Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028g.jpg" align="left" border="0" height="265" width="353">
Reflecting turbulence in the financial markets, the Conference
Board reported that its October index of consumer confidence collapsed
by more than one-third m/m to a record low level.
The latest index level of 38.0, off by two-thirds from last year,
followed a level of 61.4 during September. Consensus expectations had
been for a lesser m/m decline to a reading of 52.0.
During the last ten years there has been a 79% correlation
between the level of consumer confidence and the y/y change in real
consumer spending.
This month's decline reflected a 42.3% m/m plunge in the
expectations component of the index. The index was at a record low
level and the October drop followed increases during the prior three
months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028h.jpg" align="right" border="0" height="265" width="353">
Fewer jobs were seen by 41.5% of respondents, the highest
since 1980. Only 4.4% planned to buy an automobile and just 3.3%
planned to buy carpet. Both of these percentages set the record low for
the series. Twenty six percent of respondents planned to buy a major
appliance within six months, near the fifteen year low. Only 2.7% of
respondents planned to buy a home within six months, down from the high
near 5% in 1999.
The percentage of respondents expecting business conditions to
worsen in six months jumped to 36.6%, the highest level since the
credit crunch of 1980. Only 9.9% expected improvement in conditions.
Down by nearly one-third m/m, the present conditions index
fell to the lowest level since 1992. Jobs were seen as hard to get by
37.2% of respondents, the highest since 1993 and jobs were seen as
plentiful by just 8.9%. Business conditions were seen as good by just
9.2%, the lowest since 1991. Those who thought it bad rose to 38.3%,
also the highest since 1992.
Expectations for the inflation rate in twelve months
surprisingly rose to 6.9%, the highest level since July. 
The Enduring Challenge of Concentrated Poverty: Case
Studies from Communities Across the U.S. from the U.S.
Federal Reserve Board is available <a href="http://www.federalreserve.gov/newsevents/press/other/20081024a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y %</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>38.0</td>
<td>61.4</td>
<td>-60.1</td>
<td>103.4</td>
<td>105.9</td>
<td>100.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>41.9</td>
<td>61.1</td>
<td>-64.5</td>
<td>128.8</td>
<td>130.2</td>
<td>116.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>35.5</td>
<td>61.5</td>
<td>-55.6</td>
<td>86.4</td>
<td>89.7</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

Reflecting turbulence in the financial markets, the Conference Board reported that its October index of consumer confidence collapsed by more than one-third m/m to a record low level. The latest index level of 38.0, off by two-thirds [...]

Consumer Confidence Collapses To Record Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028e.jpg" align="left" border="0" height="265" width="353">
The S&amp;P/Case-Shiller Composite 20
Home Price Index fell another 1.0% in August which about matched the
July drop. Since their peak in July 2006 prices have fallen
20.0% -- down 16.6% during the last twelve months. The series
dates back only to 2000. The decline in August prices was as expected.
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is weighted to reflect price changes due to extensive remodeling,
home additions or extreme neglect. For example, smaller weights are
assigned to sales of homes that have undergone extensive remodeling.
The Case-Shiller composite index of homes in 10 metropolitan
areas, which has a longer history and dates back to 1987, fell 1.1% in
August, the same as during July. The index was down 17.7% year-to-year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028f.jpg" align="right" border="0" height="265" width="353">
Home prices in Phoenix, Nevada continued quite weak and fell
2.9% during August (-30.7% y/y) and in San Diego prices fell 2.3%
(-25.8% y/y). Home prices in Las Vegas, Nevada were down 2.4% (-30.6%
y/y), about as they were in July. Prices in Miami also repeated their
August performance and fell 1.8% (-28.1% y/y) while the same was true
for home prices in Los Angeles, down 26.7% y/y. In San Francisco home
prices were off 27.3% y/y and prices in Tampa, Florida posted an 18.1%
y/y decline.
In the Northeast home prices have held up relatively well. In
New York prices fell a lesser 6.9% y/y and they were down 4.7% in
Boston. In Dallas prices also were off a modest 2.7% y/y and by 2.8% in
Charlotte, North Carolina. In Denver home prices were off 5.1% y/y and
they were down 6.6% in Cleveland Ohio.
The S&amp;P/Case-Shiller home price series can be found in
Haver's USECON database but the city data is in the
REGIONAL database.
The latest press release from Standard &amp; Poor's can be
found <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_102831.pdf">here</a>.
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">August</th>
<th scope="col">July</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">20 City Composite
Index</td>
<td>164.57</td>
<td>166.29</td>
<td>-16.6%</td>
<td>-3.8%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
</body></html>

The S&P/Case-Shiller Composite 20 Home Price Index fell another 1.0% in August which about matched the July drop. Since their peak in July 2006 prices have fallen 20.0% -- down 16.6% during the last twelve months. The series dates [...]

