Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126c.jpg" width="353">
The Conference Board reported that the December composite index of leading economic indicators rose 0.3% after an unrevised 0.4% November decline. The peak for the index was in July of last year and the six-month percent change of -5.0% was near the largest rate of decline since 1990.
Five of the ten components of the leading index fell last month with the largest declines coming from lower building permits, shorter hours worked and easier vendor performance. Higher initial claims for jobless insurance also subtracted a sharp 0.15 percentage points from the leaders and consumer expectations were about unchanged. Faster money supply growth added back one percentage point to the m/m change in the leading index and a steeper yield curve added another 0.2 points.
The breadth of one-month increase amongst the leaders&#39; 10 components improved to 50% but over a six-month period the breadth of gain amongst the components remained stuck at a quite low 30%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126d.jpg" width="353">
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators fell again. The 0.5% decline followed an unrevised 0.3% November drop an it was the tenth of the year. Three quarters of the index components fell m/m but over six months 25.0% rose. Year-to-year the coincident indicators fell 2.8% and over the last ten years there has been a 76% correlation between this y/y change and real GDP.
The lagging index fell 0.4% after no change in November. The ratio of coincident-to-lagging indicators (a measure of economic excess) fell slightly to its lowest level since 1975.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.3</td>
<td>-0.4</td>
<td>-1.0</td>
<td>-5.0</td>
<td>-2.7</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.5</td>
<td>-0.3</td>
<td>0.3</td>
<td>-2.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>0.0</td>
<td>0.1</td>
<td>2.9</td>
<td>2.8</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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The Conference Board reported that the December composite index of leading economic indicators rose 0.3% after an unrevised 0.4% November decline. The peak for the index was in July of last year and the six-month percent change of [...]

U.S. Leading Indicators Rose Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126a.jpg" width="353">
Could the decline in home sales be stabilizing, perhaps due to lower prices? According to the National Association of Realtors, sales of existing homes rose 6.5% last month to 4.740M. The 9.4% November decline was slightly deeper than reported initially. Consensus expectations had been for sales of 4.40M homes. Total sales include sales of condos and co-ops.
Median home prices fell yet again during December. The 2.7% (NSA) decline followed a 3.3% November drop that was slightly deeper than initially reported. It was the sixth consecutive monthly drop and it lowered prices by 15.3% from December of 2007. Prices have fallen 23.4% since their peak in June 2007.
The number of unsold homes (condos &amp; single-family) on the market dropped a sharp 11.7% (-7.5% y/y). At the current sales rate there was a 9.3 months&#39; supply on the market which was the lowest since early during 2007. For single-family homes the inventory fell m/m to an 8.7 months supply at the current sales rate which also was the lowest since 2007.
Last month, sales of existing single-family homes recovered nearly all of the November decline with a 7.0% increase. Nevertheless, sales of existing homes remained down by nearly one-third from their peak in mid-2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126b.jpg" width="353">
By region, home sales in the West posted the strongest gain in December with a 13.6% rise. This gain recouped all of the declines during the prior two months and returned sales to the upward trend line that has been in place since the low in October of 2007. Sales in the South also gained 7.4% versus November but that level was the series&#39; low for this cycle. Sales in the Midwest also rose by 4.0%. That too was off the series&#39; low. Sales in the Northeast fell 1.4% after a huge 12.0% November drop. Single family home sales here were at their lowest since 1992.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous)</th>
<th scope="col">December</th>
<th scope="col">y/y %</th>
<th scope="col">November</th>
<th scope="col">December &#39;07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,740</td>
<td>-3.5</td>
<td>4,450</td>
<td>4,910</td>
<td>4,897</td>
<td>5,672</td>
<td>6,508</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>720</td>
<td>-14.3</td>
<td>730</td>
<td>840</td>
<td>842</td>
<td>1,008</td>
<td>1,090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>-10.3</td>
<td>1,000</td>
<td>1,160</td>
<td>1,129</td>
<td>1,331</td>
<td>1,491</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>-11.2</td>
<td>1,620</td>
<td>1,960</td>
<td>1,863</td>
<td>2,240</td>
<td>2,576</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>31.6</td>
<td>1,100</td>
<td>950</td>
<td>1,066</td>
<td>1,093</td>
<td>1,353</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,260</td>
<td>-1.4</td>
<td>3,980</td>
<td>4,320</td>
<td>4,345</td>
<td>4,958</td>
<td>5,703</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,400</td>
<td>-15.3</td>
<td>180,300</td>
<td>207,000</td>
<td>197,217</td>
<td>216,617</td>
<td>222,000</td>
</tr>
</tbody>
</table>
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Could the decline in home sales be stabilizing, perhaps due to lower prices? According to the National Association of Realtors, sales of existing homes rose 6.5% last month to 4.740M. The 9.4% November decline was slightly deeper than [...]

U.S. Existing Home Sales Rose Last Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126a.jpg" align="left" border="0" height="265" width="353">
Could the decline in home sales be stabilizing, perhaps due to
lower prices? According to the National Association of Realtors, sales
of existing homes rose 6.5% last month to 4.740M.
The 9.4% November decline was slightly deeper than reported initially.
Consensus expectations had been for sales of 4.40M homes. Total sales
include sales of condos and co-ops.
Median home prices fell yet again during
December. The 2.7% (NSA) decline followed a 3.3% November drop that was
slightly deeper than initially reported. It was the sixth consecutive
monthly drop and it lowered prices by 15.3% from December of 2007.
Prices have fallen 23.4% since their peak in June 2007.
The number of unsold homes (condos &amp; single-family) on
the market dropped a sharp 11.7% (-7.5% y/y). At the current sales rate
there was a 9.3 months' supply on the market which was the lowest since
early during 2007. For single-family homes the inventory fell m/m to an
8.7 months supply at the current sales rate which also was the lowest
since 2007.
Last month, sales of existing single-family homes recovered
nearly all of the November decline with a 7.0% increase. Nevertheless,
sales of existing homes remained down by nearly one-third from their
peak in mid-2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126b.jpg" align="right" border="0" height="265" width="353">
By region, home sales in the West posted the strongest gain in
December with a 13.6% rise. This gain recouped all of the declines
during the prior two months and returned sales to the upward trend line
that has been in place since the low in October of 2007. Sales in the
South also gained 7.4% versus November but that level was the series'
low for this cycle. Sales in the Midwest also rose by 4.0%. That too
was off the series' low. Sales in the Northeast fell 1.4% after a huge
12.0% November drop. Single family home sales here were at their lowest
since 1992.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous)</th>
<th scope="col">December</th>
<th scope="col">y/y %</th>
<th scope="col">November</th>
<th scope="col">December '07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,740</td>
<td>-3.5</td>
<td>4,450</td>
<td>4,910</td>
<td>4,897</td>
<td>5,672</td>
<td>6,508</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>720</td>
<td>-14.3</td>
<td>730</td>
<td>840</td>
<td>842</td>
<td>1,008</td>
<td>1,090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>-10.3</td>
<td>1,000</td>
<td>1,160</td>
<td>1,129</td>
<td>1,331</td>
<td>1,491</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>-11.2</td>
<td>1,620</td>
<td>1,960</td>
<td>1,863</td>
<td>2,240</td>
<td>2,576</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>31.6</td>
<td>1,100</td>
<td>950</td>
<td>1,066</td>
<td>1,093</td>
<td>1,353</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,260</td>
<td>-1.4</td>
<td>3,980</td>
<td>4,320</td>
<td>4,345</td>
<td>4,958</td>
<td>5,703</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,400</td>
<td>-15.3</td>
<td>180,300</td>
<td>207,000</td>
<td>197,217</td>
<td>216,617</td>
<td>222,000</td>
</tr>
</tbody>
</table>
U.S. Leading Indicators Rose
Slightly 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126c.jpg" align="left" border="0" height="265" width="353">
The Conference Board reported that the December composite
index of leading economic indicators rose 0.3% after an unrevised 0.4%
November decline. The peak for the index was in July of last year and
the six-month percent change of -5.0% was near the largest rate of
decline since 1990.
Five of the ten components of the leading index fell last
month with the largest declines coming from lower building permits,
shorter hours worked and easier vendor performance. Higher initial
claims for jobless insurance also subtracted a sharp 0.15 percentage
points from the leaders and consumer expectations were about unchanged.
Faster money supply growth added back one percentage point to the m/m
change in the leading index and a steeper yield curve added another 0.2
points.
The breadth of one-month increase amongst the leaders' 10
components improved to 50% but over a six-month period the breadth of
gain amongst the components remained stuck at a quite low 30%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126d.jpg" align="right" border="0" height="265" width="353">
The leading index is based on actual reports for eight
economic data series. The Conference Board initially estimates two
series, orders for consumer goods and orders for capital goods.
The coincident indicators fell again. The 0.5% decline
followed an unrevised 0.3% November drop an it was the tenth of the
year. Three quarters of the index components fell m/m but over six
months 25.0% rose. Year-to-year the coincident indicators fell 2.8% and
over the last ten years there has been a 76% correlation between this
y/y change and real GDP.
The lagging index fell 0.4% after no change in November. The
ratio of coincident-to-lagging indicators (a measure of economic
excess) fell slightly to its lowest level since 1975.
Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


