Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090423c.jpg" align="left" border="0">
The PMI&#8217;s for the zone are up sharply in April. At 36.33 the
MFG PMI is still in the lower 11 percentile of its range. The services
reading at 43.10 is in the lower 16 percentile of its range. These are
weak positions that speak of a continuing low level of economic
activity. But there is also some good news. 
 

In April the MFG PMI has made its largest jump since the
series began in June of 1997. The MFG index is up by 2.73 points in
April. Similarly the Services PMI has risen by 2.15 points and that is
the fourth largest jump m/m rise for services since Feb of 1999 when
that series started. 
 

The jump for services comes on the heels of a 1.17 point gain
in the index in March which was the eight largest rise at that time. So
services in Europe are making greater strides toward improvement in the
last few months. 
 

Of course the level of the two indices is still very low. Both
are below the break-even line of 50; both indices attest to the
continuing unraveling of economic activity in Europe. On top of that a
new poll by the German economic think-tanks projects a 6% drop in GDP
for the year ahead in that key e-Zone country. For the UK, Barclays CEO
has just prognosticated a deep and long downturn in the UK. In France
has a new domestic survey on business sentiment says that it has gained
some small ground. 
 

There are both scattered signs of improvement in Europe and at
the same time pessimistic assessments of where the economy is as well
as of where it is going over the rest of the year. It is not clear
which of these signals markets are going to latch onto. Still, it is
reassuring to see the down drafts slowing. The report of new industrial
orders out the e-Zone today is an example of this topsy-turvy news. EMU
orders took the largest Yr/Yr drop in their history today. Still the
series reported a one of its smallest month-to-month drops. So, even as
the year /year data confirm how bad the orders drop has become, there
is evidence that the declines are set to slow. The bottom line is that
Europe is probably worse off than many have been thinking- including
the authorities that have been reluctant to act aggressively and even
stiffed the US request to do more at the recently concluded G-20 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit
PMIs for the E-Zone</th>
</tr></thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Apr-09</td>
<td>36.66</td>
<td>43.10</td>
</tr>
<tr>
<td class="firstcol">Mar-09</td>
<td>33.93</td>
<td>40.95</td>
</tr>
<tr>
<td class="firstcol">Feb-09</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.42</td>
<td>42.16</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 3-Mo</td>
<td>33.97</td>
<td>41.10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 6-Mo</td>
<td>35.41</td>
<td>41.66</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 12-Mo</td>
<td>41.90</td>
<td>45.06</td>
</tr>
<tr class="odd">
<td colspan="3">127-Mo Range</td>
</tr>
<tr>
<td class="firstcol">&nbsp; High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Range</td>
<td>11.6%</td>
<td>16.7%</td>
</tr>
</tbody>
</table>
U.S. Continuing Claims for Jobless
Insurance Reach Another Record 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090423a.jpg" align="left" border="0">
The Bureau of Labor Statistics reported that job market stress
reached another record level and that some leading sign of improvement
is at best tentative. Continuing claims for unemployment insurance
increased to a record high of 6,137,000 are more than double
the year ago level. The series dates back to 1966. The
four-week average of continuing claims also rose to another record of
5,944,000. Continuing claims provide some indication of workers'
ability to find employment and they lag the initial claims figures by
one week.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090423b.jpg" align="right" border="0">
A leading sign of developments in the labor market tends to be
provided by initial claims for unemployment insurance. Though claims
rose last week to an expected 640,000 from a little revised 613,000
during the prior week, they have fallen during all of this month. The
average level of claims during April of 638,000 is down from 658,000
during March. However, the early timing of Easter may have played a
role in the decline as the seasonal factors raised the March level.
Nevertheless, claims remain near the ten-year high.
The latest claims data cover the survey week for April nonfarm
payrolls. Claims held roughly stable at 640,000 with 644,000 last
month. During the last ten years there has been an 86% correlation
between the level of initial claims and the change in nonfarm payrolls.
The Labor Department indicated that the largest increases in
initial claims for the week ending April 11 were in Florida (+9,303),
Pennsylvania (+7,538), California (+6,404), Wisconsin (+3,611), and New
York (+3,581), while the largest decreases were in Michigan (-12,566),
North Carolina (-6,428), Missouri (-5,575), Kentucky 
(-5,313), and Oregon (-4,580).
The insured rate of unemployment continued its upward march.
The latest level of 4.6% was double that of last April and the highest
level since 1983. During the last ten years there has been a 93%
correlation between the level of the insured unemployment rate and the
overall rate of unemployment published by the Bureau of Labor
Statistics.Clearly the figure understates labor market distress in some
states. The highest insured unemployment rates in the week ending April
4 were in Oregon (7.7 percent), Michigan (7.6), Idaho (6.8), Wisconsin
(6.7), Puerto Rico (6.6), Pennsylvania (6.3), Nevada (6.1), Rhode
Island (6.0), Vermont (5.9), and Montana (5.8).
The unemployment insurance claim data is available in Haver's WEEKLY
database.
Introduction to the New Keynesian Phillips Curve from
the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2008/fall/pdf/hornstein.pdf">here.</a>
The Phillips Curve and U.S. Macroeconomic Policy:
Snapshots, 1958-1996 also from the Federal Reserve Bank of
Richmond can be found <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2008/fall/pdf/king.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">04/18/09</th>
<th scope="col">04/11/09</th>
<th scope="col">04/04/09</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>640</td>
<td>613</td>
<td>660</td>
<td>81.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,137</td>
<td>6,044</td>
<td>109.5%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Slip
During March As Prices Firm 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090423d.jpg" align="left" border="0">
The lower price-higher sales story from the housing market
seemed to reverse last month, according to the National Association of
Realtors. Sales of existing homes fell 3.0% last
month to 4.57M and that reversed most of February' 4.9% gain. Consensus
expectations had been for March sales of 4.65M homes. Total sales
include sales of condos and co-ops. In each of the country's regions
sales during February roughly recovered their January declines.
<blockquote><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090423e.jpg" align="right" border="0">

