Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202f.jpg" width="353">
The value of construction put in place during December dropped another 1.4%. The decline followed a 1.2% November drop which was double the decline originally estimated. These declines pulled overall construction down 5.2% for the full year 2008 which was the weakest performance since 1991. It followed a 2.7% decline during 2007. Last month&#39;s decline about matched Consensus expectations.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202g.jpg" width="353">
Residential building activity led the latest monthly decline with a 3.2% drop which pulled 2008 activity off by roughly one-quarter from the full year from 2007. That was a record decline for the series which extends back to 1965. Single-family construction activity fell 8.1% last month after a 6.1% November drop. It pulled the full-year level down 39.0% after a 26.8% drop during 2007. Building activity on multi-family units also fell hard. The 3.2% December decline lowered activity by 8.5% for the full year, about the same as the 2007 drop. Spending on improvements, however, recouped a 2.0% November fall but still ended the year posting a 7.2% decline.
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 has remained firm relative to the residential sector. Though the 0.4% December slip was the fifth in the last six months, activity rose 15.3% for the full year or about the same as during 2007. Spending on office construction rose<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202h.jpg" width="353"> 8.3% for the year, but that was roughly half the growth during the prior three years. Building in the multi-retail sector, however, fell 3.8% for the year after a 17.0% gain during 2007 and a 28.3% surge during 2006. Spending on health care facilities rose 8.1% for the year, about as it has since 2003. Building activity of educational facilities rose 10.2% last year after a 22.9% 2007 gain
Public construction fell 0.8% in December. But for the year activity rose a firm 7.1% after a 12.3% 2007 rise. Office building led the gain with 30.8% rise for the full year while the value of spending on educational facilities rose 7.8%. Spending on highways &amp; streets rose 5.1% the full year, about as it did in 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 dealers 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.

<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">December</th>
<th scope="col">November</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>-1.4</td>
<td>-1.2</td>
<td>-3.6</td>
<td>-5.2</td>
<td>-2.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.7</td>
<td>-2.3</td>
<td>-7.6</td>
<td>-9.3</td>
<td>-6.9</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-3.2</td>
<td>-4.1</td>
<td>-22.9</td>
<td>-27.1</td>
<td>-19.8</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.4</td>
<td>-0.8</td>
<td>8.9</td>
<td>15.3</td>
<td>19.6</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.8</td>
<td>1.2</td>
<td>7.0</td>
<td>7.1</td>
<td>12.3</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place during December dropped another 1.4%. The decline followed a 1.2% November drop which was double the decline originally estimated. These declines pulled overall construction down 5.2% for the [...]

U.S. Construction Spending Fell For Second Year

Robert Brusca

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202i.jpg" align="left" border="0" height="265" width="353">

The PMIs for Europe reside very near the bottom of their
respective ranges. Generally the readings are bottom 10% of range or
less across large EMU members and the UK. Germany is now one of the
relative weakest countries on this measure &#8211; it is at its range low
point. Germany is one of four countries to see its MFG PMI drop further
in January. 
 

PMIs: what they are: 
PMIs are super sensitive gauges of activity. And they usually detect
turning points in a sector before more convention indicators do. The
MFG PMIs have only just stopped their declining ways for the EMU
region; for several countries the bottom has not yet been hit (as far
as we know). Even for those that have rebounded this month we do not
know with any degree of confidence that they have firmly put their past
low point behind them for the duration of this cycle. 
 

Too soon for the end? 
It is too soon to call this a turning point signal. But the first step
to getting to a turning point is to build a base that signals that the
PACE OF decline has bottomed out. Remember that these are diffusion
indices and even if they move &#8216;sideways&#8217;, as long as the value is below
50 it is signaling further declines in the sector they measure. Also
recall that PMIs are formally indicators of the breadth of a decline or
the breadth of an increase in industry; they are not indicators of
STRENGTH. 
 

What about the beginning of the end? 
It may also be too soon to look even for bottoming, but it may also be
that such a bottoming process has begun. The levels of the PMIs are
extremely low, and that is the sort of pace we would expect a true
stabilization process to begin at in a cycle such as this. We know MFG
is hard-hit so unless the PMIs reached very low readings we would
continue to think that worse results would still lay ahead. Now that a
first criterion for stabilization has been met (new all-time lows or
readings near to that) we can look for a second, namely a period of
time in which the PMIs either make modest gains or establish a base by
moving sideways. The final step would be for them to rise and
eventually to poke their heads above the level of 50. That one is still
quite a way off. 

