Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116g.jpg">
Industrial production during December fell for the ninth month of 2008. The 2.0% drop followed a 1.3% November decline which was revised deeper from the initial report. Last month&#39;s decline was double Consensus expectations for a 1.0% decline. For the year, industrial production declined 7.8% which was the sharpest negative twelve-month change since the deep recession of 1975.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116h.jpg">
Factory output took the brunt of the recession&#39;s force and declined 9.9% last year. That was led by a 13.9% twelve-month decline in output of construction supplies, again the deepest since 1975. Output of consumer goods fell 5.2% during last year, pulled lower by a 26.7% December-to-December drop in the output of motor vehicles &amp; parts. That came on top of roughly 3% declines during the prior two years. Outside of the auto sector output also was hard it and production of furniture fell 21.9% while apparel output dropped 6.0%. Production of business equipment was late to the recession&#39;s downturn, but for the year production fell 6.7%.
Industrial production in the high-tech sector fell 6.5% last year. That was the worst performance since 2001. Outside of high-tech production declines amounted to 11.0% for the year, the worst decline since 1975.
Less the weakness in autos and high tech, output fell 6.9% last year, the steepest since 1982. Machinery production led that fall with a steep 11.6% drop while output of electrical equipment production also fell, but by 9.5% y/y. Production of chemicals fell 11.6% y/y, also the worst since 1975, but apparel output fell a modest 6.0%.
Capacity utilization fell to 73.6%, the lowest level since 2003. Utilization in the factory sector dropped further, however, to 70.2%, its lowest since 1982. Capacity in the factory sector increased a firm 1.7% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA, %)</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 Output </td>
<td>-2.0</td>
<td>-1.3</td>
<td>-7.8</td>
<td>-1.8</td>
<td>1.7</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>-2.4</td>
<td>-2.2</td>
<td>-9.9</td>
<td>-2.5</td>
<td>1.7</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>-1.7</td>
<td>-1.0</td>
<td>-5.2</td>
<td>-2.1</td>
<td>1.7</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>1.8</td>
<td>2.9</td>
<td>-6.7</td>
<td>-1.1</td>
<td>3.3</td>
<td>10.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Construction Supplies</td>
<td>-3.3</td>
<td>-4.6</td>
<td>-13.9</td>
<td>-6.1</td>
<td>-2.5</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>-0.1</td>
<td>0.9</td>
<td>0.5</td>
<td>0.4</td>
<td>3.3</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>73.6</td>
<td>75.2</td>
<td>81.0 (Dec.&#39;07)</td>
<td>78.2</td>
<td>81.0</td>
<td>80.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial production during December fell for the ninth month of 2008. The 2.0% drop followed a 1.3% November decline which was revised deeper from the initial report. Last month's decline was double Consensus expectations for a 1.0% [...]

U.S. Factory Output Fell Again in December; 2008 Decline The Largest Since 1975

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116d.jpg" align="left" border="0" height="265" width="353">
The EMU trade deficit widened in November as exports fell by
4.7%. Imports also dropped but by 2.5% causing the deficit to widen.
The table above is replete with negative numbers denoting declining
export and import flows. The global downturn is hitting trade hard on
both the export and the import side. Among exports raw materials and
manufactured goods are both being hit hard. On the import side weakness
is in oil imports but spreads across all groupings. 
 

Over 12-months exports are lower by 5.1% and imports are off
by 0.1%. In contrast a year before exports had risen over 12-months by
6.8% and imports were up by 7.7%. Even in Yr/Yr terms the slowdown is
rapid and that is why the economic dislocations are so severe. 
 

The figures for EMU are of course figures for EMU member trade
outside of the block. The various national figures also include
intra-EMU state trading. EMU countries are very prone to trade. Since
these flows are slowing down it is hitting a lot of EMU economies very
hard. Germany, the largest exporter in the world, is being clobbered by
export weakness. German exports are down by 9% Yr/Yr in November,
nearly twice the EMU pace. The trade picture is a bleak one for EMU
members. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Ezone 15-Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; (4,891)</td>
<td>&#8364;&#8364; (2,122)</td>
<td>&#8364;&#8364; (4,154)</td>
<td>&#8364;&#8364; (4,800)</td>
<td>&#8364;&#8364; 2,124</td>
<td>&#8364;&#8364; (1,483)</td>
</tr>
<tr class="even">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Exp</td>
<td>-4.7%</td>
<td>-2.8%</td>
<td>-22.6%</td>
<td>-10.8%</td>
<td>-5.3%</td>
<td>6.8%</td>
</tr>
<tr>
<td class="firstcol">Food and Drinks</td>
<td>-3.0%</td>
<td>0.9%</td>
<td>-5.2%</td>
<td>-3.3%</td>
<td>1.6%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">Raw materials</td>
<td>-13.0%</td>
<td>-3.2%</td>
<td>-58.8%</td>
<td>-34.9%</td>
<td>-12.2%</td>
<td>-0.2%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>-4.6%</td>
<td>-3.0%</td>
<td>-22.6%</td>
<td>-10.6%</td>
<td>-5.7%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-4.0%</td>
<td>-1.6%</td>
<td>-22.8%</td>
<td>-10.8%</td>
<td>-6.6%</td>
<td>4.2%</td>
</tr>
<tr class="even">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All IMP</td>
<td>-2.5%</td>
<td>-5.1%</td>
<td>-24.5%</td>
<td>-5.6%</td>
<td>-0.1%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">Food and Drinks</td>
<td>-2.9%</td>
<td>-1.3%</td>
<td>-12.4%</td>
<td>-7.8%</td>
<td>-3.7%</td>
<td>18.0%</td>
</tr>
<tr>
<td class="firstcol">Raw materials</td>
<td>-0.4%</td>
<td>-4.5%</td>
<td>-6.7%</td>
<td>4.8%</td>
<td>8.3%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>-2.6%</td>
<td>-5.3%</td>
<td>-26.0%</td>
<td>-6.1%</td>
<td>-0.3%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.5%</td>
<td>-2.3%</td>
<td>-12.9%</td>
<td>-1.8%</td>
<td>-1.3%</td>
<td>3.6%</td>
</tr>
<tr class="even">
<td colspan="5">*Eur mlns; mo or period average</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The EMU trade deficit widened in November as exports fell by 4.7%. Imports also dropped but by 2.5% causing the deficit to widen. The table above is replete with negative numbers denoting declining export and import flows. The global [...]

