Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090408a.jpg" align="right" border="0" height="265" width="353">The Mortgage
Bankers Association reported another increase in mortgage applications.
The 4.7% w/w increase last week pulled them up by nearly three-quarters
from the year ago level and to nearly their highest for this year.
Fueled by lower interest rates, the index of applications to
refinance
a home mortgage again rose. The moderate 3.2% w/w increase pulled them
up by more than double the year ago level.
 Returning to the 2003 low,
the effective interest rate on a conventional 15-year mortgage fell to
4.73% week-to-week. For a 30-year mortgage, rates held near their
recent lows at 4.93%. Interest rates on 15- and 30-year mortgages are
closely correlated (&gt;90%) with the rate on 10-year Treasury
securities.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090408b.jpg" align="right" border="0" height="265" width="353">
For an adjustable 1-Year mortgage the rate has been fairly
stable this year near 6.25% but the rate still was down sharply from
the 7.07% peak reached this past Fall.
Mortgage applications
for purchase also rose last week, but the 11.5% w/w gain still left
them down by one-quarter from last year. Nevertheless, some sign of
life in home purchases may be evident in a 25% increase in applications
from the absolute lows of this past February. That life, however, has
yet to translate into material gains in the home sales figures. Sales
of new plus existing single family homes in February only recovered a
sharp January decline. They remained near the cycle low and near the
lowest since 1997.
 During the last ten years there has been a
(negative) 79% correlation between the level of applications for
purchase and the effective interest rate on a 30-year
mortgage.&nbsp; Moreover, during the last ten years there has been
a 61% correlation between the y/y change in purchase applications and
the change in new plus existing single family home sales.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090408c.jpg" align="right" border="0" height="265" width="353">The
figures
for weekly mortgage applications are available in Haver's SURVEYW
database.
The Mortgage Bankers Association surveys between 20
to 35 of the top lenders in the U.S. housing industry to derive its
refinance, purchase and market indexes. The weekly survey covers
roughly 50% of all U.S. residential mortgage applications processed
each week by mortgage banks, commercial banks and thrifts. Visit the
Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.&nbsp;
Recession
or depression? from the Federal Reserve Bank of St. Louis is
available <a href="http://research.stlouisfed.org/publications/es/09/ES0915.pdf">here</a>.
Explaining
trends in wages, work and occupations from the Federal
Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflapril2009_261.pdf">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">04/03/09</th>
<th scope="col">03/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>1,250.6</td>
<td>1,194.4</td>
<td>72.4%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>297.7</td>
<td>268.0</td>
<td>-22.6%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>6,813.5</td>
<td>6,600.1</td>
<td>150.1%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>

German New Orders Decline 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 8,
2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090408d.jpg" align="left" border="0">The
growth rates for German industrial orders are not getting
progressively worse, but they still are bad and the three-month growth
rate still is worse than the six month growth rate. There may be a hint
or whiff of slowing down the pace of the order decline, but it&#8217;s a
vague hint. Over THREE MONTHS the pace of order decline in real terms
is -51.5% led by a 60.2% pace of decline in foreign orders and a lesser
but still severe 39.3% pace of decline in new domestic orders. 
 

The pace of order decline in the current quarter annualized is
just about the same as the pace in 2008-Q4. Meanwhile real sector sales
continue to drop at a steadily accelerating pace. Capital goods
declines lead the parade over three-months, six months and twelve
months. 
 

These sorts of declines cannot go on for very long without
bringing disaster. It is reasonable to think we are on the cusp of
seeing a slowdown in the rate of unravel. There are some stimulus
programs afoot in Europe. But just as clearly the Euro-view and the ECB
view has been to be less helpful than the view from the authorities in
the US. In global terms these &#8216;guys&#8217; are intending to piggy-back a bit
on US generated stimulus. 
 

I was shocked to see how blasé Europe really is when Juergen
Stark of the ECB was disapproving of the extension of IMF credit. We
are in the middle of a real financial and growth problem. And Stark was
not pleased to get some help that would be channeled to the neediest.
Without this help, recession would hit less developed and smaller
nations harder; they would have to wait for the larger economies to
pick up in order to benefit. Europe is not doing that every quickly, as
we just observed, above. In the case of Europe the biggest risk is in
Eastern Europe and there the EU has taken some special steps to provide
assistance. This recession has been a good case study in how nations
&#8216;take care of their own&#8217;. But the IMF money which is less that way and
is geared more toward need without bilateral strings attached is very
helpful and timely. I do not share the Stark/ECB reluctance. 
 