</div>



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">NTC/Markit MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>34.42</td>
<td>33.88</td>
<td>35.58</td>
<td>34.63</td>
<td>39.58</td>
<td>44.98</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>31.96</td>
<td>32.66</td>
<td>35.66</td>
<td>33.43</td>
<td>40.03</td>
<td>46.69</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>37.90</td>
<td>34.91</td>
<td>37.28</td>
<td>36.70</td>
<td>39.91</td>
<td>45.34</td>
<td>10.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>36.06</td>
<td>35.54</td>
<td>34.95</td>
<td>35.52</td>
<td>39.62</td>
<td>43.86</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>31.51</td>
<td>28.49</td>
<td>29.42</td>
<td>29.81</td>
<td>34.12</td>
<td>38.89</td>
<td>10.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Austria</td>
<td>33.12</td>
<td>35.01</td>
<td>38.26</td>
<td>35.46</td>
<td>40.74</td>
<td>45.43</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>39.98</td>
<td>40.96</td>
<td>42.25</td>
<td>41.06</td>
<td>45.77</td>
<td>49.44</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>38.94</td>
<td>37.87</td>
<td>37.10</td>
<td>37.97</td>
<td>40.36</td>
<td>43.00</td>
<td>10.1%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>36.29</td>
<td>38.42</td>
<td>38.71</td>
<td>37.81</td>
<td>42.80</td>
<td>46.99</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>35.78</td>
<td>34.91</td>
<td>34.48</td>
<td>35.06</td>
<td>38.64</td>
<td>43.65</td>
<td>6.0%</td>
</tr>
<tr class="odd">
<td colspan="6">percentile is over range since March
2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The PMIs for Europe reside very near the bottom of their respective ranges. Generally the readings are bottom 10% of range or less across large EMU members and the UK. Germany is now one of the relative weakest countries on this [...]

MFG PMIs Stop Their Descent

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202d.jpg" width="353">
The Institute for Supply Management (ISM) reported that its January Composite Index of Activity in the manufacturing sector improved slightly to 35.6 from it&#39;s December low of 32.4. The latest was still near the lowest level since the recession year of 1980. The break-even level for this diffusion index of factory sector activity is a level of 50.you
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202e.jpg" width="353">
The separate index of prices paid also improved moderately to 29.0. That, however, was not much above the lowest level since 1949. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
The latest increase in the composite index recouped only a bit of the declines during the prior five months. That suggests the recent 10% rate of decline in industrial output will continue.
The new orders index during January improved slightly as 15% of survey participants reported higher orders but 52% reported that orders fell. The export order index improved, but only at the margin as economic weakness outside of the U.S. continued. It was still near the lowest level in this index&#39;s short twenty year history. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.

<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/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January &#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">Composite Index</td>
<td>35.6</td>
<td>32.9</td>
<td>50.8</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>33.2</td>
<td>23.1</td>
<td>48.9</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>29.9</td>
<td>29.9</td>
<td>47.9</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>29.0</td>
<td>18.0</td>
<td>76.0</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
</body>
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The Institute for Supply Management (ISM) reported that its January Composite Index of Activity in the manufacturing sector improved slightly to 35.6 from it's December low of 32.4. The latest was still near the lowest level since the [...]

ISM Index Improved Slightly From Historic Low

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202a.jpg" align="left" border="0" height="265" width="353">