Working the other way were median home prices
which rose 4.2% after an upwardly revised 2.1% increase. These gains
may reflect, however, the end of the winter doldrums. Prices have
fallen 23.5% since their peak. Declines in home prices and lower
interest rates have gone a long way to increase the affordability of an
existing home which is up roughly one-quarter from one year ago. The
measure rose in February to a record high for the series which dates
back to 1971.
</blockquote>

Sales of existing single-family homes alone also reversed most
of the earlier month's gain with a 2.8% m/m decline to 4.100M units.
Sales remained near the lowest level since July 1997 and they have been
essentially flat for the last four months. (These data have a longer
history than the total series).
The number of unsold homes (condos &amp; single-family) on
the market reversed a portion of their February increase with a 1.6%
decline. Year-to-year inventories are down 9.3%. At the current sales
rate there was a 9.8 months' supply on the market which was near the
lowest since 2007. For single-family homes the inventory also fell
slightly by 1.2% (-9.7% y/y). At the current sales rate there was a 9.3
month's supply, near the lowest since 2007.
The data on existing home sales, prices and affordability can
be found in Haver's USECON database. The regional
price, affordability and inventory data is available in the REALTOR
database.
Global Economy Contracts, With Slow Recovery Next
Year from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/RES042209A.htm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March y/y %</th>
<th scope="col">March '08</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>4,570</td>
<td>4,710</td>
<td>-7.1</td>
<td>4,920</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>690</td>
<td>750</td>
<td>-22.5</td>
<td>890</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>1,040</td>
<td>-11.1</td>
<td>1,170</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,710</td>
<td>1,740</td>
<td>-10.9</td>
<td>1,920</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,130</td>
<td>1,180</td>
<td>18.9</td>
<td>950</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,100</td>
<td>4,220</td>
<td>-5.7</td>
<td>4,350</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,200</td>
<td>168,200</td>
<td>-12.4</td>
<td>200,100</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>
</body></html>

The PMI’s for the zone are up sharply in April. At 36.33 the MFG PMI is still in the lower 11 percentile of its range. The services reading at 43.10 is in the lower 16 percentile of its range. These are weak positions that speak of a [...]

E- Area PMIs Are Still Low-Valued But Jump

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090422a.jpg" align="left" border="0">
The UK claimant count and the unemployment rate continue to
spurt higher. The count is the highest since the late 1990s (August
1998, for the percentage rate). Unemployment is skyrocketing. The
number of unemployed persons rose m/m by 6.6% in January, by an
outsized 10.9% in February, and by a slower but still bruising 5.3% in
March. Employment levels (available only through January) show
continuing accelerating declines. 
 

