Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331a.jpg" align="left" border="0" height="265" width="353">
The January S&amp;P/Case-Shiller 20
Home Price Composite Index fell 2.2% from December. That
pulled prices down 19.0% during the last twelve months and by 29.1%
since their peak in May 2006. The series dates back only to
2000. The January decline in prices was as expected.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090331b.jpg" align="right" border="0" height="265" width="353">
The S&amp;P/Case-Shiller home price series can be found in
Haver's USECON database but the city data is in the
REGIONAL database.
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is weighted to reflect price changes due to extensive remodeling,
home additions or extreme neglect. For example, smaller weights are
assigned to sales of homes that have undergone extensive remodeling.
The Case-Shiller composite index of homes in 10 metropolitan
areas, which has a longer history and dates back to 1987, fell 2.0% and
was down 19.4% year-to-year. The measure was down 29.7% since the 2006
peak.
Weakest Regions: Home prices in Phoenix,
Nevada were quite weak and fell 35.0% y/y and in San Diego prices fell
24.9% y/y, off 40.4% from their early 2006 peak. Home prices in Las
Vegas, Nevada fell 32.5% y/y and were down 46.2% from their peak.
Prices in Miami fell 29.4% y/y while home prices in Los Angeles were
down 25.8% y/y. In San Francisco home prices were off 32.4%
year-to-year. In Tampa they fell 23.3% and in Detroit home prices fell
by 22.6% y/y.
Less Weak Regions: In the Northeast, the
decline in home prices continued less severe. Prices in New York fell
9.6% y/y, off 16.2% from their 2006 peak. Prices were down 7.3%
year-to-year in Boston and in Dallas prices were off by a modest 4.8%
y/y and by 8.8% from the 2007 peak. In Charlotte, North Carolina prices
fell a moderate 8.8% y/y and in Denver home prices prices fell just
5.1% y/y. In Cleveland, Ohio prices were off 5.1% y/y but in Chicago
home prices were down a larger 16.4% y/y, 22.0% from the 2007 peak.
The latest press release from Standard &amp; Poor's can be
found <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_033114.pdf">here</a>.
An overview of the S&amp;P/Case-Shiller home price series can be
found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
The Case-Shiller data is available in Haver's USECON
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">January</th>
<th scope="col">December</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">20 City Composite
Index</td>
<td>147.45</td>
<td>150.75</td>
<td>-19.0%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>
</body></html>

The January S&P/Case-Shiller 20 Home Price Composite Index fell 2.2% from December. That pulled prices down 19.0% during the last twelve months and by 29.1% since their peak in May 2006. The series dates back only to 2000. The January [...]

Case-Shiller Home Price Index Falls Further

Case-Shiller Home Price IndexFalls Further

Robert Brusca

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<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

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<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?

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<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

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<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

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<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

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.

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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