Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111a.jpg" width="353">
According to the National Federation of Independent Business (NFIB), small business optimism collapsed last month. The 5.8% m/m decline to an index level of 87.5 reversed all of the gains during the prior two months and dropped the level of optimism to its lowest level since early 1975.
During the last ten years there has been a 50% correlation between the level of the NFIB index and the two-quarter change in real GDP.
Plans for capital expenditures collapsed with the recent weakness if corporate profits. During the next 3-6 months, plans for spending fell to their lowest level since 1975.
The percent expecting credit conditions to ease fell to its lowest level since 1980 while the percent expecting higher real sales in six months dropped also to its lowest since 1980. Only five percent of firms thought that now was a good time to expend the business, near the lowest since 1982.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111b.jpg" width="353">
The percentage planning to raise employment fell to zero. The percentage of respondents with one or more job openings improved to 14%, the least since 1992. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls.
The largest, single most important problems seen by business were poor sales (23%), inflation (11%), insurance cost and availability (11%) and taxes (18%). The latter, however, still was reduced from 27% in early 2007.
The percentage of firms actually raising prices fell to 15%, the lowest level since February. During the last ten years there has been a 69% correlation between the y/y change in the producer price index and the level of the NFIB price index. The percentage of firms planning to raise prices also fell further to 18% which was the least since 2003
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver&#39;s SURVEYS database.
Toward A Durable Recovery is last week&#39;s speech by Atlanta Fed Bank President Dennis P. Lockhart and it available <a href="http://www.frbatlanta.org/invoke.cfm?objectid=77A47FE2-5056-9F12-12AFBD6ADE42D36E&amp;method=display">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/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</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>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>87.5</td>
<td>92.9</td>
<td>-9.0%</td>
<td>96.7</td>
<td>98.9</td>
<td>101.6</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the National Federation of Independent Business (NFIB), small business optimism collapsed last month. The 5.8% m/m decline to an index level of 87.5 reversed all of the gains during the prior two months and dropped the [...]

U.S. Small Business Optimism Lowest Since 1975

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111a.jpg" align="left" border="0" height="265" width="353">
According to the National Federation of Independent Business
(NFIB), small business optimism collapsed last month. The 5.8% m/m
decline to an index level of 87.5 reversed all of the gains during the
prior two months and dropped the level of optimism to its lowest level
since early 1975.
During the last ten years there has been a 50% correlation
between the level of the NFIB index and the two-quarter change in real
GDP.
Plans for capital expenditures collapsed with the recent
weakness if corporate profits. During the next 3-6 months, plans for
spending fell to their lowest level since 1975.
The percent expecting credit conditions to ease fell to its
lowest level since 1980 while the percent expecting higher real sales
in six months dropped also to its lowest since 1980. Only five percent
of firms thought that now was a good time to expend the business, near
the lowest since 1982.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111b.jpg" align="right" border="0">
The percentage planning to raise employment fell to zero. The
percentage of respondents with one or more job openings improved to
14%, the least since 1992. During the last ten years there has been a
71% correlation between the NFIB employment percentage and the y/y
change in nonfarm payrolls.
The largest, single most important problems seen by business
were poor sales (23%), inflation (11%), insurance cost and availability
(11%) and taxes (18%). The latter, however, still was reduced from 27%
in early 2007.
The percentage of firms actually raising
prices fell to 15%, the lowest level since February. During the last
ten years there has been a 69% correlation between the y/y change in
the producer price index and the level of the NFIB price index. The
percentage of firms planning to raise prices also
fell further to 18% which was the least since 2003
About 24 million businesses exist in the United States. Small
business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver's SURVEYS
database.
Toward A Durable Recovery is last week's
speech by Atlanta Fed Bank President Dennis P. Lockhart and it
available <a href="http://www.frbatlanta.org/invoke.cfm?objectid=77A47FE2-5056-9F12-12AFBD6ADE42D36E&amp;method=display">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/SURVEYS/@S7/@S7.HTM">Nat'l
Federation of Independent Business</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>
<td class="firstcol">Small Business Optimism Index
(1986=100)</td>
<td>87.5</td>
<td>92.9</td>
<td>-9.0%</td>
<td>96.7</td>
<td>98.9</td>
<td>101.6</td>
</tr>
</tbody>
</table>
U.S. Gasoline Prices Lowest Since
February 2007. Demand Fell Further 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 11, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111c.jpg" align="left" border="0" height="265" width="353">
The retail price for a gallon of regular gasoline fell
by another eighteen cents last week after the twenty six cent drop
during the prior week, according to the U.S. Department of Energy
survey. The price of $2.22 was the lowest since February 2007. Prices
have now fallen $1.89 per gallon, or by nearly one-half, since their
peak early this past July. The latest decline was accompanied by a drop
in the average price for all grades of gasoline to $2.28 per gallon.
Yesterday, the spot market price for a gallon of regular
gasoline fell eight cents from last week's average to $1.40. In futures
trading the November contract closed down further at $1.37 per gallon.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111d.jpg" align="right" border="0" height="265" width="353">
Weekly gasoline prices can be found in Haver's WEEKLY
database. Daily prices are in the DAILY
database.
The demand for gasoline fell by 3.3% y/y,
according to the U.S. Department of Energy. The rate of decline has
bottomed out recently but the decline is still the fastest since
late-1995 (the latest four weeks versus the same four weeks last year).
The demand for all petroleum products also has softened, falling 7.0%
y/y.
These DOE figures are available in Haver's OILWKLY
database.
The price for a barrel of West Texas Intermediate crude oil
fell further last week to an average $64.31 per barrel, down 56% since
the peak in July of $145.66. In futures trading yesterday, the
two-month price for crude oil was even lower at $63.27 per barrel.
Last week, prices for natural gas ticked up w/w to $6.74 per
mmbtu (-3.3% y/y) as seasonal factors began to lift the price. The
average price this month was nearly one-half below the high for natural
gas prices in early-July of $13.19/mmbtu.
If Exchange Rates Are Random Walks, Then Almost
Everything We Say About Monetary Policy Is Wrong from
the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/research/QR/QR3211.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">11/10/08</th>
<th scope="col">11/03/08</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>2.22</td>
<td>2.40</td>
<td>-28.5%</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>64.31</td>
<td>65.68</td>
<td>-32.5%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Dropped 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 11, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111e.jpg" align="left" border="0" height="265" width="353">
According to the International Council of Shopping
Centers-Goldman Sachs Index, chain store sales dropped 1.0% last week
from the last week in October. That wasn't the first sign of severe
weakness in sales. There was one weekly decline last month and sales
were down during each week of September, but the decline did lower the
starting level of sales this month 0.7% below the October average.
During all of October sales fell 1.0% from September following that
month's 1.9% drop.