The personal income &amp; outlays report for the end of
2008 contained news of difficult times for the "front-end" of the U.S.
economy. To start, personal income fell for the third straight month.
The 0.2% December decline was a bit less-than-expected and it lowered
the gain for the full year to 3.7% which was the weakest since 2003.
The year ended with December-to-December growth in income of just 1.4%
and a three-month drop of 2.6% (AR).
A 0.3% decline in wages &amp; salaries was in the
forefront of that income weakness as employment levels declined. Wages
over the last three months were down at a 2.1%rate and up just 2.8% for
the full year, half that during 2007. Factory sector wages suffered the
worst of the shortfall with an 8.2% three-month rate of decline. In
addition, service sector wages fell at a 1.5% rate during those three
months which was their weakest performance since the recession of 2001.
Lower interest rates caused the seventh straight monthly
decline in interest income. The -7.2% y/y growth rate was eclipsed,
however, by the 22.1% rate of decline during the last three months.
Dividend income also fell at a 5.9% rate during that three month period
as corporate profits fell.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202b.jpg" align="right" border="0" height="265" width="353">
Disposable personal income dropped last
month for the sixth month in the last seven to lower the three-month
change to -2.3%. Thanks to falling energy prices and weaker pricing
power generally, real disposable income growth actually increased by a
strong 6.7% (1.3% y/y).
Personal consumption suffered heavily from across-the-board
weakness. The December decline was the sixth in a row. While the
three-month rate of growth was an abysmal -11.2% (AR), the change in
real terms was little better. Real personal consumption
expenditures fell 0.5% last month and at a 3.1% during the
last three.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202c.jpg" align="left" border="0" height="265" width="353">
Real spending on discretionary items was notably weak. Motor
vehicle &amp; parts purchases fell 0.4% in December and the
three-month annual growth rate amounted to -33.1%. Real spending on
household furniture &amp; appliances fell at a lesser 4.7% rate
while real spending on apparel dropped at a 2.7% rate since September.
These and other detailed spending figures are available in Haver's
USNA database.
The silver lining of this weakness in spending is while it
reflects weakened income growth, it also produced a rise in the level
of savings. The personal savings rate rose last month to 3.6 versus an
average of 1.7% for the year, which was the highest since 2004.
Declines in spending caused pricing power to evaporate. The PCE
chain price index fell 0.5% last month with lower petroleum
prices. Core pricing power, however, was additionally under pressure.
The 0.0% December downtick in the core PCE price index
about matched expectations and it was the third such consecutive
decline. It lowered the three-month change in core pricing to -0.1%
which was its weakest since the recession of 2001.
The Federal Reserve Board published a policy that was
adopted to help avoid preventable foreclosures on certain residential
mortgage assets. The Fed's release can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090130a1.pdf">
here</a>.
</div>


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-0.2</td>
<td>-0.4</td>
<td>1.4</td>
<td>3.7</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-0.2</td>
<td>-0.3</td>
<td>1.9</td>
<td>4.6</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>-1.0</td>
<td>-0.8</td>
<td>-1.1</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>3.6</td>
<td>2.8</td>
<td>0.4 (Dec. 08)</td>
<td>1.7</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>-0.5</td>
<td>-1.1</td>
<td>0.6</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>-0.0</td>
<td>-0.0</td>
<td>1.7</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
</body></html>

The personal income & outlays report for the end of 2008 contained news of difficult times for the "front-end" of the U.S. economy. To start, personal income fell for the third straight month. The 0.2% December decline was a bit less- [...]

U.S. December Income, Consumption & Prices Fell While Savings Rose

U.S. December Income, Consumption& Prices Fell While Savings Rose

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090130h.jpg" align="left" border="0" height="265" width="353">
The drop off in Japan&#8217;s industrial production index is now
extraordinary as it has posted a month-to-month drop of nearly double
digits. Over three months Japan&#8217;s IP is plunging at a 58% annual rate.
It is also down by 22.5% Yr/Yr. Transportation output dropped by 14% in
November and its three-month annualized growth rate is -79%.
Intermediate goods are taking the most sever beating in December. But
consumer goods output is off by 7.9% in December. Investment goods
output is dropping by 4.8% in December. There is no safe haven. 
 

Japan has been sliding for some time. But the figures from
overnight are shocking with household spending off and housing stars
off and construction orders plunging. Unemployment has jumped and
Japan&#8217;s manufacturing PMI has dropped for eleven straight months and to
a record low. 
 