For now the German data on industrial orders tell us that
Europe is weakening at a rapid pace. German domestic demand may be
faring a tad better as it spins off the vaguest hint of slowing its
descent. But for foreign orders the assessment for German data remains
quite bleak. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> German
Orders and Sales By Sector and Origin </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"> Real and SA</td>
<td colspan="3"> % M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Feb-09</td>
<td> Jan-09</td>
<td> Dec-08</td>
<td> 3-MO</td>
<td> 6-Mo</td>
<td> 12-Mo</td>
<td> Yr Ago</td>
<td> QTR-2-Date</td>
</tr>
<tr class="even">
<td class="firstcol"> Total Orders</td>
<td>-3.5%</td>
<td>-6.7%</td>
<td>-7.3%</td>
<td> -51.5%</td>
<td>-30.4%</td>
<td> -36.3%</td>
<td>4.4%</td>
<td>-54.5%</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Foreign</td>
<td>-1.3%</td>
<td> -10.9%</td>
<td>-9.7%</td>
<td> -60.2%</td>
<td>-36.9%</td>
<td> -40.7%</td>
<td>4.7%</td>
<td>-63.7%</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Domestic</td>
<td> -5.7%</td>
<td>-1.8%</td>
<td>-4.6%</td>
<td> -39.3%</td>
<td>-22.1%</td>
<td> -30.9%</td>
<td>3.9%</td>
<td>-41.2%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">
Real Sector Sales</td>
</tr>
<tr class="even">
<td class="firstcol"> MFG/Mining</td>
<td>-4.2%</td>
<td> -6.6%</td>
<td>-5.5%</td>
<td> -49.0%</td>
<td> -28.6%</td>
<td> -23.2%</td>
<td>5.1%</td>
<td>-49.7%</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Consumer</td>
<td>-3.2%</td>
<td> -6.0%</td>
<td>3.4%</td>
<td> -21.7%</td>
<td> -11.5%</td>
<td> -11.2%</td>
<td>-0.6%</td>
<td>-27.4%</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Cons Durables</td>
<td> -7.9%</td>
<td>-2.2%</td>
<td>-5.3%</td>
<td> -47.0%</td>
<td> -27.2%</td>
<td> -22.3%</td>
<td>-0.6%</td>
<td>-41.3%</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Cons Non-Durable</td>
<td>-2.5%</td>
<td> -6.6%</td>
<td>4.9%</td>
<td> -16.6%</td>
<td>-8.7%</td>
<td> -9.3%</td>
<td>-0.5%</td>
<td>-24.6%</td>
</tr>
<tr class="even">
<td class="firstcol"> Capital Gds</td>
<td>-4.8%</td>
<td> -9.4%</td>
<td>-8.4%</td>
<td> -61.0%</td>
<td> -37.5%</td>
<td> -29.2%</td>
<td>9.2%</td>
<td>-61.3%</td>
</tr>
<tr class="even">
<td class="firstcol"> Intermediate Gds</td>
<td>-3.5%</td>
<td>-4.6%</td>
<td>-7.5%</td>
<td> -47.5%</td>
<td> -27.5%</td>
<td> -24.2%</td>
<td>3.9%</td>
<td>-48.5%</td>
</tr>
<tr class="even">
<td class="firstcol"> All MFG-Sales</td>
<td>-4.3%</td>
<td> -6.6%</td>
<td>-5.8%</td>
<td> -49.7%</td>
<td> -29.1%</td>
<td> -23.4%</td>
<td>5.1%</td>
<td>-50.2%</td>
</tr>
</tbody>
</table>
UK Industrial Output
Falls Again 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 8, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090408e.jpg" align="left" border="0">
UK&#8217;s industrial output index fell again making it twelve
straight months of decline. There is a slight let up in the pace of
decline in IP as the growth rate&#8217;s declining profile at the three month
tenor shows signs of abating (see chart). Still other trends show that
strong downward momentum remains in force. 
 

Consumer durables output accelerated its drop over
three-months compared to six months as did intermediate and capital
goods industries. Even so, each of these the three-month growth rates
for February was stronger than in January. Consumer nondurables
industrial output rose in February. Most sectors saw growth rates
worsen over three-months compared to six months. Food and drink was an
exception; motor vehicles were another exception as growth rates
hovered at a horrific -64% annual rate. 
 

