Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090330d.jpg" align="left" border="0" height="265" width="353">
In the EMU framework it is pretty clear that things are not
going very well. In the March report even though the Markit (formerly
Reuter) PMIs had bottomed and risen, the similar gauges from the EU
Commission show no such trend. Indeed, the EU Commission framework
shows universal weakness and near universal worst case readings. The overall sentiment index as at a
low as is the industrial measure, consumer confidence, and the service
sector barometer. Above their lowest readings are the retail and
construction sectors each of which is still in about the lower 10% of
its respective range. And
that&#8217;s as good as it gets - bottom 10% - a clear &#8216;F&#8217; if we were grading.
Moreover, the overall sentiment gauges for EMU are at their
lowest in EMU as a whole, in Germany and in Italy . The UK , an EU
member, is also on a low. France and Spain are not at their respective
all time (since 1985) lows, but are not far from them.

If we turn to the industrial sector details we find that most
of the component readings are at or near all time lows except for
inventories; they are in the top 10% of their range &#8211; not a good
&#8216;top-10&#8217; reading at all.
Consumer confidence is also at its all-time low although its
components are not so universally at extremes.
Still, the economic situation in the past 12-months and
expectations for the next 12-months are each at all time lows. The environment for making major
purchases now is only &#8216;only&#8217; in the bottom 30% of its range. For the
next 12months the reading is in the bottom 15% of its range, a bit
worse that eh current reading: that is not good. Still
the consumer does not seem as beleaguered as the industrial sector.
German and French consumer responses are at all-time lows. Italy , the
UK and Spain are, respectively, in the bottom 17th,
17th and 9th percent of
their ranges.
With the consumers not being as impacted as badly as industry
it is not surprising that the retail sector is &#8216;only&#8217; in the bottom 10%
of its range. Across the largest EMU/EU countries the results are even
better. In France the responses are only in the bottom 63rd
percentile of their range (top 37%!), Italy&#8217;s retail sector is in the
bottom 34th percentile, Germany and Spain are in
the lower 20th percentile and the UK is the
weakest in the bottom 17th percentile.
The services sector has no bright spots or readings. The
overall gauges for EU is at its all time low as are all its component
readings; the main countries have readings that are at their all-time
lows or quite near them.
Construction as a sector is in the lower 25th
percentile of its range on an EU-wide basis. Across countries, Germany
and Italy show near midpoint readings in construction; France is a 30th
percentile reading; the UK is a bottom 25th
percentile reading; Spain is a bottom 20 percentile reading.
Expected and current employment readings are at their worst or
bottom 10% across the various sectors with the obvious exception of the
expected unemployment reading which is at an all time high.
The EU/EMU is a still every weak region. It is not showing the
upward momentum or abatement of downward momentum that is becoming
increasingly common in the US . Its leaders are less active in
implementing new stimulus programs, although in fairness, Europe in
general has a better social safety-net than does the US . Still As I
pointed out at the time of the Obama plan, &#8216;cushion&#8217; is not &#8216;stimulus&#8217;.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">EU
Sectors and Country level Overall Sentiment</th>
<th colspan="2" scope="col">R-SQ</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">EU</td>
<td>Mar 
09</td>
<td>Feb 
09</td>
<td>Jan 
09</td>
<td>Dec 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>w/ 
Overall</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Overall</td>
<td style="font-weight: bold;">60.3</td>
<td style="font-weight: bold;">60.9</td>
<td style="font-weight: bold;">63.2</td>
<td style="font-weight: bold;">66.6</td>
<td style="font-weight: bold;">0.0</td>
<td style="font-weight: bold;">220</td>
<td style="font-weight: bold;">116</td>
<td style="font-weight: bold;">60</td>
<td style="font-weight: bold;">56</td>
<td style="font-weight: bold;">99</td>
<td style="font-weight: bold;">1.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial</td>
<td>-39</td>
<td>-37</td>
<td>-33</td>
<td>-32</td>
<td>0.0</td>
<td>220</td>
<td>7</td>
<td>-39</td>
<td>46</td>
<td>-8</td>
<td>0.89</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confid</td>
<td>-32</td>
<td>-32</td>
<td>-31</td>
<td>-28</td>
<td>0.0</td>
<td>219</td>
<td>2</td>
<td>-32</td>
<td>34</td>
<td>-11</td>
<td>0.86</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-22</td>
<td>-24</td>
<td>-25</td>
<td>-25</td>
<td>9.7</td>
<td>217</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-6</td>
<td>0.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-38</td>
<td>-38</td>
<td>-36</td>
<td>-32</td>
<td>8.9</td>
<td>205</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-18</td>
<td>0.44</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-31</td>
<td>-29</td>
<td>-28</td>
<td>-23</td>
<td>0.0</td>
<td>145</td>
<td>32</td>
<td>-31</td>
<td>63</td>
<td>15</td>
<td>0.87</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>Mar 
09</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>-1.1%</td>
<td>-2.8%</td>
<td>-2.5%</td>
<td>64.6</td>
<td>0.0</td>
<td>220</td>
<td>117</td>
<td>65</td>
<td>52</td>
<td>99</td>
<td>0.96</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-1.1%</td>
<td>-1.6%</td>
<td>-4.0%</td>
<td>72.4</td>
<td>0.0</td>
<td>220</td>
<td>121</td>
<td>72</td>
<td>48</td>
<td>99</td>
<td>0.70</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-1.3%</td>
<td>-0.9%</td>
<td>-0.7%</td>
<td>73.1</td>
<td>2.4</td>
<td>219</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>99</td>
<td>0.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-6.3%</td>
<td>-0.4%</td>
<td>-1.4%</td>
<td>67.1</td>
<td>0.0</td>
<td>220</td>
<td>121</td>
<td>67</td>
<td>54</td>
<td>99</td>
<td>0.82</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>1.2%</td>
<td>-3.2%</td>
<td>3.7%</td>
<td>67.8</td>
<td>2.2</td>
<td>218</td>
<td>117</td>
<td>67</td>
<td>50</td>
<td>100</td>
<td>0.72</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo:UK</td>
<td>-0.7%</td>
<td>-6.3%</td>
<td>-10.9%</td>
<td>56.0</td>
<td>0.0</td>
<td>220</td>
<td>117</td>
<td>56</td>
<td>61</td>
<td>100</td>
<td>0.58</td>
</tr>
<tr class="even">
<td colspan="5">Since 1990 except
Services (Oct
1996)247</td>
<td>-Count</td>
<td>Services:</td>
<td>145</td>
<td>-Count</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures</td>
</tr>
</tbody>
</table>
</body></html>

