; Rate of Decline Diminishing While Expectations Up Sharply

<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/090416d.jpg" width="353">
Initial claims for unemployment insurance gave another indication that the worst of the labor market&#39;s deterioration is moderating. The level of 610,000 claims last week was down from an upwardly revised 663,000 and it was the second consecutive weekly fall. Consensus expectations for 660,000 claims.
The Labor Department indicated that the largest increases in initial claims for the week ending April 4 were in Michigan (+5,408), Missouri (+4,986), Texas (+3,734), New Jersey (+2,368), and Pennsylvania (+2,194), while the largest decreases were in California (-4,708), Ohio (-2,716), Alabama (-2,421), Florida (-1,539), and Wisconsin (-1,078).
Continuing claims for unemployment insurance reached yet another record high of 6,022,000 and now they have more than doubled the year ago level. The series dates back to 1966. The four-week average of continuing claims also rose to another record of 5,796,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090416e.jpg" width="353">
Though the latest level of continuing claims was a record, the labor force has grown as well, by nearly 30% over the last twenty years. Therefore, the insured rate of unemployment is not at a record high. It rose slightly to 4.5% which was the highest since 1983. During the last ten years there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.
The 4.4% insured unemployment rate by far understates labor market distress in some states. The highest insured unemployment rates in the week ending March 28 were in Michigan (8.0 percent), Oregon (7.9), Rhode Island (7.1), Idaho (7.0), Wisconsin (7.0), Pennsylvania (6.7), Nevada (6.2), Alaska (6.0), Montana (6.0), and Vermont (5.9).
Employment covered under the unemployment insurance program has risen sharply. The Labor Department indicated that 133.9 million workers were covered and that total amounts to 87% of the civilian labor force. The percentage has been roughly stable for the last ten years but it is up sharply from 60% to 65% in the mid-1970s.
The unemployment insurance claim data is available in Haver&#39;s WEEKLY database.
Recession or Depression? Part II from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/es/09/ES0919.pdf">here.</a>
What&#39;s Under The Tarp?, also from the St. Louis Fed, is available <a href="http://research.stlouisfed.org/publications/es/09/ES0920.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">04/11/09</th>
<th scope="col">04/04/09</th>
<th scope="col">03/28/09</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>610</td>
<td>663</td>
<td>674</td>
<td>65.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,022</td>
<td>5,850</td>
<td>102.4%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance gave another indication that the worst of the labor market's deterioration is moderating. The level of 610,000 claims last week was down from an upwardly revised 663,000 and it was the second [...]

U.S. Initial Claims for Unemployment Insurance Fall Back

<!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/090416c.jpg" align="left" border="0">
The chart above makes it clear that it is not the consumer
sector that is leading IP lower in Europe. Capital goods and
intermediate goods output are falling by 23% Year/Year compared to
consumer goods output that is down by just 7.7%. Over three months
capital goods output is declining at a 41% pace and intermediates goods
output is off at a 23% pace compared to minus 10% for consumer goods.
In the quarter to date the same sorts of caution hold sway as Q1 is
shaping up to be a terrible quarter for the industrial sector. Moreover
the rates of declines have sped up from 12-months to 6-months to three
months. Across countries German shows the a clear persisting pattern of
deceleration in industrial output. France and Spain see their growth
rates slowing the rate of decline over three months compared to six
months while Italy and the UK show flat growth rates in three months
compared to six months. 
 

Still there is scant goods in the Area&#8217;s industrial sector
this month. The preference is in step with ongoing declines in
industrial output in the US extraordinary weakness in Japan and in
China; China has posted another drop in exports (fifth monthly drop in
a row) and registered its slowest growth rate in about a decade. The
pull back is global and it is still pulling back. It may be slowing but
not even that is clear. 
 