The level of sales during the latest week remained near
the lowest since December of last year.


During the last ten years there has been a 59% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.

The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Portending further weakness in consumer spending was a 0.3%
dip in the weekly leading indicator of chain store sales from
ICSC-Goldman Sachs. The index level was, however, 6.1% below the year
ago level at the lowest level since 1996.
The chain store sales figures are available in Haver's SURVEYW
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">11/08/08</th>
<th scope="col">10/31/08</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">Total Weekly Chain
Store Sales</td>
<td>477.2</td>
<td>482.0</td>
<td>0.4%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
German Investors A Bit Less
Pessimistic About The Outlook Merchants In Japan More
Pessimistic Than Ever 
by <a href="/comment/Curley.html">
Louise Curley</a> November 11, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111f.jpg" align="left" border="0" height="265" width="353">
Investors in Germany appear to be encouraged by the steps the
central bank and the government have taken in recent weeks to deal with
the economic slowdown. The European Central Bank reduced it key rate by
50 basis points on October 8 and is expected to reduce it by another 50
basis points on November 12 binging it to 3.25%. In addition, the
German government passed a $64 billion stimulus package on November
4.In the latest ZEW survey, the excess of pessimists over optimists
regarding future conditions declined to 53.5% in November from 63.0% in
October. This still a far cry from the historical average of an excess
of optimists of 27.1%.In appraising the current situation, German
investors have become more and more pessimistic--or perhaps more
realistic. From an excess of optimists over pessimists of 17% in July,
there is now an excess of pessimists over optimists of 50.4% viewing
the current situation. The ZEW indicators for current and expected
conditions, together with recession shadings for Germany, are shown in
the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081111g.jpg" align="right" border="0" height="265" width="353">
In Japan, the merchants who make up the Economy Watchers
Diffusion Index have reported worsening conditions for both for the
present and for the future outlooks in almost every month since mid
2007, when the sub prime problem in the U. S. first surfaced.
Currently, these indexes are at all time lows as can be seen in the
second chart, which plots the history of the diffusion indexes and the
recession shading for Japan. The Bank of Japan recently cut its key
interest rate to 0.3% from 0.5%, but little has been done in the way of
fiscal stimulus.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"></th>
<th scope="col">Nov 08</th>
<th scope="col">Oct&nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp; 07&nbsp;</th>
<th scope="col">Aug 08&nbsp; &nbsp;</th>
<th scope="col">Jul&nbsp;
08&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Germany ZEW (% balance)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current
Situation</td>
<td>-50.4</td>
<td>-35.9</td>
<td>-1.0</td>
<td>-9.2</td>
<td>17.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Future
Conditions</td>
<td>-53.5</td>
<td>-63.0</td>
<td>-41.1</td>
<td>-55.5</td>
<td>-63.9</td>
</tr>
<tr>
<td class="firstcol">Japan Economy Watchers
Survey (Dif. Index)&nbsp;&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current
Conditions</td>
<td>n.a.</td>
<td>22.6</td>
<td>28.0</td>
<td>28.3</td>
<td>29.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Future
Conditions</td>
<td>n.a.</td>
<td>25.2</td>
<td>32.1</td>
<td>32.0</td>
<td>30.8</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110e.jpg" width="353">
Inflation is beginning to take a back seat in the deliberations of Central Bankers. The financial crisis, rising unemployment and declining production are overshadowing inflation fears at the same time that these fears are lessening. No matter the actual level of inflation, incoming data are showing that inflation rates are declining worldwide.