<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/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.3</td>
<td>-0.4</td>
<td>-1.0</td>
<td>-5.0</td>
<td>-2.7</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.5</td>
<td>-0.3</td>
<td>0.3</td>
<td>-2.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>0.0</td>
<td>0.1</td>
<td>2.9</td>
<td>2.8</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Chicago Fed Index Well Into
Recession Territory 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126e.jpg" align="left" border="0" height="265" width="353">
For December, the National Activity Index (CFNAI) from the
Chicago Federal Reserve Bank continued lower into recession territory.
The latest reading of -3.26 was near it's historic low. Since 1970
there has been a 75% correlation between the level of the index and the
q/q change in real GDP.
The three-month moving average of the index of -2.40
was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_january2009.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
Each category of the index including employment, production,
income, consumption &amp; housing made a negative contribution to
the November index.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during November to its lowest level
since early 1997. The steel, machinery and resource sectors all were
weak but the auto sector ticked up very slightly.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December '07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-3.26</td>
<td>-2.78</td>
<td>-0.96</td>
<td>-1.69</td>
<td>-0.39</td>
<td>0.00</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.40</td>
<td>-2.56</td>
<td>-0.71</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
Canada's Mixed Inflation Picture... 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126f.jpg" align="left" border="0" height="265" width="353">
While headline inflation continues to lose steam in Canada as
it does everywhere else in the world, Canada&#8217;s core rate is not on that
same page. Over three-months core inflation has escalated to a pace of
+2.6% from under 2% over previous key horizons (see table). By
comparison, Canada&#8217;s CPIx, that excludes eight volatile categories
shows inflation remains steady at a pace of 2.2% to 2.4%. This is not a
question about inflation spiking but a question about what sort of
momentum inflation now has in Canada and what pressures the bank of
Canada faces in setting policy. . 
 

The headline rate points clearly lower, with inflation down by
6.1% over three months (annualized) or up by just 1.2% Yr/Yr. Both of
those are good results. The dropping and negative three-month and
six-month results suggest that there may be more relief in inflation to
be passed on to core and nonvolatile items in the months ahead. But for
now Canada&#8217;s main inflation trends as depicted by the core or CPIx are
best viewed as moderate and steady. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Canada's
CPI and Core Inflation</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% MO/MO</td>
<td colspan="4">% saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol"> All Items</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.8%</td>
<td>-6.1%</td>
<td>-2.1%</td>
<td>1.2%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol"> All Items SA</td>
<td>-0.4%</td>
<td> -0.3%</td>
<td>-0.6%</td>
<td>-5.1%</td>
<td>-1.6%</td>
<td>1.4%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; CPI Core</td>
<td>0.1%</td>
<td> 0.5%</td>
<td>0.0%</td>
<td> 2.6%</td>
<td>1.5%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol"> All items Excl 8
Volatile (CPIx)</td>
<td>-0.1%</td>
<td> 0.6%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.2%</td>
<td> 2.4%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol"> RPIxseas food</td>
<td>-0.3%</td>
<td> 0.6%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>3.9%</td>
<td>4.1%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol"> Food &amp; Non
Alcohol Bev</td>
<td>0.3%</td>
<td> 1.0%</td>
<td>0.6%</td>
<td>7.7%</td>
<td> 8.7%</td>
<td> 7.2%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol"> Shelter</td>
<td>0.0%</td>
<td> 0.2%</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>3.5%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol"> Clothing &amp;
Footwear</td>
<td>-0.3%</td>
<td> 0.4%</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-3.0%</td>
<td>-2.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol"> Education</td>
<td> 0.2%</td>
<td>0.2%</td>
<td>0.7%</td>
<td> 4.6%</td>
<td> 3.8%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol"> Health &amp;
Personal Care</td>
<td>0.2%</td>
<td> 0.5%</td>
<td>0.1%</td>
<td>3.0%</td>
<td> 3.4%</td>
<td> 2.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol"> Transportation</td>
<td> -0.6%</td>
<td> -0.7%</td>
<td>-0.8%</td>
<td>-8.1%</td>
<td>-3.8%</td>
<td>0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> A
RED highlight indicates
inflation accelerating from pace of previous horizon</td>
</tr>
</tbody>
</table>
Deterioration in World Trade
Continues: the News from Sweden 
by <a href="/comment/Curley.html">Louise
Curley</a> January 26, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126g.jpg" align="left" border="0" height="265" width="353">
Last week, Robert Brusca noted how the global slowdown was
affecting international trade by citing Italy's trade data. Further
evidence of the decline in world trade became available today with the
release of December trade data for Sweden.
Sweden reported a 12,930 million kronor decline in imports and
a 15,259 decline in exports, resulting in an improvement in its balance
of trade of 7,479 million kronor for the month of December. But from
the standpoint of world trade the fewer exports and fewer imports meant
a decline in world trade activity of 18,189 million kronor or $2,760
million.
The attached chart shows the sum of the changes in Sweden's
exports and imports over the past five years. The data showed little
trend until April of this year. Since then the down trend has been
dramatic.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SWEDEN&nbsp;</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">M/M chg&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Balance of Trade
(Millions Kroner)</td>
<td>10163.14</td>
<td>2697.76</td>
<td>7470.35</td>
</tr>
<tr class="odd">
<td class="firstcol">Export&nbsp;&nbsp;
(Millions Kroner)</td>
<td>84355.39</td>
<td>89714.62</td>
<td>-5259.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports&nbsp;&nbsp;
(Millions Kroner)</td>
<td>74192.25</td>
<td>87021.86</td>
<td>-12829.61</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions Kroner)</td>
<td>18188.84</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange rate
(Kroner/US$)</td>
<td>8.0038</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions US$)</td>
<td>2272.53</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123a.jpg" align="left" border="0" height="265" width="353">
Hooray! The MFG and Services PMIs for Europe in January have
bounced. It&#8217;s too soon to call it a bottom but since they are bouncing
off historic- or near-historic lows, maybe we have seen the worst of
decay. Even if that is true it is a far cry from saying we are about to
embark on recovery. 
 

