Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127f.jpg" align="left" border="0" height="265" width="353">
The Conference Board reported that its December index of
consumer confidence fell to a record low last month. The drop to a
level of 38.0 followed a November uptick and it lowered Confidence by
more than one-half from its year ago level. The December decline about
matched Consensus expectations.
During the last ten years there has been an 82% correlation
between the level of consumer confidence and the y/y change in real
consumer spending.
The present conditions index fell by nearly one-third from the
November level, off by three-quarters during the year. Jobs were seen
as hard to get by 42.0% of respondents, the highest since 1992 and jobs
were seen as plentiful by only 6.2%. Business conditions were seen as
good by just 7.7%, the lowest since 1991. Those who thought conditions
were bad rose to 46.0%, also the highest since 1992.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127e.jpg" align="right" border="0" height="265" width="353">
And the economic outlook was dire as indicated by another
decline in the expectations index. The percentage of respondents
expecting business conditions to worsen in six months rose to 32.8%,
near the highest since the credit crunch of 1980. A modest 12.4%
expected improvement in conditions. More jobs were expected by just
9.9% of respondents while a near-record 19.1% foresaw less income.
Expectations for the inflation rate in twelve months fell
further 5.8%, the lowest level since February.
The decline in confidence around the country was fairly
uniform and varied little by income level.
The Economic Outlook and Some Challenges Facing the
Federal Reserve is a speech made by Philadelphia Fed
President Charles I. Plosser and it can be found <a href="http://www.philadelphiafed.org/publications/speeches/plosser/2009/01-14-09_university-of-delaware.cfm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</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">Consumer
Confidence Index</td>
<td>38.0</td>
<td>44.7</td>
<td>-58.1</td>
<td>57.9</td>
<td>103.4</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>29.4</td>
<td>42.3</td>
<td>-74.0</td>
<td>69.4</td>
<td>128.8</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>43.8</td>
<td>46.2</td>
<td>-42.2</td>
<td>49.9</td>
<td>86.4</td>
<td>89.7</td>
</tr>
</tbody>
</table>
 Case-Shiller Home Price Index Fell
A Record 18.2% 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 27, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127g.jpg" align="left" border="0" height="265" width="353">
The S&amp;P/Case-Shiller 20 Home Price
Composite Index fell another 1.9% during November. That
pulled prices down 18.2% during the last twelve months and by 25.2%
since their peak in May 2006. The series dates back only to
2000. The decline in November prices was as expected.
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is weighted to reflect price changes due to extensive remodeling,
home additions or extreme neglect. For example, smaller weights are
assigned to sales of homes that have undergone extensive remodeling.
The Case-Shiller composite index of homes in 10 metropolitan
areas, which has a longer history and dates back to 1987, fell 1.8%
during November. It was down 19.1% year-to-year and down 26.8% since
the 2006 peak.
Weakest Regions: Home prices in Phoenix,
Nevada continued quite weak and fell 3.1% during November (-32.9% y/y)
and in San Diego prices fell another 1.8% (-25.8% y/y). Prices here
were off 38.2% from their early 2006 peak. Home prices in Las Vegas,
Nevada fell 2.7% (-31.7% y/y) and were down 41.7% from their peak.
Prices in Miami fell 2.1% (-28.7% y/y) during November while the
weakness in home prices in Los Angeles where prices fell 1.7% (-26.9%
y/y. In San Francisco home prices were off 30.8% year-to-year, off
38.04 from their 2006 peak, while prices in Miami fell 28.7% y/y.
Florida generally has seen weak home prices. In Tampa they fell 20.9%
y/y and in Detroit home prices fell by 20.7% y/y off 34.6% from the
peak.
Less Weak Regions: In the Northeast, the
decline in home prices continued less severe. In New York, prices fell
8.6% y/y, off 13.8% from their 2006 peak. Prices were down 7.3%
year-to-year in Boston. In Dallas prices also were off by a modest 3.3%
y/y and by 5.6% from last year's peak. In Charlotte, North Carolina
they fell a somewhat greater 5.3% y/y and in Denver, home prices were
off 4.3% y/y. In Cleveland Ohio prices were off 5.2% y/y and in
Chicago, home prices were down a relatively heafty 12.5% y/y, 16.1%
from the peak.
The S&amp;P/Case-Shiller home price series can be found in
Haver's USECON database but the city data is in the
REGIONAL database.
The latest press release from Standard &amp; Poor's can be
found <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_012724.pdf">here.</a>
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>154.18</td>
<td>157.17</td>
<td>-18.2%</td>
<td>-3.8%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
 U.S. Gasoline Price Rise Stabilized 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 27, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127a.jpg" align="left" border="0" height="265" width="353">
The recent rise in regular gasoline prices
stabilized last week after three consecutive weeks of increase. At an
average $1.84 per gallon prices about matched the prior week's level
but that still was up 13 cents from the recent low, according to the
U.S. Department of Energy survey. The latest level was near the highest
price since late November. Yesterday, the spot market price for regular
gasoline held stable with Friday's level of $1.17 per gallon which also
was the average during last week.
Weekly gasoline prices can be found in Haver's WEEKLY
database. Daily prices are in the DAILY
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127b.jpg" align="right" border="0" height="265" width="353">
Demand continued quite weak for gasoline in reaction to the
economy's weakness. The U.S. Department of Energy reported that the demand
for gasoline fell by 3.2% during the latest four weeks.
While the rate of decline remained nearly the fastest since late-1995
(the latest four weeks versus the same four weeks in 2008) it has been
stable since November. The demand for all petroleum
products also has been down a sharp 4.7% y/y. These numbers are
available in Haver's OILWKLY database.
The source for that reduced demand for gasoline is the cutback
in vehicle miles driven which have fallen 5.3% year-to-year during the
twelve months ended November. The rate of decline has been accelerating
since late 2007 and it is nearly unprecedented. These Department of
Transportation figures are available in Haver's OGJ database.
The price for a barrel of West Texas Intermediate crude moved
back up last week to $42.18 per barrel. Prices reached their high of
$145.66 last July. In futures trading yesterday, the one-month price
for crude oil moved higher versus last week to $45.73 per barrel. The
two month futures price was higher still at $48.49.
The price of natural gas slipped further to $4.80 per mmbtu
(-39.1% y/y). The latest average price was almost 50% below natural gas
prices in early-July of $13.19/mmbtu.
Bagehot on the Financial Crisis of 1825...and 2008
from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20090201/mtpub.pdf">here.</a>
The Fed's Response To The Credit Crunch,
also from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/es/09/ES0906.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"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">01/26/09</th>
<th scope="col">01/19/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon)</td>
<td>1.84</td>
<td>1.85</td>
<td>-38.3%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>42.18</td>
<td>36.91</td>
<td>-52.8%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
 U.S. Chain Store Sales Fell Back;
2.4% Yearly Decline a Record 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 27, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127c.jpg" align="left" border="0" height="265" width="353">
Chain store sales last week retraced the prior week's
increase, and more, with a 1.8% decline, according to the International
Council of Shopping Centers-Goldman Sachs Index. The drop followed the
prior week's 1.1% increase and it left sales in January about even with
the December average. The year-to year change of -2.4% stands
as the weakest in the series' history which extends back to 1990.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


