Tom Moeller

The payroll processor ADP indicated in its latest National Employment Report that private nonfarm payrolls fell 697,000 last month. That followed a 614,000 decline during January which was revised from the initial estimate of a [...]

ADP Report: Payroll Employment Off 697,000

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303i.jpg" align="right" border="0" height="265" width="353">The
Australian Central Bank kept its benchmark interest rate at 3.25% today
after reductions of 400 basis points over the last seven months, as
shown in the first chart.&nbsp;&nbsp; Governor Glenn Stevens,
in announcing the decision, remarked that "In Australia, demand has not
weakened as much as in other countries and, on the basis of currently
available information, the Australian economy has not experienced the
sort of large contraction seen elsewhere.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303j.jpg" align="right" border="0" height="265" width="353">
Through
the third quarter of this year Australia has managed to register
positive advances in GDP while the U. S. and the Euro Area began to
show declines in the second and third quarters, as can be seen in the
second chart.&nbsp; Australia's fourth quarter will be announced
tomorrow and is expected to show a much smaller, if any, decline than
that shown by the U. S. and the Euro Area. The Reserve Bank of
Australia which forecasts year to year changes in GDP and inflation has
yet for forecast a decline in GDP.&nbsp; Their last three forecasts
for GDP are shown in the third chart.&nbsp; Their latest forecast
shows the lowest growth at 0.25% in the second quarter of 2009.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303k.jpg" align="right" border="0" height="265" width="353">
 Australia has, as noted above, moved aggressively to lower interest
rates and market and mortgage rates have responded and are at
historical lows. Business loan rates have also declined. Moreover, the
government has injected A$8.9 billion in to the economy with cash
handouts to the elderly and low income families that no doubt accounted
for much of the unusually big increase of 3.8% in retail sales in
December.&nbsp; Last month, Prime Minister, Kevin Rudd, indicated
that he will spend another A$42 billion on cash handouts and
infrastructure. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q4 07</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">SAAR REAL
GDP&nbsp;%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Australia</td>
<td></td>
<td>0.25</td>
<td>1.43</td>
<td>2.41</td>
<td>3.49</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>-5.84</td>
<td>-0.74</td>
<td>-0.72</td>
<td>2.67</td>
<td>1.34</td>
</tr>
<tr class="odd">
<td class="firstcol">United States</td>
<td>-6.25</td>
<td>-0.51</td>
<td>2.83</td>
<td>0.87</td>
<td>-0.17</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Australia</td>
<td>Jan 09</td>
<td>Dec 08&nbsp;</td>
<td>Nov 08&nbsp;</td>
<td>Oct 08&nbsp;</td>
<td>Sep 07</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail trade (SA M/M %)</td>
<td>0.24</td>
<td>3.82</td>
<td>0.43</td>
<td>0.96</td>
<td>-1.60</td>
</tr>
</tbody>
</table>
</body></html>

The Australian Central Bank kept its benchmark interest rate at 3.25% today after reductions of 400 basis points over the last seven months, as shown in the first chart. Governor Glenn Stevens, in announcing the decision, remarked [...]

Australia's Central Bank Takes A Breather: Economy Responding To Monetary And Fiscal Stimulus

