Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090107a.jpg" align="right" border="0" height="265" width="353">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 latest was the eleventh consecutive monthly
decline. During the last three months payrolls have fallen 1.3%.
The U.S. Bureau of
Labor Statistics will report on December payroll employment this
Friday. Last month, the 476,000 worker decline
(-1.6% y/y) in ADP's measure of private nonfarm payrolls was
accompanied by a 540,000 worker decline (-1.8% y/y) in the BLS measure
of private sector payrolls.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090107b.jpg" align="right" border="0" height="265" width="353">
According
to ADP and Macro Advisers, the correlation between the monthly
percentage change in the ADP estimate and that in the BLS data is 0.90.
ADP indicated in today's report that it is the first to incorporate
key methodological revisions. These revisions include improved modeling
techniques and additional data sources to better accommodate inherent
differences between the ADP and BLS data.
The impact on recent
estimates was to revise the monthly declines in employment much deeper.
 Employment in the service producing
industry was most pronounced. December payrolls fell 473,000 (-1.5%
y/y), the eleventh consecutive monthly decline and the service sector
estimates are the source for most of the downward revision in the
overall payroll figure. Medium sized payrolls fell 215,000 (-1.8% y/y)
and small sized payrolls fell 201,000 (-1.1% y/y). Large service
producing payrolls dropped by 57,000 (-1.8% y/y).
Weakness in goods producing
payrolls added to the service sector's decline. Payrolls fell by
220,000 (-5.6% y/y). The largest decline was amongst medium sized
payrolls which fell 106,000 (-5.5% y/y) followed by an 80,000 (-5.3%
y/y) drop in small sized payrolls. Large payrolls fell 34,000 (-6.4%
y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090107c.jpg" align="right" border="0" height="265" width="353">

Employment in the manufacturing sector fell 120,000 (-5.1%
y/y) It
has fallen in most every month since 2001.
&nbsp;ADP compiled the estimate from its
database of individual companies' payroll information. Macroeconomic
Advisers, LLC, the St. Louis economic consulting firm, developed the
methodology for transforming the raw data into an economic
indicator.
The
ADP National Employment Report data is maintained in Haver's USECON
database; historical data go back to December 2000. The figures in this
report cover only private sector jobs and exclude employment in the
public sector, which rose an average 11,083 during the last twelve
months.

The full ADP
National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/final_report_december_08.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf">here</a>,
and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.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/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll
Employment (m/m Chg.)</td>
<td>-693,000</td>
<td>-476,000</td>
<td>-2.2%</td>
<td>-0.4</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>

</body></html>

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 Employment Fell By 693,000

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>
<thead>
<tr>
<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>
<tbody>
<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>
</body>
</html>

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%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">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>
</tr>
</tbody>
</table>
</body>
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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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<html><head>
<style>
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background-color:#edf5ff;
}
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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

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

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

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

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

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

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

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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.