During the last ten years there has been a 64% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales.
The outlook for sales weakened recently. The weekly leading
indicator of chain store sales from ICSC-Goldman Sachs fell 0.7% after
a 1.6% decline during the prior week. The average level so far in
January is up 1.0% from December, which rose 2.1% versus November.
Since the lows of one month ago the index has recovered
3.1%.
The chain store sales figures are available in Haver's SURVEYW
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">01/24/09</th>
<th scope="col">01/17/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>471.0</td>
<td>479.8</td>
<td>-2.4%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
 German Biz Confidence In a Small
Rebound: What's All the Fuss? 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 27, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127d.jpg" align="left" border="0" height="265" width="353">
The German IFO index made a small rebound in January and that
has caused some excited stirring in markets. Still the IFO Business
climate index is very weak and the EMU sentiment index for Germany
(Dec) is even lower than it was in 2001 at the bottom. There should be
little excitement is such low persisting readings and on such a weak
rebound. 
 

The table above shows that the Biz Climate, Current Situation
and Biz Expectations indices all are down about 20% Yr/Yr. Taken as a
percent of their respective ranges since early 1991 the business
climate index is in at the bottom one-percentile of its range, the
current situation is in the bottom 12% of its range and business
expectations are in the bottom nine percent of their range. These are
all weak global range positions and year over year standings. 
 