The growth rates being posted for the quarter-to-date continue
to be very weak and in line with recent trends. Q1 is cropping up to be
another bad one. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">
UK IP
and MFG </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Saar
except m/m</td>
<td colspan="3"> Mo/Mo</td>
<td> Feb 
09</td>
<td> Jan 
09</td>
<td> Feb 
09</td>
<td> Jan 
09</td>
<td> Feb 
09</td>
<td> Jan 
09</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"> UK MFG</td>
<td> Feb 
09</td>
<td> Jan 
09</td>
<td> Dec 
08</td>
<td> 3Mo</td>
<td> 3Mo</td>
<td> 6mo</td>
<td> 6mo</td>
<td> 12mo</td>
<td> 12mo</td>
<td> Q1 
Date</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-1.9%</td>
<td>-20.7%</td>
<td>-27.4%</td>
<td>-20.4%</td>
<td>-20.2%</td>
<td>-13.8%</td>
<td>-13.0%</td>
<td> -24.2%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11"> Consumer</td>
</tr>
<tr>
<td class="firstcol">C-Durables</td>
<td>-0.4%</td>
<td>-4.8%</td>
<td>-3.6%</td>
<td>-30.1%</td>
<td>-35.3%</td>
<td>-26.6%</td>
<td>-27.6%</td>
<td>-21.3%</td>
<td>-19.8%</td>
<td> -33.0%</td>
</tr>
<tr>
<td class="firstcol">C-Non-durables</td>
<td>-0.1%</td>
<td>0.8%</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>-6.8%</td>
<td>-5.4%</td>
<td>-5.6%</td>
<td>-5.0%</td>
<td>-4.4%</td>
<td> -1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-1.4%</td>
<td>-3.3%</td>
<td>-1.7%</td>
<td>-23.0%</td>
<td>-25.4%</td>
<td>-20.7%</td>
<td>-19.9%</td>
<td>-13.8%</td>
<td>-12.7%</td>
<td> -25.0%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>-1.6%</td>
<td>-5.4%</td>
<td>-2.1%</td>
<td>-31.1%</td>
<td>-36.4%</td>
<td>-26.1%</td>
<td>-25.3%</td>
<td>-16.9%</td>
<td>-16.1%</td>
<td> -35.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">
Memo:Detail</td>
<td> 1Mo%</td>
<td> 1Mo%</td>
<td> 1Mo%</td>
<td> 3Mo</td>
<td> 3Mo</td>
<td> 6mo</td>
<td> 6mo</td>
<td> 12mo</td>
<td> 12mo</td>
<td> Q1 
Date</td>
</tr>
<tr>
<td class="firstcol">Food
Drink&amp;tobacco</td>
<td>0.2%</td>
<td>1.6%</td>
<td>-2.1%</td>
<td>-1.6%</td>
<td>-5.9%</td>
<td>-3.4%</td>
<td>-2.4%</td>
<td>-3.9%</td>
<td>-3.8%</td>
<td> -0.5%</td>
</tr>
<tr>
<td class="firstcol">Textile&amp;Leather</td>
<td>-0.8%</td>
<td>-1.5%</td>
<td>-2.1%</td>
<td>-16.6%</td>
<td>-6.5%</td>
<td>-10.8%</td>
<td>-11.3%</td>
<td>-5.4%</td>
<td>-4.1%</td>
<td> -12.3%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles
&amp; trailer</td>
<td>-4.1%</td>
<td>-18.8%</td>
<td>-0.8%</td>
<td>-64.3%</td>
<td>-77.2%</td>
<td>-46.5%</td>
<td>-64.9%</td>
<td>-46.0%</td>
<td>-43.5%</td>
<td> -74.9%</td>
</tr>
<tr>
<td class="firstcol">Mining and Quarry</td>
<td>-0.9%</td>
<td>-2.9%</td>
<td>-0.3%</td>
<td>-15.1%</td>
<td>-6.8%</td>
<td>-8.4%</td>
<td>-7.8%</td>
<td>-7.7%</td>
<td>-7.8%</td>
<td> -13.7%</td>
</tr>
<tr>
<td class="firstcol">Electricity,
gas&amp;H2O</td>
<td>-2.5%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>-7.9%</td>
<td>-3.5%</td>
<td>-7.6%</td>
<td>-5.6%</td>
<td>-4.9%</td>
<td>-2.6%</td>
<td> -6.4%</td>
</tr>
</tbody>
</table>
</body></html>

The Mortgage Bankers Association reported another increase in mortgage applications. The 4.7% w/w increase last week pulled them up by nearly three-quarters from the year ago level and to nearly their highest for this year. Fueled by [...]