In the EMU framework it is pretty clear that things are not going very well. In the March report even though the Markit (formerly Reuter) PMIs had bottomed and risen, the similar gauges from the EU Commission show no such trend. [...]

EMU Still Sinking In EU Index Report

Louise Curley

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090330e.jpg" align="left" border="0" height="265" width="353">
The Japanese index of industrial production in manufacturing
continued to fall sharply in February. The index with base 2005=100 was
68.8 down 9.5% from January and 27.8% below February, 2007.
Manufacturing production is now at levels last seen in the late
seventies and early eighties of the last century. The decline in the
production index has followed quickly on the declines in the index of
manufacturing shipments, but until the last two months, the index of
inventories continued to rise, resulting in a rising index of
inventory/sales ratio, as can be seem in the first chart. The index of
the inventory/sales ratio rose in January and February, as the declines
in shipments offset the declines in index of inventories.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090330f.jpg" align="right" border="0" height="265" width="353">
The index of manufacturing inventories showed a decline of
2.1% in January from December and one of 4.2% in February from January.
Although these reductions seem small in percentage terms, the 4.2% drop
was the biggest drop since 1978 when the record keeping began. With
production at historical lows and now historically large reductions in
inventories, manufacturers are apparently are beginning to see a need
to increase production. and are currently forecasting increases in the
index of industrial production for manufacturing in March and April of
2.8% and 3.1% respectively. The second chart shows their expectations.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN
MANUFACTURING&nbsp;&nbsp;&nbsp; (2005=100)</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09&nbsp;</th>
<th scope="col">Feb&nbsp; 08&nbsp;</th>
<th scope="col">M/M CHG&nbsp;</th>
<th scope="col">Y/Y CHG</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial
Production&nbsp;</td>
<td>68.6</td>
<td>75.8</td>
<td>110.2</td>
<td>-9.50</td>
<td>-37.75</td>
<td>103.9</td>
<td>107.4</td>
</tr>
<tr>
<td class="firstcol">Shipments</td>
<td>70.4</td>
<td>76.0</td>
<td>111.3</td>
<td>-6.84</td>
<td>-36.39</td>
<td>104.5</td>
<td>107.8</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td>103.7</td>
<td>108.2</td>
<td>105.4</td>
<td>-4.16</td>
<td>-1.61</td>
<td>106.7</td>
<td>103.9</td>
</tr>
<tr>
<td class="firstcol">Inventory/sales Ratio</td>
<td>158.2</td>
<td>151.4</td>
<td>99.8</td>
<td>4.49</td>
<td>60.94</td>
<td>108.7</td>
<td>100.4</td>
</tr>
</tbody>
</table>
</body></html>

The Japanese index of industrial production in manufacturing continued to fall sharply in February. The index with base 2005=100 was 68.8 down 9.5% from January and 27.8% below February, 2007. Manufacturing production is now at levels [...]

Has Japanese Industrial Production Bottomed?

Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090330a.jpg" width="353">
At best, the recent movement in commodity prices suggests that recessionary forces are diminishing. Prices for oil, copper and grains have stabilized after sharp declines in last year&#39;s second half. The price of gold has moved to the high end of the last year&#39;s range. Continued recovery in prices is dependent, of course, on whether worldwide economic recovery develops. So far, the move in commodity prices alone is not convincing.
Crude oil prices have shown some bottoming with the price of WTI crude rising to $50 per barrel from the $40 low. But the case for a turnaround is not strong. The recession in the U.S. industrial sector and fewer car-miles driven have lowered the demand for all petroleum products by 3.2% y/y after the 3.5% decline last year. And a pending upturn is not yet signaled by various leading indicators. Inventory decumulation rates are picking up steam and consumer sentiment remains depressed. Abroad, recessionary forces are gaining steam. Industrial output in Germany and France fell 11-12% through the end of last year and production in Japan was off by roughly one quarter.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090330b.jpg" width="353">
The worldwide recession also has taken its hold on industrial metals prices as factory sector output has fallen sharply. Prices for aluminum, stainless steel scrap and high grade copper are 50% lower than a year ago and the latest bottoming in copper prices is tentative, at best.An upturn in metals prices awaits recovery in global manufacturing sector activity.
Food prices have been mixed, with an upward trend. Wheat and corn prices recently recovered modestly after earlier sharp declines. Conversely, beef prices which showed signs of stability, have moved lower. The upward trend to prices overall derives from several global forces, notably economic development (upward income mobility) in the worlds&#39; economies and government mandated bio-fuel standards.
Finally, gold prices have strengthened recently and they have reached new highs of near $1,000 per ounce. Platinum and silver prices have strengthen as well from the lows of last fall but they still are down by 25% to 40% year to year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090330c.jpg" width="353">
Overall, commodity prices have shown just a small effect on consumer price inflation. At most they account for one-third of the price of a particular product. It&#39;s as an indicator of demand that they are valuable. They are quite sensitive to changes in the supply-demand equation. As of yet they may be signaling that the U.S. recession was passed its worst stage. Factory sector output fell 5.4%, 9.2% then 17.4% (AR) through the first three quarters of 2008. OECD output in the big 7 nations similarly fell at a 3.5%, 6.8% then 21.8% rate in 2008.
The commodity price series in the table below can be found in Haver&#39;s WEEKLY database. The monetary and inflation figures cited above are available in USECON.
A Framework for Analyzing Bank Lending is today&#39;s speech by Fed Governor Elizabeth A. Duke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/F918CF1E7D0C4ABCBE1BDCB5E4918006.htm"> here</a>.
The Risk of Deflation from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-12.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Commodity Prices</a></th>
<th scope="col">Latest Week</th>
<th scope="col">Y/Y</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">March &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Industrial Metals</td>
<td>&nbsp;</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">&nbsp;&nbsp; Aluminum ($/lb.)</td>
<td>0.64</td>
<td>-50.4%</td>
<td>0.99</td>
<td>0.63</td>
<td>1.34</td>
<td>1.18</td>
<td>1.18</td>
<td>1.18</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Stainless Steel Scrap ($/Ton)</td>
<td>1,188</td>
<td>-59.9%</td>
<td>1,201</td>
<td>--</td>
<td>2,893</td>
<td>2,121</td>
<td>2,786</td>
<td>2,918</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; High Grade Copper ($/ton)</td>
<td>1.80</td>
<td>-51.4%</td>
<td>1.50</td>
<td>1.51</td>
<td>3.77</td>
<td>1.31</td>
<td>3.06</td>
<td>3.04</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Foods</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Milk (Cents/lb.)</td>
<td>85</td>
<td>-34.6%</td>
<td>85</td>
<td>84</td>
<td>132</td>
<td>86</td>
<td>172</td>
<td>145</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Beef Carcass (Index Value)</td>
<td>126.6</td>
<td>-4.3%</td>
<td>127.0</td>
<td>136.2</td>
<td>135.3</td>
<td>134.6</td>
<td>139.3</td>
<td>134.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Corn, No. 2 Yellow ($/bushel)</td>
<td>3.70</td>
<td>-27.5%</td>
<td>3.44</td>
<td>3.59</td>
<td>5.18</td>
<td>3.76</td>
<td>4.14</td>
<td>3.46</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Wheat, Soft Red ($/bushel)</td>
<td>4.35</td>
<td>-50.0%</td>
<td>3.42</td>
<td>3.49</td>
<td>9.43</td>
<td>4.78</td>
<td>8.64</td>
<td>4.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Light Sweet Crude Oil, WTI ($/bbl.)</td>
<td>49.46</td>
<td>-53.3%</td>
<td>39.05</td>
<td>41.72</td>
<td>105.78</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Gold, Handy &amp; Harmon ($/oz.)</td>
<td>923.75</td>
<td>-0.3%</td>
<td>941.63</td>
<td>856.38</td>
<td>972.06</td>
<td>869.75</td>
<td>810.5</td>
<td>628.7</td>
</tr>
</tbody>
</table>
</body>
</html>

At best, the recent movement in commodity prices suggests that recessionary forces are diminishing. Prices for oil, copper and grains have stabilized after sharp declines in last year's second half. The price of gold has moved to the [...]

