Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223h.jpg" width="353">
U.S. existing home sales fell 8.6% last month versus October to pull sales down to 4,490 million, according to the National Association of Realtors. The decline during the prior month was revised slightly and the latest was much greater than Consensus expectations for sales of 4.93M homes. Total sales include sales of condos and co-ops.
Median home prices fell 2.8% (NSA) last month, about as they did during October and it was the fifth consecutive monthly drop. That pulled the y/y comparison to -13.2%. Prices have fallen 21.0% since their peak in June 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223i.jpg" width="353">
Sales of existing single-family homes followed a similar pattern as the total and fell 8.0% after a revised 4.6% during October. Sales of existing homes are down by one-third from their peak in mid-2005.
The latest drop in single-family home sales was to the lowest since 1997, is from a trend line this year that had been roughly stable and moving sideways.
By region, home sales in the Northeast led last month&#39;s decline with a 12.0% drop and they were down nearly twenty percent from last year. In the South sales also were quite weak as they posted a 10.9% drop. In the West sales sales fell about they did during October, by 4.3%. Sales in the Midwest fell 7.4%, like they did during October.
The number of unsold homes (condos &amp; single-family) on the market ticked up 0.1%, about as they did year-to-year. At the current sales rate there as a 11.2 months&#39; supply on the market which was near the series&#39; high.. For single-family homes the inventory rose m/m to a 10.6 months supply at the current sales rate, also near the high.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous)</th>
<th scope="col">November</th>
<th scope="col">y/y %</th>
<th scope="col">October</th>
<th scope="col">November &#39;07</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">Total</td>
<td>4,490</td>
<td>-10.6</td>
<td>4,910</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>730</td>
<td>-18.0</td>
<td>830</td>
<td>890</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,000</td>
<td>-16.0</td>
<td>1,080</td>
<td>1,190</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,640</td>
<td>-17.6</td>
<td>1,840</td>
<td>1,990</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,120</td>
<td>17.9</td>
<td>1,170</td>
<td>950</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,020</td>
<td>-8.8</td>
<td>4,370</td>
<td>4,410</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>181,300</td>
<td>-13.2</td>
<td>186,500</td>
<td>208,800</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. existing home sales fell 8.6% last month versus October to pull sales down to 4,490 million, according to the National Association of Realtors. The decline during the prior month was revised slightly and the latest was much [...]

U.S. Existing Home Sales Fell; Single-Family Sales Lowest Since 1997

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223e.jpg" width="353">
Regular gasoline prices were roughly unchanged last week at $1.65 per gallon, according to the U.S. Department of Energy survey. Yesterday, the spot market price for a gallon of regular gasoline fell sharply to $0.88 per gallon.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
Though gasoline prices are down, that has done little to drive up product demand. The U.S. Department of Energy reported that the demand for gasoline fell by 3.5% y/y, nearly the fastest rate of decline since late-1995 (the latest four weeks versus the same four weeks last year). The demand for all petroleum products also fell 4.9% y/y.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223f.jpg" width="353">
These DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil fell last week by five dollars from the prior week&#39;s average to $39.65 per barrel, down by two-thirds since the peak in July of $145.66. In futures trading yesterday, the one-month price for crude oil was $39.91.
Last week, prices for natural gas were unchanged w/w at $5.67 per mmbtu (-20.7% y/y). The latest average price was 50% below natural gas prices in early-July of $13.19/mmbtu.
The Yield Curve from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2009/0109/01monpol.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">12/22/08</th>
<th scope="col">12/15/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>1.65</td>
<td>1.66</td>
<td>-44.5%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>39.65</td>
<td>44.71</td>
<td>-56.6%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

Regular gasoline prices were roughly unchanged last week at $1.65 per gallon, according to the U.S. Department of Energy survey. Yesterday, the spot market price for a gallon of regular gasoline fell sharply to $0.88 per gallon. [...]