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090304a.jpg" width="353">
What can be said about the decline in U.S. vehicle sales that hasn&#39;t already been noted? It&#39;s been picking up momentum recently. It&#39;s been to the lowest level since 1982. It&#39;s been broad-based across manufacturers and product type. U.S. unit sales of light vehicles fell a surprising 4.7% m/m to 9.12M (SAAR) from 9.57M during January. Sales of 9.6M had been expected for February. The latest figure was the lowest since June of 1982 according to the Autodata Corporation and Ward&#39;s Automotive News. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). The increased downward momentum portion of the story is that the February decline pulled the comparison versus a year ago to -40 6% which was its worst since the data became available in the late 1960s.
Sales of domestically-made light vehicles again were particularly hard hit. They posted a 6.8% month-to-month decline from January to 6.29 million units. That decline came on the heels of January&#39;s 12.2% drop. The level is now 45.5% below February 2008. Sales of domestically made light trucks led last month&#39;s downdraft with a 13.0% decline to 3.4M units. That was countered to an extent by a 1.7% m/m rise in domestic auto sales, but February&#39;s increase followed a 20.8% January decline and they still were off by almost one-half from February 2008.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090304b.jpg" width="353">
Imported light vehicle sales again outperformed the domestics last month as they posted a modest increase after January&#39;s 7.6% increase. Nevertheless, sales fell 25.9% year-to-year but the decline still is far less than for U.S. made vehicles. Sales of imported light trucks were the strongest as they increased 3.1% from January. The increase enabled sales of imported light trucks to grab 24.4% of the market; a record and more than double the share of ten years earlier. Sales of imported autos slipped 1.1% (-28.1% y/y) from January after that month&#39;s 8.5% rise.
Import&#39;s share of the U.S. light vehicle market jumped to a record 31.1% in February, up almost five percentage points from the 2008 average. (Imported vehicles are those produced outside the U.S. and do not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.)
The U.S. vehicle sales figures can be found in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Feb.&#39;09 / Feb.&#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">Total</td>
<td>9.12</td>
<td>9.57</td>
<td>10.31</td>
<td>-40.6%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>4.63</td>
<td>4.60</td>
<td>5.21</td>
<td>-37.2</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>2.89</td>
<td>2.84</td>
<td>3.59</td>
<td>-41.7</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.74</td>
<td>1.76</td>
<td>1.62</td>
<td>-28.1</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>4.50</td>
<td>4.97</td>
<td>5.10</td>
<td>-43.7</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>3.40</td>
<td>3.91</td>
<td>4.10</td>
<td>-48.3</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.10</td>
<td>1.06</td>
<td>1.00</td>
<td>-22.2</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>


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What can be said about the decline in U.S. vehicle sales that hasn't already been noted? It's been picking up momentum recently. It's been to the lowest level since 1982. It's been broad-based across manufacturers and product type. [...]

February U.S. Light Vehicle Sales Lower Still

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303h.jpg" align="left" border="0" height="265" width="353">
Swiss GDP is taking a hit like the rest of European GDP.
Capital formation in Switzerland is being hit especially hard.
Switzerland, the graph above shows, has been somewhat resistant to
decline in its GDP aggregate until recently when the drop has been very
severe. With banking as a key Swiss industry and the economy hit so
hard, it is no wonder than Switzerland has been drawn into the vortex
of European decline. Switzerland is also a trade-dependent country with
exports plus imports topping aggregate GDP in value. Exports are more
than 50% of GDP by themselves. With the European economy in a shambles,
Swiss exports are being clobbered. Of course Switzerland imports a lot
too, and imports have fallen in percentage terms even more than exports
for the year, but not for the quarter. The trade situation is a big
detractor to Swiss GDP over the quarter as well as over the year due to
the relative size of exports in the Swiss economy. 
 

So far Switzerland has weathered the storm of European
weakness by pumping up government spending. Public sector spending was
up at a 2.9% pace in Q4 and is up by 3.4% Yr/Yr. That helped to drive
up domestic demand in the quarter but Yr/Yr domestic demand is still
dropping. Europe&#8217;s weakness has Switzerland fully in its grasp and the
troubles in Swiss banking will pose an added problem for the Swiss
authorities, trying to the keep the economy afloat. 
 

Longer term, Switzerland&#8217;s banking sector may prove to be even
more of a problem. With a global banking crisis in full bloom the rest
of the world is pushing hard for transparency. Switzerland has long
held a unique position in the global markets with bank secrecy. But
banking problems have become so severe that in the European summit of
one week ago the Europeans called for strong actions against tax
havens. UBS, a major Swiss bank, currently is embroiled in a major
fight in the US where it helped US citizens perpetrate tax fraud. The
Americans are pushing for the release of the names of about 50,000
American citizens that have accounts at UBS. UBS has offered up a much
smaller number of about 250 names. US authorities are pressing UBS and
do not seem likely to accept interventions by the Swiss authorities as
cover. Although the situation gets complicated because a suit filed in
Switzerland is trying to enjoin UBS from releasing these names as it is
a crime &#8211; a violation of Swiss bank secrecy laws - to do so. The issue
and question of bank secrecy and whether it will remain a right is now
under a full court press. With so many scandals and allegations of
fraud in play the international banking authorities do not want to
encounter and black box of secrecy at the end of their chase- as is
happening to the US right now. To Switzerland this is a very important
issue- but it is also important to other banking sectors where
authorities have become increasing suspicious of secrecy anywhere. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Swiss GDP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3"> Consumption</td>
<td> Capital</td>
<td colspan="2"> Trade Domestic</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> GDP</td>
<td> Private</td>
<td> Public</td>
<td> Formation</td>
<td> Exports</td>
<td> Imports</td>
<td> Demand</td>
</tr>
<tr>
<td colspan="8" class="firstcol"> % change Q/Q</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-08</td>
<td>-1.2%</td>
<td>0.4%</td>
<td>2.9%</td>
<td>-12.0%</td>
<td>-28.5%</td>
<td>-21.3%</td>
<td>7.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-08</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>5.7%</td>
<td>-7.2%</td>
<td>1.1%</td>
<td>-2.9%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-08</td>
<td>0.5%</td>
<td>2.5%</td>
<td>3.2%</td>
<td>-2.9%</td>
<td>14.0%</td>
<td>14.0%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-08</td>
<td>0.5%</td>
<td>0.6%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>-2.7%</td>
<td>-12.0%</td>
<td>-4.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol"> % change Yr/Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-08</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>3.4%</td>
<td>-5.4%</td>
<td>-5.4%</td>
<td>-6.4%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-08</td>
<td>1.3%</td>
<td>1.5%</td>
<td>1.2%</td>
<td>-1.3%</td>
<td>4.9%</td>
<td>2.0%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-08</td>
<td>2.3%</td>
<td>2.2%</td>
<td>-1.8%</td>
<td>-2.0%</td>
<td>6.5%</td>
<td>3.4%</td>
<td>0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-08</td>
<td>3.1%</td>
<td>2.2%</td>
<td>-2.6%</td>
<td>1.9%</td>
<td>3.7%</td>
<td>0.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">5-Yrs</td>
<td>2.5%</td>
<td>1.7%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>5.5%</td>
<td>3.5%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
</body></html>