Commodity Prices Meander

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327g.jpg" align="left" border="0" height="265" width="353">
 Egad! Still very weak: Euro industrial
orders continued their steep rate of decline in January. The 3.4% mo/mo
drop was less than the 8% plunge in December and the 9.4% stunner in
November, but it fell far short of being reassuring. 
 

Weak Q1 in train, too: The three month pace
of decline is 57% at an annual rate. The rate of decline in the quarter
is also at a -50% annual rate. So 2009-Q1 is not an encouraging number
to look forward to at this point. 
 

Imported weakness for Europe: The
domestic/foreign split for orders is somewhat illuminating. Domestic
orders fell at by 3.9% from December. Foreign orders fell by 7.3%. The
pace of decline for past growth rates also shows that the domestic rate
of decline has lagged the pace of the foreign orders decline. But that
growth gap has become more pronounced this month with domestic orders
off by so much less than foreign orders. Clearly the EMU is importing
weakness from abroad. Its foreign orders and exports are falling at a
faster pace than its domestic activity. 
 

Dissent at home: While the ECB is coming
under more criticism from business groups (today it is Business Europe,
which represents national business federations and industry groups) the
industrial orders data strongly suggest that the pulse of weakness is
from beyond the ECBs border and reach. That does not mean that the ECB
or that fiscal stimulus could not make up for it, but that there is a
continuing drag of controllable influence on the euro-economy. 
 

A glint or two of good news: Still, it is
encouraging that the Markit PMI indices for services and for MFG turned
higher in March. Today the CEPR index of activity echoed that signal
and turned just a little bit less negative in March compared to
February. This sort of statistic is not bankable but it is indicative
of an economy that may be passing from its most severe phase of
negative growth to a milder phase and perhaps eventually headed to
recovery. 
 

Looking ahead to March data&#8230; For the bulk
of Euro-data the readings remain dispirited and grim. But the March
reports which are so few in number have begun to stake out a less
negative view. There it is: the precursor to a positive view. Not to
get too excited yet, but this is the way that the rebound will start.
So despite the discouraging data on the day the there is some good news
in train but it&#8217;s only found in the freshest of reports. That means we
are apt to see better news for COUNTRY level data first, since the EMU
reports lag the timeliest of national reports. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">E-zone-13 and UK Industrial Orders And Sales</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Jan-09</td>
<td>Dec-08</td>
</tr>
<tr class="grey4">
<td class="firstcol">E- AREA Detail</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG Orders</td>
<td>-3.4%</td>
<td>-8.0%</td>
<td>-9.4%</td>
<td>-57.9%</td>
<td>-63.9%</td>
<td>-50.1%</td>
<td>-46.2%</td>
<td>-32.0%</td>
<td>-28.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG Sales</td>
<td>#N/A</td>
<td>-3.5%</td>
<td>-3.9%</td>
<td>#N/A</td>
<td>-34.7%</td>
<td>#N/A</td>
<td>-24.0%</td>
<td>#N/A</td>
<td>-11.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Consumer</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>#N/A</td>
<td>-4.9%</td>
<td>#N/A</td>
<td>-4.3%</td>
<td>#N/A</td>
<td>-2.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Capital</td>
<td>#N/A</td>
<td>-1.7%</td>
<td>-2.1%</td>
<td>#N/A</td>
<td>-20.3%</td>
<td>#N/A</td>
<td>-16.1%</td>
<td>#N/A</td>
<td>-8.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Intermediate</td>
<td>-3.9%</td>
<td>-5.9%</td>
<td>-8.4%</td>
<td>-52.8%</td>
<td>-56.1%</td>
<td>-46.9%</td>
<td>-40.8%</td>
<td>-28.6%</td>
<td>-23.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Memo: MFG</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total Orders</td>
<td>-3.4%</td>
<td>-8.0%</td>
<td>-9.4%</td>
<td>-57.9%</td>
<td>-63.9%</td>
<td>-50.1%</td>
<td>-46.2%</td>
<td>-32.0%</td>
<td>-28.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; E-13 Domestic MFG
orders</td>
<td>-3.9%</td>
<td>-5.9%</td>
<td>-8.4%</td>
<td>-52.8%</td>
<td>-56.1%</td>
<td>-46.9%</td>
<td>-40.8%</td>
<td>-28.6%</td>
<td>-23.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; E-13 Foreign MFG
orders</td>
<td>-7.3%</td>
<td>-7.1%</td>
<td>-10.3%</td>
<td>-64.4%</td>
<td>-64.0%</td>
<td>-56.2%</td>
<td>-45.5%</td>
<td>-37.2%</td>
<td>-28.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Countries:</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Germany (MFG):</td>
<td>-7.6%</td>
<td>-8.1%</td>
<td>-7.5%</td>
<td>-61.9%</td>
<td>-61.3%</td>
<td>-52.5%</td>
<td>-46.3%</td>
<td>-35.0%</td>
<td>-30.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; France (Ind):</td>
<td>-2.5%</td>
<td>-2.0%</td>
<td>-6.6%</td>
<td>-36.6%</td>
<td>-52.1%</td>
<td>-44.6%</td>
<td>-36.5%</td>
<td>-28.0%</td>
<td>-23.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Italy (Ind):</td>
<td>#N/A</td>
<td>-2.0%</td>
<td>-6.6%</td>
<td>#N/A</td>
<td>-47.2%</td>
<td>#N/A</td>
<td>-31.4%</td>
<td>#N/A</td>
<td>-18.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; UK (Engineering Ind):</td>
<td>-25.2%</td>
<td>26.1%</td>
<td>-11.9%</td>
<td>-52.3%</td>
<td>-33.0%</td>
<td>-39.7%</td>
<td>5.0%</td>
<td>-34.4%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
</body></html>