U.S. Weekly Mortgage ApplicationsJump Higher As Refi's More Than Double

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407i.jpg" align="left" border="0" height="265" width="353">
The Bank of Australia reduced its benchmark interest rate from
3.25% to 3.00% today. This marks a 525 basis point reduction from the
8.25% rate in June, 2008. Growth in the Australian economy virtually
came to a halt in the third quarter of 2008 when GDP increased by 0.08%
and disappeared in the fourth quarter when GDP declined by 0.53%. In
February of this year, the Australian government announced a A$42
billion (3.5% of GDP) stimulus program of cash disbursements and
infrastructure spending.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407j.jpg" align="right" border="0" height="265" width="353">
NZIER (New Zealand Institute of Economic Research) published
its quarterly survey of business opinion today. The results are shown
as percent balances between those expecting improvement in the economy
over next six months and those expecting a deterioration. The overall
opinion is based on the opinions of manufacturers, builders, merchants
and those engaged in the service industries. In the latest survey, the
overall, or economy wide, balance of opinion was -65% meaning that
there were 65% more pessimists than optimists. There is a great deal of
volatility in the opinions of the participants in the survey but also a
clear down ward trend as can be seen in the first chart. In the latest
survey, there was a slightly less negative balance for the manufactures
and the merchants and a slightly more negative for the builders and
those engaged in the service industries.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407k.jpg" align="left" border="0" height="265" width="353">
New Zealand's economy has been weaker than that of Australia
as can be seen in the second chart that shows the quarterly changes in
real GDP for the two countries. In New Zealand, GDP declined throughout
2008 and for the year as a whole was 1.0% below 2007. In Australia, GDP
did not decline until the fourth quarter and for the year 2.1% above
2007. The quarterly changes in real GDP in New Zealand and Australia
are shown in the second chart. The third chart shows the official
policy interest rates for both countries.New Zealand has, until
recently, had a higher benchmark interest rate than Australia, largely
as a result of New Zealand's large current account deficit, which has
been running between 8 and 9% of GDP for the past few years. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">AUSTRALIA
&amp; NEW ZEALAND</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4 08&nbsp;</th>
<th scope="col">Q3&nbsp; 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08</th>
<th scope="col">2008 CHG%</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP % Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Australia</td>
<td>--</td>
<td>-0.53</td>
<td>0.08</td>
<td>0.28</td>
<td>0.49</td>
<td>2.06</td>
<td>4.02</td>
</tr>
<tr>
<td class="firstcol">New Zealand</td>
<td>--</td>
<td>-0.57</td>
<td>-0.65</td>
<td>-.061</td>
<td>-.052</td>
<td>-0.97</td>
<td>3.12</td>
</tr>
<tr class="odd">
<td class="firstcol">NZIER (% Balance)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Manufacturers</td>
<td>-61</td>
<td>-67</td>
<td>-24</td>
<td>-60</td>
<td>-73</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Builders</td>
<td>-64</td>
<td>-62</td>
<td>-12</td>
<td>-56</td>
<td>-64</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Merchants</td>
<td>-62</td>
<td>-70</td>
<td>-10</td>
<td>-66</td>
<td>-60</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Service Industries</td>
<td>-66</td>
<td>-62</td>
<td>-21</td>
<td>-65</td>
<td>-62</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Bank of Australia reduced its benchmark interest rate from 3.25% to 3.00% today. This marks a 525 basis point reduction from the 8.25% rate in June, 2008. Growth in the Australian economy virtually came to a halt in the third [...]

News from Australia and New Zealand

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407g.jpg" width="353">
For February the Federal Reserve reported that consumer credit outstanding fell $7.4B. As a result of the decline, which was the fifth since July, credit growth slowed to just 1.1% year-to-year which was the weakest since late 1992. On a three-month basis credit outstanding has followed the decline in retail spending and fallen at a 0.8% annual rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407h.jpg" width="353">
Non-revolving credit (autos &amp; other consumer durables), which accounts for nearly two-thirds of the total, ticked up just $0.3B in February. However, it rose at a 1.9% rate over the last three months, a pickup from the negative growth at the end of last year. Usage of revolving credit fell a huge $7.8B in February which was a record. The decline lowered three-month growth to a negative 5.1% which was near the record.
These figures are the major input to the Fed&#39;s quarterly Flow of Funds accounts for the household sector.
Credit data are available in Haver&#39;s USECON database. The Flow of Funds data are in Haver&#39;s FFUNDS database.
Credit Storm Sinking Global Trade from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=440A110B-5056-9F12-1273B38469A2401E&amp;method=display_body"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Credit (m/m Chg, SAAR)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-7.4B</td>
<td>&nbsp;$8.1B</td>
<td>1.1%</td>
<td>1.8%</td>
<td>5.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-7.8B</td>
<td>$1.9B</td>
<td>0.5%</td>
<td>2.4%</td>
<td>7.4%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$0.3B</td>
<td>$6.2B</td>
<td>1.4%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

For February the Federal Reserve reported that consumer credit outstanding fell $7.4B. As a result of the decline, which was the fifth since July, credit growth slowed to just 1.1% year-to-year which was the weakest since late 1992. [...]