The progressive growth rates (from 3Mo to 6Mo to 12Mo) show
accelerating rates of unemployment rising at an annualized rate of 140%
over the most recent 3-Mo period. Employment levels are dropping at an
accelerating pace which has risen to an annual rate of -1.7%. The
larger impact on unemployment growth comes about since employment
levels are high as a percentage of the labor force while unemployment
levels are low. When &#8216;small amounts&#8217; are pared from the roles of the
employed they can quickly become a huge proportion of the unemployed.
Of course in historic context unemployment is hardly &#8216;small&#8217; I simple
refer to &#8216;size&#8217; as a proportion of the labor market and relative to the
&#8216;employment rate&#8217; which at over 95% is quite large compared to
unemployment at 4.5%. In that context the unemployment rate is &#8216;small&#8217;.
It is this size mismatch that results in most of the extreme difference
in growth rates for the employed Vs the jobless in addition to some
less mechanical labor behavior. (like labor force participation) . 
 

In response to these worsening trends Alistair Darling
Chancellor of the exchequer has switched his budget forecast. He now
sees that the UK economy will shrink by 3.5% - the worst contraction in
modern times. The Darling also projects a deepening deflation with the
RPI gauge falling to minus 3% by September. But the forecast still
provides that the economy will begin to pick up by the end of the year,
with a moderate positive growth rate of 1.25% restored in 2010. 
 

Darling has also announced help for jobless young people and a
car scrap-for cash scheme. A £2,000 stipend is to be paid to car owners
who trade in autos over 10 years in age for new ones. It is not clear
how much of this payment will be diverted to dealers who might offer
poorer trade-in prices and how much will actually get to the pocketbook
of those buying the new car and stimulate new purchases. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">UK job market trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Level</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>3-mo Avg</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Claimant count U-rate</td>
<td>4.5</td>
<td>4.3</td>
<td>3.9</td>
<td>4.2</td>
<td>3.8</td>
<td>3.2</td>
</tr>
<tr class="grey2">
<td class="firstcol">U-Rate (Harmonized)</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>6.3</td>
<td>6.0</td>
<td>5.6</td>
</tr>
<tr class="grey3">
<td class="firstcol">% Period/Period</td>
<td>m/m</td>
<td>m/m</td>
<td>m/m</td>
<td>3-Mo% AR</td>
<td>6-Mo% AR</td>
<td>12-Mo% AR</td>
</tr>
<tr class="grey3">
<td class="firstcol">Unemployed (000)*</td>
<td>5.3%</td>
<td>10.9%</td>
<td>6.6%</td>
<td>140.4%</td>
<td>134.2%</td>
<td>84.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Employment (000)**</td>
<td>#N/A</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>-1.7%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
<tr class="grey3">
<td colspan="7">Note: Multi-Mo calculations
are * lagged by three months; lagged by two-months</td>
</tr>
</tbody>
</table>
</body></html>

The UK claimant count and the unemployment rate continue to spurt higher. The count is the highest since the late 1990s (August 1998, for the percentage rate). Unemployment is skyrocketing. The number of unemployed persons rose m/m by [...]

UK Unemployment Continues To Soar (Sour)

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090422a.jpg" align="left" border="0">
The UK claimant count and the unemployment rate continue to
spurt higher. The count is the highest since the late 1990s (August
1998, for the percentage rate). Unemployment is skyrocketing. The
number of unemployed persons rose m/m by 6.6% in January, by an
outsized 10.9% in February, and by a slower but still bruising 5.3% in
March. Employment levels (available only through January) show
continuing accelerating declines. 
 

The progressive growth rates (from 3Mo to 6Mo to 12Mo) show
accelerating rates of unemployment rising at an annualized rate of 140%
over the most recent 3-Mo period. Employment levels are dropping at an
accelerating pace which has risen to an annual rate of -1.7%. The
larger impact on unemployment growth comes about since employment
levels are high as a percentage of the labor force while unemployment
levels are low. When &#8216;small amounts&#8217; are pared from the roles of the
employed they can quickly become a huge proportion of the unemployed.
Of course in historic context unemployment is hardly &#8216;small&#8217; I simple
refer to &#8216;size&#8217; as a proportion of the labor market and relative to the
&#8216;employment rate&#8217; which at over 95% is quite large compared to
unemployment at 4.5%. In that context the unemployment rate is &#8216;small&#8217;.
It is this size mismatch that results in most of the extreme difference
in growth rates for the employed Vs the jobless in addition to some
less mechanical labor behavior. (like labor force participation) . 
 