Egad! Still very weak: Euro industrial orders continued their steep rate of decline in January. The 3.4% mo/mo drop was less than the 8% plunge in December and the 9.4% stunner in November, but it fell far short of being reassuring. [...]

EMU Orders: Still Sinking Fast

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327d.jpg" align="right" border="0" height="265" width="353">
As reported
mid-month, consumers' moods have stabilized as suggested by the
University of Michigan. It reported that the full month March reading
of consumer sentiment held stable in the range of the last several
months. Despite this stability, however, the latest figure was down
17.6% from last March. During the last ten years, there has been a 63%
correlation between the level of sentiment and the three-month change
in real personal consumption expenditures. The March reading came in
slightly above Consensus expectations.The expectations component of
consumer sentiment firmed a bit and recovered nearly half of the
February decline. Expectations for business conditions during the next
year led that increase but remained near the lowest level
since 1980.&nbsp; Expectations for conditions during the
next five years fell slightly to the lowest level since last June.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327e.jpg" align="right" border="0" height="265" width="353">
The
expected change in personal finances ticked higher.The current
economic conditions index also improved slightly from February after an
initial reading of sharp decline. Buying conditions for large household
goods fell just slightly m/m but they remained down 21.0% from a year
earlier. The view of current personal finances also fell and remained
down by one-half from early 2007. The opinion of government
policy, which may eventually influence economic expectations, improved
sharply to the highest level since January of 2007. Twenty two percent
of respondents thought that a good job was being done by government, up
from the four percent low of last December, while a much reduced twenty
eight percent thought that a poor job was being done.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327f.jpg" align="right" border="0" height="265" width="353">
Inflation expectations for the next year were about stable at 2.4%.
They were as high as 7.0% last May. The range of expectations is from
slight price deflation to a 5.3% increase in prices. The expected
inflation rate during the next five years reversed most of the
increases during the last two months and fell to 2.9%. The
University of Michigan survey data is not seasonally adjusted.
&nbsp;The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews.&nbsp; The summary indexes are in Haver's USECON
database with details in the proprietary UMSCA database.
Payments Fraud: An Introduction from the Federal
Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/economicperspectives/ep_1qtr2009_part1_amromin_porter.pdf">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">March (Final)</th>
<th scope="col">Mid-March</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">March y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>57.3</td>
<td>56.6</td>
<td>56.3</td>
<td>61.2</td>
<td>-17.6%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>63.3</td>
<td>62.3</td>
<td>65.5</td>
<td>66.5</td>
<td>-24.8</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>53.5</td>
<td>53.0</td>
<td>50.5</td>
<td>57.8</td>
<td>-11.0</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body></html>

As reported mid-month, consumers' moods have stabilized as suggested by the University of Michigan. It reported that the full month March reading of consumer sentiment held stable in the range of the last several months. Despite this [...]