That markets want to put a positive spin on such a poor
showing tells us of the poor state of market psychology right now.
Clearly the chart (above) shows little to cheer about. In any event we
would expect a much more substantial rebound in expectations even
before the current situation improves. Nothing like that is in train.
The optimism registered today, is just that based on nothing in
particular. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">IFO
Survey: Germany</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="4">Index Numbers</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jan 
09</td>
<td>Dec 
08</td>
<td>Nov 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Current</td>
<td>Dec 
08</td>
<td>Curr/ 
Avg</td>
<td>Percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">Biz Climate</td>
<td>-19.8%</td>
<td>-20.0%</td>
<td>-17.8%</td>
<td>-13.4%</td>
<td>-11.0%</td>
<td>83.0</td>
<td>82.7</td>
<td>86.3%</td>
<td>1.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Current Situation</td>
<td>-19.8%</td>
<td>-18.1%</td>
<td>-14.2%</td>
<td>-8.9%</td>
<td>-9.4%</td>
<td>86.8</td>
<td>88.8</td>
<td>90.3%</td>
<td>11.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol"> Biz Expectations</td>
<td>-19.8%</td>
<td>-21.9%</td>
<td>-21.3%</td>
<td>-17.6%</td>
<td>-12.6%</td>
<td>79.4</td>
<td>76.9</td>
<td>82.4%</td>
<td>8.7%</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">average
&amp; range since Apr-91</td>
</tr>
</tbody>
</table>
</body></html>

The Conference Board reported that its December index of consumer confidence fell to a record low last month. The drop to a level of 38.0 followed a November uptick and it lowered Confidence by more than one-half from its year ago [...]

Consumer Confidence Fell To ARecord Low

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126g.jpg" align="left" border="0" height="265" width="353">
Last week, Robert Brusca noted how the global slowdown was
affecting international trade by citing Italy's trade data. Further
evidence of the decline in world trade became available today with the
release of December trade data for Sweden.
Sweden reported a 12,930 million kronor decline in imports and
a 15,259 decline in exports, resulting in an improvement in its balance
of trade of 7,479 million kronor for the month of December. But from
the standpoint of world trade the fewer exports and fewer imports meant
a decline in world trade activity of 18,189 million kronor or $2,760
million.
The attached chart shows the sum of the changes in Sweden's
exports and imports over the past five years. The data showed little
trend until April of this year. Since then the down trend has been
dramatic.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SWEDEN&nbsp;</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">M/M chg&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Balance of Trade
(Millions Kroner)</td>
<td>10163.14</td>
<td>2697.76</td>
<td>7470.35</td>
</tr>
<tr class="odd">
<td class="firstcol">Export&nbsp;&nbsp;
(Millions Kroner)</td>
<td>84355.39</td>
<td>89714.62</td>
<td>-5259.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports&nbsp;&nbsp;
(Millions Kroner)</td>
<td>74192.25</td>
<td>87021.86</td>
<td>-12829.61</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions Kroner)</td>
<td>18188.84</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange rate
(Kroner/US$)</td>
<td>8.0038</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions US$)</td>
<td>2272.53</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Last week, Robert Brusca noted how the global slowdown was affecting international trade by citing Italy's trade data. Further evidence of the decline in world trade became available today with the release of December trade data for [...]

Deterioration in World Trade Continues: the News from Sweden

Robert Brusca

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126f.jpg" align="left" border="0" height="265" width="353">
While headline inflation continues to lose steam in Canada as
it does everywhere else in the world, Canada&#8217;s core rate is not on that
same page. Over three-months core inflation has escalated to a pace of
+2.6% from under 2% over previous key horizons (see table). By
comparison, Canada&#8217;s CPIx, that excludes eight volatile categories
shows inflation remains steady at a pace of 2.2% to 2.4%. This is not a
question about inflation spiking but a question about what sort of
momentum inflation now has in Canada and what pressures the bank of
Canada faces in setting policy. . 
 

