Tom Moeller

The payroll processor ADP indicated in its latest National Employment Report that December private nonfarm payrolls fell 693,000. The decline followed a revised 476,000 November drop that was much deeper than the initial estimate. The [...]

ADP Report: Payroll EmploymentFell By 693,000

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106l.jpg" align="left" border="0" height="265" width="353">
On a seasonally adjusted basis, industrial production in
Brazil fell 5.2% in November from October, following a 2.8% decline in
October from September. The November decline is one of the largest
month to month declines on record. On a seasonally unadjusted basis,
industrial production was 6.2% below November 2007, the largest year to
year decline since December 2001. The year to year declines in
production are shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106m.jpg" align="right" border="0" height="265" width="353">
The Automobile, Office machinery and equipment and the
Electrical material, devices and communication equipment industries
were among the hardest hit, showing year to year declines of 31%, 30%
and 21% respectively.
The sharp fall in industrial production has raised the
possibility of a reduction in the target interest rate at the next
meeting of the Monetary Policy Committee (COPOM) of the Central Bank of
Brazil scheduled for January 20, 21, 2009. COPOM has been targeting
inflation and raised the target rate, Selic, from 11.25% in March 2008
to 11.75% in April 2008 . Further increases took place in June, July
and September, when the rate reached 13.75% where it has since
remained. Inflation has now begun to lessen, if only slightly. The
increase in the national consumer price index (INCP) was 7.20% in
November, down from 7.56% in July. The rate of inflation and the target
rate of interest are shown in the second chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106n.jpg" align="left" border="0" height="265" width="353">
There is a more general price index--the General Price Index
(IGP M)--which is a weighted average of the CPI, WPI and the Cost
Construction Indexes and measures the change in prices from the 21st of
the previous month to the 20th of the current month. Since the year to
year changes in the (IGP M) index are closely correlated with the those
of the (INCP) as can be seen in the third chart, the trend in the (IGP
M) changes is a good indicator of the trend in the national consumer
price index. This Index is published about a week before the national
consumer price index and suggests that inflation as measured by the CPI
has continued to decline. in December.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL&nbsp;</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">Oct 08&nbsp;</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Aug 09</th>
<th scope="col">July 08</th>
<th scope="col">June 08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial
Production&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Month to Month %
Change (SA)</td>
<td>--</td>
<td>-5.16</td>
<td>-2.83</td>
<td>1.80</td>
<td>-1.28</td>
<td>0.74</td>
<td>3.03</td>
</tr>
<tr>
<td class="firstcol">Year to Year % Change
(NSA)</td>
<td>--</td>
<td>-6.18</td>
<td>1.07</td>
<td>9.65</td>
<td>1.95</td>
<td>8.76</td>
<td>6.50</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Rate of Inflation
(INPC) %)</td>
<td>--</td>
<td>7.20</td>
<td>7.26</td>
<td>7.04</td>
<td>7.15</td>
<td>7.56</td>
<td>7.28</td>
</tr>
<tr>
<td class="firstcol">Rate of Inflation (IGP
M) (%)</td>
<td>9.81</td>
<td>11.88</td>
<td>12.23</td>
<td>12.31</td>
<td>13.63</td>
<td>15.12</td>
<td>13.44</td>
</tr>
<tr>
<td class="firstcol">Target Interest Rate
(Selic) (%)</td>
<td>13.75</td>
<td>13.75</td>
<td>13.75</td>
<td>13.75</td>
<td>13.00</td>
<td>13.00</td>
<td>12.25</td>
</tr>
</tbody>
</table>
</body></html>

On a seasonally adjusted basis, industrial production in Brazil fell 5.2% in November from October, following a 2.8% decline in October from September. The November decline is one of the largest month to month declines on record. On a [...]