Consumer Credit Usage Remains Negative

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407e.jpg" width="353">
For February, the Bureau of Labor Statistics reported in its Job Openings &amp; Labor Turnover Survey (JOLTS) that job availability made up just a piece of the January decline. The 2.9% rise in the number of job opening followed a 9.4% January falloff and openings remained off by roughly one-third from the year ago level. The latest level remained near the record low for the series which dates back to December 2000.
The job openings rate also rose modestly in February to 2.2% versus a downwardly revised 2.1% rate in January. These rates were down from more than a 3% rate in 2007. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings in the construction sector fell by 81% from the year ago level and factory sector job openings fell 50%, as did leisure &amp; hospitality jobs which also were off by 50%. Professional &amp; business services job openings fell more than one-third year-to-year while openings in the education &amp; health sectors also were off by nearly one quarter. Openings in retail trade fell a slight 6% y/y. Not only were private sector openings down but government sector job openings fell a sharp 12% with state &amp; local off 17% as tax revenues fell.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407f.jpg" width="353">
By region, openings in the West fell the hardest, by 42% year-to-year, while openings in the South and the Midwest were off roughly 30%. Openings in the Northeast they were down by a more moderate 12%.
The hires rate held steady for the third month at 3.3% and that was near the lowest in the series&#39; short eight year history.The hires rate is the number of hires during the month divided by employment.The actual number of hires fell by 13% year-to-year with the largest declines coming in the leisure &amp; hospitality industry (-25%) followed by the factory sector (-23%) and the retail sector (-22%). In the professional &amp; business services industry the decline was a more moderate 11% while education &amp; health services jobs fell 8%. Construction sector hires fell 2%.
The job separations rate fell slightly to 3.6%, about where it&#39;s been since early 2008. Separations include quits, layoffs, discharges, and other separations as well as retirements. The level of job separations fell 3.5% y/y.
The JOLTS survey dates only to December 2000 but has followed the movement in nonfarm payrolls, though the actual correlation between the two series is low.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/pdf/jolts.pdf">here</a> and the figures are available in Haver&#39;s USECON 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/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor &nbsp;Turnover Survey)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#39;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">Job Openings, Total&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>2.2</td>
<td>2.1</td>
<td>3.0</td>
<td>2.3</td>
<td>3.1</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>3,006</td>
<td>2,920</td>
<td>4,248</td>
<td>3,224</td>
<td>4,382</td>
<td>4,606</td>
</tr>
<tr class="odd">
<td class="firstcol">Hires, Total</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.3</td>
<td>3.3</td>
<td>3.7</td>
<td>41.1</td>
<td>46.1</td>
<td>47.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>4,360</td>
<td>4,460</td>
<td>5,035</td>
<td>56,486</td>
<td>63,666</td>
<td>64,879</td>
</tr>
</tbody>
</table>
</body>
</html>

For February, the Bureau of Labor Statistics reported in its Job Openings & Labor Turnover Survey (JOLTS) that job availability made up just a piece of the January decline. The 2.9% rise in the number of job opening followed a 9.4% [...]

JOLTS: U.S. Job Openings Tick Higher In February But Remain Off By One-Third Y/Y

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407d.jpg" width="353">
After a weak March, the consumer may be showing signs of returning to the stores. The International Council of Shopping Centers-Goldman Sachs Index indicated that sales in early April rose 0.6% after the 1.1% jump during the prior week. As a result, sales began this month 1.2% above the March average following that month&#39;s tepid 0.3% uptick.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. These weekly figures are available in Haver&#39;s SURVEYW database.
The outlook for sales continued cautiously optimistic. The leading indicator of sales has been moving sideways since early February.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">04/03/09</th>
<th scope="col">03/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>489.5</td>
<td>486.5</td>
<td>-0.3%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

After a weak March, the consumer may be showing signs of returning to the stores. The International Council of Shopping Centers-Goldman Sachs Index indicated that sales in early April rose 0.6% after the 1.1% jump during the prior [...]

U.S. Chain Store Sales Pick Up Early This Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407a.jpg" align="right" border="0" height="265" width="353">Regular
gasoline prices last week held firm at $2.04 per gallon, the
highest level since last November. The latest was up 42 cents from the
December low. Yesterday, the spot market price for regular gasoline
also remained firm at $1.37 per gallon. That was roughly unchanged from
the prior two weeks but up from under $1.00 at the end of last year.
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.
Crude oil <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407b.jpg" align="right" border="0" height="265" width="353">
prices backpedaled from their
earlier high as
estimates of crude oil production strengthened. The American Petroleum
Institute indicated that production rose in the latest week by 7.8%
y/y. That increase compares with a decline in crude oil production of
2.1% during all of last year. Inventories of crude oil also were
strong, as estimated by DOE's Energy Information Association.
Inventories rose 15.6% following the 9.0% increase in 2008. The
inventory and production figures lowered the price for a barrel of West
Texas Intermediate to $50.32 from the recent high of $53.09. However,
that remained up more than 50% from the December low of $32.37 per
barrel. In futures trading the May contract price for crude oil fell
back yesterday to a still firm $51.05 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.
 Gasoline demand last week fell 0.2% 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 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407c.jpg" align="right" border="0" height="265" width="353">
petroleum products was down 4.4% y/y. That
negative comparison was led by a 9.1% decline in distillate demand.
Demand for residual rose a modest 1.2%. These numbers are available in
Haver's OILWKLY database.
 The price of natural
gas continued downward with the coming end to the winter heating
season. Prices fell to $3.64 per mmbtu (-61.7% 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 $13.19/mmbtu.
The
Panic of 2008 is the title of yesterday's speech by Fed
Governor Kevin Warsh and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/warsh20090406a.htm">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">04/06/09</th>
<th scope="col">03/30/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.04</td>
<td>2.05</td>
<td>-38.9%</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>50.32</td>
<td>53.09</td>
<td>-51.4%</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 $2.04 per gallon, the highest level since last November. The latest was up 42 cents from the December low. Yesterday, the spot market price for regular gasoline also remained firm at [...]