What it means - At a reading of 34 for MFG, the sector is
telling us that about 34% of the industries are expanding&#8230; (That is
strictly speaking an improper interpretation since the PMI reading is
all the &#8216;up&#8217; readings plus &#8216;half the unchanged responses&#8217; and there are
myriad ways to get that result. A given PMI reading does not tell you
how many, or which proportion, of industries are expanding. But the
reading of 34 is &#8216;as if&#8217; 34% were rising and the rest falling although
fewer may be rising and twice the residual might be unchanged. I will
use this short hand of treating the PMI as if it were an &#8216;up only&#8217;
index for simplicity but the reader should understand that the truth is
a bit more complex- I think nothing is lost by this expositional
device.). For services the reading of +42 is coming off that (shorter)
series&#8217; all-time low. 
 

Lots of weakness ahead - In any event it is clear that these
two measures can rise for some time and still not get back to neutral
(a reading of 50 is neutral- half the sectors expanding, half
contracting). 
 

&#8216;Neutral&#8217; is not &#8216;normal&#8217; - And of course &#8216;neutral&#8217; is not the
same as &#8216;normal&#8217;. When you put your car in &#8216;neutral&#8217; is neither in
&#8216;drive&#8217; nor &#8216;reverse&#8217;. If we were to average what gear your car were in
most of the time the average would not be close to neutral. Similarly,
since July 1998 when the services measure was launched it has averaged
54.2. Over the same span the MFG index has averaged 52. On balance more
sectors are expanding than contracting in normal times. So the current
readings are a very great distance away from being &#8216;normal&#8217; and it
should take a good deal of time to get back to normal. 
 

Diffusion increases do not necessarily mean that output
increases - When these diffusion indices rise, until they surpass a
reading of 50, they are indicating contraction at a slower pace but
still contraction and not expansion.. For now the PMIs are saying that
the worst &#8211; most severe phase of the contraction - is behind us, not
that recession is ending. And that is the message only if the December
bottoms stay in place and are not replaced by new weaker readings. 
 

More weakness ahead - Rest &#8216;assured&#8217; that more declines lies
ahead for conventional economic variables even if the diffusion indices
continue to rise from their lows. 
 

Diffusing as Mr Sensitivity - Diffusion readings are very
valuable because they are so timely and because they are sensitive.
Formally the PMI indices are measures are gauges of the BREADTH not of
its strength. But everyone treats theses measure of breadth as if they
are of strength. Financial experts are well aware that is not so. For
stock markets analysts (for example) always looked at big &#8216;up&#8217; or
&#8216;down&#8217; days in the stock indices to see if the breadth reinforced the
trend or not. Breadth in fact is not the same as strength &#8211; but they
are highly correlated. So again be careful how use diffusion data. They
often are the first whiff of slowdown or of bottoming. But they are
indicators and are not real economic variables so be careful how you
interpret them. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit PMIs for the Euro
Area </th>

</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the Euro
Area 15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.53</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Dec-08</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">Nov-08</td>
<td>35.58</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>36.85</td>
<td>42.62</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>41.74</td>
<td>45.19</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>46.51</td>
<td>47.93</td>
</tr>
<tr class="odd">
<td colspan="3">126-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body></html>

Hooray! The MFG and Services PMIs for Europe in January have bounced. It’s too soon to call it a bottom but since they are bouncing off historic- or near-historic lows, maybe we have seen the worst of decay. Even if that is true it is [...]

PMI Indices for EMU Bounce – Dead Cat or Live One?

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<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123b.jpg" width="353">
The 4Q 08 figures for Gross National Product will be available next Friday at 8:30 A.M. As always, the data will be a key gauge for measuring the current shape of the economy. And the news is not likely to be pleasant reading. It&#39;s easy to now generate an estimate that economic activity fell at a 5.1% annual rate last quarter, which indeed is the current Consensus forecast. The range of forecasts extends, however, from -2.0% to -7.5%.
By itself, the magnitude of the drop expected by Consensus would be the fastest since the middle of the 1981-82 recession. Peak-to-trough activity declined during that recession by 2.9% reflecting a pattern of sharp decline early, then nine months of stagnation. This time no such pattern is foreseen by Consensus estimates. Another sharp drop in GDP is expected for this quarter, 1Q09, then a slight decline in 2Q. A downturn following that pattern would make it severe and the harshest since the end of WWII.The Recession in Perspective from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123c.jpg" width="353">
The table below contains a set of estimates for the 4Q GDP components, generated mostly from the monthly data that already is available. As might be expected, consumer spending and housing lead the downturn. Developing estimates for the worst case outcome of a 7.5% decline in activity is relatively easy by just changing the expectation for consumer spending to -8.0%, perhaps due to weaker vehicle sales, and eliminating the addition from an improved trade deficit.
General expectations are for a subpar, 2H recovery with quarterly gains of 1.0% to 2.0%. Persistent declines in consumer spending coupled with further weakness in housing would easily unravel those expectations. Moreover, lagged declines in business investment and weaker exports due to recessions abroad could add to any lack of forward economic momentum. However, there is the potential for some upside. Pent-up demand for consumer durables could be unleashed with the huge amount of monetary stimulus already in place and an easing of tight credit conditions.
In this era of recession and weak growth, price inflation seems not to be an issue. Growth in the GDP chain prices is expected to drop to 1.0% by 2010 where it is expected to remain in 2011.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">U.S. GDP Components (%, AR)</th>
<th scope="col">4Q (Estimate)</th>
<th scope="col">GDP Weight</th>
<th scope="col">3Q</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption Expenditures</td>
<td>-6.0</td>
<td>.70</td>
<td>-3.8</td>
<td>2.8</td>
<td>3.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential Investment</td>
<td>-20.0</td>
<td>.03</td>
<td>-16.1</td>
<td>-17.9</td>
<td>-7.1</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Investment</td>
<td>-15.0</td>
<td>.12</td>
<td>-1.7</td>
<td>4.9</td>
<td>7.5</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Spending</td>
<td>3.0</td>
<td>.17</td>
<td>5.8</td>
<td>2.1</td>
<td>1.7</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventories (Contribution to GDP Growth)</td>
<td>0.0</td>
<td>--</td>
<td>0.8</td>
<td>-0.4</td>
<td>-0.0</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports (Contribution to GDP Growth)</td>
<td>1.0</td>
<td>--</td>
<td>1.1</td>
<td>0.6</td>
<td>-0.0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The 4Q 08 figures for Gross National Product will be available next Friday at 8:30 A.M. As always, the data will be a key gauge for measuring the current shape of the economy. And the news is not likely to be pleasant reading. It's [...]