U.S. Gasoline Prices Down Again

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223a.jpg" width="353">
As roughly indicated in the prior two reports, 3Q08 U.S. real GDP growth slipped 0.5%. The latest figure matched Consensus expectations. The y/y rate of growth of 0.7% continued as the weakest since the end of the 2001 recession.
Corporate profits also were little revised and they posted a 1.2% drop and were down 9.2% y/y. Last quarter&#39;s decline was the seventh drop of the last eight quarters and the y/y change was the weakest since the 2001 recession. The financial sector&#39;s travails continued to lead profits lower. They were revised weaker and down by roughly one-third from the year ago level. Domestic nonfinancial corporations fell a little-revised 4.3% y/y. Finally, repatriated earnings from abroad rose 6.2% y/y which was slightly better than reported initially.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223b.jpg" width="353">
Real U.S. final sales to domestic purchasers were little revised and they posted a 2.2% drop. That remained the largest quarterly decline since the end of the 1990-91 recession. The year-to-year dip of 0.2% was the first decline since 1991.
Personal consumption expenditures fell at a 3.8% annual rate (-0.2% y/y). Spending on autos &amp; light trucks collapsed at a 26.6% annual rate (-15.0% y/y). Real spending on furniture &amp; other household equipment fell at an 8.2% rate but they were still up 2.6% y/y. Real spending on apparel fell at a 13.3% clip (-1.1% y/y) and that more than reversed a 2Q jump. Spending on consumer services slipped 0.1% and the y/y gain of 1.1% was the weakest since 1981.
Residential construction fell a little revised 16.1% (-20.6% y/y) and subtracted 0.7% points from GDP growth. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223c.jpg" width="353">
The 1.7% decline in business fixed investment was little revised (+1.6% y/y). Equipment investment fell at a 7.5% rate (-3.1% y/y), the third consecutive quarter of decline while structures investment was firm again and rose at an upwardly revised 9.6% annual rate (11.2% y/y).
Inventory accumulation was little revised and added 0.8 percentage points to GDP growth after three consecutive quarters of subtraction.
An improved foreign trade deficit added the same 1.1 percentage points to U.S. growth as estimated last month and it remained the main source of lift to GDP growth. The addition was, however, almost one third of that in 2Q. Exports grew at a slower 3.0% annual rate (6.1% y/y), half that in 2Q. Growth in imports weakened with the slowdown in overall economic growth and they fell at a 3.5% annual rate (-3.5% y/y). It was the fifth quarterly decline in the last six.
Spending by governments was strong again and rose 5.8% (3.1% y/y). That was little revised and the quickest since early 2003.
The estimate of the GDP chain price index was lowered to a still-strong 3.9% (AR) gain. The downward revision was due to a lowered jump in the PCE price index to 4.3%. Capital spending prices rose at an accelerated 4.2% rate (2.2% y/y) while the residential investment price deflator was revised downward and declined at a 2.4% rate; down for the fourth straight quarter (-2.4% y/y).
Agricultural Markets and Food Price Inflation - A conference summary from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljanuary2009_258a.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;08 (Final)</th>
<th scope="col">3Q &#39;08 (Preliminary)</th>
<th scope="col">3Q &#39;08 (Advance)</th>
<th scope="col">2Q &#39;08</th>
<th scope="col">3Q 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">GDP</td>
<td>-0.5</td>
<td>-0.5</td>
<td>-0.3</td>
<td>2.8</td>
<td>0.7</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.8</td>
<td>0.9</td>
<td>0.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.0</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-1.3</td>
<td>-1.4</td>
<td>-0.8</td>
<td>4.4</td>
<td>1.2</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.1</td>
<td>1.1</td>
<td>1.1</td>
<td>2.9</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-2.2</td>
<td>-2.3</td>
<td>-1.8</td>
<td>1.3</td>
<td>-0.2</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.9</td>
<td>4.2</td>
<td>4.2</td>
<td>1.1</td>
<td>2.6</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>


</html>

As roughly indicated in the prior two reports, 3Q08 U.S. real GDP growth slipped 0.5%. The latest figure matched Consensus expectations. The y/y rate of growth of 0.7% continued as the weakest since the end of the 2001 recession. [...]