Gasoline Prices Hold Prior Weeks' Gains

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407a.jpg" align="right" border="0" height="265" width="353">Regular
gasoline prices last week held firm at $2.04 per gallon, the
highest level since last November. The latest was up 42 cents from the
December low. Yesterday, the spot market price for regular gasoline
also remained firm at $1.37 per gallon. That was roughly unchanged from
the prior two weeks but up from under $1.00 at the end of last year.
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.
Crude oil <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407b.jpg" align="right" border="0" height="265" width="353">
prices backpedaled from their
earlier high as
estimates of crude oil production strengthened. The American Petroleum
Institute indicated that production rose in the latest week by 7.8%
y/y. That increase compares with a decline in crude oil production of
2.1% during all of last year. Inventories of crude oil also were
strong, as estimated by DOE's Energy Information Association.
Inventories rose 15.6% following the 9.0% increase in 2008. The
inventory and production figures lowered the price for a barrel of West
Texas Intermediate to $50.32 from the recent high of $53.09. However,
that remained up more than 50% from the December low of $32.37 per
barrel. In futures trading the May contract price for crude oil fell
back yesterday to a still firm $51.05 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.
 Gasoline demand last week fell 0.2% 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 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407c.jpg" align="right" border="0" height="265" width="353">
petroleum products was down 4.4% y/y. That
negative comparison was led by a 9.1% decline in distillate demand.
Demand for residual rose a modest 1.2%. These numbers are available in
Haver's OILWKLY database.
 The price of natural
gas continued downward with the coming end to the winter heating
season. Prices fell to $3.64 per mmbtu (-61.7% 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 $13.19/mmbtu.
The
Panic of 2008 is the title of yesterday's speech by Fed
Governor Kevin Warsh and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/warsh20090406a.htm">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">04/06/09</th>
<th scope="col">03/30/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.04</td>
<td>2.05</td>
<td>-38.9%</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>50.32</td>
<td>53.09</td>
<td>-51.4%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>

U.S. Chain Store Sales Pick Up
Early This Month 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407d.jpg" align="left" border="0" height="265" width="353">
After a weak March, the consumer may be showing signs of
returning to the stores. The International Council of Shopping
Centers-Goldman Sachs Index indicated that sales in early April rose
0.6% after the 1.1% jump during the prior week. As a result, sales
began this month 1.2% above the March average following that month's
tepid 0.3% uptick.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