Home Prices Fell 20% Indicates Case-Shiller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028c.jpg" width="353">
Consumer spending continued to weaken this month, according to the International Council of Shopping Centers-Goldman Sachs Index, chain store sales recovered just a piece of the prior week&#39;s decline. The 0.5% increase came after a 1.6% drop keeping October sales 1.1% below the September average. Chain store sales fell 1.9% during August.
The level of sales during the latest week remained near the lowest since December of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028d.jpg" width="353">
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 1.3% drop in the leading indicator of chain store sales from ICSC-Goldman Sachs. It fell 1.3% (-5.8% y/y) during the latest week to the lowest level since 1996.
The chain store sales figures are available in Haver&#39;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">10/25/08</th>
<th scope="col">10/18/08</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>479.3</td>
<td>477.0</td>
<td>1.3%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

Consumer spending continued to weaken this month, according to the International Council of Shopping Centers-Goldman Sachs Index, chain store sales recovered just a piece of the prior week's decline. The 0.5% increase came after a [...]

U.S. Chain Store Sales Further Confirm Weak Retail Spending

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028a.jpg" width="353">
The retail price for a gallon of regular gasoline fell by twenty five cents last week. At $2.66 per gallon, according to the U.S. Department of Energy survey, the price was the lowest since March of 2007. Prices have now fallen roughly $1.50 per gallon, or by one-third, 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 $2.72 per gallon.
Yesterday, the spot market price for a gallon of regular gasoline fell further to $1.60, down twenty cents from last week&#39;s average. In futures trading the November contract closed down further at $1.48 per gallon.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028b.jpg" width="353">
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
In reaction to the general slowing of U.S. economic growth and relatively high prices, the demand for gasoline is down. The 4.2% y/y decline, according to the U.S. Department of Energy, was the largest y/y drop since late 1995 (the latest four weeks versus the same four weeks last year).
These DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil fell sharply last week to an average $68.16 per barrel, down by more than one half from the high in July of $145.66. In futures trading, the two-month price for crude oil was down further yesterday at $63.71 per barrel.
Last week prices for natural gas were near their lowest level since August of last year. At an average $6.73 per mmbtu, prices ticked up slightly from the prior week but the average price this month was nearly one-half below the high for natural gas prices in early-July of $13.19/mmbtu.

<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">10/27/08</th>
<th scope="col">10/20/08</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>2.66</td>
<td>2.91</td>
<td>-7.5%</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>68.18</td>
<td>75.21</td>
<td>-23.9%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The retail price for a gallon of regular gasoline fell by twenty five cents last week. At $2.66 per gallon, according to the U.S. Department of Energy survey, the price was the lowest since March of 2007. Prices have now fallen [...]

U.S. Gasoline Prices Lowest Since March '07 As Demand Falls

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027e.jpg" width="353">
Europe&#146;s money supply growth and credit growth do not show signs of further slowing in September. Growth is slower that it has been over the past 12months but 3-month growth rates are about the same or a bit higher than 6-month rates of growth. In the US and the UK rates of growth in three months have picked up beyond those for their respective 12-month paces. In Japan money growth rates are very low and continue to ease. The grow rates for real money balances actually look a bit stronger all around except in Japan. 
As the financial problems have gotten worse one thing we have seen is that money supply numbers have bulged. Money demand has three components: precautionary, speculative and transactions demand. We tend to look at increases in money supply as being for transactions demand but in times such as these the precautionary element could be spiking as investors ditch riskier investments and flock to bank deposits. I would not look at the pick up in money growth or in the growth in real money balances as something that is inflationary for that reason. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr><th colspan="8" scope="col">Look at Global and Euro Liquidity Trends </th>

