Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022a.jpg" width="353">
The total number of mortgage applications fell 16.6% last week from the prior period to their lowest level since late-2000, according to the Mortgage Bankers Association. The decline pulled the October average 17.6% below September during which there had been a brief upturn in applications.
Applications for a mortgage to purchase a home tumbled 10.9% w/w and the decline pulled the month-to-date average 13.5% below September. Last month, purchase applications rose 8.7% from August during which these applications fell 6.1% m/m (-27.0% y/y). The August decline was accompanied by a 2.4% m/m decline (-12.7% y/y) in new plus existing single family home sales.
During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. Figures covering sales of existing single-family home will be available this Friday while single-family home sales will be published early next week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022b.jpg" width="353">
Applications to refinance a home mortgage tumbled 23.5% last week and the decline lowered applications so far this month 22.3% below the September average. During September, applications to refinance had risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.
The effective interest rate on a conventional 15-year mortgage rose last week to 6.33% following an average of 6.01% last month. For a 30-year mortgage, rates fell w/w to 6.50%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate rose to 7.07% from 6.70% averaged last month.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The figures for weekly mortgage applications are available in Haver&#39;s USWEEKLY database.
Strategic Risk Management in an Interconnected World is the title of a speech given Monday by Fed Governor Randall S. Kroszner and it can be found <a href="http://http://www.federalreserve.gov/newsevents/speech/kroszner20081020a.htm">here</a>.
Unprecedented Times in our Economy* are remarks offered last week by Chicago Fed President Charles L. Evans and they are available <a href="http://www.chicagofed.org/news_room/speeches/fond%20du%20lac_Speech.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/17/08</th>
<th scope="col">10/10/08</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>408.1</td>
<td>489.3</td>
<td>-37.8%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>279.3</td>
<td>313.5</td>
<td>-32.8%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,158.8</td>
<td>1,514.2</td>
<td>-43.7%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications fell 16.6% last week from the prior period to their lowest level since late-2000, according to the Mortgage Bankers Association. The decline pulled the October average 17.6% below September [...]

U.S. Mortgage Applications Lowest Since 2000

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022a.jpg" align="left" border="0" height="265" width="353">
The total number of mortgage applications fell 16.6% last week
from the prior period to their lowest level since late-2000, according
to the Mortgage Bankers Association. The decline pulled the October
average 17.6% below September during which there had been a brief
upturn in applications.
Applications for a mortgage to purchase a home tumbled 10.9%
w/w and the decline pulled the month-to-date average 13.5% below
September. Last month, purchase applications rose 8.7% from August
during which these applications fell 6.1% m/m (-27.0% y/y). The August
decline was accompanied by a 2.4% m/m decline (-12.7% y/y) in new plus
existing single family home sales.
During the last ten years there has been a 61% correlation
between the y/y change in purchase applications and the change in new
plus existing single family home sales. Figures covering sales of
existing single-family home will be available this Friday while
single-family home sales will be published early next week.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022b.jpg" align="right" border="0" height="265" width="353">
Applications to refinance a home mortgage tumbled 23.5% last
week and the decline lowered applications so far this month 22.3% below
the September average. During September, applications to refinance had
risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.
The effective interest rate on a conventional 15-year mortgage
rose last week to 6.33% following an average of 6.01% last month. For a
30-year mortgage, rates fell w/w to 6.50%. Interest rates on 15 and 30
year mortgages are closely correlated (&gt;90%) with the rate on
10-year Treasury securities. For an adjustable rate 1-Year mortgage the
rate rose to 7.07% from 6.70% averaged last month.
During the last ten years there has been a (negative) 79%
correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of
the top lenders in the U.S. housing industry to derive its refinance,
purchase and market indexes. The weekly survey covers roughly 50% of
all U.S. residential mortgage applications processed each week by
mortgage banks, commercial banks and thrifts. Visit the Mortgage
Bankers Association site <a href="http://www.mbaa.org">here</a>.
The figures for weekly mortgage applications are available in
Haver's USWEEKLY database.
Strategic Risk Management in an Interconnected World is
the title of a speech given Monday by Fed Governor Randall S. Kroszner
and it can be found <a href="%7Fhttp:/www.federalreserve.gov/newsevents/speech/kroszner20081020a.htm">here</a>.
Unprecedented Times in our Economy* are
remarks offered last week by Chicago Fed President Charles L. Evans and
they are available <a href="http://www.chicagofed.org/news_room/speeches/fond%20du%20lac_Speech.cfm">here</a>. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">BA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/17/08</th>
<th scope="col">10/10/08</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>408.1</td>
<td>489.3</td>
<td>-37.8%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>279.3</td>
<td>313.5</td>
<td>-32.8%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,158.8</td>
<td>1,514.2</td>
<td>-43.7%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
Italy&#8217;s Consumer Confidence and
Retail Sales Trends Continue to Drop 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022c.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s consumer sentiment trend and retail sales trends
continue to show each other the way lower. While some speak
disparagingly about consumer surveys, it is clear that the consumer&#8217;s
habits are bang in line with what the consumer is telling various
surveyors. 
 