During the last ten years there has been a 64% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. These weekly figures are
available in Haver's SURVEYW database.
The outlook for sales continued cautiously optimistic. The
leading indicator of sales has been moving sideways since early
February.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">04/03/09</th>
<th scope="col">03/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>489.5</td>
<td>486.5</td>
<td>-0.3%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
JOLTS: U.S. Job Openings Tick
Higher In February But Remain Off By One-Third Y/Y 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407e.jpg" align="left" border="0" height="265" width="353">
For February, the Bureau of Labor Statistics reported in its
Job Openings &amp; Labor Turnover Survey (JOLTS) that job
availability made up just a piece of the January decline. The 2.9% rise
in the number of job opening followed a 9.4% January falloff and
openings remained off by roughly one-third from the year ago level. The
latest level remained near the record low for the series which dates
back to December 2000.
The job openings rate also rose modestly
in February to 2.2% versus a downwardly revised 2.1% rate in January.
These rates were down from more than a 3% rate in 2007. The
job openings rate is the number of job openings on the last business
day of the month as a percent of total employment plus job openings.
The actual number of job openings in the construction sector
fell by 81% from the year ago level and factory sector job openings
fell 50%, as did leisure &amp; hospitality jobs
which also were off by 50%. Professional &amp; business services
job openings fell more than one-third year-to-year while openings in
the education &amp; health sectors also were off by nearly one
quarter. Openings in retail trade fell a slight 6% y/y. Not only were
private sector openings down but government sector job openings fell a
sharp 12% with state &amp; local off 17% as tax revenues fell.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407f.jpg" align="right" border="0" height="265" width="353">
By region, openings in the West fell the hardest, by 42%
year-to-year, while openings in the South and the Midwest were off
roughly 30%. Openings in the Northeast they were down by a more
moderate 12%.
The hires rate held steady for the third
month at 3.3% and that was near the lowest in the series' short eight
year history.The hires rate is the number of hires during the
month divided by employment.The actual number of hires fell
by 13% year-to-year with the largest declines coming in the leisure
&amp; hospitality industry (-25%) followed by the factory sector
(-23%) and the retail sector (-22%). In the professional &amp;
business services industry the decline was a more moderate 11% while
education &amp; health services jobs fell 8%. Construction sector
hires fell 2%.
The job separations rate fell slightly to
3.6%, about where it's been since early 2008. Separations
include quits, layoffs, discharges, and other separations as well as
retirements. The level of job separations fell 3.5% y/y.
The JOLTS survey dates only to December 2000 but has followed
the movement in nonfarm payrolls, though the actual correlation between
the two series is low.
A description of the Jolts survey and the latest release from
the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/pdf/jolts.pdf">here</a>
and the figures are available in Haver's USECON
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/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a>
(Job Openings &amp; Labor &nbsp;Turnover Survey)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February '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">Job Openings, Total&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>2.2</td>
<td>2.1</td>
<td>3.0</td>
<td>2.3</td>
<td>3.1</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>3,006</td>
<td>2,920</td>
<td>4,248</td>
<td>3,224</td>
<td>4,382</td>
<td>4,606</td>
</tr>
<tr class="odd">
<td class="firstcol">Hires, Total</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.3</td>
<td>3.3</td>
<td>3.7</td>
<td>41.1</td>
<td>46.1</td>
<td>47.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>4,360</td>
<td>4,460</td>
<td>5,035</td>
<td>56,486</td>
<td>63,666</td>
<td>64,879</td>
</tr>
</tbody>
</table>
Consumer Credit Usage Remains
Negative 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407g.jpg" align="left" border="0" height="265" width="353">
For February the Federal Reserve reported that consumer credit
outstanding fell $7.4B. As a result of the decline, which was the fifth
since July, credit growth slowed to just 1.1% year-to-year which was
the weakest since late 1992. On a three-month basis credit outstanding
has followed the decline in retail spending and fallen at a 0.8% annual
rate.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407h.jpg" align="right" border="0" height="265" width="353">
Non-revolving credit (autos &amp; other consumer
durables), which accounts for nearly two-thirds of the total, ticked up
just $0.3B in February. However, it rose at a 1.9% rate over the last
three months, a pickup from the negative growth at the end of last
year. Usage of revolving credit fell a huge $7.8B in February which was
a record. The decline lowered three-month growth to a negative 5.1%
which was near the record.
These figures are the major input to the Fed's quarterly Flow
of Funds accounts for the household sector.
Credit data are available in Haver's USECON
database. The Flow of Funds data are in Haver's FFUNDS
database.
Credit Storm Sinking
Global Trade from the Federal Reserve Bank of Atlanta can be
found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=440A110B-5056-9F12-1273B38469A2401E&amp;method=display_body">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit (m/m Chg, SAAR)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-7.4B</td>
<td>&nbsp;$8.1B</td>
<td>1.1%</td>
<td>1.8%</td>
<td>5.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-7.8B</td>
<td>$1.9B</td>
<td>0.5%</td>
<td>2.4%</td>
<td>7.4%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$0.3B</td>
<td>$6.2B</td>
<td>1.4%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
News from Australia and New
Zealand 
by <a href="/comment/Curley.html">Louise
Curley</a> April 7, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407i.jpg" align="left" border="0" height="265" width="353">
The Bank of Australia reduced its benchmark interest rate from
3.25% to 3.00% today. This marks a 525 basis point reduction from the
8.25% rate in June, 2008. Growth in the Australian economy virtually
came to a halt in the third quarter of 2008 when GDP increased by 0.08%
and disappeared in the fourth quarter when GDP declined by 0.53%. In
February of this year, the Australian government announced a A$42
billion (3.5% of GDP) stimulus program of cash disbursements and
infrastructure spending.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407j.jpg" align="right" border="0" height="265" width="353">
NZIER (New Zealand Institute of Economic Research) published
its quarterly survey of business opinion today. The results are shown
as percent balances between those expecting improvement in the economy
over next six months and those expecting a deterioration. The overall
opinion is based on the opinions of manufacturers, builders, merchants
and those engaged in the service industries. In the latest survey, the
overall, or economy wide, balance of opinion was -65% meaning that
there were 65% more pessimists than optimists. There is a great deal of
volatility in the opinions of the participants in the survey but also a
clear down ward trend as can be seen in the first chart. In the latest
survey, there was a slightly less negative balance for the manufactures
and the merchants and a slightly more negative for the builders and
those engaged in the service industries.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090407k.jpg" align="left" border="0" height="265" width="353">
New Zealand's economy has been weaker than that of Australia
as can be seen in the second chart that shows the quarterly changes in
real GDP for the two countries. In New Zealand, GDP declined throughout
2008 and for the year as a whole was 1.0% below 2007. In Australia, GDP
did not decline until the fourth quarter and for the year 2.1% above
2007. The quarterly changes in real GDP in New Zealand and Australia
are shown in the second chart. The third chart shows the official
policy interest rates for both countries.New Zealand has, until
recently, had a higher benchmark interest rate than Australia, largely
as a result of New Zealand's large current account deficit, which has
been running between 8 and 9% of GDP for the past few years. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">AUSTRALIA
&amp; NEW ZEALAND</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4 08&nbsp;</th>
<th scope="col">Q3&nbsp; 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08</th>
<th scope="col">2008 CHG%</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP % Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Australia</td>
<td>--</td>
<td>-0.53</td>
<td>0.08</td>
<td>0.28</td>
<td>0.49</td>
<td>2.06</td>
<td>4.02</td>
</tr>
<tr>
<td class="firstcol">New Zealand</td>
<td>--</td>
<td>-0.57</td>
<td>-0.65</td>
<td>-.061</td>
<td>-.052</td>
<td>-0.97</td>
<td>3.12</td>
</tr>
<tr class="odd">
<td class="firstcol">NZIER (% Balance)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Manufacturers</td>
<td>-61</td>
<td>-67</td>
<td>-24</td>
<td>-60</td>
<td>-73</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Builders</td>
<td>-64</td>
<td>-62</td>
<td>-12</td>
<td>-56</td>
<td>-64</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Merchants</td>
<td>-62</td>
<td>-70</td>
<td>-10</td>
<td>-66</td>
<td>-60</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Service Industries</td>
<td>-66</td>
<td>-62</td>
<td>-21</td>
<td>-65</td>
<td>-62</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Gasoline Prices Hold Prior Weeks'Gains