Today Egypt, Greece, Latvia and the Czech Republic reported their Consumer Price Indexes for October. The inflation rate as measured by the year-to-year increase in the CPI has recently been declining at varying degrees of speed in each country. Egypt, with inflation over 20%, has seen its inflation rate decline in the last two months from 23.8% in August to 20.1% in October. Another high inflation rate country, Latvia, has experienced declines in its inflation rate in the last five months, from 17.7% in June to 13.8% in October. Greece and the Czech Republic with relatively low inflation rates have nevertheless also witnessed declines in their inflation rates. Inflation in Greece has come down to 3.9% in October from 4.8% in June, and to 6.0% from 6.7%, respectively, in the Czech republic. The &quot;core&quot; inflation rate in the Czech Republic has declined to 1.65 % in October from 2.64 % in June. Inflation rates for the four countries are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110f.jpg" width="353">
Dramatic declines in commodity prices over the past year are responsible for much of the improved inflation outlook worldwide. The second chart shows the prices of wheat, copper and oil over the past year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INFLATION RATES&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep&nbsp;&nbsp; 08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
<th scope="col">Jul&nbsp; 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Czech Republic: Total</td>
<td>6.0</td>
<td>6.6</td>
<td>6.5</td>
<td>6.9</td>
<td>6.7</td>
</tr>
<tr>
<td class="firstcol">Czech Republic: Core</td>
<td>1.65</td>
<td>2.54</td>
<td>2.54</td>
<td>2.64</td>
<td>2.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece: Total</td>
<td>3.90</td>
<td>4.58</td>
<td>4.68</td>
<td>4.83</td>
<td>4.89</td>
</tr>
<tr>
<td class="firstcol">Egypt: Total</td>
<td>20.13</td>
<td>21.52</td>
<td>23.79</td>
<td>22.15</td>
<td>20.22</td>
</tr>
<tr class="odd">
<td class="firstcol">Latvia: Total</td>
<td>13.73</td>
<td>14.88</td>
<td>15.72</td>
<td>16.61</td>
<td>17.74</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflation is beginning to take a back seat in the deliberations of Central Bankers. The financial crisis, rising unemployment and declining production are overshadowing inflation fears at the same time that these fears are lessening. [...]

Declines in Commodity Prices Leading to Lower Inflation Rates Worldwide

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110d.jpg" align="left" border="0" height="265" width="353">
The OECD trend-adjusted cyclical leading indicators showed a
clear pattern of growth deteriorating in the OECD region. The downturn
is of increasing severity. Even Japan after a brief flirtation with
improving is getting weaker again. Over 3, 6 and 12 months it is Europe
that is now declining the most rapidly.
The OECD prefers to look at these indicators over six months.
On that basis the weakness is just as present. As we prepare for the
G-20 meeting the OECD area is shrinking rapidly.
Over six months the pace of decline for the OECD is at a rate
of 6.5%. Six months ago the six month pace for that index was -2%. One
year ago the pace was just -0.8%. And 18n months ago that pace was an
increase of 2.5%. All that
amounts to a pretty fast drop off. That is the sort of thing that is
typical, not of a slowdown, but of a recession.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="5" scope="col"> OECD Trend-Restored Leading Indicators</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth Progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-9.8%</td>
<td>-6.5%</td>
<td>-4.3%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-11.1%</td>
<td>-6.7%</td>
<td>-5.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-12.1%</td>
<td>-9.2%</td>
<td>-5.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-6.8%</td>
<td>-2.3%</td>
<td>0.0%</td>
<td>-4.0%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-10.6%</td>
<td>-5.6%</td>
<td>-5.3%</td>
<td>1.3%</td>
</tr>
<tr class="even">
<td colspan="5" class="firstcol">Six month readings at 6-Mo
Intervals</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-6.5%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-6.7%</td>
<td>-3.2%</td>
<td>-1.2%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-9.2%</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-2.3%</td>
<td>2.2%</td>
<td>-7.8%</td>
<td>-0.1%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-5.6%</td>
<td>-5.0%</td>
<td>0.8%</td>
<td>1.9%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns indicated by BOLD RED.</td>
</tr>
</tbody>
</table>
</body></html>