The headline rate points clearly lower, with inflation down by
6.1% over three months (annualized) or up by just 1.2% Yr/Yr. Both of
those are good results. The dropping and negative three-month and
six-month results suggest that there may be more relief in inflation to
be passed on to core and nonvolatile items in the months ahead. But for
now Canada&#8217;s main inflation trends as depicted by the core or CPIx are
best viewed as moderate and steady. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> Canada's CPI and Core Inflation</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% MO/MO</td>
<td colspan="4">% saar</td>
</tr>
<tr>
<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>
<td class="firstcol"> All Items</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.8%</td>
<td>-6.1%</td>
<td>-2.1%</td>
<td>1.2%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol"> All Items SA</td>
<td>-0.4%</td>
<td> -0.3%</td>
<td>-0.6%</td>
<td>-5.1%</td>
<td>-1.6%</td>
<td>1.4%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; CPI Core</td>
<td>0.1%</td>
<td> 0.5%</td>
<td>0.0%</td>
<td> 2.6%</td>
<td>1.5%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol"> All items Excl 8
Volatile (CPIx)</td>
<td>-0.1%</td>
<td> 0.6%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.2%</td>
<td> 2.4%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol"> RPIxseas food</td>
<td>-0.3%</td>
<td> 0.6%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>3.9%</td>
<td>4.1%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol"> Food &amp; Non
Alcohol Bev</td>
<td>0.3%</td>
<td> 1.0%</td>
<td>0.6%</td>
<td>7.7%</td>
<td> 8.7%</td>
<td> 7.2%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol"> Shelter</td>
<td>0.0%</td>
<td> 0.2%</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>3.5%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol"> Clothing &amp;
Footwear</td>
<td>-0.3%</td>
<td> 0.4%</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-3.0%</td>
<td>-2.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol"> Education</td>
<td> 0.2%</td>
<td>0.2%</td>
<td>0.7%</td>
<td> 4.6%</td>
<td> 3.8%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol"> Health &amp;
Personal Care</td>
<td>0.2%</td>
<td> 0.5%</td>
<td>0.1%</td>
<td>3.0%</td>
<td> 3.4%</td>
<td> 2.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol"> Transportation</td>
<td> -0.6%</td>
<td> -0.7%</td>
<td>-0.8%</td>
<td>-8.1%</td>
<td>-3.8%</td>
<td>0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> A RED highlight indicates
inflation accelerating from pace of previous horizon</td>
</tr>
</tbody>
</table>
</body></html>

While headline inflation continues to lose steam in Canada as it does everywhere else in the world, Canada’s core rate is not on that same page. Over three-months core inflation has escalated to a pace of +2.6% from under 2% over [...]

Canada's Mixed Inflation Picture...

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126e.jpg" width="353">
For December, the National Activity Index (CFNAI) from the Chicago Federal Reserve Bank continued lower into recession territory. The latest reading of -3.26 was near it&#39;s historic low. Since 1970 there has been a 75% correlation between the level of the index and the q/q change in real GDP.
The three-month moving average of the index of -2.40 was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_january2009.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
Each category of the index including employment, production, income, consumption &amp; housing made a negative contribution to the November index.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during November to its lowest level since early 1997. The steel, machinery and resource sectors all were weak but the auto sector ticked up very slightly.

<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/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December &#39;07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-3.26</td>
<td>-2.78</td>
<td>-0.96</td>
<td>-1.69</td>
<td>-0.39</td>
<td>0.00</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.40</td>
<td>-2.56</td>
<td>-0.71</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>


</html>

For December, the National Activity Index (CFNAI) from the Chicago Federal Reserve Bank continued lower into recession territory. The latest reading of -3.26 was near it's historic low. Since 1970 there has been a 75% correlation [...]

Chicago Fed Index Well Into Recession Territory

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126c.jpg" width="353">
The Conference Board reported that the December composite index of leading economic indicators rose 0.3% after an unrevised 0.4% November decline. The peak for the index was in July of last year and the six-month percent change of -5.0% was near the largest rate of decline since 1990.
Five of the ten components of the leading index fell last month with the largest declines coming from lower building permits, shorter hours worked and easier vendor performance. Higher initial claims for jobless insurance also subtracted a sharp 0.15 percentage points from the leaders and consumer expectations were about unchanged. Faster money supply growth added back one percentage point to the m/m change in the leading index and a steeper yield curve added another 0.2 points.
The breadth of one-month increase amongst the leaders&#39; 10 components improved to 50% but over a six-month period the breadth of gain amongst the components remained stuck at a quite low 30%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126d.jpg" width="353">
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators fell again. The 0.5% decline followed an unrevised 0.3% November drop an it was the tenth of the year. Three quarters of the index components fell m/m but over six months 25.0% rose. Year-to-year the coincident indicators fell 2.8% and over the last ten years there has been a 76% correlation between this y/y change and real GDP.
The lagging index fell 0.4% after no change in November. The ratio of coincident-to-lagging indicators (a measure of economic excess) fell slightly to its lowest level since 1975.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 6-Month % (AR)</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">Leading</td>
<td>0.3</td>
<td>-0.4</td>
<td>-1.0</td>
<td>-5.0</td>
<td>-2.7</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.5</td>
<td>-0.3</td>
<td>0.3</td>
<td>-2.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>0.0</td>
<td>0.1</td>
<td>2.9</td>
<td>2.8</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


</html>

The Conference Board reported that the December composite index of leading economic indicators rose 0.3% after an unrevised 0.4% November decline. The peak for the index was in July of last year and the six-month percent change of [...]