EMU Trade Deficit Widens: Exports and Imports Collapse

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116a.jpg" align="right" border="0" height="265" width="353">According
to the Bureau of Labor Statistics, the consumer price index
(CPI-U) fell for the third straight month in December. The 0.7% decline
followed drops of 1.7% and 1.0% during November and October. Indeed.
that, understates the weakness in pricing since there was a
less-than-0.1% decline in September. The latest reading lowered the
three-month rate of change to -12.7% (AR). That pulled
seasonally adjusted prices lower by 0.1% for the last twelve months,
the first such decline since 1955. The recent figure
compared to Consensus expectations for a 0.9% decline.Lower energy
prices led the weakness in last month's CPI with an 8.3% decline, the
fifth consecutive monthly drop.&nbsp; It was paced by a 17.2%
decline in gasoline prices to an average of $1.69 per gallon.&nbsp;
Gas prices have backed up a bit this in January to an average $1.78
last week.&nbsp; December fuel oil prices fell 9.2% (-14.4% y/y)
for their fifth consecutive monthly drop and prices for natural gas
&amp; electricity were roughly unchanged m/m (+7.9%
y/y). Increases in food &amp; beverage prices tapered
off and posted a slight December decline. That followed moderate
increases of 0.3% and 0.2% during the prior two months. However,
monthly increases between 0.6% and 0.9% were common earlier in the
year. Therefore, the year-to-year growth in food prices
during 2008 was the strongest since 1981.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116b.jpg" align="left" border="0" height="265" width="353">
Core pricing power
also weakened further in December with the developing recession. The CPI
less food &amp; energy slipped and it was down at a 0.3%
annual rate during the last three months. It reached a peak three-month
rate of increase of 3.5% just this past July and the latest change was
the weakest since 1982.Core goods prices fell for
the fourth consecutive month.&nbsp; The 0.3% decline pulled the
three-month rate of change to a negative 3.4% which was the weakest
since late-2003. The latest decline was led by another fall in prices
of new &amp; used motor vehicles which were off 0.4% (-3.5%
y/y).&nbsp; Apparel prices also fell last month by 0.9% and they
dropped 1.0% last year.&nbsp; Prices for household furnishings
&amp; operations ticked up 0.1% after their 0.2% November
drop.&nbsp; However, the 2.0% year-to-year gain was the firmest
since 2005.&nbsp; Tobacco prices rose 0.5% last month and they were
up 6.3% during the full year. Core services prices again
ticked up by 0.1% and they rose at a 1.0% annual rate during the last
three months. That was the lowest rate of increase since
1982.&nbsp; Medical care services prices rose a moderate 0.2% (3.0%
y/y) but education costs remained strong.&nbsp; They posted a 0.5%
increase (5.6% y/y) during December. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116c.jpg" align="right" border="0" height="265" width="353">
Shelter prices were unchanged m/m
and the year-to-year gain of 1.9% was the weakest since 2005. As the
housing market remained deeply depressed owners equivalent rent of
primary residence, a measure not equivalent to other house price
measures, rose just 0.1% (2.1% y/y).&nbsp; Public transportation
prices fell for the fourth consecutive month and were up just 1.8%
year-to-year. Recreation prices fell 0.2% and they rose a modest 1.8%
y/y. The chained CPI, which adjusts for shifts in consumption
patterns, fell 1.3%. Less food and energy, chained prices fell 0.3% for
the second month and the year-to-year gain of 1.3% was the lowest since
early 2004. Rethinking the Measurement of Household
Inflation Expectations: Preliminary Findings from the
Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr359.pdf">here.</a>
&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>-0.7</td>
<td>-1.7</td>
<td>-0.1</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>-0.0</td>
<td>0.0</td>
<td>1.7</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-0.5</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>0.1</td>
<td>2.6</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-8.3</td>
<td>-17.0</td>
<td>-21.9</td>
<td>13.6</td>
<td>5.6</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.0</td>
<td>0.2</td>
<td>5.8</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>-1.3</td>
<td>-2.0</td>
<td>-0.5 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>-0.3</td>
<td>-0.3</td>
<td>1.3</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body></html>

According to the Bureau of Labor Statistics, the consumer price index (CPI-U) fell for the third straight month in December. The 0.7% decline followed drops of 1.7% and 1.0% during November and October. Indeed. that, understates the [...]

U.S. CPI Fell A Third Month Due To Lower Energy Prices

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116a.jpg" align="right" border="0" height="265" width="353">According
to the Bureau of Labor Statistics, the consumer price index
(CPI-U) fell for the third straight month in December. The 0.7% decline
followed drops of 1.7% and 1.0% during November and October. Indeed.
that, understates the weakness in pricing since there was a
less-than-0.1% decline in September. The latest reading lowered the
three-month rate of change to -12.7% (AR). That pulled
seasonally adjusted prices lower by 0.1% for the last twelve months,
the first such decline since 1955. The recent figure
compared to Consensus expectations for a 0.9% decline.
Lower energy
prices led the weakness in last month's CPI with an 8.3% decline, the
fifth consecutive monthly drop.&nbsp; It was paced by a 17.2%
decline in gasoline prices to an average of $1.69 per gallon.&nbsp;
Gas prices have backed up a bit this in January to an average $1.78
last week.&nbsp; December fuel oil prices fell 9.2% (-14.4% y/y)
for their fifth consecutive monthly drop and prices for natural gas
&amp; electricity were roughly unchanged m/m (+7.9%
y/y).
 Increases in food &amp; beverage prices tapered
off and posted a slight December decline. That followed moderate
increases of 0.3% and 0.2% during the prior two months. However,
monthly increases between 0.6% and 0.9% were common earlier in the
year. Therefore, the year-to-year growth in food prices
during 2008 was the strongest since 1981.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116b.jpg" align="left" border="0" height="265" width="353">Core pricing power
also weakened further in December with the developing recession. The CPI
less food &amp; energy slipped and it was down at a 0.3%
annual rate during the last three months. It reached a peak three-month
rate of increase of 3.5% just this past July and the latest change was
the weakest since 1982.
Core goods prices fell for
the fourth consecutive month.&nbsp; The 0.3% decline pulled the
three-month rate of change to a negative 3.4% which was the weakest
since late-2003. The latest decline was led by another fall in prices
of new &amp; used motor vehicles which were off 0.4% (-3.5%
y/y).&nbsp; Apparel prices also fell last month by 0.9% and they
dropped 1.0% last year.&nbsp; Prices for household furnishings
&amp; operations ticked up 0.1% after their 0.2% November
drop.&nbsp; However, the 2.0% year-to-year gain was the firmest
since 2005.&nbsp; Tobacco prices rose 0.5% last month and they were
up 6.3% during the full year. 
 Core services prices again
ticked up by 0.1% and they rose at a 1.0% annual rate during the last
three months. That was the lowest rate of increase since
1982.&nbsp; Medical care services prices rose a moderate 0.2% (3.0%
y/y) but education costs remained strong.&nbsp; They posted a 0.5%
increase (5.6% y/y) during December. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116c.jpg" align="right" border="0" height="265" width="353">
Shelter prices were unchanged m/m
and the year-to-year gain of 1.9% was the weakest since 2005. As the
housing market remained deeply depressed owners equivalent rent of
primary residence, a measure not equivalent to other house price
measures, rose just 0.1% (2.1% y/y).&nbsp; Public transportation
prices fell for the fourth consecutive month and were up just 1.8%
year-to-year. Recreation prices fell 0.2% and they rose a modest 1.8%
y/y. 
The chained CPI, which adjusts for shifts in consumption
patterns, fell 1.3%. Less food and energy, chained prices fell 0.3% for
the second month and the year-to-year gain of 1.3% was the lowest since
early 2004. 
Rethinking the Measurement of Household
Inflation Expectations: Preliminary Findings from the
Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr359.pdf">here.</a>
&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>-0.7</td>
<td>-1.7</td>
<td>-0.1</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>-0.0</td>
<td>0.0</td>
<td>1.7</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-0.5</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>0.1</td>
<td>2.6</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-8.3</td>
<td>-17.0</td>
<td>-21.9</td>
<td>13.6</td>
<td>5.6</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.0</td>
<td>0.2</td>
<td>5.8</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>-1.3</td>
<td>-2.0</td>
<td>-0.5 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>-0.3</td>
<td>-0.3</td>
<td>1.3</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>