Germany, another export dependent country, heard its deputy
finance minister today warn that the hammer blow to exports was
continuing and the domestic economy was getting hit even harder as a
result. The lesson is to be wary of export oriented economies since the
export market is drying up fast, however you define it. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Japan
Industrial Production Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> m/m %</td>
<td colspan="3"> Saar %</td>
<td> Yr/Yr</td>
<td> Qtr-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol"> seas adjusted</td>
<td> Dec-08</td>
<td> Nov-08</td>
<td> Oct-08</td>
<td> 3-mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> Yr-Ago</td>
<td>% AR</td>
</tr>
<tr class="odd">
<td class="firstcol"> mining&amp;MFG</td>
<td> -9.6%</td>
<td> -8.5%</td>
<td> -3.1%</td>
<td> -58.8%</td>
<td> -37.4%</td>
<td> -22.5%</td>
<td>2.3%</td>
<td>-39.8%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Total Industry</td>
<td> -9.2%</td>
<td> -7.9%</td>
<td> -3.4%</td>
<td> -57.4%</td>
<td> -36.2%</td>
<td> -21.7%</td>
<td>2.3%</td>
<td>-39.2%</td>
</tr>
<tr class="odd">
<td class="firstcol"> MFG</td>
<td> -9.6%</td>
<td> -8.5%</td>
<td> -3.2%</td>
<td> -59.0%</td>
<td> -37.5%</td>
<td> -22.5%</td>
<td>2.4%</td>
<td>-39.8%</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Textiles</td>
<td> -4.4%</td>
<td> -1.5%</td>
<td> -0.2%</td>
<td> -22.3%</td>
<td> -18.7%</td>
<td> -15.7%</td>
<td> -4.3%</td>
<td>-12.7%</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; T-port</td>
<td> -14.3%</td>
<td> -14.3%</td>
<td> -7.4%</td>
<td> -78.6%</td>
<td> -55.3%</td>
<td> -33.9%</td>
<td>5.2%</td>
<td>-59.7%</td>
</tr>
<tr>
<td colspan="9" class="firstcol"> Product Group</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Consumer
Gds</td>
<td> -7.9%</td>
<td> -6.2%</td>
<td> -2.2%</td>
<td> -49.1%</td>
<td> -28.6%</td>
<td> -16.8%</td>
<td>2.4%</td>
<td>-33.9%</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;
Intermediate Gds</td>
<td> -12.5%</td>
<td> -8.6%</td>
<td> -4.7%</td>
<td> -66.4%</td>
<td> -44.0%</td>
<td> -26.7%</td>
<td>4.8%</td>
<td>-45.5%</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Investment
Gds</td>
<td> -4.8%</td>
<td> -9.3%</td>
<td> -2.6%</td>
<td> -50.2%</td>
<td> -31.4%</td>
<td> -19.4%</td>
<td> -2.5%</td>
<td>-31.6%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Miining</td>
<td> -1.4%</td>
<td>7.6%</td>
<td> -7.5%</td>
<td> -7.5%</td>
<td> -1.5%</td>
<td> -3.9%</td>
<td>4.3%</td>
<td>-20.9%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Electric&amp;Gas</td>
<td> -3.8%</td>
<td>0.4%</td>
<td>1.4%</td>
<td> -8.3%</td>
<td> -3.5%</td>
<td> -4.5%</td>
<td>2.4%</td>
<td>-3.4%</td>
</tr>
</tbody>
</table>
</body></html>

The drop off in Japan’s industrial production index is now extraordinary as it has posted a month-to-month drop of nearly double digits. Over three months Japan’s IP is plunging at a 58% annual rate. It is also down by 22.5% Yr/Yr. [...]