Decline in Production and Lower Inflation in Brazil: A Reduction in the Target Rate (Selic)?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106j.jpg" width="353">
Factory inventories fell in November. The decline of 0.3%, along with those during prior months, was disproportionately influenced by the decline in oil prices. Less oil, inventories rose 0.2% after a 0.4% October gain. Moreover, the year-to-year change in nonpetroleum inventories has held constant near 6.0%. Evidence of a change in the management of factory sector inventories is, however, evident in the more recent figures. The three-month change in nonpetroleum inventories has been reduced, as a result of production cuts, to 1.5% from its recent high of 9.0%.
Again, one industry recently has dominated even the nonoil figures. Growth in inventories of commercial aircraft has been running at a near-40% year-to-year rate. Less commercial aircraft production cutbacks have reduced factory inventory growth to 1.6% y/y from the high early in 2007 near 10.0%. Automobile inventories have been reduced by 7.8% versus last year. Electrical equipment &amp; appliance inventories have been growing at a 2.0% rate versus double-digit growth early in 2007 and growth in machinery inventories has been nearly halved to 6%.
Total factory orders fell 4.6% during November but the figure very much reflected the decline in oil prices (orders here equal shipments.) Orders for durable goods orders fell 1.5% and that very much reflected, as it did in the advance report, the 37.7% drop in commercial aircraft orders. Less commercial aircraft, orders for durable goods fell 9.0% y/y, down from a high rate of accumulation near 10%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106k.jpg" width="353">
Factory shipments dropped 5.3% due to lower oil prices. Less oil, shipments fell a somewhat lesser 3.4% but they still were down 5.6% y/y. Shipments of transportation equipment fell 18.6% y/y as commercial aircraft shipments plunged 28.9% y/y and automobile shipments fell 21.9%. Shipments of electrical equipment were off 8.6% y/y) and electronic computer shipments fell 31.7% y/y with lower prices. Shipments of furniture &amp; related products fell a hard 12.6% y/y.
Unfilled orders fell 0.6% and the y/y gain of 7.9% is down from the peak near 20%. Less transportation unfilled orders grew 3.4% y/y versus a peak of 16% in 2006.
The minutes to the latest FOMC meeting can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20081216.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</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>
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<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.3</td>
<td>-0.6</td>
<td>5.1</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.9</td>
<td>-1.0</td>
<td>3.1</td>
<td>2.7</td>
<td>7.9</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-4.6</td>
<td>-6.0</td>
<td>-12.2</td>
<td>1.9</td>
<td>6.2</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-4.2</td>
<td>-5.1</td>
<td>-9.1</td>
<td>1.2</td>
<td>7.4</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-5.3</td>
<td>-3.6</td>
<td>-9.6</td>
<td>1.2</td>
<td>5.9</td>
<td>10.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-5.5</td>
<td>-3.4</td>
<td>-8.2</td>
<td>1.5</td>
<td>6.7</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.6</td>
<td>-0.9</td>
<td>7.9</td>
<td>17.1</td>
<td>15.3</td>
<td>15.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-0.9</td>
<td>-2.0</td>
<td>3.4</td>
<td>8.2</td>
<td>16.0</td>
<td>9.2</td>
</tr>
</tbody>
</table>
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Factory inventories fell in November. The decline of 0.3%, along with those during prior months, was disproportionately influenced by the decline in oil prices. Less oil, inventories rose 0.2% after a 0.4% October gain. Moreover, the [...]

U.S. Factory Inventories Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106g.jpg" width="353">
For November, the National Association of Realtors indicated that pending sales of existing homes fell another 4.0%, about as they did during the prior two months. The October drop was revised sharply larger. Consensus expectations were for a 1.0% November decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106h.jpg" width="353">
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
Sales in the Northeast were the weakest last month and they fell 7.2%. They&#39;re down 20.8% during the last three months. Sales in the Midwest suffered from the weakness in the auto industry and fell 6.7%, off 11.6% during the last three months. November sales in the South fell 2.2%, about as they did during October, and they are down 11.7% in the last three months while sales fell 2.4% in the West, 7.6% since August.
Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale was about unchanged (-0.3% y/y) after three months of sharp decline.
At the current sales rate there was an 11.2 months&#39; supply of homes on the market, higher than 8.9 months last year and 6.5 months during 2006. For single-family homes the months&#39; supply rose sharply to 10.6, well above the 8.7 average of last year.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market and prices are in the REALTOR database.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>82.3</td>
<td>85.7</td>
<td>&nbsp;&nbsp; -5.3%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>63.2</td>
<td>68.1</td>
<td>-14.6</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>74.2</td>
<td>79.5</td>
<td>-10.1</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>85.3</td>
<td>87.2</td>
<td>-12.7</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>101.2</td>
<td>103.7</td>
<td>19.3</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
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For November, the National Association of Realtors indicated that pending sales of existing homes fell another 4.0%, about as they did during the prior two months. The October drop was revised sharply larger. Consensus expectations [...]