In response to these worsening trends Alistair Darling
Chancellor of the exchequer has switched his budget forecast. He now
sees that the UK economy will shrink by 3.5% - the worst contraction in
modern times. The Darling also projects a deepening deflation with the
RPI gauge falling to minus 3% by September. But the forecast still
provides that the economy will begin to pick up by the end of the year,
with a moderate positive growth rate of 1.25% restored in 2010. 
 

Darling has also announced help for jobless young people and a
car scrap-for cash scheme. A £2,000 stipend is to be paid to car owners
who trade in autos over 10 years in age for new ones. It is not clear
how much of this payment will be diverted to dealers who might offer
poorer trade-in prices and how much will actually get to the pocketbook
of those buying the new car and stimulate new purchases. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">UK job
market trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Level</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>3-mo Avg</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Claimant count U-rate</td>
<td>4.5</td>
<td>4.3</td>
<td>3.9</td>
<td>4.2</td>
<td>3.8</td>
<td>3.2</td>
</tr>
<tr class="grey2">
<td class="firstcol">U-Rate (Harmonized)</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>6.3</td>
<td>6.0</td>
<td>5.6</td>
</tr>
<tr class="grey3">
<td class="firstcol">% Period/Period</td>
<td>m/m</td>
<td>m/m</td>
<td>m/m</td>
<td>3-Mo% AR</td>
<td>6-Mo% AR</td>
<td>12-Mo% AR</td>
</tr>
<tr class="grey3">
<td class="firstcol">Unemployed (000)*</td>
<td>5.3%</td>
<td>10.9%</td>
<td>6.6%</td>
<td>140.4%</td>
<td>134.2%</td>
<td>84.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Employment (000)**</td>
<td>#N/A</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>-1.7%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
<tr class="grey3">
<td colspan="7">Note: Multi-Mo calculations
are * lagged by three months; lagged by two-months</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421c.jpg" align="right" border="0" height="265" width="353">For the first time since
July 2007 when wind of the sub prime mortgage
crisis in the United States began to surface, there were more optimists
than pessimists among German analysts and institutional investors
regarding the outlook six months ahead.&nbsp; The ZEW Center for
European Economic Research at Mannheim reported today that its measure
of investor expectations (the percent balance between positive and
negative opinions) rose from -3.5% to +13%.&nbsp; The excess of
optimists is, however, well below the 71.0% reached in January, 2006
and also the&nbsp; historical average of 26.1%.&nbsp; It is
however, encouraging.&nbsp;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421d.jpg" align="right" border="0" height="265" width="353">
The ZEW expectation indicator has
performed reasonably well in heralding changes in German GDP and their
magnitudes, as can be seen in the first chart.
While there was an improvement in expectations among the
participants
in the survey, there was a worsening in their appraisal of the current
conditions.&nbsp; The excess of pessimists over optimists rose to
91.6% from 89.4%.&nbsp; An excess of pessimists this large was last
seen in September, 2003.&nbsp; The second chart shows the balances
of opinion on expectations and current conditions.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421e.jpg" align="right" border="0" height="265" width="353">The ZEW
survey also includes the participants' expectations for profits in a
number of industries.&nbsp; In general the balances of opinion on
profit expectations also turned negative around August, 2007 and became
more and more negative until the last few months.&nbsp; Since then,
most balances of opinion have become less negative.&nbsp; The
exception is the expectation for profits in the banking industry where
the optimists exceed the pessimists by 2% for the first time since July
2007.&nbsp; The third chart shows the profit expectations for the
banking industry and a few other industries.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"> ZEW
INDICATORS (% balance)&nbsp;</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar&nbsp;&nbsp;
09</th>
<th scope="col">Previous Low</th>
<th scope="col">Date</th>
<th scope="col">Previous High</th>
<th scope="col">Date&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Expectations</td>
<td>13.0</td>
<td>-3.5</td>
<td>-63.9</td>
<td>&nbsp;&nbsp;&nbsp; Jul 08</td>
<td>&nbsp;71.0</td>
<td>Jan 06</td>
</tr>
<tr class="grey3">
<td class="firstcol">Current Conditions</td>
<td>-91.6</td>
<td>&nbsp;&nbsp;&nbsp; -89.4</td>
<td>&nbsp;&nbsp;&nbsp;&nbsp; -91.7</td>
<td>Sep 03</td>
<td>88.7</td>
<td>Jun 07</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">Profit Expectations</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Banking</td>
<td>2.0</td>
<td>&nbsp;-31.6</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">Telecommunications</td>
<td>-13.0</td>
<td>-16.1</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">Vehicles/Automotive</td>
<td>-56.1</td>
<td>-70.2</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Insurance</td>
<td>-15.1</td>
<td>-34.2</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