EMU Trade Deficit Widens: Exports
and Imports Collapse 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 16, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116d.jpg" align="left" border="0" height="265" width="353">
The EMU trade deficit widened in November as exports fell by
4.7%. Imports also dropped but by 2.5% causing the deficit to widen.
The table above is replete with negative numbers denoting declining
export and import flows. The global downturn is hitting trade hard on
both the export and the import side. Among exports raw materials and
manufactured goods are both being hit hard. On the import side weakness
is in oil imports but spreads across all groupings. 
 

Over 12-months exports are lower by 5.1% and imports are off
by 0.1%. In contrast a year before exports had risen over 12-months by
6.8% and imports were up by 7.7%. Even in Yr/Yr terms the slowdown is
rapid and that is why the economic dislocations are so severe. 
 

The figures for EMU are of course figures for EMU member trade
outside of the block. The various national figures also include
intra-EMU state trading. EMU countries are very prone to trade. Since
these flows are slowing down it is hitting a lot of EMU economies very
hard. Germany, the largest exporter in the world, is being clobbered by
export weakness. German exports are down by 9% Yr/Yr in November,
nearly twice the EMU pace. The trade picture is a bleak one for EMU
members. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Ezone
15-Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; (4,891)</td>
<td>&#8364;&#8364; (2,122)</td>
<td>&#8364;&#8364; (4,154)</td>
<td>&#8364;&#8364; (4,800)</td>
<td>&#8364;&#8364; 2,124</td>
<td>&#8364;&#8364; (1,483)</td>
</tr>
<tr class="even">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Exp</td>
<td>-4.7%</td>
<td>-2.8%</td>
<td>-22.6%</td>
<td>-10.8%</td>
<td>-5.3%</td>
<td>6.8%</td>
</tr>
<tr>
<td class="firstcol">Food and Drinks</td>
<td>-3.0%</td>
<td>0.9%</td>
<td>-5.2%</td>
<td>-3.3%</td>
<td>1.6%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">Raw materials</td>
<td>-13.0%</td>
<td>-3.2%</td>
<td>-58.8%</td>
<td>-34.9%</td>
<td>-12.2%</td>
<td>-0.2%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>-4.6%</td>
<td>-3.0%</td>
<td>-22.6%</td>
<td>-10.6%</td>
<td>-5.7%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-4.0%</td>
<td>-1.6%</td>
<td>-22.8%</td>
<td>-10.8%</td>
<td>-6.6%</td>
<td>4.2%</td>
</tr>
<tr class="even">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All IMP</td>
<td>-2.5%</td>
<td>-5.1%</td>
<td>-24.5%</td>
<td>-5.6%</td>
<td>-0.1%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">Food and Drinks</td>
<td>-2.9%</td>
<td>-1.3%</td>
<td>-12.4%</td>
<td>-7.8%</td>
<td>-3.7%</td>
<td>18.0%</td>
</tr>
<tr>
<td class="firstcol">Raw materials</td>
<td>-0.4%</td>
<td>-4.5%</td>
<td>-6.7%</td>
<td>4.8%</td>
<td>8.3%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>-2.6%</td>
<td>-5.3%</td>
<td>-26.0%</td>
<td>-6.1%</td>
<td>-0.3%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.5%</td>
<td>-2.3%</td>
<td>-12.9%</td>
<td>-1.8%</td>
<td>-1.3%</td>
<td>3.6%</td>
</tr>
<tr class="even">
<td colspan="5">*Eur mlns; mo or period average</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
U.S. Factory Output Fell Again in
December; 2008 Decline The Largest Since 1975 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 16, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116g.jpg" align="left" border="0">
Industrial production during December fell for the ninth month
of 2008. The 2.0% drop followed a 1.3% November decline which was
revised deeper from the initial report. Last month's decline was double
Consensus expectations for a 1.0% decline. For the year,
industrial production declined 7.8% which was the sharpest negative
twelve-month change since the deep recession of 1975.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116h.jpg" align="right" border="0">
Factory output took the brunt of the recession's force and
declined 9.9% last year. That was led by a 13.9% twelve-month decline
in output of construction supplies, again the deepest since 1975.
Output of consumer goods fell 5.2% during last year, pulled lower by a
26.7% December-to-December drop in the output of motor vehicles
&amp; parts. That came on top of roughly 3% declines during the
prior two years. Outside of the auto sector output also was hard it and
production of furniture fell 21.9% while apparel output dropped 6.0%.
Production of business equipment was late to the recession's downturn,
but for the year production fell 6.7%.
Industrial production in the high-tech sector fell 6.5% last
year. That was the worst performance since 2001. Outside of high-tech
production declines amounted to 11.0% for the year, the worst decline
since 1975.
Less the weakness in autos and high tech, output fell 6.9%
last year, the steepest since 1982. Machinery production led that fall
with a steep 11.6% drop while output of electrical equipment production
also fell, but by 9.5% y/y. Production of chemicals fell 11.6% y/y,
also the worst since 1975, but apparel output fell a modest 6.0%.
Capacity utilization fell to 73.6%, the lowest level since
2003. Utilization in the factory sector dropped further, however, to
70.2%, its lowest since 1982. Capacity in the factory sector increased
a firm 1.7% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INDUSTRIAL
PRODUCTION (SA, %)</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 Output </td>
<td>-2.0</td>
<td>-1.3</td>
<td>-7.8</td>
<td>-1.8</td>
<td>1.7</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>-2.4</td>
<td>-2.2</td>
<td>-9.9</td>
<td>-2.5</td>
<td>1.7</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>-1.7</td>
<td>-1.0</td>
<td>-5.2</td>
<td>-2.1</td>
<td>1.7</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>1.8</td>
<td>2.9</td>
<td>-6.7</td>
<td>-1.1</td>
<td>3.3</td>
<td>10.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-3.3</td>
<td>-4.6</td>
<td>-13.9</td>
<td>-6.1</td>
<td>-2.5</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>-0.1</td>
<td>0.9</td>
<td>0.5</td>
<td>0.4</td>
<td>3.3</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>73.6</td>
<td>75.2</td>
<td>81.0 (Dec.'07)</td>
<td>78.2</td>
<td>81.0</td>
<td>80.9</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Up
Again In Early January Yet Still Near The Series' Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 16, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116e.jpg" align="left" border="0" height="265" width="353">
For early January, the University of Michigan reported that
consumer sentiment rose slightly for the second month. The 3.0% rise
followed an 8.7% increase off the cycle's low in November.
Nevertheless, at 61.9 the latest level was near the lowest for the
series back to 1980 and earlier. Moreover, the figure remained down by
nearly one quarter from last year after the 25.5% decline during all of
2008. The latest reading beat Consensus expectations for a reading of
59.0.
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.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116f.jpg" align="right" border="0" height="265" width="353">
The expectations component of consumer sentiment rose
moderately to the highest level since October. Still, the series was
near its lowest since 1990 and close to the low of 1980. Expectations
for business conditions during the next year more than recovered the
December drop and expectations for conditions during the next five
years ticked up as well. The expected change in personal finances rose
to the highest level since September.
The current economic conditions index held roughly unchanged
from December. A decline in buying conditions for large household
goods, presumably due to weak income gains, offset a rise in the view
of current personal finances to the highest level since September. The
figure did, however, remain off sharply from last year's average.
The opinion of government policy, which apparently influences
economic expectations, fell to the series' low (-35.9% y/y). Only six
percent of respondents thought that a good job was being done by
government and a record fifty-six 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' low. It was as high as
7.0% in May. The expected inflation rate during the next five years
rose off the series' 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'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">Mid-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>61.9</td>
<td>60.1</td>
<td>55.3</td>
<td>-21.0%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.2</td>
<td>69.5</td>
<td>57.5</td>
<td>-26.7</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>57.2</td>
<td>54.0</td>
<td>53.9</td>
<td>-16.0</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body></html>