U.S. Pending Home Sales Lower Still

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106e.jpg" width="353">
For December, the Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) improved slightly to 40.6 from an unrevised 37.3 during November. The figure was firmer than Consensus expectations for a reading of 37.0 but it was still near the lowest in the series&#39; relatively brief ten year history. A level of these ISM indices below 50 indicates declining activity.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106f.jpg" width="353">
The nonmanufacturing business activity sub-index also made a bit more than half of the sharp November decline, but at 39.6 it was still near the record low for the series. Since the series&#39; inception in 1997 there has been a 48% correlation between the level of the business activity index for the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
In addition, the employment index also edged higher to a reading of 34.7. However, that still indicated sharp layoffs and was near the low for the series. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.
The new orders sub-index edged up to a still low 39.9.
Pricing power fell further last month and the reading of 36.0 was a new record low for the series. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indexes for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.

<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/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</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">Composite Index</td>
<td>40.6</td>
<td>37.3</td>
<td>53.2</td>
<td>47.3</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>36.0</td>
<td>36.6</td>
<td>71.5</td>
<td>66.1</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


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For December, the Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) improved slightly to 40.6 from an unrevised 37.3 during November. The figure was firmer than Consensus expectations for a [...]

U.S. ISM Nonmanufacturing Index Improved Slightly

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106d.jpg" align="left" border="0" height="265" width="353">
The EMU inflation rate fell sharply in December more sharply
than have been expected. Headline inflation &#8211;the measure that the ECB
sets a ceiling for -- is now below that ceiling of 2% at a Yr/Yr rate
of 1.6%. A Yr/Yr rise of 1.8% had been expected. Core (ex food and
energy inflation) has long been on a milder path than that of headline
inflation. But the ECB sets a ceiling for the headline alone. Still,
the headline pace is now more in line with the core where the pace
Yr/Yr is 2.2% (lagged by one month since the December Core is not yet
available- so the real up-to-date core rate is probably even lower).
Core inflation, even through November, shows the six- and three-month
rates of inflation are dropping fast. That is true for headline
inflation as well, as the chart above amply demonstrates. 
 

In short, the ECB now has a set of consistent signals about
inflation. Inflation is now inside its preferred boundaries and
falling. It faces an inflation pace that is well below its ceiling. It
faces a weakening economy. Clearly this inflation result allows for the
ECB policy to be much bolder and for its rhetoric to be much less
circumspect. Even stodgy old central bankers should see the message
clear and strong as indicating that economic weakness is more
pronounced than expected, pushing down prices and not just allowing,
but calling for more aggressive fiscal and monetary policy actions. The
euro weakened in the wake of this report on precisely those sorts of
conclusions by market participants. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Trends in
EMU HICP; Flash Index</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="odd">
<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">EMU-13</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-2.5%</td>
<td>-0.9%</td>
<td>1.6%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>-0.8%</td>
<td>0.0%</td>
<td> 0.1%</td>
<td>-1.7%</td>
<td>1.8%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-2.7%</td>
<td>1.5%</td>
<td> 2.6%</td>
<td>2.5%</td>
</tr>
<tr class="even">
<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>
<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>
<td class="firstcol">France</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-1.4%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-2.4%</td>
<td>0.5%</td>
<td>2.4%</td>
<td>4.1%</td>
</tr>
<tr class="even">
<td colspan="2"> Core:xFE&amp;A</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td> 1.3%</td>
<td>1.3%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.5%</td>
<td>1.9%</td>
<td>2.7%</td>
<td> 2.8%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>2.3%</td>
<td> 2.5%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.6%</td>
<td>2.7%</td>
<td>3.3%</td>
</tr>
<tr class="even">
<td colspan="8" class="firstcol">Blue shaded area data trail by one
month</td>
</tr>
</tbody>
</table>
</body></html>

The EMU inflation rate fell sharply in December more sharply than have been expected. Headline inflation –the measure that the ECB sets a ceiling for -- is now below that ceiling of 2% at a Yr/Yr rate of 1.6%. A Yr/Yr rise of 1.8% had [...]

EMU Inflation: Now You See It; Now You Don't!

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106c.jpg" align="left" border="0" height="265" width="353">
The services PMI index for Europe fell to 42.06 from 42.47.
All main reporting EMU members show very weak service sector indices.
France is at an all time low (the data above date from May 2000 a
period for which all these countries have observations). The EMU result
is a ten year low. 
 

Weakness continues to be the order of the day across Europe.
The chart at the top shows that the MFG and services PMI&#8217;s both are
dropping sharply, although the pace of decline in services hints at a
slowdown in the unraveling. 
 