</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar-all</td>
<td colspan="3">Euro Measures (E13): Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets: Money</td>
<td>Memo</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&#128;&#128;-Supply M2</td>
<td>Credit:Resid</td>
<td>Loans</td>
<td>$US M2</td>
<td>&pound;&pound;UK M4</td>
<td>&yen;&yen;Jpn M2+Cds</td>
<td>OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">3-MO</td>
<td>10.1%</td>
<td>8.5%</td>
<td>7.2%</td>
<td>7.0%</td>
<td>16.3%</td>
<td>1.2%</td>
<td>-63.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">6-MO</td>
<td>9.2%</td>
<td>8.1%</td>
<td>7.0%</td>
<td>4.0%</td>
<td>14.3%</td>
<td>1.8%</td>
<td>-3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>10.1%</td>
<td>10.5%</td>
<td>8.7%</td>
<td>6.2%</td>
<td>11.8%</td>
<td>2.2%</td>
<td>30.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>10.2%</td>
<td>10.8%</td>
<td>9.7%</td>
<td>6.2%</td>
<td>12.3%</td>
<td>2.0%</td>
<td>27.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>9.6%</td>
<td>11.2%</td>
<td>10.2%</td>
<td>5.7%</td>
<td>13.0%</td>
<td>1.5%</td>
<td>16.4%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Real Balances: deflated by Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">3-MO</td>
<td>9.2%</td>
<td>7.5%</td>
<td>6.3%</td>
<td>4.3%</td>
<td>9.7%</td>
<td>0.0%</td>
<td>-64.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">6-MO</td>
<td>6.6%</td>
<td>5.5%</td>
<td>4.4%</td>
<td>-1.2%</td>
<td>7.2%</td>
<td>-0.7%</td>
<td>-8.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>6.2%</td>
<td>6.6%</td>
<td>4.9%</td>
<td>1.2%</td>
<td>6.3%</td>
<td>0.0%</td>
<td>24.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>7.1%</td>
<td>7.7%</td>
<td>6.6%</td>
<td>2.3%</td>
<td>8.6%</td>
<td>1.0%</td>
<td>22.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>6.9%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>2.4%</td>
<td>9.6%</td>
<td>0.6%</td>
<td>12.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

Europes money supply growth and credit growth do not show signs of further slowing in September. Growth is slower that it has been over the past 12months but 3-month growth rates are about the same or a bit higher than 6-month rates [...]

Money Supply Growth Stabilizes

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027d.jpg" align="left" border="0" height="265" width="353">
It is no surprise, given the world economic turmoil that
German firms have become increasingly pessimistic regarding their
economic outlook. The IFO Business climate indicator fell 2.9% to 90.2
(2000=100) in October from 92.9 in September. The indicator is now
approaching the lows last reached in 2001 and 2002.The Business Climate
Indicator is based on the responses of some 7000 firms in the
manufacturing, construction, wholesale and retail trade industries to
questions regarding current conditions and expected conditions over the
next six months. In the current survey, the index for current
conditions increased minimally by 0.1%,while the index for expectations
declined 5.9%. The indexes for the business climate, current conditions
and expectations for the next six months are shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027c.jpg" align="right" border="0" height="265" width="353">
In addition to the indexes, the data are also shown as
percentage balances of good versus poor for current conditions and more
favorable versus less favorable for expectations. The percentage
balances for the business climate in the manufacturing, construction,
wholesale and retail trade industries are shown in the second chart.
All the indicators have been declining since the sub prime problem
arose in the United States in the Fall of 2007, but the declines in
manufacturing and retail trade appear to have accelerated in the past
few months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMANY
IFO BUSINESS CLIMATE&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Oct&nbsp; 07&nbsp;</th>
<th scope="col">M/M %chg&nbsp;</th>
<th scope="col">Y/Y&nbsp; chg&nbsp;</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">INDEXES&nbsp;
(2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Climate</td>
<td>90.2</td>
<td>92.9</td>
<td>104.1</td>
<td>-2.91</td>
<td>-13.35</td>
<td>106.2</td>
<td>105.4</td>
<td>95.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current
Conditions</td>
<td>99.9</td>
<td>99.8</td>
<td>109.7</td>
<td>0.10</td>
<td>-8.93</td>
<td>111.2</td>
<td>108.4</td>
<td>94.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Expectations for Next Six Months</td>
<td>81.4</td>
<td>86.5</td>
<td>98.8</td>
<td>-5.90</td>
<td>-17.61</td>
<td>101.4</td>
<td>102.7</td>
<td>96.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PERCENT BALANCES (%)</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;Pt chg</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Industry</td>
<td>-20.2</td>
<td>-14.9</td>
<td>7.5</td>
<td>-5.3</td>
<td>-27.7</td>
<td>11.6</td>
<td>10.2</td>
<td>-9.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-18.9</td>
<td>-11.9</td>
<td>18.4</td>
<td>-7.2</td>
<td>-37.3</td>
<td>22.4</td>
<td>19.8</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Construction&nbsp;</td>
<td>-27.6</td>
<td>-25.2</td>
<td>-20.3</td>
<td>-2.4</td>
<td>-7.3</td>
<td>-16.1</td>
<td>-15.8</td>
<td>-37.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale
Trade</td>
<td>-15.1</td>
<td>-10.3</td>
<td>2.6</td>
<td>-4.8</td>
<td>-17.7</td>
<td>11.1</td>
<td>11.7</td>
<td>-9.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail
Trade</td>
<td>-25.0</td>
<td>-24.1</td>
<td>-6.4</td>
<td>-0.9</td>
<td>-18.6</td>
<td>-6.5</td>
<td>-6.0</td>
<td>-28.0</td>
</tr>
</tbody>
</table>
</body></html>