U.S. CPI Fell A Third Month Due ToLower Energy Prices

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115h.jpg" align="left" border="0" height="265" width="353">
The EMU inflation picture was finalized with headline
inflation dropping by 0.3% in the month and up by 1.6% Yr/Yr as had
been reported in the flash release. With today&#8217;s report we get the
detail behind the headline. 
 

Inflation is falling sharply for goods as the progressive
growth rates show over shorter horizons the pace of declines getting
greater. That is not true of services, however, there inflation is
stuck and has even notched up over three-months. Still, for the overall
and core rates inflation is decelerating and for the key headline
series for which the ECB imposes a ceiling, the pace of inflation is
now below that ceiling for 3mo, 6-mo and 12-mo inflation calculations,
but most importantly for the 12-mo series that the ECB emphasizes. 
 

Still we present a graph above showing the core rate compared
with that same rate in the US. For Core inflation the two rates have
had different cycles for this two economic groups and some considerable
divergence in recent years. But now the core, which is as good a short
hand as we have for TREND inflation, is showing a sharp decline for
inflation in the US and well as in EMU. 
 

The most recent synchronous declines in inflation came in 2002
and 2003 with another minor episode in 2005. 
 

Since 2004 US and EMU inflation trends have been doing
different things. Over this period EMU inflation has accelerated until
the recent peaking and deceleration. In the US inflation has mostly
moved sideways during this period but with some considerable
volatility. US Core inflation rose from early through late 2006 before
oscillating in range- a range from which it is now declining. As a
result the current US core inflation rate is the lowest realm we have
seen since mid 2004. For EMU core inflation is only back to late 2007
levels. Even a casual look at the chart and the table above shows why
some ECB hawks have been reluctant to cut rates. EMU core inflation has
been much more in the mode of accelerating than has core inflation in
the US. Even as the headline rate plummets, EMU service sector
inflation is showing some unexpected - and sometimes unrecognized -
resilience. So despite the EMU rate cut we can only wonder how much
these trends will limit flexibility in the ECB monetary policymaking in
the months ahead.. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Trends in HICP</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</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>
</tr>
<tr class="odd">
<td class="firstcol">EMU-13</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-2.6%</td>
<td>-0.9%</td>
<td>1.6%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>-0.8%</td>
<td>-0.8%</td>
<td>0.0%</td>
<td>-6.1%</td>
<td>-4.1%</td>
<td>0.9%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>2.6%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">HICP</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-3.3%</td>
<td>-0.9%</td>
<td>1.1%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-2.5%</td>
<td>-1.6%</td>
<td>1.2%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-4.2%</td>
<td>-1.5%</td>
<td>1.4%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Core excl Food Energy
Alcohol</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.5%</td>
<td>3.0%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.0%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
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The EMU inflation picture was finalized with headline inflation dropping by 0.3% in the month and up by 1.6% Yr/Yr as had been reported in the flash release. With today’s report we get the detail behind the headline. Inflation is [...]