 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> E-Area MFG IP
</th></tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"> Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol"> E-Area Detail</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>Dec 08</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td> Q-1</td>
</tr>
<tr class="even">
<td class="firstcol">MFG</td>
<td>-2.4%</td>
<td>-3.2%</td>
<td>-3.3%</td>
<td>-30.3%</td>
<td>-31.7%</td>
<td>-28.4%</td>
<td>-24.7%</td>
<td>-19.6%</td>
<td>-17.5%</td>
<td> -30.9%</td>
</tr>
<tr class="even">
<td class="firstcol">Consumer</td>
<td>-1.6%</td>
<td>-0.8%</td>
<td>-0.3%</td>
<td>-10.4%</td>
<td>-7.4%</td>
<td>-9.2%</td>
<td>-6.9%</td>
<td>-7.7%</td>
<td>-6.2%</td>
<td> -9.6%</td>
</tr>
<tr class="even">
<td class="firstcol">C-Durables</td>
<td>-4.3%</td>
<td>-1.8%</td>
<td>-2.5%</td>
<td>-29.4%</td>
<td>-28.8%</td>
<td>-28.5%</td>
<td>-21.3%</td>
<td>-21.2%</td>
<td>-16.9%</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">C-Non-durables</td>
<td>-1.4%</td>
<td>-0.7%</td>
<td>-0.1%</td>
<td>-8.3%</td>
<td>-4.8%</td>
<td>-6.3%</td>
<td>-4.5%</td>
<td>-5.9%</td>
<td>-4.5%</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Intermediate</td>
<td>-2.4%</td>
<td>-1.0%</td>
<td>-6.4%</td>
<td>-32.9%</td>
<td>-37.3%</td>
<td>-34.0%</td>
<td>-30.6%</td>
<td>-23.4%</td>
<td>-21.3%</td>
<td> -32.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Capital</td>
<td>-3.0%</td>
<td>-7.0%</td>
<td>-2.9%</td>
<td>-41.0%</td>
<td>-41.5%</td>
<td>-35.8%</td>
<td>-30.4%</td>
<td>-23.9%</td>
<td>-21.5%</td>
<td> -43.3%</td>
</tr>
<tr>
<td colspan="11" class="firstcol">Main E-Area Countries and
UK IP in MFG</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Only</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>Dec 08</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-2- Date</td>
</tr>
<tr class="even">
<td class="firstcol">Germany:</td>
<td>-3.4%</td>
<td>-7.3%</td>
<td>-4.8%</td>
<td>-47.3%</td>
<td>-48.9%</td>
<td>-39.3%</td>
<td>-32.0%</td>
<td>-22.5%</td>
<td>-19.6%</td>
<td> -49.1%</td>
</tr>
<tr class="even">
<td class="firstcol">France: IPxConstruct'n</td>
<td>-0.5%</td>
<td>-3.9%</td>
<td>-1.6%</td>
<td>-21.5%</td>
<td>-28.7%</td>
<td>-24.7%</td>
<td>-22.9%</td>
<td>-15.5%</td>
<td>-14.5%</td>
<td> -25.9%</td>
</tr>
<tr class="even">
<td class="firstcol">Italy</td>
<td>-4.0%</td>
<td>-1.1%</td>
<td>-4.2%</td>
<td>-31.6%</td>
<td>-28.6%</td>
<td>-31.1%</td>
<td>-24.8%</td>
<td>-20.3%</td>
<td>-16.8%</td>
<td> -28.6%</td>
</tr>
<tr class="even">
<td class="firstcol">Spain</td>
<td>1.5%</td>
<td>-7.9%</td>
<td>1.4%</td>
<td>-19.5%</td>
<td>-46.6%</td>
<td>-24.6%</td>
<td>-40.3%</td>
<td>-24.0%</td>
<td>-24.6%</td>
<td> -37.0%</td>
</tr>
<tr class="even">
<td class="firstcol">UK: EU member</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-1.9%</td>
<td>-20.7%</td>
<td>-27.4%</td>
<td>-20.4%</td>
<td>-20.2%</td>
<td>-13.8%</td>
<td>-13.0%</td>
<td> -24.2%</td>
</tr>
</tbody>
</table>
</body></html>

The chart above makes it clear that it is not the consumer sector that is leading IP lower in Europe. Capital goods and intermediate goods output are falling by 23% Year/Year compared to consumer goods output that is down by just [...]

E-Area IP Plunges

<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/090416a.jpg" width="353">
The breather in the housing market downturn proved short-lived as housing starts fell to the second lowest level on record. The Commerce Department indicated that total housing starts in March reversed nearly all of their February gain and fell 10.8% to 510,000. The February level was revised down slightly and the latest figure compares to Consensus expectations for 550,000 starts.
The reversal occurred as starts of multi-family homes fell 29.0% to 152,000 after a downwardly revised 62.1% February increase. The latest levels are the lowest since the early 1990s.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090416b.jpg" width="353">
Despite these latest declines, a bottom in the housing market seems to be forming. Starts of single-family homes were unchanged last month at 358,000 after a slight uptick in February. Nevertheless, they remained near the record low for the series which dates back to 1959. The latest level is down eighty percent since the peak in early 2006. During the last ten years, there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.
By region, starts of single-family units in the Northeast roughly repeated their February gain and rose 30.6% (-29.9% y/y). Starts in the Midwest ticked up a lesser 3.6% (-47.2% y/y) after their sharp 17.0% February recovery but in the South, single-family starts were quite weak. They fell to a new record low (-49.7% y/y). In the West, starts also were depressed as their 3.3% uptick (-59.6% y/y) followed a 25.6% February decline. Starts here have fallen 87.3% from their 2005 peak.
The latest figures covering permits to build single-family homes, a leading indicator of starts, also suggest that a bottom in housing activity may be forming. Though they fell 7.4% last month, that followed a 16.1% rise in February and permits roughly equal the December level.
The housing starts figures can be found in Haver&#39;s USECON database.
The Fed&#39;s latest Beige Book covering regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090415/fullreport20090415.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Housing Starts (000s, SAAR)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>510</td>
<td>572</td>
<td>488</td>
<td>-48.4%</td>
<td>903</td>
<td>1,341</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>358</td>
<td>358</td>
<td>356</td>
<td>-49.6</td>
<td>617</td>
<td>1,034</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>152</td>
<td>214</td>
<td>132</td>
<td>-45.1</td>
<td>286</td>
<td>307</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>513</td>
<td>564</td>
<td>531</td>
<td>-45.0</td>
<td>880</td>
<td>1,389</td>
<td>1,844</td>
</tr>
</tbody>
</table>
</body>
</html>

The breather in the housing market downturn proved short-lived as housing starts fell to the second lowest level on record. The Commerce Department indicated that total housing starts in March reversed nearly all of their February [...]