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
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}
.even{
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background-color:#f0f0f0;
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<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090406b.jpg" align="left" border="0" height="265" width="353">
The value of retail sales excluding motor vehicles and
motorcycles in the Euro Area had risen each month since the series
began in 1995 until September of last year. (In the Euro Area, retail
sales, excluding motor vehicles and motorcycles, are reported in index
form with a base of 2005=100.) Since then, they have declined in four
of the five subsequent months. By February 2009, they were 2.7% below
February 2008<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090406c.jpg" align="right" border="0" height="265" width="353">
In general, retail sales tend to show increases in year to
year growth reflecting the growing demands of an increasing population.
Even in mild recessions, retail sales tend to increase. The growth in
retail sales in the Euro Area has tended to be lower than that in
either the UK or the US, as can be seen in the first chart. In the last
four months retail sales in the Euro Area show much smaller declines in
sales relative to the US but slightly larger declines than the UK. (The
chart shows recession shading for the US.)
Good data for retail sales, like data on employment,
production and such, take time to compile and by the time they are
published, then current conditions may well have changed. Measures of
consumer and business confidence help in judging current sentiment and
they have recently shown some slight improvement. The stock markets
also reflect economic sentiment and markets around the world have
improved in the very recent past.. The second chart plots the daily
price of stocks in the Euro Area, the UK and the US on a log scale.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Retail
sales ex motor vehicles and motor cycles (2005=100)</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09&nbsp;</th>
<th scope="col">Dec&nbsp; 08&nbsp;</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep 08</th>
<th scope="col">Feb 09/Feb 08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EURO AREA&nbsp;</td>
<td>105.97</td>
<td>106.38</td>
<td>106.10</td>
<td>106.59</td>
<td>107.36</td>
<td>108.70</td>
<td>-2.66</td>
</tr>
<tr>
<td class="firstcol">United Kingdom</td>
<td>109.57</td>
<td>110.64</td>
<td>106.91</td>
<td>109.98</td>
<td>110.71</td>
<td>116.41</td>
<td>-2.14</td>
</tr>
<tr class="odd">
<td class="firstcol">United States</td>
<td>107.72</td>
<td>106.76</td>
<td>105.12</td>
<td>108.94</td>
<td>112.42</td>
<td>116.16</td>
<td>-6.04</td>
</tr>
</tbody>
</table>
</body></html>

The value of retail sales excluding motor vehicles and motorcycles in the Euro Area had risen each month since the series began in 1995 until September of last year. (In the Euro Area, retail sales, excluding motor vehicles and [...]

Retail Sales Continue To Fall In The Euro Area

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Robert Brusca

260120E.jpg

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

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

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

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

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

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

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

260120.jpg

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

ZEW Survey Shows Advancement All Around

Tian Yong Woon

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

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

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

260119T1.jpg

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

260119T2.jpg

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

260119T3.jpg

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

260119T4.gif

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

260119T5.jpg

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

260119T6.jpg

Asia

Economic Letter from Asia: Shifting Gears

Winnie Tapasanun

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

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

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

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

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

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

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

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