Consensus Forecast for 4Q GDP: Activity Down 5%

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123b.jpg" align="left" border="0" height="265" width="353">
The 4Q 08 figures for Gross National Product will be available
next Friday at 8:30 A.M. As always, the data will be a key gauge for
measuring the current shape of the economy. And the news is not likely
to be pleasant reading. It's easy to now generate an estimate that
economic activity fell at a 5.1% annual rate last quarter, which indeed
is the current Consensus forecast. The range of forecasts extends,
however, from -2.0% to -7.5%.
By itself, the magnitude of the drop expected by Consensus
would be the fastest since the middle of the 1981-82 recession.
Peak-to-trough activity declined during that recession by 2.9%
reflecting a pattern of sharp decline early, then nine months of
stagnation. This time no such pattern is foreseen by Consensus
estimates. Another sharp drop in GDP is expected for this quarter,
1Q09, then a slight decline in 2Q. A downturn following that pattern
would make it severe and the harshest since the end of WWII.The
Recession in Perspective from the Federal Reserve Bank of
Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123c.jpg" align="right" border="0" height="265" width="353">
The table below contains a set of estimates for the 4Q GDP
components, generated mostly from the monthly data that already is
available. As might be expected, consumer spending and housing lead the
downturn. Developing estimates for the worst case outcome of a 7.5%
decline in activity is relatively easy by just changing the expectation
for consumer spending to -8.0%, perhaps due to weaker vehicle sales,
and eliminating the addition from an improved trade deficit.
General expectations are for a subpar, 2H recovery with
quarterly gains of 1.0% to 2.0%. Persistent declines in consumer
spending coupled with further weakness in housing would easily unravel
those expectations. Moreover, lagged declines in business investment
and weaker exports due to recessions abroad could add to any lack of
forward economic momentum. However, there is the potential for some
upside. Pent-up demand for consumer durables could be unleashed with
the huge amount of monetary stimulus already in place and an easing of
tight credit conditions.
In this era of recession and weak growth, price inflation
seems not to be an issue. Growth in the GDP chain prices is expected to
drop to 1.0% by 2010 where it is expected to remain in 2011.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">U.S.
GDP Components (%, AR)</th>
<th scope="col">4Q (Estimate)</th>
<th scope="col">GDP Weight</th>
<th scope="col">3Q</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption
Expenditures</td>
<td>-6.0</td>
<td>.70</td>
<td>-3.8</td>
<td>2.8</td>
<td>3.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>-20.0</td>
<td>.03</td>
<td>-16.1</td>
<td>-17.9</td>
<td>-7.1</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Investment</td>
<td>-15.0</td>
<td>.12</td>
<td>-1.7</td>
<td>4.9</td>
<td>7.5</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Spending</td>
<td>3.0</td>
<td>.17</td>
<td>5.8</td>
<td>2.1</td>
<td>1.7</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventories
(Contribution to GDP Growth)</td>
<td>0.0</td>
<td>--</td>
<td>0.8</td>
<td>-0.4</td>
<td>-0.0</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports
(Contribution to GDP Growth)</td>
<td>1.0</td>
<td>--</td>
<td>1.1</td>
<td>0.6</td>
<td>-0.0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
 PMI Indices for EMU Bounce &#8211; Dead
Cat or Live
One?
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123a.jpg" align="left" border="0" height="265" width="353">
Hooray! The MFG and Services PMIs for Europe in January have
bounced. It&#8217;s too soon to call it a bottom but since they are bouncing
off historic- or near-historic lows, maybe we have seen the worst of
decay. Even if that is true it is a far cry from saying we are about to
embark on recovery. 
 

What it means - At a reading of 34 for MFG, the sector is
telling us that about 34% of the industries are expanding&#8230; (That is
strictly speaking an improper interpretation since the PMI reading is
all the &#8216;up&#8217; readings plus &#8216;half the unchanged responses&#8217; and there are
myriad ways to get that result. A given PMI reading does not tell you
how many, or which proportion, of industries are expanding. But the
reading of 34 is &#8216;as if&#8217; 34% were rising and the rest falling although
fewer may be rising and twice the residual might be unchanged. I will
use this short hand of treating the PMI as if it were an &#8216;up only&#8217;
index for simplicity but the reader should understand that the truth is
a bit more complex- I think nothing is lost by this expositional
device.). For services the reading of +42 is coming off that (shorter)
series&#8217; all-time low. 
 

Lots of weakness ahead - In any event it is clear that these
two measures can rise for some time and still not get back to neutral
(a reading of 50 is neutral- half the sectors expanding, half
contracting). 
 

&#8216;Neutral&#8217; is not &#8216;normal&#8217; - And of course &#8216;neutral&#8217; is not the
same as &#8216;normal&#8217;. When you put your car in &#8216;neutral&#8217; is neither in
&#8216;drive&#8217; nor &#8216;reverse&#8217;. If we were to average what gear your car were in
most of the time the average would not be close to neutral. Similarly,
since July 1998 when the services measure was launched it has averaged
54.2. Over the same span the MFG index has averaged 52. On balance more
sectors are expanding than contracting in normal times. So the current
readings are a very great distance away from being &#8216;normal&#8217; and it
should take a good deal of time to get back to normal. 
 

Diffusion increases do not necessarily mean that output
increases - When these diffusion indices rise, until they surpass a
reading of 50, they are indicating contraction at a slower pace but
still contraction and not expansion.. For now the PMIs are saying that
the worst &#8211; most severe phase of the contraction - is behind us, not
that recession is ending. And that is the message only if the December
bottoms stay in place and are not replaced by new weaker readings. 
 

More weakness ahead - Rest &#8216;assured&#8217; that more declines lies
ahead for conventional economic variables even if the diffusion indices
continue to rise from their lows. 
 

