Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114g.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment for the middle of this month remained near the low posted during October. The index ticked up to 57.9 from 57.6. The latest level was near the lowest for the series since this past June which in turn was the lowest since early-1980. The latest figure was higher than Consensus expectations for a reading of 56.0.
During the last ten years there has been a 55% correlation between the level of sentiment and the three-month change in real consumer spending.
The mid-month current conditions index improved modestly to 61.4 but it remained down by one-third from last year. The view of current personal finances ticked up m/m but remained down by more than one-third from last year. The index of buying conditions for large household goods recouped about one-third of the October decline but remained off 30.9% y/y and near the lowest since 1980.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114h.jpg" width="353">
The expectations component of consumer sentiment was down. A 2.3% m/m decline this month came on top of the 15.2% October drop. The figures were, however, slightly above the lows reached this past Spring. Expectations for business conditions during the next years fell slightly as did expectations for conditions during the next year, but they both remained up from their recent lows. The expected change in personal finances ticked higher by 0.9% m/m and the reading was up 10% from the Spring low.
The opinion of government policy, which apparently influences economic expectations, also ticked up from October (-35.4% y/y). Only a slightly improved seven percent of respondents thought that a good job was being done by government while 54% thought a poor job was being done. That was near the highest percentage on record.
Recent economic weakness and lower oil prices caused inflation expectations to fall. The mean expected rate of inflation during the next year plummeted to 2.9% from 4.3% last month. It was as high as 7.0% in May. The expected inflation rate during the next five years ticked up to 3.3%, near the lowest level since 2003.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November 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">Consumer Sentiment</td>
<td>57.9</td>
<td>57.6</td>
<td>70.3</td>
<td>-23.9%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>61.4</td>
<td>58.4</td>
<td>75.0</td>
<td>-32.9</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>55.7</td>
<td>57.0</td>
<td>67.2</td>
<td>-15.9</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
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The University of Michigan's reading of consumer sentiment for the middle of this month remained near the low posted during October. The index ticked up to 57.9 from 57.6. The latest level was near the lowest for the series since this [...]

Michigan Reading of Consumer Sentiment Remained Glum

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114e.jpg" width="353">
Total U.S. import prices fell another 4.7% last month following the little-revised 3.3% September drop. Consensus expectations had been for a 4.4% drop during October.
Petroleum prices cratered another 16.7% and this month imported crude petroleum prices are down another 19% m/m.
During October import prices less petroleum fell 0.9%, the same as during September. During the last three months prices fell at an 8.4% annual rate versus the 12 to 13% rates of positive growth this past spring.
 Growth in import prices will slow further given the recent rise in the foreign exchange value of the dollar. During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a reduced 47% against a broader basket of currencies.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114e.jpg" width="353">
Capital goods import prices fell 0.2% after two months of no change. On a three-month basis prices fell at a 0.9% annual rate after a 5% to 6% rate of increase earlier this year. Less the lower prices of computers, capital goods prices ticked 0.1% lower but three month growth was just 1.1% after 9% growth earlier this year. Prices of computers, peripherals &amp; accessories were down at a 6.8% rate during the last three months.
Finally, prices for nonauto consumer goods ticked up 0.1% and the 0.4% rate of increase during the last three months is down from the 5.9% peak earlier this year. Durable goods prices overall rose at a 1.2% rate during the last three months versus a 6.2% rate of increase earlier this year.
Total export prices fell another 1.9% due to an 8.7% (+5.7% y/y) decline in agricultural prices which followed a 0.1% September uptick. Nonagricultural export prices slumped another 1.2% (+4.0% y/y), the third consecutive monthly decline.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA, %)</a></th>
<th scope="col">October</th>
<th scope="col">September</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">Import - All Commodities</td>
<td>-4.7</td>
<td>-3.3</td>
<td>6.7</td>
<td>4.2</td>
<td>4.9</td>
<td>7.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-16.7</td>
<td>-10.2</td>
<td>13.1</td>
<td>11.6</td>
<td>20.6</td>
<td>37.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>-0.9</td>
<td>-0.9</td>
<td>5.0</td>
<td>2.7</td>
<td>1.7</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>-1.9</td>
<td>-0.8</td>
<td>4.2</td>
<td>4.9</td>
<td>3.6</td>
<td>3.2</td>
</tr>
</tbody>
</table>


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Total U.S. import prices fell another 4.7% last month following the little-revised 3.3% September drop. Consensus expectations had been for a 4.4% drop during October. Petroleum prices cratered another 16.7% and this month imported [...]