U.S. 3Q'08 GDP Growth Unrevised; Profit's Fall Little Changed

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222e.jpg">
The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for November continued on a downtrend and remained in recession territory. The latest reading of -2.47 followed a short-lived October bounce back from two hurricanes. Since 1970 there has been a 75% correlation between the level of the index and the q/q change in real GDP.
The three-month moving average of the index of -2.49 was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_december2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222f.jpg">
Each category of the index including employment, production, income, consumption &amp; housing made a negative contribution to the November index.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during October to its lowest level since 1997. The auto sector continued to lead the weakness but the steel and machinery components also were weak.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">November &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.47</td>
<td>-1.27</td>
<td>-0.44</td>
<td>-0.40</td>
<td>-0.01</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.49</td>
<td>-2.40</td>
<td>-0.49</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>


</html>

The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for November continued on a downtrend and remained in recession territory. The latest reading of -2.47 followed a short-lived October bounce back from two [...]

Chicago Fed Index Well Into Recession Territory

Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222c.jpg" align="left" border="0" height="265" width="353">
A rapid deceleration&#8230;The sharp drop in the growth rate for
orders in the current quarter is telling of the rapidity with which
this slowdown has struck Europe. Orders in the fourth quarter are
falling at annual rates of 50% in Germany, 57% in France, 37% in Italy
and nearly 70% in the United Kingdom. This obvious bespeaks of a sharp
slowing for growth in 2008-Q4. 
 

Severe real sector hit&#8230; While the headlines have focused on
the financial sector and banking problems and, although German consumer
sentiment has been supported, the hit to EMU MFG has been severe. Both
the EMU MFG and Services PMIs have taken sharp drops. These barometers
precede the availability of authentic activity measures. The purchaser
type surveys are merely &#8216;indicators&#8217; While variables such as industrial
output and retail sales are the actual results. 
 

Orders are an actual forward-looking series&#8230; The orders series
is also an actual result and not simply an &#8216;indicator&#8217;. Orders, while
not actual activity are true figures corresponding to activity that
been contracted ahead. The orders data are available for October but
PMI data for December already are in hand &#8211;and they continue to be weak. 
 

The recognition lag... It has taken some time but Germany
seems to have come around to the idea of more stimulus. The drop in the
HICP for the Zone (bringing the Yr/Yr headline pace to 2.1%) may also
free up the ECB to become less tentative. Both orders and sales are all
falling and orders are falling with uniform and shocking weakness
across EMU. The dramatic policy moves and in the US have been rekindles
euro FX strength. Is that a good sign or a signal how far behind Europe
is in adopting needed stimulus? There should be no question about the
severity of the weakness in Europe. It&#8217;s not just a banking problem. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col"> E-zone and UK Industrial Orders &amp; Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol"> Saar except m/m</td>
<td colspan="3">% m/m</td>
<td> Oct 08</td>
<td> Oct 08</td>
<td> Oct 08</td>
<td> Oct 07</td>
<td> Oct 06</td>
<td>Qtr-2 Date</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Ezone Detail</td>
<td>Oct 08</td>
<td> Sep 08</td>
<td> Aug 08</td>
<td> 3-Mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol"> MFG Sales</td>
<td>-1.3%</td>
<td>-1.6%</td>
<td>-0.8%</td>
<td>-13.7%</td>
<td>-6.7%</td>
<td>-0.7%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>-14.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>-2.8%</td>
<td>-2.2%</td>
<td>-1.1%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>-2.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital</td>
<td>-0.4%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>-5.0%</td>
<td>-4.1%</td>
<td>-0.5%</td>
<td>3.9%</td>
<td>4.6%</td>
<td>-4.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate</td>
<td>#N/A</td>
<td>-5.6%</td>
<td>-0.3%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>7.3%</td>
<td>8.0%</td>
<td>-15.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG Orders</td>
</tr>
<tr class="grey1">
<td class="firstcol"> Total Orders</td>
<td>-4.7%</td>
<td>-5.4%</td>
<td>-1.6%</td>
<td>-38.1%</td>
<td>-26.1%</td>
<td>-14.4%</td>
<td>8.8%</td>
<td>10.9%</td>
<td>-42.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Countries:</td>
<td>Oct 08</td>
<td> Sep 08</td>
<td> Aug 08</td>
<td> 3-Mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> Qtr-2 Date</td>
</tr>
<tr class="grey1">
<td class="firstcol">Germany:</td>
<td>-6.8%</td>
<td>-8.0%</td>
<td>3.1%</td>
<td>-38.9%</td>
<td>-29.1%</td>
<td>-16.4%</td>
<td>10.8%</td>
<td>9.1%</td>
<td>-50.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">France:</td>
<td>-11.3%</td>
<td>0.4%</td>
<td>-7.7%</td>
<td>-54.3%</td>
<td>-37.7%</td>
<td>-18.3%</td>
<td>4.7%</td>
<td>10.9%</td>
<td>-58.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>-2.5%</td>
<td>-1.9%</td>
<td>-33.1%</td>
<td>-18.6%</td>
<td>-10.1%</td>
<td>6.1%</td>
<td>12.7%</td>
<td>-37.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">UK(EU)</td>
<td>-28.3%</td>
<td>28.7%</td>
<td>-8.6%</td>
<td>-49.5%</td>
<td>-42.4%</td>
<td>-14.2%</td>
<td>5.0%</td>
<td>9.2%</td>
<td>-69.9%</td>
</tr>
</tbody>
</table>
</body></html>