The OECD trend-adjusted cyclical leading indicators showed a clear pattern of growth deteriorating in the OECD region. The downturn is of increasing severity. Even Japan after a brief flirtation with improving is getting weaker again. [...]

OECD Slowdown is Broad-Based and More Severe

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110c.jpg" align="left" border="0" height="265" width="353">
EMU IP is sinking fast. Add Italy and France to the list of
large EMU countries with industrial output dropping like a stone. The
Q3 growth rates for IP in France and in Italy each are negative,
Italy&#8217;s drop is at a huge -8.4% pace while France&#8217;s drop is a still
weak at -2.7%. In Italy
consumer goods, capital goods and intermediate goods output each is
falling. Transportation is twice as weak in Italy as it is in France
for the quarter. In France intermediate goods output is even a bit
weaker than it is in Italy in Q3 but the drop in output of capital
goods is quite a bit less severe and consumer goods output in France
continued to rise strongly in Q3. French consumer goods output, in
fact, has risen in each month of the third quarter as well.
On balance, as the accompanying chart shows, IP is falling
rapidly in Germany, Italy and France. The drop in France shows some
signs of leveling off in its pace of decline over the past few months
while Italy and Germany are still plunging at what seem to be
accelerating rates of decline. Italy &#8217;s pattern of decline is a bit
more complicated than that for Germany and France. But Germany has the
most severe weakness. While it has so far the smallest Yr/Yr drop, its
output has decelerated more sharply since German output was growing so
much more strongly until early 2008 when the pace of increase suddenly
and sharply moved lower and into a state of decline.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">French IP
Excluding Construction </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>-4.2%</td>
<td>-1.9%</td>
<td>-2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>8.2%</td>
<td>2.8%</td>
<td>-0.4%</td>
<td>6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>0.7%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>0.5%</td>
<td>1.7%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-1.5%</td>
<td>-0.8%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-7.2%</td>
<td>-4.4%</td>
<td>-5.0%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Auto</td>
<td>-3.1%</td>
<td>-1.2%</td>
<td>4.2%</td>
<td>-1.3%</td>
<td>-14.8%</td>
<td>-8.3%</td>
<td>-9.3%</td>
</tr>
<tr class="even">
<td colspan="8" class="firstcol">Italy IP Excluding
Construction</td>
</tr>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP-MFG</td>
<td>-2.3%</td>
<td>0.4%</td>
<td>-1.3%</td>
<td>-12.1%</td>
<td>-8.0%</td>
<td>-5.7%</td>
<td>-8.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>-3.3%</td>
<td>0.8%</td>
<td>-2.3%</td>
<td>-18.0%</td>
<td>-6.5%</td>
<td>-5.4%</td>
<td>-10.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>-2.5%</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>-14.9%</td>
<td>-11.1%</td>
<td>-8.2%</td>
<td>-13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-2.6%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-7.2%</td>
<td>-5.9%</td>
<td>-5.4%</td>
<td>-3.5%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Transportation</td>
<td>-5.7%</td>
<td>1.9%</td>
<td>-3.9%</td>
<td>-27.2%</td>
<td>-21.1%</td>
<td>-13.1%</td>
<td>-22.4%</td>
</tr>
</tbody>
</table>
</body></html>

EMU IP is sinking fast. Add Italy and France to the list of large EMU countries with industrial output dropping like a stone. The Q3 growth rates for IP in France and in Italy each are negative, Italy’s drop is at a huge -8.4% pace [...]