U.S. Import Prices Fell Again; Oil & Nonoil Prices Lower

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114d.jpg" align="left" border="0" height="265" width="353">
The decline in US, UK and EMU GDP growth is all occurring at
once. Yr/Yr GDP growth is in a slowing down mode with the slowing at a
rather severe pace. We can see that the degree of slowdown and the low
pace of growth are both comparable to the decelerations in 2000-2001.
At that time the decelerating came from a higher pace of growth to
start with. 
 

While the US is being made the &#8216;poster boy of the downturn&#8217; in
terms of being the cause of this recession, the data show us that the
persisting sharp slowing in growth began in EMU as its currency rose
above level that growth in that region could tolerate.. The decline in
the UK growth rate came later and has been synchronous with the decline
in the US growth but UK growth has fallen harder- from a higher initial
pace. 
 

The US suffered worse in the earlier cycle, around the year
2000, as its growth dropped from an above European pace to a below
European pace at the trough. But the US economy subsequently had a
recovery phase that was quite robust pushing US growth above the growth
rates in EMU and the UK from 2003 &#8211; 2006. Then US growth began to get
erratic. But the ongoing cyclical weakness in the US did not start
again until nearly four quarters after EMU&#8217;s GDP began to make its
ongoing turn for the worse at the of 2006. EMU Yr/Yr growth peaked late
in 2006 at 3.3% and has since then been steadily eroding. 
 

Right now the UK, EMU and the US (Japan, and many others, too)
are engulfed n a synchronous downturn. And it has begun to create
tensions. 
 

In the US, the automakers are in trouble as unit auto sales
slipped to just above a 10mu unit rate last month an extremely low pace
that implies crushing overhead costs from fixed business charges. .
With a huge number of jobs linked to the auto sector, the US is
concerned that GM, Ford and Chrysler are in such straights. And with a
bailout plan that has been used to help financial firms there is now a
clamoring in the US to help the auto makers. But in Europe auto sales
are weak too; there sales have fallen for six months running. The
European Commission warned it would contest any U.S. bailout for the
sector that broke state aid rules. Insurers in Europe have withdrawn
credit protection for auto suppliers that protected them in the event
of bankruptcies of the US auto makers. Asian and European automakers
are feeling the pinch but still are not in the desperate circumstances
that US car makers face. 
 
The EU Threat 

"We are in the process of analyzing the &lt;US&gt;
plan. The plan has not yet been presented yet. Of course, if it is
illegal state aid, we will act at a WTO level," Commission President
Jose Manuel Barroso has said. So the lines are drawn. The risk is
protectionism and its ability to create a deep downward spiral since it
is hard to imagine that the US would let a European protest stand in
the way of supporting the automakers. And if the US did that the
Europeans surely would gain some WTO sanctioned recourse to retaliate
and that is how the mess gets out of hand. 
 

So yes, economies are weak. Financial sectors are strained.
Central banks are cutting rates. There have been some assistance plans.
In the US where import penetration is the most freely allowed, the US
automakers are feeling the pinch. As US lawmakers argue about remedies
for the &#8216;Big Three&#8217; European&#8217;s plan a surprise attack of their own
through WTO. If you think the only risk here is the economic downturn
and the financial sector, you are fooling yourself. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Euro-Area
and main G-10 country GDP Results</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Quarter over quarter-Saar</td>
<td colspan="4">Year/Year</td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Q4-07</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-15</td>
<td>-0.8%</td>
<td>-0.7%</td>
<td>2.7%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>2.1%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.6%</td>
<td>-1.1%</td>
<td>1.6%</td>
<td>0.6%</td>
<td>1.2%</td>
<td>2.0%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-2.1%</td>
<td>-1.7%</td>
<td>5.7%</td>
<td>0.8%</td>
<td>1.9%</td>
<td>2.7%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-2.0%</td>
<td>-1.8%</td>
<td>2.1%</td>
<td>-0.9%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">The Netherlands</td>
<td>0.1%</td>
<td>0.0%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>2.9%</td>
<td>3.7%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-2.1%</td>
<td>0.0%</td>
<td>1.1%</td>
<td>0.3%</td>
<td>1.5%</td>
<td>2.4%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">US</td>
<td>-0.3%</td>
<td>2.8%</td>
<td>0.9%</td>
<td>0.8%</td>
<td>2.1%</td>
<td>2.5%</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
</body></html>

The decline in US, UK and EMU GDP growth is all occurring at once. Yr/Yr GDP growth is in a slowing down mode with the slowing at a rather severe pace. We can see that the degree of slowdown and the low pace of growth are both [...]