</body></html>

For the first time since July 2007 when wind of the sub prime mortgage crisis in the United States began to surface, there were more optimists than pessimists among German analysts and institutional investors regarding the outlook six [...]

Optimists Exceed Pessimists Among German Investors And Analysts For The First Time Since July 2007

Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421a.jpg">
Regular gasoline prices last week held firm at $2.06 per gallon, the highest level since last November. The latest was up 42 cents from the December low. On news of a weakening U.S. economy, however, the spot market price for regular gasoline slipped to $1.37 per gallon yesterday from its average of $1.42 last week. The figures are reported by the U.S. Department of Energy. Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421b.jpg">
 Crude oil prices weakened to an even greater degree due to soft economic news. The price for a barrel of West Texas Intermediate fell to $49.80 last week and to $45.88 yesterday. These 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.
Higher gasoline prices and economic weakness are prompting less driving. Gasoline demand last week fell 2.4% y/y versus the 4.8% rate of decline seen last October. (Gasoline prices at the time were just off their peak.) 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 5.2% y/y. That negative comparison was led by a 9.3% decline in distillate demand and a 19.7% 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 $3.55 per mmbtu (-65.0% 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.
The Economic Outlook is yesterday&#39;s speech by Fed Vice chairman Donald L. Kohn an it can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20090420a.htm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">04/20/09</th>
<th scope="col">06/13/09</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>2.06</td>
<td>2.05</td>
<td>-41.3%</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>49.80</td>
<td>50.46</td>
<td>-56.5%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Regular gasoline prices last week held firm at $2.06 per gallon, the highest level since last November. The latest was up 42 cents from the December low. On news of a weakening U.S. economy, however, the spot market price for regular [...]