IP Dropping Fast in Key EMU Countries

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110b.jpg" width="353">
The National Association of Realtors reported that September pending sales of existing homes fell 4.6% from the prior month. Sales had risen 7.5% during August. Consensus expectations were for a slightly more moderate m/m drop.
Despite the latest decline, the level of sales on a three-month basis was up 6.6% from its March low.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
The Mortgage Meltdown, Financial Markets, and the Economy is adapted from a speech by San Francisco Federal Reserve Bank President Janet Yellen and it can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-35-36.pdf">here</a>.
Across the country&#39;s regions the pattern of recent sales movements has been very erratic. Sales in the West led the September increase with a 3.7% m/m rise on the heels of an 18.4% spurt upward in August. The latest was the highest level of sales since early 2006. But that was all of the good news in the latest home sales report. Sales in the Northeast slumped 16.8% m/m to a new low for the series. Sales in the South fell 7.9% and the decline reversed most of the modest firming of sales during the prior three months. Home sales in the Midwest ticked down 0.7% though sales still were a moderate 12.4% higher than the March low.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110a.jpg" width="353">
Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell a not seasonally adjusted 1.6% (-2.4% y/y) after a 5.2% August decline. That was the second y/y decline since early 2005.
At the current sales rate there was a 9.9 months&#39; supply of homes on the market, the lowest since February but still higher than 8.9 months last year and 6.5 months during 2006. For single family homes the months&#39; supply fell to 9.4, the lowest since March but still well above the 8.7 average of last year.
The median sales price of an existing single family home fell 5.7% (-9.0% y/y) during September. Prices were down 16.3% from their peak during June of last year. For single family homes, prices fell 5.6% (-8.6% y/y) and they were off 16.8% from last year&#39;s June peak.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market and prices are in the REALTOR database.
The Federal Reserve Board and the U.S. Treasury announced the restructuring of the government&#39;s financial support to the American International Group (AIG) and the text of the announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20081110a.htm">here</a>
What Is Liquidity Risk? also is from the Federal Reserve Bank of San Francisco and it is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-33.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></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&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>89.2</td>
<td>&nbsp;93.5</td>
<td>&nbsp;&nbsp; 1.6%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>66.4</td>
<td>79.8</td>
<td>-9.4</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>83.3</td>
<td>83.9</td>
<td>-3.1</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>89.0</td>
<td>96.6</td>
<td>-11.3</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>113.6</td>
<td>109.5</td>
<td>39.6</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Realtors reported that September pending sales of existing homes fell 4.6% from the prior month. Sales had risen 7.5% during August. Consensus expectations were for a slightly more moderate m/m drop. [...]