Japan Hits The Skids Hard In December

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090130g.jpg" align="left" border="0" height="265" width="353">
The EU sentiment index has fallen to a record low. Most of its
sector readings are on lows as well. Construction, in the lower 13% of
its range, is the strongest sector in relative terms. The sentiment
indices for the major EMU nations and for the UK are on lows as well &#8211;
at the very bottom of their ranges. France is the relative strongest in
only the bottom 5% of its range. Europe is obviously getting clobbered
and the weakness runs across sectors and countries. The EMU overall
sentiment reading fell to 64.9 in Jan from 68.2 in December &#8211; a very
sharp fall at a reading level that is already so low. That is not a
good sign. The pace of the drop in sentiment is not slowing down.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" class="firstcol">EU
Sectors and Country level Overall Sentiment</th>
<th class="firstcol">R-SQ</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">EU</td>
<td>Jan 
09</td>
<td>Dec 
08</td>
<td>Nov 
08</td>
<td>Oct 
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 class="firstcol">Overall</td>
<td>64.9</td>
<td>68.2</td>
<td>75.1</td>
<td>81.1</td>
<td>0.0</td>
<td>220</td>
<td>116</td>
<td>65</td>
<td>51</td>
<td>100</td>
<td>1.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial</td>
<td>-34</td>
<td>-32</td>
<td>-25</td>
<td>-19</td>
<td>0.0</td>
<td>220</td>
<td>7</td>
<td>-34</td>
<td>41</td>
<td>-8</td>
<td>0.85&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confid</td>
<td>-31</td>
<td>-28</td>
<td>-24</td>
<td>-23</td>
<td>0.0</td>
<td>220</td>
<td>2</td>
<td>-31</td>
<td>33</td>
<td>-11</td>
<td>0.87</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-25</td>
<td>-25</td>
<td>-18</td>
<td>-16</td>
<td>0.0</td>
<td>219</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-6</td>
<td>0.61</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-36</td>
<td>-32</td>
<td>-28</td>
<td>-25</td>
<td>13.3</td>
<td>203</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td>0.48</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-28</td>
<td>-23</td>
<td>-18</td>
<td>-10</td>
<td>0.0</td>
<td>145</td>
<td>33</td>
<td>-28</td>
<td>61</td>
<td>15</td>
<td>0.82</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td>Jan 
09</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">EMU</td>
<td>-2.1%</td>
<td>-10.2%</td>
<td>-5.7%</td>
<td>68.9</td>
<td>0.0</td>
<td>220</td>
<td>118</td>
<td>69</td>
<td>49</td>
<td>99</td>
<td>0.96</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-4.0%</td>
<td>-6.4%</td>
<td>-7.0%</td>
<td>74.4</td>
<td>0.0</td>
<td>220</td>
<td>121</td>
<td>74</td>
<td>46</td>
<td>99</td>
<td>0.61</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-1.2%</td>
<td>-10.6%</td>
<td>-1.8%</td>
<td>74.4</td>
<td>5.2</td>
<td>219</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-1.4%</td>
<td>-11.7%</td>
<td>-1.4%</td>
<td>71.9</td>
<td>0.0</td>
<td>220</td>
<td>121</td>
<td>72</td>
<td>50</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>3.7%</td>
<td>-7.2%</td>
<td>-3.4%</td>
<td>69.2</td>
<td>5.0</td>
<td>219</td>
<td>117</td>
<td>67</td>
<td>50</td>
<td>100</td>
<td>0.69</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo:UK</td>
<td>-10.9%</td>
<td>-0.6%</td>
<td>-9.9%</td>
<td>60.2</td>
<td>0.0</td>
<td>220</td>
<td>117</td>
<td>60</td>
<td>57</td>
<td>100</td>
<td>0.50</td>
</tr>
<tr class="even">
<td colspan="5" class="firstcol">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>

The EU sentiment index has fallen to a record low. Most of its sector readings are on lows as well. Construction, in the lower 13% of its range, is the strongest sector in relative terms. The sentiment indices for the major EMU [...]

EU Index At Record Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090130e.jpg" width="353">
The January consumer sentiment index from the University of Michigan rose slightly for the second month. The 1.8% rise was slightly less than indicated in the mid-month report but it followed an 8.7% increase off the cycle&#39;s low in December. Nevertheless, at 61.2, the latest level was close to the lows for the series which occurred in the severe recessions of 1973-75 and 1980. Moreover, the figure remained down nearly one-quarter from last year. The latest reading about matched Consensus expectations for a reading of 61.9.
During the last ten years there has been a 58% correlation between the level of sentiment and the three-month change in real consumer spending.
The expectations component of consumer sentiment rose moderately. Still, the series was near its lowest since 1990 and close to the low of 1980. Expectations for business conditions during the next year rose somewhat and expectations for conditions during the next five years also ticked up. The expected change in personal finances rose to the highest level since September.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090130f.jpg" width="353">
The current economic conditions index fell after an initial reading that was unchanged from December. The buying conditions index for large household goods fell sharply but the view of current personal finances rose (surprisingly) to the highest level since September. The figure did, however, remain off sharply from the 2007 average.
The opinion of government policy, which apparently influences economic expectations, was about unchanged but off a sharp 28.2% during the last twelve months. Only seven percent of respondents thought that a good job was being done by government and a near-record fifty-one percent thought that a poor job was being done.
Inflation expectations ticked slightly higher to 2.5% during the next year but that remained near the series&#39; low. It was as high as 7.0% in May. The expected inflation rate during the next five years rose off the series&#39; low to 3.7%.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA 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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">January 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>61.2</td>
<td>60.1</td>
<td>55.3</td>
<td>-21.9%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>66.5</td>
<td>69.5</td>
<td>57.5</td>
<td>-29.6</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>57.8</td>
<td>54.0</td>
<td>53.9</td>
<td>-15.1</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The January consumer sentiment index from the University of Michigan rose slightly for the second month. The 1.8% rise was slightly less than indicated in the mid-month report but it followed an 8.7% increase off the cycle's low in [...]

Michigan Consumer Sentiment Up Slightly In January, Yet Still Near Series' Low

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

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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.