A rapid deceleration…The sharp drop in the growth rate for orders in the current quarter is telling of the rapidity with which this slowdown has struck Europe. Orders in the fourth quarter are falling at annual rates of 50% in [...]

Orders Make Record Drop in Euro During October

Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222a.jpg" width="353">
Japan announced today a 233 billion yen deficit in its foreign trade for the month of November. Monthly deficits in foreign trade are rare in Japan and this was the third deficit in the last four months. On a three month moving average of the seasonally unadjusted data, the results of the last few months are even more dramatic as can be seen in the first chart. These deficits of recent months are the first to have occurred since the late seventies and early eighties.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222b.jpg" width="353">
Exports were 27% below November 2008 due in part to the slowing of world demand and also to the rise in the yen. The rise in the yen over the past few months is compared with the performance of the dollar, the euro and the U.K. pound in the second chart. Between August 7 and December 19 (The recent low for the yen and the most recent), the broad trade weighted yen appreciated 32%, while the euro was virtually unchanged, the dollar was up 10% and the pound was down 18%. While a higher yen might ordinarily lead to higher imports, the current low level of the propensity to consume in Japan has actually resulted in a decline of 14% in imports from a year ago.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN&nbsp;</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct&nbsp;&nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp; 08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Balance Total (Bil Yen)</td>
<td>-233</td>
<td>-68</td>
<td>86</td>
<td>-332</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance USA&nbsp; (Bil Yen)</td>
<td>-696</td>
<td>-528</td>
<td>-764</td>
<td>-720</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Exports&nbsp; (Bil Yen)</td>
<td>5327</td>
<td>6924</td>
<td>7364</td>
<td>7050</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports&nbsp; (Bil Yen)</td>
<td>6660</td>
<td>6992</td>
<td>7278</td>
<td>7386</td>
</tr>
<tr>
<td class="firstcol">Trade Weighted Exchange Rates (2000=100)</td>
<td>Aug&nbsp; 7</td>
<td>Dec&nbsp; 18&nbsp;&nbsp;&nbsp;</td>
<td>% Chg&nbsp;</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">US Dollar</td>
<td>82.6</td>
<td>90.7</td>
<td>9.8</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro</td>
<td>139.3</td>
<td>139.6</td>
<td>0.2</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">UK Pound&nbsp;</td>
<td>94.5</td>
<td>77.9</td>
<td>-17.6</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">Yen</td>
<td>83.9</td>
<td>110.4</td>
<td>31.8</td>
<td>-</td>
</tr>
</tbody>
</table>
</body>
</html>

Japan announced today a 233 billion yen deficit in its foreign trade for the month of November. Monthly deficits in foreign trade are rare in Japan and this was the third deficit in the last four months. On a three month moving [...]