Diffusing as Mr Sensitivity - Diffusion readings are very
valuable because they are so timely and because they are sensitive.
Formally the PMI indices are measures are gauges of the BREADTH not of
its strength. But everyone treats theses measure of breadth as if they
are of strength. Financial experts are well aware that is not so. For
stock markets analysts (for example) always looked at big &#8216;up&#8217; or
&#8216;down&#8217; days in the stock indices to see if the breadth reinforced the
trend or not. Breadth in fact is not the same as strength &#8211; but they
are highly correlated. So again be careful how use diffusion data. They
often are the first whiff of slowdown or of bottoming. But they are
indicators and are not real economic variables so be careful how you
interpret them. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit
PMIs for the Euro
Area </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the Euro
Area 15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.53</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Dec-08</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">Nov-08</td>
<td>35.58</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>36.85</td>
<td>42.62</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>41.74</td>
<td>45.19</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>46.51</td>
<td>47.93</td>
</tr>
<tr class="odd">
<td colspan="3">126-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body></html>

Consensus Forecast for 4Q GDP:Activity Down 5%

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122i.jpg" align="left" border="0" height="265" width="353">
E-Zone orders are dropping sharply in November. Based on some
more topical country level reports, it is not surprising that the EMU
orders series made another sharp fall &#8211; and more those lie ahead.
Today, in fact, the UK CBI survey of industry posted another sharply
weaker result with its up minus down diffusion index falling to -48 in
January compared to -35 in December. That&#8217;s right, in January.
Diffusion data are generally out a month or more ahead of the actual
underlying series that they describe and, as such, they provide a road
map of where we are headed. Still, the variables themselves tell the
actual story of industry. 
 

In November the EMU series is telling us of increased pain in
the zone. The carnage is widespread. For Germany, France, Italy and the
UK Yr/Yr orders are dropping in November by 20% or more from November
of one year ago. In the quarter to date (Q4) the country level growth
rates for orders are more like a negative 50% at an annual rate
compared to Q3 2008. 
 

The weakness is spread more or less equally across domestic
and foreign orders in the EMU series. Foreign orders are down by more
over 12-months but the drop in November is worse for domestic orders. 
 

For the moment we are in the worst of the grip of the
downturn. As we admit this, the international banking crisis is not
getting any better. The &#8216;Dutch boys&#8217; with their fingers in the dikes
are calling out for more recruits --for more stop-gap plans. Others are
crying out for a more permanent solution and for mindful attention to
what all this interventionism will mean for the future. The US has just
completed its transition to new leadership. Japan is eroding faster
after showing some resilience. The strength in the yen is finally
creating more distress there. The data from the industrial sector in
EMU are telling. The pressure on the financial sector is bad and it is
going to get worse. We were already in a financial mess before this
recession began. Now the recession is global in nature and it is going
to spawn and spread the usual credit mess that comes hand in hand with
recession- and this recession is severe. So be prepared, because things
will get worse... That is the main message from the day&#8217;s weak
industrial data in Europe. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">E-zone-13 and UK Industrial Orders And Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
</tr>
<tr>
<td class="firstcol">Ezone Detail</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-4.5%</td>
<td>-5.7%</td>
<td>-5.4%</td>
<td>-47.3%</td>
<td>-40.3%</td>
<td>-27.6%</td>
<td>-28.3%</td>
<td>-21.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>-0.9%</td>
<td>-1.9%</td>
<td>-1.9%</td>
<td>-17.0%</td>
<td>-17.0%</td>
<td>-10.5%</td>
<td>-8.6%</td>
<td>-2.6%</td>
<td>-1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-1.4%</td>
<td>-0.7%</td>
<td>-1.2%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>-5.8%</td>
<td>-6.7%</td>
<td>-5.3%</td>
<td>-5.2%</td>
<td>-1.5%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate</td>
<td>-7.0%</td>
<td>-5.5%</td>
<td>-6.0%</td>
<td>-53.6%</td>
<td>-38.7%</td>
<td>-28.6%</td>
<td>-26.9%</td>
<td>-20.5%</td>
<td>-12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo:MFG</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-4.5%</td>
<td>-5.7%</td>
<td>-5.4%</td>
<td>-47.3%</td>
<td>-40.3%</td>
<td>-27.6%</td>
<td>-28.3%</td>
<td>-21.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-7.0%</td>
<td>-5.5%</td>
<td>-6.0%</td>
<td>-53.6%</td>
<td>-38.7%</td>
<td>-28.6%</td>
<td>-26.9%</td>
<td>-20.5%</td>
<td>-12.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-3.5%</td>
<td>-6.9%</td>
<td>-5.9%</td>
<td>-48.9%</td>
<td>-46.5%</td>
<td>-30.3%</td>
<td>-32.3%</td>
<td>-24.8%</td>
<td>-18.9%</td>
</tr>
<tr>
<td class="firstcol">Countries:</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany (MFG):</td>
<td>-7.2%</td>
<td>-7.1%</td>
<td>-8.0%</td>
<td>-60.3%</td>
<td>-39.7%</td>
<td>-37.5%</td>
<td>-29.6%</td>
<td>-24.4%</td>
<td>-16.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France(Ind):</td>
<td>-5.7%</td>
<td>-11.8%</td>
<td>0.6%</td>
<td>-50.8%</td>
<td>-55.2%</td>
<td>-33.7%</td>
<td>-38.5%</td>
<td>-25.5%</td>
<td>-18.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy (Ind):</td>
<td>-6.3%</td>
<td>-6.6%</td>
<td>-3.8%</td>
<td>-49.7%</td>
<td>-39.0%</td>
<td>-27.2%</td>
<td>-23.2%</td>
<td>-21.1%</td>
<td>-12.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; UK (Engineering Ind):</td>
<td>-8.4%</td>
<td>-24.0%</td>
<td>28.8%</td>
<td>-35.6%</td>
<td>-35.3%</td>
<td>-38.9%</td>
<td>-35.2%</td>
<td>-21.7%</td>
<td>-8.9%</td>
</tr>
</tbody>
</table>
</body></html>

E-Zone orders are dropping sharply in November. Based on some more topical country level reports, it is not surprising that the EMU orders series made another sharp fall – and more those lie ahead. Today, in fact, the UK CBI survey of [...]

E-Zone Orders Drop Sharply...Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122g.jpg" width="353">
At 589,000 last week, initial claims for unemployment insurance rose another 62,000 to their highest level since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough. The latest increase in initial claims followed a 57,000 increase during the prior period and it exceeded Consensus expectations for a rise to 548,000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122h.jpg" width="353">
The latest initial claims figure is for the January survey period for nonfarm payrolls and claims were up 5.9% from the December period. During the last ten years there has been a negative 84% correlation between the level of claims and the month-to-month change in nonfarm payrolls.
The Labor Department indicated that the largest increases in initial claims for the week ending January 10 were in Michigan (+34,639), California (+22,573), Florida (+20,658), North Carolina (+15,637), and Pennsylvania (+13,848), while the largest decreases were in South Carolina (-2,682), Massachusetts (-1,882), New York (-1,852), Iowa (-1,593), and Oregon (-856).
Continuing claims for unemployment insurance during the week of January 10 recovered nearly all of the prior week&#39;s decline with a 97,000 increase. That also lifted continuing claims to their highest since late 1982. The four-week average of continuing claims rose 58,800 to 4,559,750. 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 remained stable for the fourth week at this cycle&#39;s high of 3.4%, the highest since 1983. The highest insured unemployment rates in the week ending January 3 were in Michigan (7.5 percent), Oregon (7.5), Idaho (6.7), Wisconsin (6.7), Pennsylvania (6.6), Indiana (5.7), Kentucky (5.7), North Carolina (5.7), South Carolina (5.6), and Rhode Island (5.5).
The Tech Pulse Index: Recent Trends in Tech-Sector Activity from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-03.pdf">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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">01/17/09</th>
<th scope="col">01/10/09</th>
<th scope="col">01/03/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>589</td>
<td>527</td>
<td>470</td>
<td>81.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,607</td>
<td>4,510</td>
<td>71.8%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

At 589,000 last week, initial claims for unemployment insurance rose another 62,000 to their highest level since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough. The latest [...]