Gasoline Prices Remain Steady Around $2.00 Per Gallon

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421a.jpg" align="left" border="0">
Regular gasoline prices last week held
firm at $2.06 per gallon, the highest level since last November. The
latest was up 42 cents from the December low. On news of a weakening
U.S. economy, however, the spot market price for regular gasoline
slipped to $1.37 per gallon yesterday from its average of $1.42 last
week. The figures are reported by the U.S. Department of Energy. Weekly
gasoline prices can be found in Haver's WEEKLY database.
Daily prices are in the DAILY database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421b.jpg" align="right" border="0">
 Crude oil prices weakened to an even
greater degree due to soft economic news. The price for a barrel of
West Texas Intermediate fell to $49.80 last week and to $45.88
yesterday. These 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's Weekly Oil Statistics database.
Higher gasoline prices and economic weakness are prompting
less driving. Gasoline demand last week fell 2.4%
y/y versus the 4.8% rate of decline seen last October. (Gasoline prices
at the time were just off their peak.) 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 5.2% y/y. That
negative comparison was led by a 9.3% decline in distillate demand and
a 19.7% drop in demand for residual fuel oil. These numbers are
available in Haver's OILWKLY database.
The price of natural gas fell even further with the end to of
winter heating season. Prices fell to $3.55 per mmbtu (-65.0% 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.
The Economic Outlook is yesterday's speech
by Fed Vice chairman Donald L. Kohn an it can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20090420a.htm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">04/20/09</th>
<th scope="col">06/13/09</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>2.06</td>
<td>2.05</td>
<td>-41.3%</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>49.80</td>
<td>50.46</td>
<td>-56.5%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
 Optimists Exceed Pessimists AmongGerman Investors And Analysts For The First Time Since July 2007 
by <a href="/comment/Curley.html">Louise
Curley</a> April 21, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421c.jpg" align="right" border="0" height="265" width="353">For the first time since
July 2007 when wind of the sub prime mortgage
crisis in the United States began to surface, there were more optimists
than pessimists among German analysts and institutional investors
regarding the outlook six months ahead.&nbsp; The ZEW Center for
European Economic Research at Mannheim reported today that its measure
of investor expectations (the percent balance between positive and
negative opinions) rose from -3.5% to +13%.&nbsp; The excess of
optimists is, however, well below the 71.0% reached in January, 2006
and also the&nbsp; historical average of 26.1%.&nbsp; It is
however, encouraging.&nbsp;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421d.jpg" align="right" border="0" height="265" width="353">
The ZEW expectation indicator has
performed reasonably well in heralding changes in German GDP and their
magnitudes, as can be seen in the first chart.
While there was an improvement in expectations among the
participants
in the survey, there was a worsening in their appraisal of the current
conditions.&nbsp; The excess of pessimists over optimists rose to
91.6% from 89.4%.&nbsp; An excess of pessimists this large was last
seen in September, 2003.&nbsp; The second chart shows the balances
of opinion on expectations and current conditions.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090421e.jpg" align="right" border="0" height="265" width="353">The ZEW
survey also includes the participants' expectations for profits in a
number of industries.&nbsp; In general the balances of opinion on
profit expectations also turned negative around August, 2007 and became
more and more negative until the last few months.&nbsp; Since then,
most balances of opinion have become less negative.&nbsp; The
exception is the expectation for profits in the banking industry where
the optimists exceed the pessimists by 2% for the first time since July
2007.&nbsp; The third chart shows the profit expectations for the
banking industry and a few other industries.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"> ZEW
INDICATORS (% balance)&nbsp;</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar&nbsp;&nbsp;
09</th>
<th scope="col">Previous Low</th>
<th scope="col">Date</th>
<th scope="col">Previous High</th>
<th scope="col">Date&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Expectations</td>
<td>13.0</td>
<td>-3.5</td>
<td>-63.9</td>
<td>&nbsp;&nbsp;&nbsp; Jul 08</td>
<td>&nbsp;71.0</td>
<td>Jan 06</td>
</tr>
<tr class="grey3">
<td class="firstcol">Current Conditions</td>
<td>-91.6</td>
<td>&nbsp;&nbsp;&nbsp; -89.4</td>
<td>&nbsp;&nbsp;&nbsp;&nbsp; -91.7</td>
<td>Sep 03</td>
<td>88.7</td>
<td>Jun 07</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">Profit Expectations</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Banking</td>
<td>2.0</td>
<td>&nbsp;-31.6</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">Telecommunications</td>
<td>-13.0</td>
<td>-16.1</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">Vehicles/Automotive</td>
<td>-56.1</td>
<td>-70.2</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Insurance</td>
<td>-15.1</td>
<td>-34.2</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090420d.jpg" align="left" border="0">
European orders are still on bad trends. But France is showing
some life in February. As life signs go it&#8217;s still a weak vital sign
despite its apparent vigor. Orders did jump by 5.2% in nominal terms in
February, just one month after falling by 2.1%. But orders are still
down by 23% over 12 months as the annual rate over three months has
shot up to a positive 4.3%, a rare positive three-month reading in the
e-zone. Still, the accompanying chart puts the French figures in
context. The French Yr/Yr drop had been much worse than the similar
decline in Italy since about may of 2008. With the large bump up in
orders for France in February, France &#8217;s Yr/Yr decline has braked and
left Italy with the weaker trend, but this is nothing unprecedented.
For France the order revival is a domestic affair as foreign
orders continued to fall by 0.6% in February, a drop but one with less
vigor. Still the 5.2% rise in orders speaks of a sharp rebound
domestically, possibly following the striking activity in France . So
I&#8217;d be wary of reading much into it.
Compared to Italy , French foreign order growth has been much
weaker over the last three months. Of course, one reason might be that
Italy &#8217;s &#8216;foreign&#8217; orders have benefited from some uptick in domestic
activity in France this month. By comparison, French exports have had
no such favor in Italy , where the domestic economy is still
struggling. Apart from that the two nations face a similar array of
trading partners but with their own specific concentrations of trade,
of course. Both countries show ongoing weakness in sales or in
industrial output at home. As I said above, there is not much to sink
your teeth into, if you are an optimist, despite the rise in French
orders this month. Given the performance in the rest of Europe,
especially Germany , and given the way the persisting French strikes
have wracked the French economy, I&#8217;d be wary to read much into this
rebound in French orders in February. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Italy
Orders
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>3-month</td>
<td>6-month</td>
<td>12-month</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total</td>
<td>-1.5%</td>
<td>-3.9%</td>
<td>-2.1%</td>
<td>-26.2%</td>
<td>-39.3%</td>
<td>-31.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Foreign</td>
<td>3.5%</td>
<td>-3.0%</td>
<td>-2.1%</td>
<td>-7.2%</td>
<td>-37.6%</td>
<td>-30.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Domestic</td>
<td>-4.1%</td>
<td>-4.4%</td>
<td>-2.0%</td>
<td>-34.8%</td>
<td>-40.3%</td>
<td>-31.5%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Memo:</td>
</tr>
<tr class="grey3">
<td class="firstcol">Sales</td>
<td>-3.1%</td>
<td>-4.0%</td>
<td>-3.3%</td>
<td>-34.6%</td>
<td>-33.1%</td>
<td>-23.0%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">French Orders</td>
</tr>
<tr class="grey1">
<td class="firstcol">Saar except m/m</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>3-month</td>
<td>6-month</td>
<td>12-month</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total</td>
<td>5.2%</td>
<td>-2.1%</td>
<td>-1.9%</td>
<td>4.3%</td>
<td>-30.8%</td>
<td>-23.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Foreign</td>
<td>-0.6%</td>
<td>-11.5%</td>
<td>0.0%</td>
<td>-40.1%</td>
<td>-44.0%</td>
<td>-37.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">IP ex Construction</td>
<td>-0.1%</td>
<td>-5.0%</td>
<td>-2.3%</td>
<td>-25.8%</td>
<td>-28.0%</td>
<td>-17.8%</td>
</tr>
</tbody>
</table>
</body></html>