U.S. Leading Indicators Rose Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126a.jpg" width="353">
Could the decline in home sales be stabilizing, perhaps due to lower prices? According to the National Association of Realtors, sales of existing homes rose 6.5% last month to 4.740M. The 9.4% November decline was slightly deeper than reported initially. Consensus expectations had been for sales of 4.40M homes. Total sales include sales of condos and co-ops.
Median home prices fell yet again during December. The 2.7% (NSA) decline followed a 3.3% November drop that was slightly deeper than initially reported. It was the sixth consecutive monthly drop and it lowered prices by 15.3% from December of 2007. Prices have fallen 23.4% since their peak in June 2007.
The number of unsold homes (condos &amp; single-family) on the market dropped a sharp 11.7% (-7.5% y/y). At the current sales rate there was a 9.3 months&#39; supply on the market which was the lowest since early during 2007. For single-family homes the inventory fell m/m to an 8.7 months supply at the current sales rate which also was the lowest since 2007.
Last month, sales of existing single-family homes recovered nearly all of the November decline with a 7.0% increase. Nevertheless, sales of existing homes remained down by nearly one-third from their peak in mid-2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126b.jpg" width="353">
By region, home sales in the West posted the strongest gain in December with a 13.6% rise. This gain recouped all of the declines during the prior two months and returned sales to the upward trend line that has been in place since the low in October of 2007. Sales in the South also gained 7.4% versus November but that level was the series&#39; low for this cycle. Sales in the Midwest also rose by 4.0%. That too was off the series&#39; low. Sales in the Northeast fell 1.4% after a huge 12.0% November drop. Single family home sales here were at their lowest since 1992.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous)</th>
<th scope="col">December</th>
<th scope="col">y/y %</th>
<th scope="col">November</th>
<th scope="col">December &#39;07</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>4,740</td>
<td>-3.5</td>
<td>4,450</td>
<td>4,910</td>
<td>4,897</td>
<td>5,672</td>
<td>6,508</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>720</td>
<td>-14.3</td>
<td>730</td>
<td>840</td>
<td>842</td>
<td>1,008</td>
<td>1,090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>-10.3</td>
<td>1,000</td>
<td>1,160</td>
<td>1,129</td>
<td>1,331</td>
<td>1,491</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>-11.2</td>
<td>1,620</td>
<td>1,960</td>
<td>1,863</td>
<td>2,240</td>
<td>2,576</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>31.6</td>
<td>1,100</td>
<td>950</td>
<td>1,066</td>
<td>1,093</td>
<td>1,353</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,260</td>
<td>-1.4</td>
<td>3,980</td>
<td>4,320</td>
<td>4,345</td>
<td>4,958</td>
<td>5,703</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,400</td>
<td>-15.3</td>
<td>180,300</td>
<td>207,000</td>
<td>197,217</td>
<td>216,617</td>
<td>222,000</td>
</tr>
</tbody>
</table>
</body>
</html>

Could the decline in home sales be stabilizing, perhaps due to lower prices? According to the National Association of Realtors, sales of existing homes rose 6.5% last month to 4.740M. The 9.4% November decline was slightly deeper than [...]