U.S. Housing Starts Fall to Second Lowest Level on Record But Bottom May Be Forming

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

260120E.jpg

The ZEW survey for January showed improvement all around with both economic expectations and macroeconomic conditions showing improvements in the United States, Germany, and the euro area.

The economic situation in January in the euro area improved to a reading of -18.1 from -28.5 in December. In Germany, the reading improved to -72.7 from -81 in December, while in the United States the reading improved to +17.7 from -0.6 in December. The message here clearly is the month-to-month improvement. Still, the January readings leave the assessments of conditions in these three areas as quite different. The percentile-queue standings place each one of these topical readings in their queue of data back to December 1992, expressing the standing in percentile terms. Viewed in this way, the euro area has a 57.2 percentile standing, the U.S. has nearly a 45-percentile standing, while Germany has a 22.6 percentile standing, leaving each of these areas in their own distinctive positions relative to their historic norms. The euro area has a firm and above-median ranking since the reading is above the 50th percentile (where the median is located). The U.S. is slightly weaker than that, with a reading that's marginally below its median. Germany has a reading between the lower quartile and the one-fifth mark of its historic data, branding it as weak.

Macroeconomic expectations find that Germany in January moved up to a positive reading of 59.6 from 45.8 in December. The U.S. also improved, moving up to -3 from -12 in December. The macro-expectations find Germany and the U.S. in very different places with German expectations in an 80.4 percentile of their queue, placing them in the top 20% while the U.S. has a 45-percentile standing, below its historic median and essentially the same relative position as its current situation ranking. In contrast, Germany has a weak current economic assessment versus a stronger expectations assessment.

Inflation expectations weaken across the board in January, with the euro area falling to -7.6 from -4.6 in December, Germany falling to -6.0 from -1.7 and the U.S. falling to 44.2 from 54.9. The ZEW experts see a disinflationary environment, and they see that despite the pickup in current conditions and improved macroeconomic expectations. Expectations in the U.S. have a 61.1 percentile standing; the German and the euro area readings are much weaker and closer together, with the German standing at its 31.2 percentile and the euro area at its 25.8 percentile.

On the back of these expectations, short-term interest rates in the euro area are less weak, with the January reading at -7.7, up from -10.8 in December. The U.S. has a -65.6 reading, stronger than Decembers -73.9. On a ranking basis, the euro area’s short-term rates have a 37.4 percentile standing The U.S. has a 9.3 percentile standing. The interest rate assessment is that short-term rates are going to be modest to lower over the outlook.

Long-term interest rates in Germany and the U.S. weaken slightly in January from December to 44.5 in January for Germany, compared to 49.2 in December, and in the U.S., there is a very modest ‘decimal point’ change to 44.1 in January from 44.9 in December. German long-term rates have a 58.8 percentile standing while the U.S. has rates at about a 50-percentile standing, placing them just about on top of their historic median. Neither one of these expectations has long-term expectations different from historic norms.

Stock market expectations from December to January, however, are little changed and mostly weaker, with the euro area gauge falling to 35.2 from 41.3 in December. The German gauge slips to 35.9 from 36.3 in December. The January gauge for the U.S. is ticking slightly higher to 31.5 January from 30.2 in December. The rankings for the January gauges show the U.S. above its median at a 59.3 percentile mark, the euro area slightly below its median with a 44.9 percentile reading; the German stock market still scores as the weakest at a 39.7 percentile standing.

260120.jpg

On balance, there are improvements expected in the macroeconomic realm as well as improvements detected in the current economic situation. Inflation is expected to remain tame; short-term interest rates are expected to continue declining, while long-term interest rates are going to be showing some pressure or in the case of the U.S. will continue to oscillate around current levels or firm slightly. Stock market conditions in the U.S. are modestly higher than their historic norms; however, the euro area stocks are in for modest weakness; German stocks weakened and are historically weak. Looking ahead, the thing to do is to watch the market metrics in particular to see how the recent U.S.-European rift over Greenland is going to play out in markets and how much it's going to affect expectations. That's the newest trend in play. How quickly they forget drug running boat sinkings, Maduro’s capture, threats on Iran, and cage rattling the Fed Chair. It’s all about Greenland now- at least for now, don’t blink!

ZEW Survey Shows Advancement All Around

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>

Economy in Brief

Jump to:

EMU Trade Deficit Improves But Picture Does Not

MAPI Survey Indicates Deepening Stress in the Factory Sector

Michigan Consumer Sentiment Improves Again

MAPI Survey Indicates Deepening Stress in the Factory Sector

Philadelphia Fed Index Indicates Further Economic Contraction; Rate of Decline Diminishing While Expectations Up Sharply

U.S. Initial Claims for Unemployment Insurance Fall Back

E-Area IP Plunges

U.S. Housing Starts Fall to Second Lowest Level on Record But Bottom May Be Forming