A Strong Yen And Falling World Demand Lead To Deficit In Japanese Foreign Trade

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222e.jpg" align="left" border="0" height="265" width="353">
The National Activity Index (CFNAI) from the Chicago Federal
Reserve Bank for November continued on a downtrend and remained in
recession territory. The latest reading of -2.47 followed a short-lived
October bounce back from two hurricanes. Since 1970 there has been a
75% correlation between the level of the index and the q/q change in
real GDP.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222f.jpg" align="right" border="0" height="265" width="353">
The three-month moving average of the index of -2.49
was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_december2008.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
Each category of the index including employment, production,
income, consumption &amp; housing made a negative contribution to
the November index.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during October to its lowest level
since 1997. The auto sector continued to lead the weakness but the
steel and machinery components also were weak.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">November '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.47</td>
<td>-1.27</td>
<td>-0.44</td>
<td>-0.40</td>
<td>-0.01</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.49</td>
<td>-2.40</td>
<td>-0.49</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
A Strong Yen And Falling World
Demand Lead To Deficit In Japanese Foreign Trade 
by <a href="/comment/Curley.html">Louise
Curley</a> December 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222a.jpg" align="left" border="0" height="265" width="353">
Japan announced today a 233 billion yen deficit in its foreign
trade for the month of November. Monthly deficits in foreign trade are
rare in Japan and this was the third deficit in the last four months.
On a three month moving average of the seasonally unadjusted data, the
results of the last few months are even more dramatic as can be seen in
the first chart. These deficits of recent months are the first to have
occurred since the late seventies and early eighties.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222b.jpg" align="right" border="0" height="265" width="353">
Exports were 27% below November 2008 due in part to the
slowing of world demand and also to the rise in the yen. The rise in
the yen over the past few months is compared with the performance of
the dollar, the euro and the U.K. pound in the second chart. Between
August 7 and December 19 (The recent low for the yen and the most
recent), the broad trade weighted yen appreciated 32%, while the euro
was virtually unchanged, the dollar was up 10% and the pound was down
18%. While a higher yen might ordinarily lead to higher imports, the
current low level of the propensity to consume in Japan has actually
resulted in a decline of 14% in imports from a year ago.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN&nbsp;</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct &nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp; 08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Balance Total
(Bil Yen)</td>
<td>-233</td>
<td>-68</td>
<td>86</td>
<td>-332</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance
USA&nbsp; (Bil Yen)</td>
<td>-696</td>
<td>-528</td>
<td>-764</td>
<td>-720</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Exports&nbsp;
(Bil Yen)</td>
<td>5327</td>
<td>6924</td>
<td>7364</td>
<td>7050</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports&nbsp;
(Bil Yen)</td>
<td>6660</td>
<td>6992</td>
<td>7278</td>
<td>7386</td>
</tr>
<tr>
<td class="firstcol">Trade Weighted
Exchange Rates (2000=100)</td>
<td>Aug&nbsp; 7</td>
<td>Dec&nbsp; 18&nbsp;&nbsp;&nbsp;</td>
<td>% Chg&nbsp;</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">US Dollar</td>
<td>82.6</td>
<td>90.7</td>
<td>9.8</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro</td>
<td>139.3</td>
<td>139.6</td>
<td>0.2</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">UK Pound&nbsp;</td>
<td>94.5</td>
<td>77.9</td>
<td>-17.6</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">Yen</td>
<td>83.9</td>
<td>110.4</td>
<td>31.8</td>
<td>-</td>
</tr>
</tbody>
</table>
Orders Make Record Drop in Euro
During October. 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222c.jpg" align="left" border="0" height="265" width="353">
A rapid deceleration&#8230;The sharp drop in the growth rate for
orders in the current quarter is telling of the rapidity with which
this slowdown has struck Europe. Orders in the fourth quarter are
falling at annual rates of 50% in Germany, 57% in France, 37% in Italy
and nearly 70% in the United Kingdom. This obvious bespeaks of a sharp
slowing for growth in 2008-Q4. 
 