U.S. Existing Home Sales Rose Last Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126a.jpg" align="left" border="0" height="265" width="353">
Could the decline in home sales be stabilizing, perhaps due to
lower prices? According to the National Association of Realtors, sales
of existing homes rose 6.5% last month to 4.740M.
The 9.4% November decline was slightly deeper than reported initially.
Consensus expectations had been for sales of 4.40M homes. Total sales
include sales of condos and co-ops.
Median home prices fell yet again during
December. The 2.7% (NSA) decline followed a 3.3% November drop that was
slightly deeper than initially reported. It was the sixth consecutive
monthly drop and it lowered prices by 15.3% from December of 2007.
Prices have fallen 23.4% since their peak in June 2007.
The number of unsold homes (condos &amp; single-family) on
the market dropped a sharp 11.7% (-7.5% y/y). At the current sales rate
there was a 9.3 months' supply on the market which was the lowest since
early during 2007. For single-family homes the inventory fell m/m to an
8.7 months supply at the current sales rate which also was the lowest
since 2007.
Last month, sales of existing single-family homes recovered
nearly all of the November decline with a 7.0% increase. Nevertheless,
sales of existing homes remained down by nearly one-third from their
peak in mid-2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126b.jpg" align="right" border="0" height="265" width="353">
By region, home sales in the West posted the strongest gain in
December with a 13.6% rise. This gain recouped all of the declines
during the prior two months and returned sales to the upward trend line
that has been in place since the low in October of 2007. Sales in the
South also gained 7.4% versus November but that level was the series'
low for this cycle. Sales in the Midwest also rose by 4.0%. That too
was off the series' low. Sales in the Northeast fell 1.4% after a huge
12.0% November drop. Single family home sales here were at their lowest
since 1992.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous)</th>
<th scope="col">December</th>
<th scope="col">y/y %</th>
<th scope="col">November</th>
<th scope="col">December '07</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>4,740</td>
<td>-3.5</td>
<td>4,450</td>
<td>4,910</td>
<td>4,897</td>
<td>5,672</td>
<td>6,508</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>720</td>
<td>-14.3</td>
<td>730</td>
<td>840</td>
<td>842</td>
<td>1,008</td>
<td>1,090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>-10.3</td>
<td>1,000</td>
<td>1,160</td>
<td>1,129</td>
<td>1,331</td>
<td>1,491</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>-11.2</td>
<td>1,620</td>
<td>1,960</td>
<td>1,863</td>
<td>2,240</td>
<td>2,576</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>31.6</td>
<td>1,100</td>
<td>950</td>
<td>1,066</td>
<td>1,093</td>
<td>1,353</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,260</td>
<td>-1.4</td>
<td>3,980</td>
<td>4,320</td>
<td>4,345</td>
<td>4,958</td>
<td>5,703</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,400</td>
<td>-15.3</td>
<td>180,300</td>
<td>207,000</td>
<td>197,217</td>
<td>216,617</td>
<td>222,000</td>
</tr>
</tbody>
</table>
U.S. Leading Indicators Rose
Slightly 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126c.jpg" align="left" border="0" height="265" width="353">
The Conference Board reported that the December composite
index of leading economic indicators rose 0.3% after an unrevised 0.4%
November decline. The peak for the index was in July of last year and
the six-month percent change of -5.0% was near the largest rate of
decline since 1990.
Five of the ten components of the leading index fell last
month with the largest declines coming from lower building permits,
shorter hours worked and easier vendor performance. Higher initial
claims for jobless insurance also subtracted a sharp 0.15 percentage
points from the leaders and consumer expectations were about unchanged.
Faster money supply growth added back one percentage point to the m/m
change in the leading index and a steeper yield curve added another 0.2
points.
The breadth of one-month increase amongst the leaders' 10
components improved to 50% but over a six-month period the breadth of
gain amongst the components remained stuck at a quite low 30%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126d.jpg" align="right" border="0" height="265" width="353">
The leading index is based on actual reports for eight
economic data series. The Conference Board initially estimates two
series, orders for consumer goods and orders for capital goods.
The coincident indicators fell again. The 0.5% decline
followed an unrevised 0.3% November drop an it was the tenth of the
year. Three quarters of the index components fell m/m but over six
months 25.0% rose. Year-to-year the coincident indicators fell 2.8% and
over the last ten years there has been a 76% correlation between this
y/y change and real GDP.
The lagging index fell 0.4% after no change in November. The
ratio of coincident-to-lagging indicators (a measure of economic
excess) fell slightly to its lowest level since 1975.
Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


<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/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 6-Month % (AR)</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">Leading</td>
<td>0.3</td>
<td>-0.4</td>
<td>-1.0</td>
<td>-5.0</td>
<td>-2.7</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.5</td>
<td>-0.3</td>
<td>0.3</td>
<td>-2.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>0.0</td>
<td>0.1</td>
<td>2.9</td>
<td>2.8</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Chicago Fed Index Well Into
Recession Territory 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126e.jpg" align="left" border="0" height="265" width="353">
For December, the National Activity Index (CFNAI) from the
Chicago Federal Reserve Bank continued lower into recession territory.
The latest reading of -3.26 was near it's historic low. Since 1970
there has been a 75% correlation between the level of the index and the
q/q change in real GDP.
The three-month moving average of the index of -2.40
was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_january2009.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
Each category of the index including employment, production,
income, consumption &amp; housing made a negative contribution to
the November index.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during November to its lowest level
since early 1997. The steel, machinery and resource sectors all were
weak but the auto sector ticked up very slightly.