It is no surprise, given the world economic turmoil that German firms have become increasingly pessimistic regarding their economic outlook. The IFO Business climate indicator fell 2.9% to 90.2 (2000=100) in October from 92.9 in [...]

No Surprise: German Ifo's Business Climate Indicator Continues To Decline

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027a.jpg" width="353">
The U.S. Census Department reported that September sales of new single-family homes ticked up 2.7% m/m to 464,000. The rise followed a 12.6% m/m decline during August that was little revised. The level of sales in September was down 66.6% from the July 2005 peak but it was slightly better than Consensus expectations for 450,000 sales.
By region sales in the West accounted for most of last month&#39;s increase in the total with a 22.7% gain. However, the rise did not wholly make up a 30.2% slide during August. In the South sales ticked up 0.7% but that hardly dented a 5.7% August drop. Reflecting the weakness in the auto industry, new home sales in the Midwest sales reversed all of their August rise with a 5.6% slide. Suffering greatly from weakness in the financial industry, new home sales in the Northeast dropped 21.4% m/m after an August slide of 34.9%. September sales in the Northeast were roughly 80% below the peaks in 2004-05.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027b.jpg" width="353">
The median price for a new single-family home declined a slight 0.9% to $218,400. However, that slip followed a sharp 7.1% m/m drop in August and prices were off 9.1% y/y. New home prices in September were back to where they were late in 2004. The decline in home prices roughly matched the drop reported last week by the Office of Federal Housing Enterprise Oversight (FHFA). The FHFA figures, (formerly the Office of Federal Housing Enterprise Oversight (OFHEO), as well as the Census Dept. figures, are available in Haver&#39;s USECON database. 
The number of new homes for purchase again fell sharply, by 7.3% (-25.4% y/y). That reduced the inventory of unsold homes to the lowest level since late-2004. In each of the country&#39;s regions the inventory is down roughly one-quarter during the last year.
The month&#39;s supply of new homes for sale ticked lower m/m to 10.4, not far from the peak of 11.4 months during August.
Foreclosure prevention efforts and market stability is last week&#39;s Senate testimony given by Fed Governor Elizabeth A. Duke and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/duke20081023a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</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">Total Sales (SAAR, 000s)</td>
<td>464</td>
<td>452</td>
<td>-33.1</td>
<td>768</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>22</td>
<td>28</td>
<td>&nbsp;-65.1</td>
<td>64</td>
<td>64</td>
<td>81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>65</td>
<td>69</td>
<td>-37.5</td>
<td>118</td>
<td>161</td>
<td>203</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>269</td>
<td>267</td>
<td>-23.8</td>
<td>408</td>
<td>559</td>
<td>638</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>108</td>
<td>88</td>
<td>-37.9</td>
<td>178</td>
<td>266</td>
<td>356</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>218,400</td>
<td>220,400</td>
<td>-9.1</td>
<td>243,742</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. Census Department reported that September sales of new single-family homes ticked up 2.7% m/m to 464,000. The rise followed a 12.6% m/m decline during August that was little revised. The level of sales in September was down [...]

September U.S. New-Home Sales Ticked Up but Still Near the Cycle's Low

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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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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260205B2.jpg

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

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

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

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

260205C2.jpg

260205D2.jpg

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

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

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

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

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

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

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

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

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

Economy in Brief

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Consumer Confidence Collapses To Record Low

Home Prices Fell 20% Indicates Case-Shiller

U.S. Chain Store Sales Further Confirm Weak Retail Spending

U.S. Gasoline Prices Lowest Since March '07 As Demand Falls

Consumer Confidence Collapses To Record Low

Money Supply Growth Stabilizes

No Surprise: German Ifo's Business Climate Indicator Continues To Decline

September U.S. New-Home Sales Ticked Up but Still Near the Cycle's Low