Robert Brusca

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<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>
</body></html>

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 [...]

German New Orders Decline

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>
</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 Applications Jump Higher As Refi's More Than Double

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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>

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>
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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

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.

260205Z1.jpg

**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.

260205Z4.jpg

**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

260205X15.jpg

260205Y15.jpg

**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.

260205C15.jpg

260205D15.jpg

- 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

260205A2.jpg

260205B2.jpg

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.