<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/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December '07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-3.26</td>
<td>-2.78</td>
<td>-0.96</td>
<td>-1.69</td>
<td>-0.39</td>
<td>0.00</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.40</td>
<td>-2.56</td>
<td>-0.71</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
Canada's Mixed Inflation Picture... 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126f.jpg" align="left" border="0" height="265" width="353">
While headline inflation continues to lose steam in Canada as
it does everywhere else in the world, Canada&#8217;s core rate is not on that
same page. Over three-months core inflation has escalated to a pace of
+2.6% from under 2% over previous key horizons (see table). By
comparison, Canada&#8217;s CPIx, that excludes eight volatile categories
shows inflation remains steady at a pace of 2.2% to 2.4%. This is not a
question about inflation spiking but a question about what sort of
momentum inflation now has in Canada and what pressures the bank of
Canada faces in setting policy. . 
 

The headline rate points clearly lower, with inflation down by
6.1% over three months (annualized) or up by just 1.2% Yr/Yr. Both of
those are good results. The dropping and negative three-month and
six-month results suggest that there may be more relief in inflation to
be passed on to core and nonvolatile items in the months ahead. But for
now Canada&#8217;s main inflation trends as depicted by the core or CPIx are
best viewed as moderate and steady. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Canada's
CPI and Core Inflation</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% MO/MO</td>
<td colspan="4">% saar</td>
</tr>
<tr>
<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>
<td class="firstcol"> All Items</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.8%</td>
<td>-6.1%</td>
<td>-2.1%</td>
<td>1.2%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol"> All Items SA</td>
<td>-0.4%</td>
<td> -0.3%</td>
<td>-0.6%</td>
<td>-5.1%</td>
<td>-1.6%</td>
<td>1.4%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; CPI Core</td>
<td>0.1%</td>
<td> 0.5%</td>
<td>0.0%</td>
<td> 2.6%</td>
<td>1.5%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol"> All items Excl 8
Volatile (CPIx)</td>
<td>-0.1%</td>
<td> 0.6%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.2%</td>
<td> 2.4%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol"> RPIxseas food</td>
<td>-0.3%</td>
<td> 0.6%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>3.9%</td>
<td>4.1%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol"> Food &amp; Non
Alcohol Bev</td>
<td>0.3%</td>
<td> 1.0%</td>
<td>0.6%</td>
<td>7.7%</td>
<td> 8.7%</td>
<td> 7.2%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol"> Shelter</td>
<td>0.0%</td>
<td> 0.2%</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>3.5%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol"> Clothing &amp;
Footwear</td>
<td>-0.3%</td>
<td> 0.4%</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-3.0%</td>
<td>-2.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol"> Education</td>
<td> 0.2%</td>
<td>0.2%</td>
<td>0.7%</td>
<td> 4.6%</td>
<td> 3.8%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol"> Health &amp;
Personal Care</td>
<td>0.2%</td>
<td> 0.5%</td>
<td>0.1%</td>
<td>3.0%</td>
<td> 3.4%</td>
<td> 2.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol"> Transportation</td>
<td> -0.6%</td>
<td> -0.7%</td>
<td>-0.8%</td>
<td>-8.1%</td>
<td>-3.8%</td>
<td>0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> A
RED highlight indicates
inflation accelerating from pace of previous horizon</td>
</tr>
</tbody>
</table>
Deterioration in World Trade
Continues: the News from Sweden 
by <a href="/comment/Curley.html">Louise
Curley</a> January 26, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126g.jpg" align="left" border="0" height="265" width="353">
Last week, Robert Brusca noted how the global slowdown was
affecting international trade by citing Italy's trade data. Further
evidence of the decline in world trade became available today with the
release of December trade data for Sweden.
Sweden reported a 12,930 million kronor decline in imports and
a 15,259 decline in exports, resulting in an improvement in its balance
of trade of 7,479 million kronor for the month of December. But from
the standpoint of world trade the fewer exports and fewer imports meant
a decline in world trade activity of 18,189 million kronor or $2,760
million.
The attached chart shows the sum of the changes in Sweden's
exports and imports over the past five years. The data showed little
trend until April of this year. Since then the down trend has been
dramatic.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SWEDEN&nbsp;</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">M/M chg&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Balance of Trade
(Millions Kroner)</td>
<td>10163.14</td>
<td>2697.76</td>
<td>7470.35</td>
</tr>
<tr class="odd">
<td class="firstcol">Export&nbsp;&nbsp;
(Millions Kroner)</td>
<td>84355.39</td>
<td>89714.62</td>
<td>-5259.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports&nbsp;&nbsp;
(Millions Kroner)</td>
<td>74192.25</td>
<td>87021.86</td>
<td>-12829.61</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions Kroner)</td>
<td>18188.84</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange rate
(Kroner/US$)</td>
<td>8.0038</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions US$)</td>
<td>2272.53</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
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.grey5{
background-color:#b8b8b8;
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</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123a.jpg" align="left" border="0" height="265" width="353">
Hooray! The MFG and Services PMIs for Europe in January have
bounced. It&#8217;s too soon to call it a bottom but since they are bouncing
off historic- or near-historic lows, maybe we have seen the worst of
decay. Even if that is true it is a far cry from saying we are about to
embark on recovery. 
 