Core Inflation in the EMU and in the US Falling Together...at Last

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115f.jpg" align="left" border="0" height="265" width="353">
The Philadelphia Federal Reserve Bank indicated that its
January Index of General Business conditions in the manufacturing
sector rose slightly from the recent monthly lows. However, the index
at -24.3 this month was still only slightly better than the lows of the
prior two recessions. A weaker reading of -35 had been expected for
this month.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115g.jpg" align="right" border="0" height="265" width="353">
During the last ten years there has been a 71% correlation
between the level of the Philadelphia Fed Business Conditions Index and
the three-month growth in factory sector industrial production. There
has been a 54% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total
business activity and each of the sub-indexes. The business conditions
index reflects a separate survey question.
The employment index weakened sharply to the lowest level
since the recession of 1975. A record forty eight percent of
respondents expected to reduce employment levels while only nine
percent expected to raise them. During the last ten years there has
been a 79% correlation between the index level and the m/m change in
manufacturing sector payrolls.
The new orders index ticked up slightly to a reading of -22.3
and the shipments index also recovered all of its sharp December
decline.
The prices paid index fell, for the third month, to a record
low. During the last ten years there has been a 69% correlation between
the prices paid index and the three-month growth in the intermediate
goods PPI. There has been an 82% correlation with the change in core
intermediate goods prices. Just eleven percent of respondents increased
prices this month versus thirty eight percent that lowered them.
The separate index of expected business conditions in six
months rose slightly to its highest level since September. The
expectations index for new orders led the improvement but the
expectations index for employment fell to a record low.
The Philadelphia Fed figures can be found in Haver's SURVEYS
database.
The latest Business Outlook Survey from the Federal
Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0109.pdf">here.</a>
The Fed, Liquidity, and Credit Allocation from
the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/09/01/Thornton.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January&nbsp; '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-24.3</td>
<td>-36.1</td>
<td>-12.0</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-27.0</td>
<td>&nbsp;-25.5</td>
<td>&nbsp;49.8</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
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The Philadelphia Federal Reserve Bank indicated that its January Index of General Business conditions in the manufacturing sector rose slightly from the recent monthly lows. However, the index at -24.3 this month was still only [...]

Philadelphia Fed Index Improved Slightly But Still Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115d.jpg" width="353">
Initial claims for unemployment insurance rose last week and recovered a piece of the decline in earlier weeks. The 54,000 week-to-week increase to 524,000 followed declines of 21,000 (slightly revised) and 98,000 during the prior two weeks. These latter declines were widely attributed to aberrant seasonal factors, although a problem near this magnitude has not been observed since 2001. The latest increase exceeded Consensus expectations for a rise to 501,000.
The Labor Department indicated that the largest increases in initial claims for the week ending January 3 were in New York (+24,465), North Carolina (+19,749), Georgia (+18,308), South Carolina (+14,905), and Virginia (+7,362), while the largest decreases were in California (-14,796), Kansas (-13,313), Michigan (-11,956), Illinois (-9,727), and Ohio (-7,499).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115e.jpg" width="353">
Continuing claims for unemployment insurance during the week of January 3 fell 115,000 and that reversed roughly half of the prior week&#39;s increase. The four-week average of continuing claims rose 27,500 to 4,500,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment remained stable for the third week at this cycle&#39;s high of 3.4%. The highest insured unemployment rates in the week ending December 27 were in Oregon (7.4 percent), Michigan (6.6), Idaho (6.3), Wisconsin (6.0), South Carolina (5.4), Arkansas (5.3), Nevada (5.2), Pennsylvania (5.2), Indiana (5.1), and Montana (5.1).
Three Funerals and a Wedding from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/09/01/Bullard.pdf">here</a>.
The Current Recession: How Bad Is It? also from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/es/09/ES0904.pdf">here</a>.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">01/10/09</th>
<th scope="col">01/03/09</th>
<th scope="col">12/27/08</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>
<td class="firstcol">Initial Claims</td>
<td>524</td>
<td>470</td>
<td>491</td>
<td>66.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,497</td>
<td>4,612</td>
<td>64.5%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
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Initial claims for unemployment insurance rose last week and recovered a piece of the decline in earlier weeks. The 54,000 week-to-week increase to 524,000 followed declines of 21,000 (slightly revised) and 98,000 during the prior two [...]

U.S. Weekly Claims For Jobless Insurance Back Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115a.jpg" align="right" border="0" height="265" width="353">U.S.
producer prices for finished goods fell 1.9% last month versus
expectations for a 2.0% drop. The decline was the fifth in as many
months. Nevertheless, 2008 was a year when price increases as a whole
were stronger than during 2007. The 6.3% increase in the overall
Producer Price Index compared to a 3.9% rise one year earlier and it
was the firmest since 1991.&nbsp; Several month-to-month increases,
which exceeded 1.0% early in 2008, were responsible for that lift.
Gains in energy prices were responsible for much of the acceleration in
the PPI last year. Though they fell 9.3% last month, down for the fifth
consecutive month, for all of 2008 they rose 14.0% and that was double
the 2007 increase. December-to-December energy prices fell 21.2%. That
decline was enough to lower the level of finished energy prices in
December to that of mid-2005.&nbsp; Therefore, much more sanguine
news on pricing is in the cards for this year. Finished consumer food
prices also eased during the last three months and in December they
fell 1.5%. That lowered the December-to-December increase to a moderate
3.8%. Nevertheless, for all of last year food prices rose a strong 6.9%
which was about the gain they posted in 2007.&nbsp; Large monthly
increases early in the year were responsible for that lift and they
were led by a 6.5% rise in meat prices, which was double the 2007 rise,
and a 34.5% rise in pasta product prices.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115b.jpg" align="right" border="0" height="265" width="353">
Less food &amp; energy,
prices also firmed in 2008. First, the December increase of 0.2% was
double Consensus expectations. That gain followed a slim 0.1% increase
one month earlier but these followed four consecutive monthly increases
between 0.4% and 0.6%. The y/y rise in the core PPI of 4.3% was nearly
the strongest since late-1989. Prices of core finished consumer goods
rose 0.3% last month and that ended a year when they increased 4.5%
from December-to-December. The gain was the strongest since 1989.
Durable consumer goods prices jumped 0.5% last month and were up 3.2%
y/y. Appliance prices jumped 3.8% y/y, their strongest since 1989,
while core nondurable goods prices strengthened to a 5.6% y/y increase,
also the fastest rise since early 1999.&nbsp; In addition, prices
for capital equipment firmed and rose 4.0%, again the strongest since
1989. Lower prices for intermediate goods may portend easier price
gains in finished goods prices this year.&nbsp;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115c.jpg" align="right" border="0" height="265" width="353">
They fell 4.2% last
month and repeating their decline in November.&nbsp; Energy prices
dropped 9.5% (-20.4% y/y).&nbsp; Excluding food &amp; energy,
prices fell for the third consecutive month. The crude
materials PPI was down sharply for the fifth straight month. Energy
prices led the fall with a 6.0% (-33.4% y/y) drop and crude food prices
fell 5.3% (-13.9% y/y). Less food &amp; energy, crude prices fell
2.2% with the recent drop in commodity prices. The latest Beige
Book from the Federal Reserve which covers regional economic
conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090114/default.htm">here</a>.&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</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">Finished Goods</td>
<td>-1.9</td>
<td>-2.2</td>
<td>-1.2</td>
<td>6.3</td>
<td>3.9</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2</td>
<td>0.1</td>
<td>4.3</td>
<td>3.4</td>
<td>1.9</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-4.2</td>
<td>-4.3</td>
<td>-2.0</td>
<td>10.5</td>
<td>4.1</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-3.0</td>
<td>-2.3</td>
<td>3.2</td>
<td>7.6</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-5.3</td>
<td>-12.5</td>
<td>-24.8</td>
<td>21.5</td>
<td>12.1</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-2.2</td>
<td>-20.4</td>
<td>&nbsp;-24.5</td>
<td>15.2</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>
</body></html>