Europe's GDP and the Auto Sector Woes

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114a.jpg" width="353">
The Commerce Department reported this morning that retail sales dropped 2.8% last month after little revised declines during September and August. The decline exceeded Consensus expectations for a 2.0% drop. Lower vehicle sales, and lower prices for the fuel used to power them, accounted for most of last month&#39;s sales&#39; decline. But there was notable weakness elsewhere. The retail sales data are contained in Haver&#39;s USECON database.
Motor vehicle &amp; parts sales dropped 5.5% after the 4.8% plunge during September. As a result of these outsized declines, sales last month were roughly one quarter the year-ago level. The drop mirrors the 34.2% y/y drop reported last week in unit sales of motor vehicles.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114b.jpg" width="353">
Sales at gasoline service stations dropped 12.7% month-to-month (+0.4% y/y) as gasoline prices fell 17.6% m/m to an average of $3.05 per gallon. Another downward leg is in store for November retail sales given that gasoline prices already have fallen 27% from their October average to $2.22.
Retail sales less autos and gasoline are on a steep downward trend as well. These sales fell 0.5% which marked the third consecutive monthly decline. For nonauto sales alone, the 3.8% three-month decline is the largest in the series&#39; history which extends back to the 1960s.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114c.jpg" width="353">
Sales at furniture and electronics &amp; appliance stores fared the worst over the latest three months. They dropped 2.4% during October (-9.7% y/y) and were off 7.2% over the last three months alone. Furniture store sales fell 2.5% during October (-13.5% y/y), for their fourth consecutive monthly drop, and sales of electronics &amp; appliance stores were off by 2.3% (-5.6% y/y). They&#39;re down by 6.6% over the last three months.
Apparel store sales hardly did much better, down 1.4% last month (-4.0% y/y) and they were off 5.7% during the last three. Sales at general merchandise stores have done little better. With their 0.4% decline last month (+2.3% y/y) they posted a 1.7% three-month drop.
And people aren&#39;t dining out much either. Restaurant &amp; drinking place sales did rise 0.3% last month, but the y/y gain of 3.9% compares to 5.2% growth last year and 6.0%+ growth during the prior three years. They&#39;re curtailing spending even as they eat at home. Grocery store sales during the last three months rose just 0.4% after a 4.8% gain during all of last year. Finally, consumers restrained their on-line shopping. Sales of nonstore retailers (mostly electronic shopping) fell 1.8% last month +1.4% y/y) and sales were off 4.2% during the last three months.
Sales of building materials and garden equipment fell 0.4% (-1.5% y/y), their fourth down month in the last five.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a> (%)</td>
<td>-2.8</td>
<td>-1.3</td>
<td>-0.7</td>
<td>-4.1</td>
<td>4.1</td>
<td>5.8</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-2.2</td>
<td>-0.5</td>
<td>-1.1</td>
<td>1.0</td>
<td>4.5</td>
<td>6.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Less Gasoline</td>
<td>-0.5</td>
<td>-0.6</td>
<td>-0.8</td>
<td>1.0</td>
<td>4.1</td>
<td>6.2</td>
<td>6.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The Commerce Department reported this morning that retail sales dropped 2.8% last month after little revised declines during September and August. The decline exceeded Consensus expectations for a 2.0% drop. Lower vehicle sales, and [...]

U.S. Retail Sales Drop With Gasoline Prices, Vehicle & Most Other Sales

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081113g.jpg" align="left" border="0" height="265" width="353">
German GDP drops -German GDP drops by 2.1%
saar in 2008-Q3. As has been the case in Germany for sometime, the
Bundesbank continues to blame the thrust of events on outside forces.
Germany's Bundesbank said that the global growth slowdown was to blame
for Germany slipping into recession this year, after gross domestic
product data on Thursday showed that its economy shrank by 0.5 percent
in the third quarter of the year. 

Germany as Victim: "National production in
Germany has significantly fallen in the summer ... compared to the
previous quarter. The broad global economic slowdown is now
increasingly making its presence felt," the German central bank said in
a statement. 

Germany as free rider - There is no
disputing these facts but the Bundesbank does not point out that
Germany has an economy geared to exporting and one that therefore is
set to do better when the world economy does better and to do worse
when the world economy does worse. Blaming the world economy in this
circumstance is like the caboose blaming the engine for going too slow.
This arrangement is one that Germany has sought and has prospered under
in the past. Now that it is not working, it is not Germany&#8217;s fault.
Right. 