Michigan Consumer Sentiment Improves As The Opinion Of Government Jumps

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327a.jpg" align="right" border="0" height="265" width="353">Consumer
spending is recovering from its swoon this past Fall. The U.S. Bureau
of Economic Analysis reported that personal spending during February
logged its second increase after six consecutive monthly declines. That
recovery is hardly robust however. Adjusted for inflation, spending in
fact fell 0.2% last month after January's 0.7% rise. For the quarter so
far, real spending is up at just a 1.3% annual rate which makes up
little of the 4.3% rate of decline during 4Q and the 3.8% 3Q drop. 
Much of the recovery in overall real spending this quarter traces to
the modest, halting rise in spending on autos, after an abysmal Fall.
Real spending on autos &amp; parts fell 3.9% last month retracing
most of a 5.3% January increase. This flatness follows declines at 10%
to 40% annual rates during each quarter of 2008. Elsewhere, earlier
declines in real outlays indeed may be stabilizing as indicated by two
consecutive firm gains in furniture &amp; appliances spending. But
that's about it for the good news. Real spending on apparel rose all of
0.4% last month after no change during January. It's still down 2.6%
year-to-year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327b.jpg" align="right" border="0" height="265" width="353">
And real spending on services has been modest as well. It
declined 0.1% last month and has been flat since November (+0.7% y/y).
The pullback in personal spending reflects lower levels of personal
income. Income declined 0.2% after a 0.2% January increase (that was
half the initially reported gain) and is down 1.3% versus its peak last
June. The latest decline about equaled the Consensus expectation. Also
losing steam, disposable personal income slipped
0.1% after the 1.6% January surge that owed to a 9.7% monthly drop in
taxes. Real disposable income also fell by 0.4% after January's gain of
1.3%. Despite the decline, real income increased 2.2% versus last
year. Wages &amp; salaries further reflected the weak job market
with a 0.4% decline (-0.2% y/y). So bad are the figures that wage
income was down in each of the last four months and at a 4.0% annual
rate during that period. That rate is the fastest since 1994. Private
sector wages during that period were down at a 6.0% annual rate, also
the worst since 1994. These declines contrast to wages in the
government sector which continue to increase. A 0.3% February rise
pulled wages up 5.1% versus last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327c.jpg" align="right" border="0" height="265" width="353">
Lower interest rates continued
to pull interest income down. It has fallen 1.0% to 2.0% during each of
the last five months (-7.2% y/y). In addition, weak corporate profits
lowered dividend income by 1.5%, about the rate of decline since
September and down 7.2% year-to-year.The stabilization of oil prices
caused the PCE chain price index to rise 0.3%
during the last two months. Core pricing power in fact firmed slightly
showing two months of 0.2% increase after having been unchanged for
two. The latest gain matched Consensus expectations. The personal
income &amp; consumption figures are available in Haver's USECON
and USNA databases.&nbsp; &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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-0.2</td>
<td>0.2</td>
<td>1.0</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-0.1</td>
<td>1.6</td>
<td>3.2</td>
<td>4.6</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.2</td>
<td>1.0</td>
<td>-0.4</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>4.2</td>
<td>4.4</td>
<td>0.3 (Feb. 08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.3</td>
<td>0.3</td>
<td>1.0</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.2</td>
<td>0.2</td>
<td>1.8</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
</body></html>

Consumer spending is recovering from its swoon this past Fall. The U.S. Bureau of Economic Analysis reported that personal spending during February logged its second increase after six consecutive monthly declines. That recovery is [...]

U.S. Personal Spending Increases Again, Modestly

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327a.jpg" align="right" border="0" height="265" width="353">Consumer
spending is recovering from its swoon this past Fall. The U.S. Bureau
of Economic Analysis reported that personal spending during February
logged its second increase after six consecutive monthly declines. That
recovery is hardly robust however. Adjusted for inflation, spending in
fact fell 0.2% last month after January's 0.7% rise. For the quarter so
far, real spending is up at just a 1.3% annual rate which makes up
little of the 4.3% rate of decline during 4Q and the 3.8% 3Q drop. 
Much of the recovery in overall real spending this quarter
traces to
the modest, halting rise in spending on autos, after an abysmal Fall.
Real spending on autos &amp; parts fell 3.9% last month retracing
most of a 5.3% January increase. This flatness follows declines at 10%
to 40% annual rates during each quarter of 2008. Elsewhere, earlier
declines in real outlays indeed may be stabilizing as indicated by two
consecutive firm gains in furniture &amp; appliances spending. But
that's about it for the good news. Real spending on apparel rose all of
0.4% last month after no change during January. It's still down 2.6%
year-to-year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327b.jpg" align="right" border="0" height="265" width="353">
And real spending on services has been modest as well. It
declined 0.1% last month and has been flat since November (+0.7% y/y).