Swiss GDP is taking a hit like the rest of European GDP. Capital formation in Switzerland is being hit especially hard. Switzerland, the graph above shows, has been somewhat resistant to decline in its GDP aggregate until recently [...]

Swiss GDP: In The Soup With The Rest Of Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303g.jpg" width="353">
Chain store sales dipped 0.6% last week (Feb.28) and that did reverse the prior week&#39;s increase, according to the International Council of Shopping Centers-Goldman Sachs Index. But the combination of large gains at the end of January and further, modest February increases raised sales for all of last month by 1.0% above the January average.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The outlook for sales, however, remains cautious. The weekly leading indicator of chain store sales from ICSC-Goldman Sachs slipped 0.2% last week and so far for February was down 2.3% from January (-3.4% y/y).
The Recent Increase in the Volatility of Economic Indicators from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2009/0309/03ecoact.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/28/09</th>
<th scope="col">02/21/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>483.0</td>
<td>485.9</td>
<td>-0.8%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales dipped 0.6% last week (Feb.28) and that did reverse the prior week's increase, according to the International Council of Shopping Centers-Goldman Sachs Index. But the combination of large gains at the end of January [...]

U.S. Chain Store Sales Dipped Last Week, But Rose For The Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303e.jpg" width="353">
According to the U.S. Department of Energy, regular gasoline prices rose two cents last week and the increase left them in the middle of the $1.89 to $1.96 range in place since early February. At an average $1.93 per gallon prices remained near their recent high, up 32 cents from the December low. Yesterday, the spot market price for regular gasoline reversed course and fell to $1.22, down eight cents from Friday and down eight cents from the early February high of $1.32 per gallon.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303f.jpg" width="353">
Downward momentum in gasoline demand continued to ease last week according to the U.S. Department of Energy. The year-to-year change of -0.5% compared to its worst comparison of -4.8% last October after gasoline prices were hitting their peak. The change in demand is the latest four weeks versus the same four weeks in 2008. Demand for all petroleum products was down 0.8% year-to-year after the -8.0% comparison last October. These numbers are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude rose last week to $41.81 per barrel. Like gasoline, crude oil prices have been trading this year in a tight range between $37.00 and $44.50 per barrel. Prices reached a high of $145.66 last July. In futures trading yesterday, the one-month price for crude oil was $40.15 per barrel. Last week&#39;s average was $42.18.
The price of natural gas fell further last week to $4.16 per mmbtu (-54.7% y/y), the lowest level since September 2006. The latest average price was down more than two-thirds from the high reached in early-July of $13.19/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">03/02/09</th>
<th scope="col">02/23/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>1.93</td>
<td>1.91</td>
<td>-38.8%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>41.81</td>
<td>36.99</td>
<td>-58.6%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the U.S. Department of Energy, regular gasoline prices rose two cents last week and the increase left them in the middle of the $1.89 to $1.96 range in place since early February. At an average $1.93 per gallon prices [...]