U.S. producer prices for finished goods fell 1.9% last month versus expectations for a 2.0% drop. The decline was the fifth in as many months. Nevertheless, 2008 was a year when price increases as a whole were stronger than during [...]

U.S. December PPI Fell Again; 2008 Strength in Pricing Abruptly Ends

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

US production rebounded in Q2, but demand continued to slow

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

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Andrew Cates

**US trade with Europe** 
Geopolitical tensions surrounding Greenland have abruptly sharpened investor sensitivity to US trade and foreign-policy risk. What might once have been dismissed as rhetorical brinkmanship has taken on greater macro-financial relevance as Donald Trump has coupled renewed interest in Greenland’s strategic importance with explicit threats of higher tariffs on European imports. The first chart below highlights that the US is materially more exposed to EU goods than the EU is to US trade, making any escalation asymmetrically more costly for the US economy. Beyond the direct inflationary impact of higher tariffs, the more immediate risk lies in confidence effects and capital flows: early signs of capital reallocation away from US assets over the past 24 hours suggest that markets could be beginning to price a broader erosion of policy predictability. In this environment, tariffs risk functioning less as a targeted trade tool and more as a systemic confidence shock—tightening financial conditions, unsettling the dollar’s safe-haven status and increasing downside risks to US growth via weaker investment and higher risk premia.

260122Z1.jpg

**Japan’s JGB yields**
That said, recent capital outflows from US assets may owe as much to developments in Japan as to geopolitical and trade-related shocks. While tariff threats and policy unpredictability have clearly unsettled sentiment, an underappreciated driver of the sell-off in US Treasuries has been the sharp repricing in the Japanese government bond market. Renewed domestic political uncertainty and intensifying concerns over Japan’s debt dynamics have triggered a rapid rise in JGB yields, prompting portfolio rebalancing by Japanese investors and reducing the relative appeal of US duration. Given Japan’s role as one of the largest foreign holders of US Treasuries, yield gyrations at home can translate quickly into capital repatriation, hedging adjustments and reduced demand for US bonds. In this sense, recent moves in US yields may reflect less a direct reaction to geopolitical risk and more a globally transmitted capital-flow shock—originating in Japan but felt most acutely in US financial markets.

260122Z2.jpg

**Inflation expectations and oil prices**
Capital-flow dynamics may have also begun to spill over into how markets are pricing US inflation risk and monetary credibility. Historically, medium-term US inflation expectations have remained closely anchored to global energy prices, as illustrated by the strong co-movement between the 5-year forward inflation rate and Brent crude prices. More recently, however, that relationship has begun to fray: inflation expectations have proven notably resilient even as oil prices have softened, suggesting that markets are increasingly pricing political and policy risk rather than cost-push fundamentals alone. Renewed tariff threats under President Trump, combined with heightened geopolitical tensions involving Greenland and transatlantic relations, risk reinforcing concerns that future inflation outcomes could be shaped as much by political intervention as by macroeconomic conditions. Any perception that the Federal Reserve may face constraints on its operational independence would compound this shift—loosening inflation anchors, raising term premia and increasing the sensitivity of capital flows to US policy credibility.

260122Z3.jpg

**UK inflation** 
UK inflation data released this week show a small upside surprise in headline CPI at year-end. Headline CPI inflation specifically rose from 3.2% y/y in November to 3.4% in December, a little more than expected. The chart below shows that the pickup was driven by persistent underlying pressures—most notably in services. While a negative drag from energy prices has largely faded, services inflation continues to account for a disproportionate share of overall price growth, probably reflecting ongoing wage pressures and limited slack in parts of the domestic economy.

260122Z4.jpg

**Wage growth in the US and Europe** 
Labour-market data from the Indeed Hiring Lab reinforce the picture of persistent services-side pressure in the UK inflation mix. As the chart shows, UK posted wage growth remains elevated relative to both the euro area and the US, even though momentum has eased from its 2023 peak. At around the mid-5% range on a three-month moving average basis, UK wage growth is still running at a pace that is difficult to reconcile with a rapid return of services inflation to target. By contrast, posted wage growth in the euro area has slowed more decisively, while the US has seen a sharper deceleration from earlier extremes.

260122Z5.jpg

**China’s property market**
Finally, the Q4 GDP figures released in China this week sit uneasily alongside continued weakness in its domestic property sector, which remains a key drag on both investment and consumption. While Q4 growth of 4.5% y/y brought full-year GDP broadly in line with the authorities’ 5% target, the chart highlights how property-market adjustment is still running deep beneath the surface. Prices of existing homes across China’s 70 cities remain in year-on-year decline, while real estate investment continues to contract sharply, underscoring the scale and persistence of the sector’s retrenchment. This helps explain why fixed asset investment has softened further and why household demand remains subdued, despite more resilient industrial output.

260122Z6.jpg

This week’s data and market moves have been framed by an abrupt escalation in geopolitical tensions surrounding Greenland, which has served as a catalyst for broader financial unease rather than a standalone shock. The episode has sharpened investor focus on US policy predictability, amplifying concerns already evident in the charts on EU–US trade exposure, where tariff threats risk feeding directly into confidence effects and capital flows. At the same time, recent turbulence in Japanese government bonds appears to have been an underappreciated driver of the sell-off in US Treasuries, highlighting how global capital reallocation—rather than geopolitics alone—has contributed to higher US yields. These forces intersect with growing questions around the durability of US monetary credibility, as inflation expectations have shown signs of decoupling from traditional oil-price anchors, raising the sensitivity of markets to any perceived constraints on the Federal Reserve. Beyond the US, UK data delivered a modest upside surprise in headline inflation, with persistent services and wage pressures reinforcing a cautious policy backdrop for the Bank of England. In China, meanwhile, Q4 GDP growth of 4.5% y/y kept full-year expansion aligned with the government’s target, but continued weakness in the property sector remains a significant drag on investment and household confidence. Taken together, the week’s developments point to a global outlook increasingly shaped by geopolitical risk, capital-flow dynamics and domestic  structural constraints, rather than by straightforward cyclical momentum alone.