U.S. Pending Home Sales Retraced Most of August Rise; Trend Still Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110b.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors reported that September
pending sales of existing homes fell 4.6% from the prior month. Sales
had risen 7.5% during August. Consensus expectations were for a
slightly more moderate m/m drop.
Despite the latest decline, the level of sales on a
three-month basis was up 6.6% from its March low.
The home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001.
The Mortgage Meltdown, Financial Markets, and
the Economy is adapted from a speech by San Francisco
Federal Reserve Bank President Janet Yellen and it can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-35-36.pdf">here</a>.
Across the country's regions the pattern of recent sales
movements has been very erratic. Sales in the West led the September
increase with a 3.7% m/m rise on the heels of an 18.4% spurt upward in
August. The latest was the highest level of sales since early 2006. But
that was all of the good news in the latest home sales report. Sales in
the Northeast slumped 16.8% m/m to a new low for the series. Sales in
the South fell 7.9% and the decline reversed most of the modest firming
of sales during the prior three months. Home sales in the Midwest
ticked down 0.7% though sales still were a moderate 12.4% higher than
the March low.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110a.jpg" align="right" border="0" height="265" width="353">
Weak home sales are encouraging potential sellers to keep
their homes off the market. The Realtors Association indicated in an
earlier report that the number of homes on the market and available for
sale fell a not seasonally adjusted 1.6% (-2.4% y/y) after a 5.2%
August decline. That was the second y/y decline since early 2005.
At the current sales rate there was a 9.9 months' supply of
homes on the market, the lowest since February but still higher than
8.9 months last year and 6.5 months during 2006. For single family
homes the months' supply fell to 9.4, the lowest since March but still
well above the 8.7 average of last year.
The median sales price of an existing single family home fell
5.7% (-9.0% y/y) during September. Prices were down 16.3% from their
peak during June of last year. For single family homes, prices fell
5.6% (-8.6% y/y) and they were off 16.8% from last year's June peak.
The pending home sales data are available in Haver's PREALTOR
database and the number of homes on the market and prices are
in the REALTOR database.
The Federal Reserve Board and the U.S. Treasury
announced the restructuring of the government's financial support to
the American International Group (AIG) and the text of the
announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20081110a.htm">here</a>
What Is Liquidity Risk? also is
from the Federal Reserve Bank of San Francisco and it is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-33.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></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&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>89.2</td>
<td>&nbsp;93.5</td>
<td>&nbsp;&nbsp; 1.6%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>66.4</td>
<td>79.8</td>
<td>-9.4</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>83.3</td>
<td>83.9</td>
<td>-3.1</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>89.0</td>
<td>96.6</td>
<td>-11.3</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>113.6</td>
<td>109.5</td>
<td>39.6</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
OECD Slowdown is Broad-Based andMore Severe 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110d.jpg" align="left" border="0" height="265" width="353">
The OECD trend-adjusted cyclical leading indicators showed a
clear pattern of growth deteriorating in the OECD region. The downturn
is of increasing severity. Even Japan after a brief flirtation with
improving is getting weaker again. Over 3, 6 and 12 months it is Europe
that is now declining the most rapidly.
The OECD prefers to look at these indicators over six months.
On that basis the weakness is just as present. As we prepare for the
G-20 meeting the OECD area is shrinking rapidly.
Over six months the pace of decline for the OECD is at a rate
of 6.5%. Six months ago the six month pace for that index was -2%. One
year ago the pace was just -0.8%. And 18n months ago that pace was an
increase of 2.5%. All that
amounts to a pretty fast drop off. That is the sort of thing that is
typical, not of a slowdown, but of a recession.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col"> OECD
Trend-Restored Leading Indicators</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth
Progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-9.8%</td>
<td>-6.5%</td>
<td>-4.3%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-11.1%</td>
<td>-6.7%</td>
<td>-5.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-12.1%</td>
<td>-9.2%</td>
<td>-5.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-6.8%</td>
<td>-2.3%</td>
<td>0.0%</td>
<td>-4.0%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-10.6%</td>
<td>-5.6%</td>
<td>-5.3%</td>
<td>1.3%</td>
</tr>
<tr class="even">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-6.5%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-6.7%</td>
<td>-3.2%</td>
<td>-1.2%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-9.2%</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-2.3%</td>
<td>2.2%</td>
<td>-7.8%</td>
<td>-0.1%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-5.6%</td>
<td>-5.0%</td>
<td>0.8%</td>
<td>1.9%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED.</td>
</tr>
</tbody>
</table>
IP Dropping Fast in Key
EMUCountries 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110c.jpg" align="left" border="0" height="265" width="353">
EMU IP is sinking fast. Add Italy and France to the list of
large EMU countries with industrial output dropping like a stone. The
Q3 growth rates for IP in France and in Italy each are negative,
Italy&#8217;s drop is at a huge -8.4% pace while France&#8217;s drop is a still
weak at -2.7%. In Italy
consumer goods, capital goods and intermediate goods output each is
falling. Transportation is twice as weak in Italy as it is in France