In the quarter to date (two-months into Q3), nominal sales are
still rising. But on the more important inflation-adjusted basis sales
are dropping at a -3.4% annual rate - that&#8217;s quite weak. 
 

Nominal sales trends have bee negative over three, six and
twelve month horizons. In August weakness seems to have hit all the
major categories together. While July showed a nominal sales gain, it
is now clear that it was not heralding a period of better growth ahead
That much has become clear in August. 
 

Italy remains a trouble EMU economy, led by consumer sector
weakness. 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Italy
Retail Sales Growth</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">mo/mo %</td>
<td colspan="4">At annual rates</td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Q-2-Date</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>-0.5%</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>-1.5%</td>
<td>-0.7%</td>
<td>0.7%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Clothing&amp;Furniture</td>
<td>-6.1%</td>
<td>6.3%</td>
<td>-3.0%</td>
<td>-12.2%</td>
<td>-10.7%</td>
<td>-3.7%</td>
<td>-0.3%</td>
<td>12.8%</td>
</tr>
<tr>
<td class="firstcol">Total Real Retail</td>
<td>-0.7%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>-5.1%</td>
<td>-5.4%</td>
<td>-4.6%</td>
<td>-0.9%</td>
<td>-3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</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">Retial Ex auto</td>
<td>-0.7%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>-5.1%</td>
<td>-5.4%</td>
<td>-4.6%</td>
<td>-0.9%</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021e.jpg" width="353">
The Confederation of Business Industry (CBI) released the results of its latest surveys of industrial trends. The quarterly survey gathers the opinions of manufacturers on a number of trends--the general business outlook, trends in their own output, orders, including foreign, capital spending, employment, prices and inventories. The monthly survey updates the opinions on trends in orders, inventories, prices and output--past and expected.
The latest quarterly survey shows that only 4% of the respondents were more optimistic about the general business situation than they had been in the previous survey, while 64% were more pessimistic, resulting in a -60 for the quarter. This was the most pessimistic reading of business confidence measure since the third quarter of 1980 when the excess of pessimists was 70%. The first chart shows the history of the CBI&#39;s confidence measure.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021f.jpg" width="353">
Most of the components of the survey showed low points not seen for some time. For example, 31% more of the respondents expected output over the next three months to be lower than those expecting it to be higher. It is necessary to go back to the fourth quarter of 1980 to find as many pessimists on the outlook. A few of the components are shown in the table below together with the date when a comparable figure occurred.
Ian McCafferty, Chief Economic Adviser of CBI remarked that &quot;.....the sharp falls in orders and output show that the slowdown in the UK economy is now spreading to sectors previously resilient to the weakness in the banking and housing sectors. It is also of serious concern that constraints on capital now appear to be affecting manufacturers, in a way that had not been the case earlier.&quot; Indeed, there were spikes in the current quarter in the percentage of respondents who said credit or finance might be a factor in their negative appraisal of output, orders and capital spending, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UNITED KINGDOM CBI INDUSTRIAL TRENDS SURVEY&nbsp;</th>
<th scope="col">Q4&nbsp; 08</th>
<th scope="col">Q3&nbsp;&nbsp;&nbsp; 08&nbsp;</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1&nbsp; 08&nbsp;</th>
<th scope="col">PRE- VIOUS&nbsp;</th>
<th scope="col">DATE&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output over next 3 months</td>
<td>-31</td>
<td>-7</td>
<td>0</td>
<td>8</td>
<td>-31</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">Capital Spending Buildings</td>
<td>-44</td>
<td>-24</td>
<td>-21</td>
<td>-21</td>
<td>-49</td>
<td>1996:4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Capital Spending Plant &amp; Equipment</td>
<td>-38</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>-46</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Domestic Orders</td>
<td>-42</td>
<td>-21</td>
<td>-9</td>
<td>-3</td>
<td>-42</td>
<td>1991:1</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Orders</td>
<td>-21</td>
<td>-8</td>
<td>5</td>
<td>0</td>
<td>-34</td>
<td>2001:4</td>
</tr>
</tbody>
</table>
</body>
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The Confederation of Business Industry (CBI) released the results of its latest surveys of industrial trends. The quarterly survey gathers the opinions of manufacturers on a number of trends--the general business outlook, trends in [...]