European orders are still on bad trends. But France is showing some life in February. As life signs go it’s still a weak vital sign despite its apparent vigor. Orders did jump by 5.2% in nominal terms in February, just one month after [...]

French and Italian Orders: Some Divergence Between These Siamese Twins

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090420c.jpg" width="353">
The March National Activity Index (CFNAI) from the Chicago Federal Reserve Bank remained negative last month. At -2.96 the figure was roughly stable with February but both figures were up marginally from the low reading of -4.03 reached in January. Since 1970 there has been a 74% correlation between the level of the index and the q/q change in real GDP.
The three-month moving average of the index ticked up slightly to -3.27 but remained near its lowest since January of 1975.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_april2009.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The employment, production and income components made large negative contributions to the March index. Thirteen of the index&#39;s component sectors had a negative influence while 72 had a negative influence.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during February to its lowest level since 1994. Indicators for the steel and machinery sectors each fell but the measure for the auto sector rose while the resource sector was unchanged.
The Chicago Federal Reserve figures are available in Haver&#39;s SURVEYS database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March &#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">CFNAI</td>
<td>-2.96</td>
<td>-2.82</td>
<td>-1.14</td>
<td>-1.79</td>
<td>-0.37</td>
<td>0.03</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-3.27</td>
<td>-3.57</td>
<td>-3.69</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>


</html>

The March National Activity Index (CFNAI) from the Chicago Federal Reserve Bank remained negative last month. At -2.96 the figure was roughly stable with February but both figures were up marginally from the low reading of -4.03 [...]

Chicago Fed Index Remained Negative In March

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

Jump to:

E- Area PMIs Are Still Low-Valued But Jump

UK Unemployment Continues To Soar (Sour)

UK Unemployment Continues To Soar (Sour)

Optimists Exceed Pessimists Among German Investors And Analysts For The First Time Since July 2007

Gasoline Prices Remain Steady Around $2.00 Per Gallon

Gasoline Prices Remain Steady Around $2.00 Per Gallon

French and Italian Orders: Some Divergence Between These Siamese Twins

Chicago Fed Index Remained Negative In March