Germany as braggart laggard - In the
chart at the top of this report notice that the RED German GDP line
usually exceeds the blue line. The red line is for all of GDP. The blue
line is for German domestic demand alone. Germany has been pulled ahead
by the global economy consistently since 2003. I don&#8217;t understand all
this complaining and the ongoing assertion of German superiority we
have been hearing from the Bundesbank, from the German finance ministry
and others. It has been about growth, the euro and German banks -
everything. 

Giving or taking? No one forced German
banks to buy and hold the bad assets they have accumulated. Yet they
did that and suffered after the Bundesbank assured us that German banks
had no such problem. Germany is an intrinsically slow growing economy
with a high rate of unemployment. Its choice has been to accept that
and to seek growth through exports instead of though domestic means. At
a time that the US has had a big payments imbalance, and developing
countries were pursuing strategies of export-led growth, Germany would
have contributed to the world economy more by putting its unemployed to
work and by exporting less. 

Global summit and blame: We are preparing for a global summit
where countries will sit across the table from one another and listen
to the pot calling the kettle black. Be sure that there will be a lot
of blaming and evading of blame at this G-20 meeting. But be clear that
as the center country in a currency system like this, if countries
choose a lower rate VS the dollar, they get it, and the US gets the
resulting deficit from trade. 

What to fix: The currency monetary system is not set up to
encourage currencies to trade at their proper parities or to remedy
balance of payments imbalances when they arise. Breton Woods collapsed
because of disputes arising over payments imbalances and the US
tendency to grow faster than its trading partners (&#8230;and amass deficits
and lose gold reserves). And now some 35 years later these same root
differences are the nemesis of the Bretton Woods&#8217; successor system of
fluctuating exchange rates. It&#8217;s not a matter of &#8216;is Germany better&#8217;
but rather &#8216;is it doing its share?&#8217; Is it contributing to the world
order or is it adding to the burden or the excess? That is the real
question. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German GDP
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Consumption</td>
<td colspan="2">Capital Formation</td>
<td>&nbsp;</td>
<td></td>
<td>Domestic</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Total</td>
<td>Housing</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">%
change Q/Q; X-M is Q/Q
change in Blns of euros</td>
</tr>
<tr class="even">
<td class="firstcol">Q3-08</td>
<td>-2.1%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Q2-08</td>
<td>-1.7%</td>
<td>-2.6%</td>
<td>1.2%</td>
<td>-2.0%</td>
<td>-13.5%</td>
<td>-0.6%</td>
<td>-5.3%</td>
<td>-4.1%</td>
</tr>
<tr>
<td class="firstcol">Q1-08</td>
<td>5.7%</td>
<td>-1.4%</td>
<td>4.6%</td>
<td>6.7%</td>
<td>24.6%</td>
<td>8.9%</td>
<td>13.2%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">Q4-07</td>
<td>1.4%</td>
<td>-0.8%</td>
<td>0.2%</td>
<td>16.0%</td>
<td>1.6%</td>
<td>5.2%</td>
<td>-1.2%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">%
change Yr/Yr; X-M is
Yr/Yr change in Gap in Blns of euros</td>
</tr>
<tr class="even">
<td class="firstcol">Q3-08</td>
<td>0.8%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Q2-08</td>
<td>1.9%</td>
<td>-0.9%</td>
<td>1.9%</td>
<td>6.5%</td>
<td>3.0%</td>
<td>5.1%</td>
<td>4.2%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Q1-08</td>
<td>2.7%</td>
<td>0.5%</td>
<td>1.6%</td>
<td>8.8%</td>
<td>3.0%</td>
<td>6.7%</td>
<td>5.1%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Q4-07</td>
<td>1.7%</td>
<td>-1.3%</td>
<td>2.0%</td>
<td>8.3%</td>
<td>-2.7%</td>
<td>3.2%</td>
<td>2.7%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
</body></html>

German GDP drops -German GDP drops by 2.1% saar in 2008-Q3. As has been the case in Germany for sometime, the Bundesbank continues to blame the thrust of events on outside forces. Germany's Bundesbank said that the global growth [...]