The pullback in personal spending reflects lower levels of
personal
income. Income declined 0.2% after a 0.2% January increase (that was
half the initially reported gain) and is down 1.3% versus its peak last
June. The latest decline about equaled the Consensus expectation. Also
losing steam, disposable personal income slipped
0.1% after the 1.6% January surge that owed to a 9.7% monthly drop in
taxes. Real disposable income also fell by 0.4% after January's gain of
1.3%. Despite the decline, real income increased 2.2% versus last
year.
 Wages &amp; salaries further reflected the weak job
market
with a 0.4% decline (-0.2% y/y). So bad are the figures that wage
income was down in each of the last four months and at a 4.0% annual
rate during that period. That rate is the fastest since 1994. Private
sector wages during that period were down at a 6.0% annual rate, also
the worst since 1994. These declines contrast to wages in the
government sector which continue to increase. A 0.3% February rise
pulled wages up 5.1% versus last year.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327c.jpg" align="right" border="0" height="265" width="353">Lower
interest rates continued
to pull interest income down. It has fallen 1.0% to 2.0% during each of
the last five months (-7.2% y/y). In addition, weak corporate profits
lowered dividend income by 1.5%, about the rate of decline since
September and down 7.2% year-to-year.
The stabilization of oil prices
caused the PCE chain price index to rise 0.3%
during the last two months. Core pricing power in fact firmed slightly
showing two months of 0.2% increase after having been unchanged for
two. The latest gain matched Consensus expectations.
 The personal
income &amp; consumption figures are available in Haver's USECON
and USNA databases.&nbsp; &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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-0.2</td>
<td>0.2</td>
<td>1.0</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-0.1</td>
<td>1.6</td>
<td>3.2</td>
<td>4.6</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.2</td>
<td>1.0</td>
<td>-0.4</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>4.2</td>
<td>4.4</td>
<td>0.3 (Feb. 08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.3</td>
<td>0.3</td>
<td>1.0</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.2</td>
<td>0.2</td>
<td>1.8</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Improves As The Opinion Of Government Jumps 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 27, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327d.jpg" align="right" border="0" height="265" width="353">As reported
mid-month, consumers' moods have stabilized as suggested by the
University of Michigan. It reported that the full month March reading
of consumer sentiment held stable in the range of the last several
months. Despite this stability, however, the latest figure was down
17.6% from last March. During the last ten years, there has been a 63%
correlation between the level of sentiment and the three-month change
in real personal consumption expenditures. The March reading came in
slightly above Consensus expectations.
The expectations component of
consumer sentiment firmed a bit and recovered nearly half of the
February decline. Expectations for business conditions during the next
year led that increase but remained near the lowest level
since 1980.&nbsp; Expectations for conditions during the
next five years fell slightly to the lowest level since last June.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327e.jpg" align="right" border="0" height="265" width="353">The
expected change in personal finances ticked higher.
The current
economic conditions index also improved slightly from February after an
initial reading of sharp decline. Buying conditions for large household
goods fell just slightly m/m but they remained down 21.0% from a year
earlier. The view of current personal finances also fell and remained
down by one-half from early 2007.
 The opinion of government
policy, which may eventually influence economic expectations, improved
sharply to the highest level since January of 2007. Twenty two percent
of respondents thought that a good job was being done by government, up
from the four percent low of last December, while a much reduced twenty
eight percent thought that a poor job was being done.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327f.jpg" align="right" border="0" height="265" width="353">Inflation
expectations for the next year were about stable at 2.4%.
They were as high as 7.0% last May. The range of expectations is from
slight price deflation to a 5.3% increase in prices. The expected
inflation rate during the next five years reversed most of the
increases during the last two months and fell to 2.9%.
 The
University of Michigan survey data is not seasonally adjusted.
&nbsp;The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews.&nbsp; The summary indexes are in Haver's USECON
database with details in the proprietary UMSCA database.
Payments Fraud: An Introduction from the
Federal
Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/economicperspectives/ep_1qtr2009_part1_amromin_porter.pdf">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">March (Final)</th>
<th scope="col">Mid-March</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">March y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>57.3</td>
<td>56.6</td>
<td>56.3</td>
<td>61.2</td>
<td>-17.6%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>63.3</td>
<td>62.3</td>
<td>65.5</td>
<td>66.5</td>
<td>-24.8</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>53.5</td>
<td>53.0</td>
<td>50.5</td>
<td>57.8</td>
<td>-11.0</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>

EMU Orders: Still Sinking Fast 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 27, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090327g.jpg" align="left" border="0" height="265" width="353">
 Egad! Still very weak: Euro industrial
orders continued their steep rate of decline in January. The 3.4% mo/mo
drop was less than the 8% plunge in December and the 9.4% stunner in
November, but it fell far short of being reassuring. 
 

Weak Q1 in train, too: The three month pace
of decline is 57% at an annual rate. The rate of decline in the quarter
is also at a -50% annual rate. So 2009-Q1 is not an encouraging number
to look forward to at this point. 
 

Imported weakness for Europe: The
domestic/foreign split for orders is somewhat illuminating. Domestic
orders fell at by 3.9% from December. Foreign orders fell by 7.3%. The
pace of decline for past growth rates also shows that the domestic rate
of decline has lagged the pace of the foreign orders decline. But that
growth gap has become more pronounced this month with domestic orders
off by so much less than foreign orders. Clearly the EMU is importing
weakness from abroad. Its foreign orders and exports are falling at a
faster pace than its domestic activity. 
 

Dissent at home: While the ECB is coming
under more criticism from business groups (today it is Business Europe,
which represents national business federations and industry groups) the
industrial orders data strongly suggest that the pulse of weakness is
from beyond the ECBs border and reach. That does not mean that the ECB
or that fiscal stimulus could not make up for it, but that there is a
continuing drag of controllable influence on the euro-economy. 
 

A glint or two of good news: Still, it is
encouraging that the Markit PMI indices for services and for MFG turned
higher in March. Today the CEPR index of activity echoed that signal
and turned just a little bit less negative in March compared to
February. This sort of statistic is not bankable but it is indicative
of an economy that may be passing from its most severe phase of
negative growth to a milder phase and perhaps eventually headed to
recovery. 
 