for the quarter. In France intermediate goods output is even a bit
weaker than it is in Italy in Q3 but the drop in output of capital
goods is quite a bit less severe and consumer goods output in France
continued to rise strongly in Q3. French consumer goods output, in
fact, has risen in each month of the third quarter as well.
On balance, as the accompanying chart shows, IP is falling
rapidly in Germany, Italy and France. The drop in France shows some
signs of leveling off in its pace of decline over the past few months
while Italy and Germany are still plunging at what seem to be
accelerating rates of decline. Italy &#8217;s pattern of decline is a bit
more complicated than that for Germany and France. But Germany has the
most severe weakness. While it has so far the smallest Yr/Yr drop, its
output has decelerated more sharply since German output was growing so
much more strongly until early 2008 when the pace of increase suddenly
and sharply moved lower and into a state of decline.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">French IP
Excluding Construction </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>-4.2%</td>
<td>-1.9%</td>
<td>-2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>8.2%</td>
<td>2.8%</td>
<td>-0.4%</td>
<td>6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>0.7%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>0.5%</td>
<td>1.7%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-1.5%</td>
<td>-0.8%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-7.2%</td>
<td>-4.4%</td>
<td>-5.0%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Auto</td>
<td>-3.1%</td>
<td>-1.2%</td>
<td>4.2%</td>
<td>-1.3%</td>
<td>-14.8%</td>
<td>-8.3%</td>
<td>-9.3%</td>
</tr>
<tr class="even">
<td colspan="8" class="firstcol">Italy
IP Excluding
Construction</td>
</tr>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP-MFG</td>
<td>-2.3%</td>
<td>0.4%</td>
<td>-1.3%</td>
<td>-12.1%</td>
<td>-8.0%</td>
<td>-5.7%</td>
<td>-8.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>-3.3%</td>
<td>0.8%</td>
<td>-2.3%</td>
<td>-18.0%</td>
<td>-6.5%</td>
<td>-5.4%</td>
<td>-10.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>-2.5%</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>-14.9%</td>
<td>-11.1%</td>
<td>-8.2%</td>
<td>-13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-2.6%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-7.2%</td>
<td>-5.9%</td>
<td>-5.4%</td>
<td>-3.5%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Transportation</td>
<td>-5.7%</td>
<td>1.9%</td>
<td>-3.9%</td>
<td>-27.2%</td>
<td>-21.1%</td>
<td>-13.1%</td>
<td>-22.4%</td>
</tr>
</tbody>
</table>
Declines in Commodity Prices
Leading to Lower Inflation Rates Worldwide 
by <a href="/comment/Curley.html">Louise
Curley</a> November 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110e.jpg" align="left" border="0" height="265" width="353">
Inflation is beginning to take a back seat in the
deliberations of Central Bankers. The financial crisis, rising
unemployment and declining production are overshadowing inflation fears
at the same time that these fears are lessening. No matter the actual
level of inflation, incoming data are showing that inflation rates are
declining worldwide.
Today Egypt, Greece, Latvia and the Czech Republic reported
their Consumer Price Indexes for October. The inflation rate as
measured by the year-to-year increase in the CPI has recently been
declining at varying degrees of speed in each country. Egypt, with
inflation over 20%, has seen its inflation rate decline in the last two
months from 23.8% in August to 20.1% in October. Another high inflation
rate country, Latvia, has experienced declines in its inflation rate in
the last five months, from 17.7% in June to 13.8% in October. Greece
and the Czech Republic with relatively low inflation rates have
nevertheless also witnessed declines in their inflation rates.
Inflation in Greece has come down to 3.9% in October from 4.8% in June,
and to 6.0% from 6.7%, respectively, in the Czech republic. The "core"
inflation rate in the Czech Republic has declined to 1.65 % in October
from 2.64 % in June. Inflation rates for the four countries are shown
in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110f.jpg" align="right" border="0" height="265" width="353">
Dramatic declines in commodity prices over the past year are
responsible for much of the improved inflation outlook worldwide. The
second chart shows the prices of wheat, copper and oil over the past
year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INFLATION
RATES&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep&nbsp;&nbsp;
08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
<th scope="col">Jul&nbsp; 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Czech Republic:
Total</td>
<td>6.0</td>
<td>6.6</td>
<td>6.5</td>
<td>6.9</td>
<td>6.7</td>
</tr>
<tr>
<td class="firstcol">Czech Republic: Core</td>
<td>1.65</td>
<td>2.54</td>
<td>2.54</td>
<td>2.64</td>
<td>2.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece: Total</td>
<td>3.90</td>
<td>4.58</td>
<td>4.68</td>
<td>4.83</td>
<td>4.89</td>
</tr>
<tr>
<td class="firstcol">Egypt: Total</td>
<td>20.13</td>
<td>21.52</td>
<td>23.79</td>
<td>22.15</td>
<td>20.22</td>
</tr>
<tr class="odd">
<td class="firstcol">Latvia: Total</td>
<td>13.73</td>
<td>14.88</td>
<td>15.72</td>
<td>16.61</td>
<td>17.74</td>
</tr>
</tbody>
</table>
</body></html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
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.grey3{
	background-color:#d4d4d4;
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.grey4{
	background-color:#c6c6c6;
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	background-color:#b8b8b8;
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</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081107a.jpg" width="353">
October Nonfarm payrolls declined 240,000, according to the Bureau of Labor Statistics. The decline, which exceeded Consensus expectations for a 198,000 drop, followed a revised 284,000 September decline that was much deeper than reported initially. So far in 2008, nonfarm payrolls are down 1.179 mil., or 0.9%.