The new wrinkle is the potential impact on Europe as gas
availability from the Russian pipeline is being curtailed stemming from
a dispute between Russia and the Ukraine. European nations are
suffering to various degrees but smaller countries with leaner
stockpiles are the most at risk. There is no sense yet that much
activity has been curtailed because of the light natural gas
deliveries, but an adverse economic impact remains a possibility if the
deliveries continue to be short or cut off entirely. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">NTC Services Indices for EU/EMU</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td> Nov-08</td>
<td> Oct-08</td>
<td> 3Mo</td>
<td> 6Mo</td>
<td> 12Mo</td>
<td> Percentile</td>
</tr>
<tr>
<td class="firstcol"> Euro-13</td>
<td> 42.06</td>
<td> 42.47</td>
<td> 45.76</td>
<td> 43.43</td>
<td> 45.92</td>
<td> 48.47</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>46.57</td>
<td>45.14</td>
<td>48.31</td>
<td>46.67</td>
<td>49.13</td>
<td>50.73</td>
<td>18.5%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>40.57</td>
<td>46.17</td>
<td>47.54</td>
<td>44.76</td>
<td>46.65</td>
<td>50.44</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>40.30</td>
<td>39.46</td>
<td>45.68</td>
<td>41.81</td>
<td>44.82</td>
<td>46.59</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>32.10</td>
<td>28.23</td>
<td>32.22</td>
<td>30.85</td>
<td>34.12</td>
<td>38.20</td>
<td>11.9%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>34.14</td>
<td>32.60</td>
<td>36.05</td>
<td>34.26</td>
<td>37.47</td>
<td>42.01</td>
<td>4.3%</td>
</tr>
<tr class="odd">
<td class="firstcol"> EU only</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">UK (CIPs)</td>
<td>40.21</td>
<td>40.06</td>
<td>42.39</td>
<td>40.89</td>
<td>44.20</td>
<td>47.59</td>
<td>0.7%</td>
</tr>
</tbody>
</table>
</body></html>

The services PMI index for Europe fell to 42.06 from 42.47. All main reporting EMU members show very weak service sector indices. France is at an all time low (the data above date from May 2000 a period for which all these countries [...]

Europe's Services PMI At New Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106a.jpg" width="353">
U.S. sales of light vehicles inched slightly higher last month but not by enough to prevent the twelve-month sales average from falling 18.5% to 13.18M, their lowest since 1993 according to the Autodata Corporation and Ward&#39;s Automotive News. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). The December-to-December figures were even bleaker. The 35.5% decline dropped sales to 10.32M, their lowest level since the recession year of 1982. The level of sales for December vehicle purchases was slightly better than Consensus expectations for sales of 10.0M.
Sales of domestically-made light vehicles edged 2.4% higher to 7.68M units and that recouped the November drop. Nevertheless, domestic vehicle sales are off 35.3% December-to-December and they fell 20.2% for the full year to their lowest since 1983. Continuing to show the effects from higher gasoline prices, sales of domestically made light trucks gave back most of their November gain to end the year down 39.6% December-to-December. They were down by one quarter for the full year. Doing a little better, sales of U.S. made cars recovered their November decline and rose 10.6%. That was not enough, however, to make up past declines. For the full year, sales of domestically made cars fell 12.7% to 4.42M units and that was down 41.3% from the peak during 1996.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106b.jpg" width="353">
Sales of imported light vehicles continued to reflect economic recession in the U.S. and they fell 1.3% last month. The 36.0% y/y decline pulled sales for the full year down 13.2%, the first full year decline since 1996. The latest was the lowest level since December 1999.Sales of imported light vehicles fell another 5.0% (-38.4% y/y) to 1.62M units and they were down 9.1% for the full year.Sales of imported light trucks rose 5.2% (-31.8% y/y) but they were off 20.1% for 2008. For last year, imported car sales fell 9.1% from 2007 but at 2.29M they still were up 79.7% from the low in 1996.
Import&#39;s share of the U.S. light vehicle market fell slightly to 25.5% of the U.S. vehicle market in December. Nevertheless, imports&#39; share rose to a high of 26.3% for the year. (Imported vehicles are those produced outside the U.S. and do not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.)