Severe real sector hit&#8230; While the headlines have focused on
the financial sector and banking problems and, although German consumer
sentiment has been supported, the hit to EMU MFG has been severe. Both
the EMU MFG and Services PMIs have taken sharp drops. These barometers
precede the availability of authentic activity measures. The purchaser
type surveys are merely &#8216;indicators&#8217; While variables such as industrial
output and retail sales are the actual results. 
 

Orders are an actual forward-looking series&#8230; The orders series
is also an actual result and not simply an &#8216;indicator&#8217;. Orders, while
not actual activity are true figures corresponding to activity that
been contracted ahead. The orders data are available for October but
PMI data for December already are in hand &#8211;and they continue to be weak. 
 

The recognition lag... It has taken some time but Germany
seems to have come around to the idea of more stimulus. The drop in the
HICP for the Zone (bringing the Yr/Yr headline pace to 2.1%) may also
free up the ECB to become less tentative. Both orders and sales are all
falling and orders are falling with uniform and shocking weakness
across EMU. The dramatic policy moves and in the US have been rekindles
euro FX strength. Is that a good sign or a signal how far behind Europe
is in adopting needed stimulus? There should be no question about the
severity of the weakness in Europe. It&#8217;s not just a banking problem. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="10" scope="col"> E-zone
and UK Industrial Orders &amp; Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol"> Saar except m/m</td>
<td colspan="3">% m/m</td>
<td> Oct 
08</td>
<td> Oct 
08</td>
<td> Oct 
08</td>
<td> Oct 
07</td>
<td> Oct 
06</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Ezone Detail</td>
<td>Oct 
08</td>
<td> Sep 
08</td>
<td> Aug 
08</td>
<td> 3-Mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol"> MFG Sales</td>
<td>-1.3%</td>
<td>-1.6%</td>
<td>-0.8%</td>
<td>-13.7%</td>
<td>-6.7%</td>
<td>-0.7%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>-14.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>-2.8%</td>
<td>-2.2%</td>
<td>-1.1%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>-2.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital</td>
<td>-0.4%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>-5.0%</td>
<td>-4.1%</td>
<td>-0.5%</td>
<td>3.9%</td>
<td>4.6%</td>
<td>-4.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate</td>
<td>#N/A</td>
<td>-5.6%</td>
<td>-0.3%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>7.3%</td>
<td>8.0%</td>
<td>-15.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr class="grey1">
<td class="firstcol"> Total Orders</td>
<td>-4.7%</td>
<td>-5.4%</td>
<td>-1.6%</td>
<td>-38.1%</td>
<td>-26.1%</td>
<td>-14.4%</td>
<td>8.8%</td>
<td>10.9%</td>
<td>-42.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Countries:</td>
<td>Oct 
08</td>
<td> Sep 
08</td>
<td> Aug 
08</td>
<td> 3-Mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> Qtr-2 
Date</td>
</tr>
<tr class="grey1">
<td class="firstcol">Germany:</td>
<td>-6.8%</td>
<td>-8.0%</td>
<td>3.1%</td>
<td>-38.9%</td>
<td>-29.1%</td>
<td>-16.4%</td>
<td>10.8%</td>
<td>9.1%</td>
<td>-50.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">France:</td>
<td>-11.3%</td>
<td>0.4%</td>
<td>-7.7%</td>
<td>-54.3%</td>
<td>-37.7%</td>
<td>-18.3%</td>
<td>4.7%</td>
<td>10.9%</td>
<td>-58.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>-2.5%</td>
<td>-1.9%</td>
<td>-33.1%</td>
<td>-18.6%</td>
<td>-10.1%</td>
<td>6.1%</td>
<td>12.7%</td>
<td>-37.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">UK(EU)</td>
<td>-28.3%</td>
<td>28.7%</td>
<td>-8.6%</td>
<td>-49.5%</td>
<td>-42.4%</td>
<td>-14.2%</td>
<td>5.0%</td>
<td>9.2%</td>
<td>-69.9%</td>
</tr>
</tbody>
</table>
French Business Climate Goes South
for the Winter 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222d.jpg" align="left" border="0" height="265" width="353">
Business climate fell to 73 from 79 to a low since January of
1990 and tied for a life of series low last reached in June 1993 in
this 35 year series. The recent trend and likely trend responses are
also at their lowest since 2000. Order and foreign orders are now at
their lowest since 2000 but they are very weak, in the bottom 5% to 7%
of their respective ranges. 
 