U.S. Weekly Claims For Jobless Insurance Highest Since 1982

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

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

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Winnie Tapasanun

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The U.S. international trade deficit in goods ballooned to a larger-than-expected $105.75 billion in May after narrowing to $83.01 billion in April, according to the advance estimate from the U.S. Census Bureau. The May reading marked the third widening in the goods trade deficit in four months, exceeding a $91.55 billion shortfall in May 2025. A deficit of $84.0 billion for May had been expected by the Action Economics Forecast Survey. The deficit reached a low of $61.44 billion in October 2025 (the smallest since February 2020) and a record high of $158.73 billion in March 2025. On a quarterly basis, the deficit averaged $94.38 billion so far in Q2'26 versus $81.96 billion in Q1'26.

Total goods exports fell 5.4% m/m (+14.7% y/y) to $207.67 billion in May, the first monthly fall since December and a three-month low, following a 3.8% rise to a record-high $219.52 billion in April. Exports were up 27.7% from a June 2023 low. The m/m fall in exports in May reflected declines of 9.2% (-5.0% y/y) in nonfood consumer goods excluding autos, 7.0% (+23.2% y/y) in industrial supplies & materials, 6.8% (+19.5% y/y) in other goods, and 5.0% (+14.8% y/y) in capital goods excluding autos. To the upside, exports of foods, feeds & beverages (+3.9%; +19.1% y/y) and automotive vehicles & parts (+0.5%; -3.6% y/y) rebounded m/m in May.

Total goods imports, up for the fourth consecutive month, rose 3.6% m/m (15.0% y/y) to $313.43 billion in May, after a 2.0% increase to $302.53 billion in April, marking the highest level since the March 2025 record high of $340.11 billion. Imports were up 25.0% from a March 2023 low. The m/m rise in imports in May was broad-based across all end-use categories, led by an 11.5% gain (22.0% y/y) in other goods, followed by increases of 6.3% (1.4% y/y) in automotive vehicles & parts, 5.7% (-9.1% y/y) in nonfood consumer goods excluding autos, 4.8% (11.7% y/y) in industrial supplies & materials, 4.3% (-0.2% y/y) in foods, feeds & beverages, and 0.4% (41.9% y/y) in capital goods excluding autos. 

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $105.75 bil. in May, up $22.75 bil. (+27.4%) from April’s $83.01 bil.
- Exports -5.4%, first m/m decline since Dec., led by a 9.2% drop in nonauto consumer goods exports.
- Imports +3.6%, fourth straight m/m rise to highest level since Mar. ’25, driven by an 11.5% gain in imports of other goods.

U.S. Goods Trade Deficit Balloons in May, Largest Since March ’25

260626E.jpg

In June, there's a slight divergence in the performance of industry climate and service sector climate, although broadly the two sectors have seen their composite indexes moving in more or less the same direction. Since 2024, the industry survey has moved up slightly after falling faster than the services gauge. The services survey has been locked in a slow trend of deterioration, largely since it reached a peak in 2021 in the wake of COVID.

The industry climate gauge has a 30.8 percentile standing, but the recent production trend, while declining, logs a more substantial 42.8 percentile standing. Contributing survey members find their own industry ‘likely trend’ much weaker, at a 21.2 percentile standing. Demand overall, however, has standings above the 50th percentile, putting overall and foreign orders & demand each above their respective medians for this period of ranking back to 2001. Inventories have a strong 81-percentile ranking. Prices are extremely strong, with 87-percentile and 86-percentile standings for respondents for their personal industry trend for prices as well as for the overarching manufacturing sector estimate of prices. Higher prices seem to be the one thing that everyone can agree on by a large margin.

260626.jpg

As for services, the service climate index improved slightly to 93.4 in June from 92.6 in May. The three-month moving average was weaker in June than in May as well; the 12-month moving average has been stuck at its current level for a number of months. The outlook in June improved slightly to a reading of -12 from -15 in May, but the outlook ranking is still a weak 26.8 percentile standing. The three-month expectations and observations of past sales trends haven't changed much in the last two months, but there has been a slight improvement for sales expectations. However, both sales metrics have low 20th percentile standings. Sales prices have deteriorated slightly in June compared to May for both the observed and the expected trends, but prices have standings above their 50th percentiles, logging above-median performance. Employment over the last three months has weakened noticeably, and expected employment is weaker by a small amount.

In terms of rankings, all of the sector rankings are below the 50th percentile on all of these observations, including the climate headline except for sales prices where both the past three-month observed trend and the expected trend have readings above their respective 50th percentiles, indicating past and expected price pressures in excess of normal.

260626 2.jpg

**Assessment**
On balance, the readings for the French industry, manufacturing sector and services are not encouraging. In addition, concerns about prices linger. The services sector, those concerns seem moderate compared to the concerns in manufacturing.

The hot war continues between Ukraine and Russia, while in the Middle East there was talk of some improvement and a potential peace deal between the United States and Iran, but every time there is some talk of a breakthrough, there appears to be a breakdown. In the most recent development, Iran has asserted its right to control traffic through the Strait of Hormuz, and it's not clear how that demand would ever be consistent with the U.S. allowing a ceasefire. It appears that Iran may have traded its irreconcilable demand for nuclear weapons for a more pragmatic and real-world argument—that it will control the traffic through the Strait of Hormuz simply because it can—and it still is doing exactly that, even after all the destruction it suffered.

Stopping Iran from controlling the Strait would take a commitment to restart the war. All this makes me personally more pessimistic. I think Iran sees the need for Trump to cut a deal and stop the war before the U.S. mid-term elections, and it is pressing that need to its advantage. Trading its nuclear ambitions for real world control of the Strait would elevate Iran’s power from being dangerous but ethereal to a real world event with constant consequences.

France

French Industry and Services Confidence Diverge in June

Andrew Cates

**Equity Momentum and Global Surprises — Still Moving Together**
One of the more telling features of global equity markets in 2026 has been the persistence of the correlation between non-US equity momentum and global growth and inflation surprise indices. Equity markets outside the United States have generally prospered when economic data have beaten consensus expectations and when inflation surprises have been negative  — a combination that has historically been associated with stronger corporate earnings and a more benign policy backdrop in economies other than the US. That correlation has held reasonably well through the turbulence of the past few months, even as the Middle East conflict introduced significant noise into both the economic data and the financial market signal. What the chart reveals this week is a picture of moderate but not alarming deterioration: global growth surprises have softened at the margin, consistent with the energy cost headwinds that have weighed on European and Asian activity, but the relationship between equity momentum and the broader data pulse remains intact. It is a signal that market participants continue to track economic fundamentals rather than purely geopolitical newsflow — a modestly reassuring sign that the underlying framework for assessing the global cycle has not broken down.