<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/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Dec. / Dec.</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>10.32</td>
<td>10.18</td>
<td>-35.5%</td>
<td>13.18</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>5.21</td>
<td>4.95</td>
<td>-32.6</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>3.59</td>
<td>3.24</td>
<td>-29.5</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.62</td>
<td>1.71</td>
<td>-38.4</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>5.11</td>
<td>5.23</td>
<td>-38.2</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.10</td>
<td>4.26</td>
<td>-39.6</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.02</td>
<td>0.97</td>
<td>-31.8</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">December 2008 (Y/Y, %)</th>
<th scope="col">Market Share, Cars (%)</th>
<th scope="col">Market Share, Trucks (%)</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Motors</td>
<td>-24.9</td>
<td>16</td>
<td>25</td>
</tr>
<tr>
<td class="firstcol">Ford</td>
<td>&nbsp;-29.4</td>
<td>11</td>
<td>22</td>
</tr>
<tr class="odd">
<td class="firstcol">Chrysler</td>
<td>&nbsp;-59.2</td>
<td>6</td>
<td>17</td>
</tr>
<tr>
<td class="firstcol">Toyota</td>
<td>&nbsp;-34.8</td>
<td>21</td>
<td>14</td>
</tr>
<tr class="odd">
<td class="firstcol">Honda</td>
<td>&nbsp;-30.4</td>
<td>13</td>
<td>8</td>
</tr>
<tr>
<td class="firstcol">Nissan</td>
<td>&nbsp;-26.8</td>
<td>8</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">Volkswagen</td>
<td>-20.1</td>
<td>5</td>
<td>1</td>
</tr>
</tbody>
</table>


</html>

U.S. sales of light vehicles inched slightly higher last month but not by enough to prevent the twelve-month sales average from falling 18.5% to 13.18M, their lowest since 1993 according to the Autodata Corporation and Ward's [...]

U.S. Light Vehicle Sales Inched Up in December; Down 18.5% For The Full Year

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

260123E.jpg

The S&P PMIs for January show flash readings that indicate broadly stronger conditions across the early reporters in this table. Exceptions are the European Monetary Union as a whole with its composite reading weaker and France with its composite reading weaker, but Germany, the United Kingdom, Japan, Australia, India, and the United States all have composite readings that are stronger month-to-month in January. With these eight countries, there are 24 readings in each period, three for each country: a composite, one for manufacturing, and one for services. Among these 24 readings, only five of them were weaker month-to-month in January. Of course, this follows a December when only 6 of the readings were stronger month-to-month.

The sequential readings, that we calculate only off hard data (which means that calculations are done from December backward) are still mixed. Substantially weaker conditions period-to-period are reported comparing three-months to six-months. Over three months, only nine of the 24 readings are stronger whereas over six months only one of the 24 readings is weaker when compared to the 12-month average. Over 12 months, the average is stronger than it was one-year ago in 15 of the 24 readings. 

Only the United States and France have service sectors that are below their medians over this period back to 2022. Only France and India have composite readings that are below their respective medians over this period. But by comparison, there are very strong composite readings as well. There is a 91-percentile standing on the composite in Australia, an 87-percentile standing in Japan and the United Kingdom. The German composite has a 79-percentile standing.

The recent data have been running sporadically hot and cold, making it difficult to make sense out of what's happening. But broadly, it's clear that the PMIs in the European Monetary Union have been working their way higher and this is the general theme.

For the 8 reporters in the table back to January 2022, all of them except India show weaker manufacturing readings in January 2026 than what they showed in January 2022. But January 2022 was, of course, part of the COVID recovery move. Manufacturing in the European Monetary Union slipped from its high point over this period to its low point around mid-2023.

260123.jpg

Looking at point-to-point changes over the last three months, we find 3-sector cumulative drops in the United States, the European Monetary Union, and Germany. India has two sectors weakening with a decline in its composite as well as its manufacturing reading. Meanwhile, all the rest of the readings in the table over these three months show improved results. On a broad basis, we have to conclude there's more strength than weakness. However, since the weakness is concentrated and widespread and the largest economic units: the United States, the European Monetary Union, and the German economy, it's better to refer to the last three months as generating mixed economic statistics.

Looking forward, conditions are still hard to sort out. There's this obvious recovery in January after an equally obvious weak spot in December. The two of them cancel one another out in some sense. The average composite reading for all countries in the table shows some improvement in the manufacturing sector but waffling on the services sector. We get the same sort of readings looking at sequential averages; they do more of waffling than any kind of clear trend. On balance, the S&P readings don't give us a lot to go on this month. The survey is a bounce-back after a weak December and that's good news. But that doesn't give us a good handle on the trend yet.

S&P Flash PMIs Rebound But Emit No Clear Signal

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

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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**.

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- 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

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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.