Charts of the Week: Seeing Green

Sandy Batten

260122N8.jpg

260122C8.jpg

Real GDP increased 4.4% q/q saar in the third quarter of 2025 in the final estimate, up marginally from 4.3% in the first release. The Action Economics Forecast Survey expected no revision. Growth from a year ago was unrevised at 2.3% y/y. Growth of corporate profits was revised up to 4.5% q/q not annualized from 4.2% in the previous report.

The revision to GDP mostly reflected slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventory investment. Nonresidential fixed investment increased a revised 3.2% q/q saar versus a 2.8% gain in the previous release. This reflected a smaller decline in structures, a smaller increase in equipment and a larger increase in intellectual property products than previously estimated. Residential investment was revised weaker with a 7.1% quarterly decline versus -5.1% in the previous estimate.

Upon revision, exports rose 9.6% q/q in Q3 versus 8.8% in the first estimate. Consequently, the trade deficit narrowed a little more than in the first estimate, resulting in net exports adding 1.62%-points to overall growth, 0.03%-point more previously estimated. The decline in inventory investment in Q3 was smaller than previously estimated, reducing the drag from inventories by 0.1%-point versus the previous estimate. The decline in inventories subtracted 0.12%-point in Q3 on top of a 3.44%-point subtraction in Q2.

Domestic demand growth remained solid in Q3 but was revised down 0.1%-point. Final sales to domestic purchasers grew a revised 2.8% q/q saar in Q3 versus 2.9% in the first estimate. Final sales to private domestic purchasers increased 2.9% q/q, down slightly from 3.0% previously.

260122O8.jpg

260122P8.jpg

The primary driver of overall growth continued to be personal consumption expenditures. They increased an unrevised 3.5% q/q saar in Q3, adding 2.34%-points to total GDP growth. This reflected a 3.0% increase in spending on goods versus 3.1% previously and a 3.6% gain in spending on services versus 3.7% previously. The rise in government spending was unrevised at 2.2% q/q. However, spending by the federal government was revised slightly slower to 2.7% from 2.9% while spending by state and local governments was revised up slightly to 2.0% from 1.8%.

Key measures of inflation were unrevised. Inflation as measured by the GDP price index remained at 3.8% q/q saar in Q3, but this was up markedly from 2.1% in Q2. Similarly, PCE inflation in Q3 was unrevised at 2.8% versus 2.1% in Q2. Core PCE inflation was also unrevised at 2.9% in Q3.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

260122Q8.jpg

260122S8.jpg

- Real GDP grew 4.4% q/q saar in Q3 2025, up slightly from 4.3% previously reported.
- The modest upward revision was due mostly to slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventories.
- Growth of domestic demand remained solid in Q3 but was revised down 0.1%-point.
- GDP and PCE inflation were unrevised at 3.8% and 2.8%, respectively. Both are meaningful accelerations from Q2.

U.S. Q3 GDP Growth Revised Slightly Faster

Kathleen Stephansen, CBE

260122A2.jpg

260122B2.jpg

Initial claims for unemployment insurance edged up 1,000 to 200,000 in the week ending January 17, from 199,000 in the week ending January 10, revised from 198,000. The four-week moving average of initial claims was 201,500 in the January 17 week, down 3,750 from 205,250 in the January 10 week, revised from 205,000, and reaching the lowest level for this average since January 13, 2024, when it was 200,000.

Federal government employees initially filed 1010 (NSA) jobless insurance claims in the week ended January 10, after filing 646 (NSA) claims in the week ended January 3.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 26,000 to 1.849 million in the week ended January 10 from 1.875 million in the week ending January 3, revised from 1.884 million. The four-week moving average was 1.871 million in the latest week, down from 1.887 million in the January 3 week, revised from 1.889 million. The insured unemployment rate remained at 1.2% in the week of January 10, unchanged from previous 6 weeks.

Federal government employees’ continuing benefits claims were 12,977 (NSA) in the week ending January 3, from 12,803 (NSA) in the week of December 27.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 3, the highest unemployment rates were in Rhode Island (3.27%), New Jersey (3.17%), Washington (2.85%), Minnesota (2.75%), Massachusetts (2.74%), Oregon (2.37%), Connecticut (2.31%), Montana (2.26%), California (2.21%), and Alaska (2.06%). The lowest rates were in Florida (0.29%), North Carolina (0.40%), and Louisiana (0.43%). Rates in other notable states include New York (2.28%), Pennsylvania (2.23%), Illinois (2.21%), and Texas (1.14%). 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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U.S. Initial Claims for Unemployment Insurance Edged Up in Latest Week

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The National Bank of Belgium index for January 2026 rose to +4 from -1 in December, stronger than its November 2025 reading of +2. The survey value is exceptionally strong, lying in the top 6% of all observations back to 1991, even as the survey contains significant variations that range from strong to quite weak across its various components. What is most notable is that the index itself is extremely high-ranking; the current situation appraisal is also quite high-ranking; and, that the forecast for unemployment embedded in this survey is at a 35-year low. Considering current circumstances, against the events of the last 35 years, that's a rather remarkable finding especially considering the world situation.

**The times, they are a changin’ was Dylan 50 years early?** 
These have been remarkable times in a number of different ways with a clear transition from the circumstances of the post-war period under way. The solidarity of the NATO alliance is clearly in a situation in flux, revealed since Russia invaded Ukraine. Prior to that, the Europeans had resisted putting more money into the NATO pot as the United States had been frantically asking them while it funded most of the security umbrella. Now, in the wake of these new events, and with the changes to the global stage wrought by climate shifting, the U.S. finds Greenland to be a more important piece on the geopolitical chess board and wants to have more say there in order to protect its own flank as Arctic ice packs recede. This is after a period when NATO basically failed to engage in the front-line protections of its own doorstep that the U.S. had thought were necessary. Not surprisingly, the U.S. found that whole episode unsatisfactory and is now reluctant to give up control to NATO of what it regards as the protection of its own back door for the area around Greenland. But at last, Europe and the U.S. appear to have a deal or the makings of one, so, stay tuned. Maybe all civility is not lost.