German GDP Drops in Q3

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081113e.jpg" width="353">
To start Fiscal Year 2009, the U.S. government&#39;s budget deficit for October reflected the duel of effects from a U.S. recession and the War in Iraq.The monthly deficit jumped to $237.2B, more than four times last year&#39;s deficit of $56.8B. October&#39;s figure also was more than double Consensus projections for a deficit of $99.2B.
Many forecasts for the budget deficit during all of this fiscal year are near $700B. If realized, that would swell the deficit to about 5% of GDP following last year&#39;s roughly 3.2% and FY07&#39;s marginal 1.2%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081113f.jpg" width="353">
Net revenues during October suffered greatly and fell 7.5% from last year. Higher unemployment took the steam out of individual income tax receipts and they fell 9.7% from last October. Lingering payouts of the Government&#39;s &quot;stimulus&quot; checks reduced revenues somewhat. However the big negative factor would have been that payroll employment, and thus tax receipts, fell roughly 1.0% y/y. Suffering even more were corporate tax receipts which nearly evaporated with huge stated losses. Growth in unemployment and social insurance taxes grew a reduced 3.7%, the least since 2004.
U.S. government outlays nearly doubled versus last November lifted mostly by a jump in the &quot;commerce &amp; housing credit&quot;. Defense spending (19% of total outlays) rose an accelerated 17.9%. The gain does not reflect the full cost of the resources devoted to Iraq &amp; Afghanistan since much of the spending would have occurred anyway. Medicare expenditures (12% of outlays) rose by nearly one-half but that followed an October decline Social security spending (21% of outlays) rose 6% after 6.8% growth last year. Net interest payments increased 4.3% y/y.
The Government&#39;s financial data are available in Haver&#39;s USECON database, with extensive detail available in the specialized GOVFIN.

<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/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2008</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>-$237.2</td>
<td>$45.7B</td>
<td>-$56.8B (10/07)</td>
<td>-$454.8B</td>
<td>-$161.5B</td>
<td>-$248.2B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$164.8B</td>
<td>$272.2B</td>
<td>-7.5%</td>
<td>-1.7%</td>
<td>6.7%</td>
<td>11.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$402.0B</td>
<td>$226.5B</td>
<td>71.1%</td>
<td>9.1%</td>
<td>2.8%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
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To start Fiscal Year 2009, the U.S. government's budget deficit for October reflected the duel of effects from a U.S. recession and the War in Iraq.The monthly deficit jumped to $237.2B, more than four times last year's deficit of [...]

Recession & War Swell U.S. Budget Deficit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081113d.jpg" width="353">
The weakening job market pushed initial claims for jobless insurance above 500,000 for the first time since they were briefly there; late during the recession of 2001 and just after the 9/11 terrorist attacks. At 516,000, claims rose last week from an upwardly revised reading of 484,000 during the prior period. Expectations had been for 479,000 claims. The four-week moving average of initial claims rose to this cycle&#39;s high of 491,000 (48.0% y/y).
The largest increases in initial claims for the week ending Nov. 1 were in Ohio (+3,885), Michigan (+2,619), Pennsylvania (+2,155), Wisconsin (+2,119), and Arizona (+1,692), while the largest decreases were in California (-3,603), Florida (-2,327), Nevada (-943), South Carolina (-824), and Indiana (-621).
Continuing claims for unemployment insurance during the week of November 1 rose another 65,000 after the prior week&#39;s 111,000 upward spurt. The four-week average of continuing claims rose to 3,794,000, this cycle&#39;s high and the highest since 1983. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose to a new cycle high of 2.9%. The Commerce Department indicated that the highest insured unemployment rates in the week ending October 25 were in Puerto Rico (5.1 percent), Oregon (3.7), Nevada (3.6), Michigan (3.5), California (3.4), New Jersey (3.3), South Carolina (3.3), Pennsylvania (3.2), Arkansas (3.1), Alaska (3.0), and North Carolina (3.0).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">11/08/08</th>
<th scope="col">11/01/08</th>
<th scope="col">10/25/08</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>
<td class="firstcol">Initial Claims</td>
<td>516</td>
<td>&nbsp;484</td>
<td>485</td>
<td>52.7%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,897</td>
<td>3,832</td>
<td>50.6%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

The weakening job market pushed initial claims for jobless insurance above 500,000 for the first time since they were briefly there; late during the recession of 2001 and just after the 9/11 terrorist attacks. At 516,000, claims rose [...]

U.S. Claims For Unemployment Insurance Top 500,000

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.

Economy in Brief

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Michigan Reading of Consumer Sentiment Remained Glum

U.S. Import Prices Fell Again; Oil & Nonoil Prices Lower

Europe's GDP and the Auto Sector Woes

U.S. Retail Sales Drop With Gasoline Prices, Vehicle & Most Other Sales

U.S. Retail Sales Drop With Gasoline Prices, Vehicle & Most Other Sales

German GDP Drops in Q3

Recession & War Swell U.S. Budget Deficit

U.S. Claims For Unemployment Insurance Top 500,000