Looking ahead to March data&#8230; For the bulk
of Euro-data the readings remain dispirited and grim. But the March
reports which are so few in number have begun to stake out a less
negative view. There it is: the precursor to a positive view. Not to
get too excited yet, but this is the way that the rebound will start.
So despite the discouraging data on the day the there is some good news
in train but it&#8217;s only found in the freshest of reports. That means we
are apt to see better news for COUNTRY level data first, since the EMU
reports lag the timeliest of national reports. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E-zone-13
and UK Industrial Orders And Sales</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Jan-09</td>
<td>Dec-08</td>
</tr>
<tr class="grey4">
<td class="firstcol">E- AREA Detail</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG Orders</td>
<td>-3.4%</td>
<td>-8.0%</td>
<td>-9.4%</td>
<td>-57.9%</td>
<td>-63.9%</td>
<td>-50.1%</td>
<td>-46.2%</td>
<td>-32.0%</td>
<td>-28.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG Sales</td>
<td>#N/A</td>
<td>-3.5%</td>
<td>-3.9%</td>
<td>#N/A</td>
<td>-34.7%</td>
<td>#N/A</td>
<td>-24.0%</td>
<td>#N/A</td>
<td>-11.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Consumer</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>#N/A</td>
<td>-4.9%</td>
<td>#N/A</td>
<td>-4.3%</td>
<td>#N/A</td>
<td>-2.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Capital</td>
<td>#N/A</td>
<td>-1.7%</td>
<td>-2.1%</td>
<td>#N/A</td>
<td>-20.3%</td>
<td>#N/A</td>
<td>-16.1%</td>
<td>#N/A</td>
<td>-8.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Intermediate</td>
<td>-3.9%</td>
<td>-5.9%</td>
<td>-8.4%</td>
<td>-52.8%</td>
<td>-56.1%</td>
<td>-46.9%</td>
<td>-40.8%</td>
<td>-28.6%</td>
<td>-23.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Memo: MFG</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total Orders</td>
<td>-3.4%</td>
<td>-8.0%</td>
<td>-9.4%</td>
<td>-57.9%</td>
<td>-63.9%</td>
<td>-50.1%</td>
<td>-46.2%</td>
<td>-32.0%</td>
<td>-28.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; E-13 Domestic MFG
orders</td>
<td>-3.9%</td>
<td>-5.9%</td>
<td>-8.4%</td>
<td>-52.8%</td>
<td>-56.1%</td>
<td>-46.9%</td>
<td>-40.8%</td>
<td>-28.6%</td>
<td>-23.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; E-13 Foreign MFG
orders</td>
<td>-7.3%</td>
<td>-7.1%</td>
<td>-10.3%</td>
<td>-64.4%</td>
<td>-64.0%</td>
<td>-56.2%</td>
<td>-45.5%</td>
<td>-37.2%</td>
<td>-28.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Countries:</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Germany (MFG):</td>
<td>-7.6%</td>
<td>-8.1%</td>
<td>-7.5%</td>
<td>-61.9%</td>
<td>-61.3%</td>
<td>-52.5%</td>
<td>-46.3%</td>
<td>-35.0%</td>
<td>-30.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; France (Ind):</td>
<td>-2.5%</td>
<td>-2.0%</td>
<td>-6.6%</td>
<td>-36.6%</td>
<td>-52.1%</td>
<td>-44.6%</td>
<td>-36.5%</td>
<td>-28.0%</td>
<td>-23.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Italy (Ind):</td>
<td>#N/A</td>
<td>-2.0%</td>
<td>-6.6%</td>
<td>#N/A</td>
<td>-47.2%</td>
<td>#N/A</td>
<td>-31.4%</td>
<td>#N/A</td>
<td>-18.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; UK (Engineering Ind):</td>
<td>-25.2%</td>
<td>26.1%</td>
<td>-11.9%</td>
<td>-52.3%</td>
<td>-33.0%</td>
<td>-39.7%</td>
<td>5.0%</td>
<td>-34.4%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Personal Spending IncreasesAgain, Modestly

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

260120E.jpg

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

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

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

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

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

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

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

260120.jpg

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

ZEW Survey Shows Advancement All Around

Tian Yong Woon

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

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

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

260119T1.jpg

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

260119T2.jpg

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

260119T3.jpg

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

260119T4.gif

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

260119T5.jpg

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

260119T6.jpg

Asia

Economic Letter from Asia: Shifting Gears

Winnie Tapasanun

260116R23.jpg

260116S23.jpg

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

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

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

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

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

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

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

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

260116T23.jpg

260116U23.jpg

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

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

260116E.jpg

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

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

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

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

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

260115Z5.jpg

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

260115Z6.jpg

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

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2mhM227WWeJJ6kRv7sJMiE?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Economy in Brief

Jump to:

EMU Still Sinking In EU Index Report

Has Japanese Industrial Production Bottomed?

Commodity Prices Meander

Commodity Prices Meander

EMU Orders: Still Sinking Fast

Michigan Consumer Sentiment Improves As The Opinion Of Government Jumps

U.S. Personal Spending Increases Again, Modestly

U.S. Personal Spending IncreasesAgain, Modestly