During the last three months, payrolls fell at a 1.9% annual rate. That is the quickest rate of decline during this cycle and it now matches the rate of decline at the end of the 2001 recession.
The unemployment rate jumped to 6.5% last month, the highest level since March 1994. The increase also exceeded Consensus expectations for a rise to 6.3%. The jump owed to a 297,000 drop in employment (-0.7% y/y), as measured in the household survey. The latest decline in household sector employment was the eighth, and second largest, monthly decline this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081107b.jpg" width="353">
The number of those who were unemployed last month rose 603,000 (38.3% y/y) and the number is up 2.425 mil. so far this year. The labor force rose 306,000 (+1.1% y/y) during October and that rate of increase has been steady. The labor force participation rate increased slightly to 66.1%. The number of people of who want a job but are not in the labor force fell last month but the figure is up 16.4% y/y, the most in over ten years.
The average duration of unemployment increased by more than one full week to 19.7 and the median duration of unemployment rose to a lesser 10.6 weeks, up from 8.5 weeks during all of last year. The number of those unemployed for more than 27 weeks increased 12.4% and that figure is up by three quarters over the last twelve months, the most since 2002.
From the establishment survey the number of private sector jobs fell 263,000 (-1.1% y/y) after a 243,000 September decline, initially reported down by 168,000. Private service sector industries shed 131,000 jobs (-0.4% y/y) and that was the ninth decline in the last ten months. Employment in trade, transportation &amp; utilities accounted for roughly half of that October decrease while retail sector jobs fell another 38,100 (-1.8% y/y) with motor vehicle dealerships (-4.8% y/y) accounting for most of the decline. Jobs in the information sector were unchanged last month (-1.5% y/y) but financial sector jobs fell 24,000 (-1.5% y/y). The professional &amp; business service industry shed 45,000 (-1.7% y/y) jobs after a 39,000 September decline (Here was where half of the big downward revision for September occurred). Temporary help services jobs which often are a leading indicator of employment growth, fell 36,600 (-11.6% y/y), the largest y/y decline since 2002. These declines were somewhat offset by a gain in education &amp; health industries jobs of 21,000 (2.8% y/y) but here again, revisions were big. The previously reported September gain of 25,000 now shows a 16,000 decline.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081107d.jpg" width="353">
Construction sector employment fell by 49,000 during October, the largest decline since June.
Factory sector jobs fell 90,000 (-3.7% y/y) after a little revised 56,000 worker decline during September. Motor vehicle &amp; parts jobs fell 9,100 (-13.5% y/y) and furniture &amp; parts jobs fell by 10,400 (-10.8% y/y. In the nondurables sector employment fell 15,000 (-2.4% y/y).
Government sector jobs moved higher by 23,000 (1.1% y/y). The gain followed a decline of 41,000 during September which initially was reported as a slight increase. (This was the source of the other half of the downward September revision in total nonfarm jobs.) Local governments added 21,000 (1.0% y/y) workers while the federal government added 6,000 (1.2% y/y) workers.
Comparing Current Payroll Employment Changes with Past Recessions from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2008/1108/04ecoact.cfm">here</a>.
The length of the average workweek held steady m/m at 33.6 hours, down slightly from the 3Q average.
Suggesting continued declines in employment was the one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level). It fell to its lowest level of this cycle (37.6%). The three-month index also was near its cycle low at 37.0% and the three-month figure for the factory sector was even weaker at 25.0%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081107c.jpg" width="353">
Average hourly earnings rose a modest 0.2%, as they did in September. A weaker employment market cooled wage increases in the factory sector where earnings fell 0.1% (+2.8% y/y). A 0.1% increase in the private services wages also indicated softness. The y/y gain eased to 3.5%, down from a 5.0% high during 2006.
The Promise and Peril of the New Financial Architecture is yesterday&#39;s speech by Fed Governor Kevin Warsh and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/warsh20081106a.htm">here</a>.

<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/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></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">Payroll Employment</td>
<td>-240</td>
<td>-284</td>
<td>-127</td>
<td>-0.8%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-159</td>
<td>-73</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-90</td>
<td>-56</td>
<td>-40</td>
<td>-3.7%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-49</td>
<td>-35</td>
<td>-20</td>
<td>-6.7%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-108</td>
<td>-201</td>
<td>-57</td>
<td>-0.1%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.6</td>
<td>33.6</td>
<td>33.7</td>
<td>33.8 (Oct. &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>6.5%</td>
<td>6.1%</td>
<td>6.1%</td>
<td>4.8% (Oct. &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

October Nonfarm payrolls declined 240,000, according to the Bureau of Labor Statistics. The decline, which exceeded Consensus expectations for a 198,000 drop, followed a revised 284,000 September decline that was much deeper than [...]

U.S. Payrolls Off 240,000 in October; 6.5% Jobless Rate Highest Since 1994

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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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

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

Winnie Tapasanun

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

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

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

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

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

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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