With this survey in hand INSEE now looks for France to suffer
a deeper recession than previously thought. Exports are diving and
plummeting sales now restrain and depress the manufacturing sector. The
euro zone's second-biggest economy would probably contract by 0.8
percent quarter-on-quarter in the final three months of 2008 after
growing just 0.1 percent between July and September, INSEE said in a
quarterly report. In Q1 2009 INSEE forecasts that the economy will
shrink by 0.4 percent and by 0.1 percent in the following quarter. In
its previous quarterly report, published in October, INSEE had
predicted a 0.1 percent decline in gross domestic product (GDP) in the
third and fourth quarters of 2008. Its view clearly has worsened.
Slowing global demand will continue to harm French exports, limiting
any advantage gained from recent softening in the euro, the statistics
office said (of course since this time the euro has strengthened
significantly making this point all the more forceful). INSEE said that
companies' efforts to run down surplus stocks are a further restraining
factor on manufacturing output, especially in the fourth quarter. 

<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> INSEE
Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec 
08</td>
<td>Nov 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate</td>
<td>73</td>
<td>79</td>
<td>87</td>
<td>91</td>
<td>0.0</td>
<td>221</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Production</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
</tr>
<tr>
<td class="firstcol">Recent Trend</td>
<td>-72</td>
<td>-68</td>
<td>-65</td>
<td>-41</td>
<td>0.0</td>
<td>222</td>
<td>44</td>
<td>-72</td>
<td>116</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol">Likely trend</td>
<td>-35</td>
<td>-26</td>
<td>-19</td>
<td>-9</td>
<td>0.0</td>
<td>222</td>
<td>30</td>
<td>-35</td>
<td>65</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders/Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Orders &amp; Demand</td>
<td>-56</td>
<td>-43</td>
<td>-31</td>
<td>-26</td>
<td>6.9</td>
<td>216</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-15</td>
</tr>
<tr>
<td class="firstcol">Fgn Orders &amp; Demand</td>
<td>-53</td>
<td>-47</td>
<td>-26</td>
<td>-27</td>
<td>5.6</td>
<td>214</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Likely Sales Price Trend</td>
<td>-8</td>
<td>-1</td>
<td>9</td>
<td>14</td>
<td>31.9</td>
<td>176</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>1</td>
</tr>
</tbody>
</table>
</body></html>

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

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.

260205C15.jpg

260205D15.jpg

- 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

260205A2.jpg

260205B2.jpg

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.

260205C2.jpg

260205D2.jpg

- 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

260205E.jpg

German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief

Jump to:

U.S. Existing Home Sales Fell; Single-Family Sales Lowest Since 1997

U.S. Gasoline Prices Down Again

U.S. 3Q'08 GDP Growth Unrevised; Profit's Fall Little Changed

U.S. 3Q'08 GDP Growth Unrevised; Profit's Fall Little Changed

Chicago Fed Index Well Into Recession Territory

Orders Make Record Drop in Euro During October

A Strong Yen And Falling World Demand Lead To Deficit In Japanese Foreign Trade

Chicago Fed Index Well Into Recession Territory