260625Z1.jpg

**The Fed Decouples: Why Oil and US Two-Year Yields Have Parted Ways**
For much of 2026, oil prices and US two-year Treasury yields moved in close alignment. The logic was straightforward: higher oil prices raised inflation expectations, which in turn pushed market participants to anticipate a more hawkish Federal Reserve, lifting short-dated yields in the process. That relationship held with notable consistency through the March escalation and the months that followed, as energy market shocks and monetary policy expectations fed off each other. What this week’s chart captures is a striking breakdown in that correlation. As oil prices have fallen on the back of the US-Iran memorandum of understanding and the associated unwinding of the geopolitical risk premium, US two-year yields have not followed them lower. The reason is last week’s Federal Reserve meeting. Under new chair Kevin Warsh, the Fed delivered a hawkish dot plot that shifted the median year-end projection to a hike, making clear that the easing cycle previously priced by some market participants is no longer the central scenario. The message is important: the deflationary impulse from lower oil prices is being offset — at least in the Fed’s framing — by persistent underlying inflation pressures and a commitment to keeping policy tight.

260625Z2.jpg

**Flash PMIs Signal Easing Supply Chain Stress and Softer Price Pressures**
June’s flash PMI surveys, released this week across the major advanced economies, provide a timely read on how the global manufacturing and services sectors are absorbing the shifting macro backdrop. Two findings stand out. First, supplier delivery times have improved (or not lengthened as much as they had in the prior two months). This finding coheres naturally with the broader narrative: lower oil prices reduce transport and energy input costs, while the resumption of Strait of Hormuz shipping flows — examined in more detail in chart 4 — is beginning to reduce the freight disruption and re-routing costs that had been building since the conflict escalated. Second, output price inflation in manufacturing has softened, suggesting that some of the pipeline pressure from earlier energy cost spikes is beginning to fade.

260625Z3.jpg

**Hormuz Traffic and Oil: A Coherent Story of Tentative Normalisation**
The recent US-Iran memorandum of understanding to work towards a final deal, though not without subsequent flare-ups, has already brought relief to markets, most visibly in crude oil prices. This should go a long way towards unwinding the inflation-related concerns that previously elevated oil prices had stoked. While the pullback has owed much to anticipation of the glut of pent-up supply expected to follow, certain trackers of shipping volume through the Strait of Hormuz, such as the IMF’s, already point to a marked pickup in traffic, even if it remains well below pre-conflict levels. Should this normalisation of shipping flows persist, it would lend continued justification to a corresponding easing in oil prices, energy-related inflation and, by extension, headline inflation — a welcome development for central banks grappling with the delicate balancing act of reining in price pressures without dampening growth too sharply.

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**South Korea’s Trade Data Flag a Modest Softening in Global Demand**
South Korea’s trade data serve as one of the global economy’s most useful early warning systems. As one of the world’s most open economies, with exports spanning semiconductors, petrochemicals, steel, automobiles and consumer electronics, South Korea’s monthly trade figures provide a timely and broad-based read on the state of global demand. This week’s data show a slightly softer picture than the strong prints that characterised much of the first quarter. Headline export growth has moderated at the margin, and crucially, semiconductor exports — which had been the most dynamic component of the trade data, propelled by AI-related chip demand — have also come in a touch below the exceptional run rates seen earlier in the year. This is not, in itself, alarming: some moderation from peak rates was always to be expected, and the semiconductor cycle remains structurally supported by the scale of AI infrastructure investment globally.

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**A Super El Niño on the Horizon — The Next Inflation Risk**
With that said, while one driver of price pressures seems to be ebbing for now — albeit not without the risk of future flare-ups — another potential inflationary risk looms on the horizon. The chart illustrates the transmission mechanism. It plots Thailand’s milled rice production (left axis) against Australia’s Southern Oscillation Index (right axis), a well-established barometer of El Niño and La Niña conditions. The convention is straightforward: SOI readings persistently above +8 indicate La Niña, associated with above-average rainfall across Southeast Asia and broadly supportive crop conditions; readings persistently below -8 signal El Niño, which brings drought stress and reduced water availability across the region. The historical relationship is striking. The sharp negative SOI troughs around 2002–03, 2009–10 and most dramatically around 2015 all coincide with visible falls in Thai milled rice output. The severe El Niño of 2014–16 produced both the deepest SOI trough in the series and the sharpest single drop in rice production, to below 24,000 thousand tonnes. As meteorological authorities have been warning for some time, the world appears to be facing an imminent Super El Niño event, with the SOI already drifting back towards negative territory in recent months. Were a significant El Niño to materialise in the second half of this year, the implications for Thai rice output — and by extension for Asian food price inflation — could be substantial. Central bankers, in other words, may find themselves having to wrestle with a new inflationary impulse just as they had begun to hope the worst was behind them.

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The mood in global financial markets this week is more settled, though “settled” should not be confused with resolved. The US-Iran memorandum of understanding, signed last week, has continued to do its work: oil prices have fallen further, Strait of Hormuz shipping traffic has picked up measurably, and the risk premium that had been embedded in energy markets since the conflict escalated in March is now visibly unwinding. That is a material development for the inflation outlook, and central bankers will be watching carefully. Yet the picture is not without its complications. Technology stocks — the most conspicuous beneficiary of the prevailing low-rate, high-growth narrative — have been subject to renewed jitters this week, as investors grow more attentive to stretched valuations and the implications of a Federal Reserve that, under new chair Kevin Warsh, is no longer signalling the easing cycle previously priced into markets. Against this backdrop, this week’s charts draw on the latest data to assess where the global economic cycle stands. Equity momentum outside the United States has tracked closely with global growth and inflation surprises, a correlation that tells us something important about how activity is being perceived (chart 1). Meanwhile, the breakdown of the previously tight relationship between oil prices and US two-year yields is arguably one of the more telling market signals of recent weeks (chart 2). June’s flash PMI surveys point to easing supply chain stress and softer output price inflation in manufacturing — a finding that chimes naturally with lower crude prices and the resumption of Hormuz flows (chart 3). The Strait of Hormuz itself deserves a closer look: traffic data and the mechanics of the oil price pullback are telling a coherent story that supports the PMI picture (chart 4). South Korea’s trade data, including semiconductors, offer a slightly softer read on global demand momentum at the margin (chart 5). And looming on the horizon, one new risk is drawing the attention of meteorological authorities: a Super El Niño event whose probability has been rising, with potentially significant implications for food commodity prices and Asian agriculture (chart 6).