**Geopolitical shifts meld with economic issues to change the landscape**
Geopolitical shifts are part of the problem because geopolitics and economics help shape one another. And there has been a great deal of economic turmoil as well. The U.S., after reassessing the Post War order, is bringing back to life tariffs, in order to try to get economic leverage after running 33 consecutive years of current account deficits under what people want to call a free trade system. The U.S. finds itself with a still very overvalued dollar and in a situation where its current account deficits are poised to continue to run high and perhaps get higher. Economists say tariffs are not the solution, but maybe they ARE the wake-up call that will lead to a solution? Europeans have also shifted to embracing a larger and larger government sector and ever larger fiscal deficits and more fiscal debt while absorbing migrants. This is constraining its ability to have any kind of a flexible macroeconomic policy and is a severe problem already for the U.K. and France. And these changes are wreaking havoc with what has been a very solid post-war Atlantic alliance.

**Views change**
But the changes that the U.S. has pushed on to the system from its geopolitical adventurism to its use of tariffs and other strong rhetorical comments have led economists to focus on the elevation of uncertainty in the economic system. Elevating uncertainty has an adverse impact on the economy and on growth. I mentioned this with the obvious caveat that this warning by economists seems to have been completely wrong. U.S. growth has turned out to be quite resilient and even strong. It is not the only adamant position that has proved to be wrong and malleable. Despite the reality of climate change, the view that once took carbon as the main and unequivocal climate change agent, itself is shifting. Opposition to carbon has dwindled, more as the U.S. is embracing nuclear power. Artificial intelligence is becoming a strong bet for stronger growth in the future, and this explains why there have been so many shifting views on energy since artificial intelligence requires massive amounts of energy and would make it impossible to make progress on carbon and to push ahead with the AI agenda at the same time. So, instead of delaying AI, the view on carbon had to go. So much for ‘science.’

**Why are Belgians so satisfied?**
The finding that in Belgium consumer confidence has risen sharply in this environment and fears of unemployment are the lowest they've been in 35 years is another shocking development in this pantheon of incredible and shocking changes. As the above discussion points out, a lot is changing and NATO is at odds with the U.S., its lynchpin. Yet, there is no clear increase in uncertainty in Belgium, while they maybe more in Brussels.

**The Belgian Survey: strong despite waffles**
Belgians do not read the economic situation over the next 12 months as that strong at a reading of -29 on the survey; it has weakened over the last few months, and the economic situation assessment is only at its 8.3 percentile, an extremely weak standing. Price trends are the opposite; they have eased somewhat in the recent months, but over the next 12 months the assessment still has a top 14-percentile evaluation. It is in this context that the unemployment forecast, which is the lowest in 35 years, emerges as surprising. The environment to make major household purchases over the next 12 months is only a mid-range at a 45.7 percentile standing. And people rate their financial situation over the next 12 months slightly better than at the end of last year but at only a 34.2 percentile standing. However, the appraisal of the current situation moved up sharply in January and has a 97.7 percentile standing, which is extremely strong.

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**Low unemployment fear spurs confidence**
The reason for consumer confidence to be strong is clear when you see how low concerns are about unemployment. But it's hard to understand why concerns about unemployment are so low with the rest of the economic metrics so varied in the survey. This is especially true with Belgium nestled in the heart of Europe and all of these concerns between the U.S. and NATO swirling around as well as a still very hot war occurring on Europe's border between Ukraine and Russia. Meanwhile, the U.S. position about this war continues to seem to back Ukraine a lot less than it should.

**Belgium is a good bellwether**
The Belgian survey is not the most important bit of economic activity. Belgium is not an extremely important country in Europe, although it's in the heart of the European Union, a member of the European Monetary Union, linked closely to Germany, and to other key European economies through trade, so that its performance likely is a good reflection of what's going on in Europe. It is not a European border country. It is in the heartland of Europe. That may explain a little bit why Belgians are not perhaps as nervous as Poles, are or Finns or the small Baltic countries, and others, with potentially more border proximity and vulnerability to the Russia-Ukraine conflict.

**Belgian optimism flies in out of the blue**
This is an observation. I think it's the kind of observation in this world economy that we find striking and unusual and will bear some further watching and some watching of other similar readings in Europe to see if there's evidence that there's some kind of new resilience that we might have missed. Economists seem hung-up broken-record style on uncertainty. Certainly, there's something here that economists have missed who have only seen these new actions by the U.S. as creating more uncertainty since we do not know what the new Greenland deal is. And uncertainty should create more adversity for growth except that it hasn't worked out that way. And it's a reminder that separating economics from geopolitics may take more than a crowbar. And also that uncertainty comes in many shapes and sizes while some may argue that there still is not a Greenland deal, what we see is a lowering of the temperature, a calming of the rhetoric and a sense that the parties have a horse trade they think they can do to resolve their differences. And while there is still uncertainty, there is also clear progress and a clear reduction in risk. Still, the times are changing.

Belgium

Belgian Consumer Confidence Up and Strong; Fear of Unemployment at 35-Year Low! Is That Possible?

Winnie Tapasanun

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, fell 9.3% m/m to 71.8 in December following unrevised increases of 3.3% in November and 2.4% in October, according to the National Association of Realtors (NAR). December marked the first m/m fall since July and the steepest since April 2020. The year-on-year rate was -3.0% in December, the first negative y/y reading since September, compared to +2.6% in November and -5.0% in December 2024. The index had fallen 42.6% since its October 2021 high of 125.1. In 2025, the PHSI declined 0.9% after drops of 3.0% in 2024 and 16.1% in 2023.

The m/m fall in December pending home sales occurred alongside a decline in the average 30-year mortgage rate to 6.20% in December, the lowest since September 2024, down from 6.24% in November and 6.25% in October. These rates, while below a peak of 7.62% in October 2023, had remained higher than a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales decreased m/m in December across all four major regions. The Midwest recorded the sharpest drop, with sales plunging 14.9% (-9.8% y/y) in December—the first m/m decline since September and the deepest since April 2020—after a 1.3% increase in November. Sales in the West slumped 13.3% (-5.1% y/y), the third m/m decrease in four months, following a 9.2% November rebound. Sales in the Northeast slid 11.0% (-3.6% y/y), the first m/m slide since August, after a 1.8% November rise. Sales in the South fell 4.0% (+2.0% y/y), the first m/m fall since June, after a 2.5% November gain.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- PHSI -9.3% m/m (-3.0% y/y) to 71.8 in Dec., lowest index level since July.
- Home sales m/m down in all four major regions, w/ the Midwest seeing the steepest drop (-14.9%).
- Home sales y/y down in the Northeast, Midwest, and West, but up in the South (+2.0%).