Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090420a.jpg" width="353">
The Conference Board reported that the March composite index of leading economic indicators fell 0.3% to the lowest level since early-2003. The decline in the February index was revised to a shortfall of 0.2%. Foreshadowing the current recession, the index has been moving steadily lower since a 2007 peak.
Six of the ten components of the leading index fell last month including sharp declines in the length of the workweek, stock prices and building permits while initial unemployment insurance claims jumped.
The breadth of one-month increase amongst the leaders&#39; 10 components fell back to 35% and over a six-month period the breadth of gain amongst the components remained minimal at just 20%.
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
Continuing to reflect economic recession, the coincident indicators fell another 0.4% and they are off 4.9% during the last year. Half of the four component series fell during March with outsized declines registered by employment and production. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090420b.jpg" width="353">
The lagging index fell 0.4% after a 0.3% February decline. The ratio of coincident-to-lagging indicators (a measure of economic excess) remained stable at its lowest level since 1975.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
Financial Innovation and Consumer Protection is Friday&#39;s speech by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090417a.htm"> here</a>.
Monetary Policy in the Financial Crisis is Saturday&#39;s speech by Fed Vice Chairman Donald L. Cohn and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20090418a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Dec. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-0.2</td>
<td>-4.9</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.4</td>
<td>-0.6</td>
<td>-0.9</td>
<td>-5.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-0.4</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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The Conference Board reported that the March composite index of leading economic indicators fell 0.3% to the lowest level since early-2003. The decline in the February index was revised to a shortfall of 0.2%. Foreshadowing the [...]

U.S. Leading Indicators Fall To The Lowest Level Since 2003

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090420a.jpg" align="left" border="0" height="265" width="353">
The Conference Board reported that the March composite index
of leading economic indicators fell 0.3% to the lowest level since
early-2003. The decline in the February index was revised to a
shortfall of 0.2%. Foreshadowing the current recession, the index has
been moving steadily lower since a 2007 peak.
Six of the ten components of the leading index fell last month
including sharp declines in the length of the workweek, stock prices
and building permits while initial unemployment insurance claims jumped.
The breadth of one-month increase amongst the leaders' 10
components fell back to 35% and over a six-month period the breadth of
gain amongst the components remained minimal at just 20%.
The leading index is based on actual reports for eight
economic data series. The Conference Board initially estimates two
series, orders for consumer goods and orders for capital goods.
Continuing to reflect economic recession, the coincident
indicators fell another 0.4% and they are off 4.9% during the last
year. Half of the four component series fell during March with outsized
declines registered by employment and production. Over the last ten
years there has been a 76% correlation between this y/y change and real
GDP.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090420b.jpg" align="right" border="0" height="265" width="353">
The lagging index fell 0.4% after a 0.3% February decline. The
ratio of coincident-to-lagging indicators (a measure of economic
excess) remained stable at its lowest level since 1975.
The Conference Board figures are available in Haver's BCI
database. Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


Financial Innovation and Consumer Protection
is Friday's speech by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090417a.htm">
here</a>.
Monetary Policy in the Financial Crisis is
Saturday's speech by Fed Vice Chairman Donald L. Cohn and it can be
found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20090418a.htm">
here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Dec. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-0.2</td>
<td>-4.9</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.4</td>
<td>-0.6</td>
<td>-0.9</td>
<td>-5.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-0.4</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Chicago Fed Index Remained
Negative In March 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 20, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090420c.jpg" align="left" border="0" height="265" 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's SURVEYS
database.
The employment, production and income components made large
negative contributions to the March index. Thirteen of the index'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'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 '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>
French and Italian Orders: Some
Divergence Between These Siamese Twins 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 20, 2009


<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>
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Robert Brusca

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<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

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<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>
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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

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<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>
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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

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<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>
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<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

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<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

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.

260205Z2.jpg

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

260205Z3.jpg

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

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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.

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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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.

260205C2.jpg

260205D2.jpg

- 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

260205E.jpg

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

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

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

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

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

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

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

Economy in Brief

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U.S. Leading Indicators Fall To The Lowest Level Since 2003

U.S. Leading Indicators Fall To The Lowest Level Since 2003

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