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Charts of the Week: Calmer Waters, New Currents

Michael J. Moran

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The price index for personal consumption expenditures rose 0.4% in May, although the measure almost rounded up to 0.5% (0.4498%). May marked the sixth consecutive month with headline prices increasing 0.3% or more. This series of changes has pulled the year-over-year inflation rate to 4.1%, up from 2.3% just over one year ago (April 2025). Energy prices, of course, have been the most important factor behind the acceleration in inflation, and they remained an issue in May, increasing 4.0% after advances of 3.9% and 11.6% in the prior two months. Food prices have moved erratically in the past year, with jumps and lulls leaving an average monthly increase of 0.2%. The noise was evident in recent months, with food prices increasing only 0.1% in May after a jump of 0.5% in April.

Core prices also have contributed to the pickup in inflation. After averaging monthly increases of 0.24% during 2025, core prices have increased at an average rate of 0.34% so far this year. The year-over-year increase in core inflation totaled 3.4% in May, up from a recent low of 2.6% in April of last year. Both the headline and core inflation rates are uncomfortably above the Federal Reserve’s target of 2.0%.

Total personal income rose briskly in May (0.7%). A surge in farm income played an important role (up 125% month-to-month, most likely reflecting government support payments), but nominal results also were firm elsewhere (up 0.5% ex farm income). Inflation reduced the purchasing power of this income gain, but aggregate income still advanced slightly in real terms (0.2%).

Given the recent surge in energy-driven inflation, May marked only the second monthly increase in real income so far this year. Tight budgets have dampened consumer spending, but individuals have not pulled to the sidelines. Real consumption expenditures rose 0.5% (annual rate) in the first quarter, and results for April and May suggest that real PCE is on track to increase 1.5% to 2.0% in the second quarter.

Households have managed to remain moderately active in their spending by limiting their saving. The saving rate has drifted lower since early 2024 moving to 3.0% in May (chart, below right). The erosion in saving perhaps seems reckless, but some of the reduction could be a response to the strength in the equity market, where wealth gains have possibly limited the incentive to save. Also, larger-than-normal tax refunds this year because of tax cuts in the One Big Beautiful Budget Act have allowed many households to spend actively despite modest increases in real income.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Energy prices rose sharply for the third consecutive month; core prices were unsettling as well.
- A jump in nominal income translated to a modest advance in real terms, allowing consumers to remain reasonably active.

Personal Income, Consumption, and Prices in May

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New orders for durable goods fell 4.5% m/m in May, the first monthly fall in three months, following an upwardly revised 8.5% gain in April (+7.9% initially reported on May 28) and a 1.3% increase in March (unrevised), according to today’s advance report by the U.S. Census Bureau. The Action Economics Forecast Survey had expected a 4.4% m/m May decrease. The year-on-year rate decelerated to -3.5% in May from +17.7% in April (+20.0% in May 2025), marking the first negative reading since December 2024 (-4.5%). Excluding transportation, durable goods orders rose 1.3% (10.2% y/y) in May, the 13th consecutive m/m rise, after a 1.4% increase in April. Meanwhile, durable goods orders excluding defense dropped 4.6% (-5.0% y/y), down for the third time in four months, following an 8.4% April rebound.

The m/m fall in May durable goods orders was driven by a 51.8% m/m plunge in orders for nondefense aircraft & parts, following a 167.4% surge in April and a 23.0% slump in March. Orders for defense aircraft & parts rose 7.9% (63.5% y/y), the fourth successive m/m increase, after gains of 2.5% in April and 23.7% in March. Orders excluding aircraft climbed 1.0% (9.8% y/y), the six straight m/m rise and the 10th in 11 months, after a 1.3% April increase.

Durable goods orders for transportation dropped 14.0% (-22.1% y/y) in May, the first m/m decline since February, following a 22.4% gain in April. In addition to May’s m/m plunge in nondefense aircraft orders and increase in defense aircraft orders, motor vehicles & parts orders rose 1.1% (12.4% y/y), the sixth straight m/m rise, after a 0.7% April increase. Orders for primary metals advanced 3.0% (15.9% y/y), the largest of six successive m/m gains, after a 2.6% April rise. Machinery orders climbed 1.9% (14.0% y/y), up for the 13th straight month, on top of a 1.3% April rise. Orders for fabricated metal products grew 1.5% (11.2% y/y), the third m/m increase in four months, following a 4.1% April gain. Orders for all other durable goods rose 0.8% (3.2% y/y), the strongest of nine consecutive m/m increases, after a 0.1% April uptick. Orders for computers & electronic products rebounded 0.3% (13.3% y/y), the eighth m/m gain in nine months, following a 0.4% April decrease. Orders for electrical equipment, appliances & components recovered 0.3% (5.8% y/y), the second increase in three months, after a 0.2% April decline.

Capital goods orders fell 13.6% (-21.1% y/y) in May, the first m/m fall in three months and the deepest since June 2025, following a 22.2% jump in April. Nondefense capital goods orders dropped 15.7% (-26.4% y/y), the fifth m/m decrease in six months, after a 24.9% April rebound. Core capital goods orders (i.e., nondefense capital goods orders excluding aircraft) rose 1.6% (10.5% y/y), the third m/m gain in four months, reversing a 0.7% April decline. Defense capital goods orders slid 3.4% (+14.4% y/y), the first m/m slide since January, after a 10.4% April gain. Notably, core capital goods shipments (core capex shipments)—a reliable coincident indicator of business spending on equipment in the national accounts—rose 0.3% (7.6% y/y), the eighth m/m rise in nine months, after a 0.5% April increase.

Shipments of all manufactured goods climbed 1.6% (8.9% y/y) in May following a 1.3% gain in April. Durable goods shipments rose 1.0% (8.9% y/y) after a 0.7% April increase. Nondurable goods shipments advanced 2.2% (9.0% y/y), building on a 1.9% April gain. All three series posted the sixth consecutive m/m increase.

Unfilled orders of durable goods rose 0.6% (8.5% y/y) in May, the 10th straight m/m rise, after a 1.8% gain in April. Excluding transportation, unfilled orders increased 0.9% (4.3% y/y), also up for the 10th consecutive month, following a 0.7% April rise.

Manufacturing inventories edged up 0.2% (1.9% y/y) in May, the seventh successive m/m gain, after a 0.3% rise in April. Durable goods inventories grew 0.2% (2.1% y/y), the eighth straight m/m increase, after rising 0.3% in April and March. Nondurable goods inventories, up for the fourth consecutive month, rose 0.3% (1.6% y/y), matching April's pace.

Manufacturers’ orders and shipments of durable and nondurable goods, along with unfilled orders and inventories, are compiled by the U.S. Census Bureau. They are available in Haver’s **USECON** database. The Action Economics forecast data are in the **AS1REPNA** database.

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- May headline orders -4.5% m/m, first fall in three mths.; -3.5% y/y, first negative reading since Dec. ’24.
- Nondefense aircraft & parts -51.8% m/m vs. April’s +167.4%.
- Transportation orders -14.0%, first m/m drop since Feb.; orders ex transp. +1.3%, 13th straight m/m rise.
- Core capital goods shipments +0.3%, eighth gain in nine mths., pointing to a moderate contribution to Q2’26 GDP from business equipt. spending.
- Durable goods shipments +1.0%; unfilled orders +0.6%; inventories +0.2%.

Economy in Brief

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