What it means - At a reading of 34 for MFG, the sector is
telling us that about 34% of the industries are expanding&#8230; (That is
strictly speaking an improper interpretation since the PMI reading is
all the &#8216;up&#8217; readings plus &#8216;half the unchanged responses&#8217; and there are
myriad ways to get that result. A given PMI reading does not tell you
how many, or which proportion, of industries are expanding. But the
reading of 34 is &#8216;as if&#8217; 34% were rising and the rest falling although
fewer may be rising and twice the residual might be unchanged. I will
use this short hand of treating the PMI as if it were an &#8216;up only&#8217;
index for simplicity but the reader should understand that the truth is
a bit more complex- I think nothing is lost by this expositional
device.). For services the reading of +42 is coming off that (shorter)
series&#8217; all-time low. 
 

Lots of weakness ahead - In any event it is clear that these
two measures can rise for some time and still not get back to neutral
(a reading of 50 is neutral- half the sectors expanding, half
contracting). 
 

&#8216;Neutral&#8217; is not &#8216;normal&#8217; - And of course &#8216;neutral&#8217; is not the
same as &#8216;normal&#8217;. When you put your car in &#8216;neutral&#8217; is neither in
&#8216;drive&#8217; nor &#8216;reverse&#8217;. If we were to average what gear your car were in
most of the time the average would not be close to neutral. Similarly,
since July 1998 when the services measure was launched it has averaged
54.2. Over the same span the MFG index has averaged 52. On balance more
sectors are expanding than contracting in normal times. So the current
readings are a very great distance away from being &#8216;normal&#8217; and it
should take a good deal of time to get back to normal. 
 

Diffusion increases do not necessarily mean that output
increases - When these diffusion indices rise, until they surpass a
reading of 50, they are indicating contraction at a slower pace but
still contraction and not expansion.. For now the PMIs are saying that
the worst &#8211; most severe phase of the contraction - is behind us, not
that recession is ending. And that is the message only if the December
bottoms stay in place and are not replaced by new weaker readings. 
 

More weakness ahead - Rest &#8216;assured&#8217; that more declines lies
ahead for conventional economic variables even if the diffusion indices
continue to rise from their lows. 
 

Diffusing as Mr Sensitivity - Diffusion readings are very
valuable because they are so timely and because they are sensitive.
Formally the PMI indices are measures are gauges of the BREADTH not of
its strength. But everyone treats theses measure of breadth as if they
are of strength. Financial experts are well aware that is not so. For
stock markets analysts (for example) always looked at big &#8216;up&#8217; or
&#8216;down&#8217; days in the stock indices to see if the breadth reinforced the
trend or not. Breadth in fact is not the same as strength &#8211; but they
are highly correlated. So again be careful how use diffusion data. They
often are the first whiff of slowdown or of bottoming. But they are
indicators and are not real economic variables so be careful how you
interpret them. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit PMIs for the Euro
Area </th>

</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the Euro
Area 15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.53</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Dec-08</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">Nov-08</td>
<td>35.58</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>36.85</td>
<td>42.62</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>41.74</td>
<td>45.19</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>46.51</td>
<td>47.93</td>
</tr>
<tr class="odd">
<td colspan="3">126-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body></html>

Hooray! The MFG and Services PMIs for Europe in January have bounced. It’s too soon to call it a bottom but since they are bouncing off historic- or near-historic lows, maybe we have seen the worst of decay. Even if that is true it is [...]

PMI Indices for EMU Bounce – Dead Cat or Live One?

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.

Economy in Brief

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