U.S. Gasoline Prices Remained Just Above $1.90; Demand Stabilizing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303a.jpg" width="353">
The news on building activity continues grim. The value of construction put-in-place tumbled 3.3% during January for the third consecutive, sharp decline. The drop was was roughly double the Consensus expectation.
Residential building activity continued its downward march with a 2.9% shortfall which started 2009 activity 18.6% below the 2008 average. Single-family construction activity fell 9.3% and remained off by nearly one half year-to-year. Building activity on multi-family units also was weak and it posted a 1.2% decline (-9.1% y/y). Spending on improvements did increase 3.8% from December but versus one year ago it fell 1.5%.
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The value of nonresidential building activity continued lower, down for the sixth month in the last seven. January activity fell 4.3% led by a 5.8% decline in the health care sector (+6.4% y/y). Spending on office construction fell another 1.5% and it was off 10.4% from one year earlier. Building in the multi-retail sector flopped 1.8% and that decline pulled activity down 20.2% from last January.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303b.jpg" width="353">
Public construction may have started to suffer the recession&#39;s effect of tax revenues. Activity fell 2.3% and that lowered year-to-year growth to 4.4%, the least since early 2005. To amplify the notion of weakness, the level of activity began this year 0.9% below 2008. The value of spending on transportation facilities fell 2.6% (-2.4% y/y), down hard for the third straight month. Spending on highways &amp; streets also fell for the second month but the 1.0% decline still left activity up 6.1% y/y, in line with the firm gains since early 2007. The value of construction on highways &amp; streets is roughly one-third of the value of total public construction spending.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002, and that constant-dollar data are no longer computed.
The construction put-in-place figures are available in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E907.HTM">Construction</a> (%)</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 class="odd">
<td class="firstcol">Total</td>
<td>-3.3</td>
<td>-2.4</td>
<td>-9.1</td>
<td>-5.6</td>
<td>-2.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-3.7</td>
<td>-2.6</td>
<td>-14.1</td>
<td>-9.8</td>
<td>-6.9</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.9</td>
<td>-4.4</td>
<td>-28.0</td>
<td>-27.6</td>
<td>-19.8</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-4.3</td>
<td>-1.2</td>
<td>0.3</td>
<td>14.9</td>
<td>19.6</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-2.3</td>
<td>-1.8</td>
<td>4.4</td>
<td>6.8</td>
<td>12.3</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The news on building activity continues grim. The value of construction put-in-place tumbled 3.3% during January for the third consecutive, sharp decline. The drop was was roughly double the Consensus expectation. Residential building [...]

U.S. Construction Spending Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303c.jpg" width="353">
The National Association of Realtors indicated that pending sales of existing homes fell 7.7% in January to a record low. The decline left sales 7.4% below the 2008 average and it was roughly twice the Consensus expectation.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
Lower prices continued to bolster home sales. The median sales price of an existing home fell in January for the seventh straight month and was down 14.8% year-to-year. Prices were down 25.7% from their peak during June 2007. For single-family homes alone, prices fell 2.9% during January and they were off 25.9% from their peak. Lower prices combined with lower interest rates significantly raised the affordability index of a home by 24.9% year-to-year. The latest level was a record high for the series which extends back to 1970.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303d.jpg" width="353">
Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell by 13.5% last month versus January of last year.
At the current sales rate there was a 9.6 months&#39; supply of homes on the market and there was a 10.4 months&#39; supply during all of last year, up from the 8.9 months supply during 2007 and 6.5 months during 2006. For single family homes, there was a 9.2 months&#39; supply in January versus a full-year figure of 10.0 months.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR database.
Current economic and financial conditions and the federal budget is today&#39;s testimony by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090303a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></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&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>80.4</td>
<td>87.1</td>
<td>&nbsp;&nbsp; -6.4%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>57.8</td>
<td>66.2</td>
<td>-19.7</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>72.6</td>
<td>80.0</td>
<td>-13.8</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>82.2</td>
<td>93.3</td>
<td>-9.1</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>103.6</td>
<td>101.1</td>
<td>13.5</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Realtors indicated that pending sales of existing homes fell 7.7% in January to a record low. The decline left sales 7.4% below the 2008 average and it was roughly twice the Consensus expectation. The home [...]

Falling Rates & Prices Push Affordability to New High

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

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

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

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

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

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

260205C15.jpg

260205D15.jpg

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

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

Sandy Batten

260205A2.jpg

260205B2.jpg

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

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

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

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

260205C2.jpg

260205D2.jpg

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

U.S. Initial Unemployment Claims Surged in Latest Week

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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.