The Global Financial Crisis Hits British Industry

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021d.jpg" width="353">
According to the International Council of Shopping Centers, chain store sales fell 1.6% last week. The decline more than reversed the gains of the prior two weeks. The level of sales so far October were 1.0% below the September average which fell 1.9% from August.
The level of sales during the latest week was near the lowest since December of last year.
During the last ten years there has been a 45% 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.
The leading indicator of chain store sales from ICSC-Goldman Sachs fell 0.2% (-4.8% y/y).
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">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>477.0</td>
<td>484.7</td>
<td>0.9%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


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According to the International Council of Shopping Centers, chain store sales fell 1.6% last week. The decline more than reversed the gains of the prior two weeks. The level of sales so far October were 1.0% below the September [...]

U.S. Chain Store Sales Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021c.jpg" width="353">
The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was then associated with -6.4% (AR) growth in real GDP during 1Q 1982.
The three-month moving average of the index also fell to -1.78 from -1.18 during August. The latest was its lowest since the last recession, early in 1991.
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%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The production and income categories made the largest negative contribution to the total index&#39;s decline during September, though each of the component categories added a negative influence.
Inflationary pressure also was indicated to be low for the coming year with price index at it&#39;s lowest since 1990.
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. The August index level reversed its recent improvement and fell to the lowest level since 2003. A decline in the auto sector component of the series led the weakness.
Revisiting Useful Approaches to Data-Rich Macroeconomic Forecasting from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr327.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.57</td>
<td>-1.61</td>
<td>-0.30</td>
<td>-0.43</td>
<td>-0.03</td>
<td>0.27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-1.78</td>
<td>-1.18</td>
<td>-0.32</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
</body>
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The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was [...]

Chicago Fed Index Fell Deeper Into Negative Territory

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021a.jpg" width="353">
For the first time since February of this year, the retail price for a gallon of regular gasoline fell below $3.00 per gallon. At $2.91, according to the U.S. Department of Energy survey, the price was the lowest since October of 2007. The latest decline was accompanied by a drop in the average price for all grades of gasoline to $2.97 per gallon.
The spot market price for a gallon of regular gasoline during the last two days reversed some of its earlier weakness and rose to $1.92 after touching $1.78 last Thursday. In futures trading the November contract closed at $1.72 per gallon.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021b.jpg" width="353">
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
According to the U.S. Department of Energy, the demand for gasoline fell 4.8% during the last four weeks versus the same four weeks last year. The y/y decline was the largest since late 1995.
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 $75.21 per barrel, down by nearly one half from the high in July of $145.66. In futures trading, the two-month price for crude oil fell yesterday to $74.39 per barrel.
Last week prices for natural gas fell to their lowest level since August of last year. At an average $6.67 per mmbtu prices were down 6.6% year-to-year. The decline stabilized yesterday and prices rose to $6.99 per mmbtu. The high for natural gas prices was in early-July at $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">10/20/08</th>
<th scope="col">10/13/08</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>2.91</td>
<td>3.15</td>
<td>3.2%</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>75.21</td>
<td>86.23</td>
<td>-14.8%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

For the first time since February of this year, the retail price for a gallon of regular gasoline fell below $3.00 per gallon. At $2.91, according to the U.S. Department of Energy survey, the price was the lowest since October of [...]

U.S. Gasoline Prices Below $3.00

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021a.jpg" width="353">
For the first time since February of this year, the retail price for a gallon of regular gasoline fell below $3.00 per gallon. At $2.91, according to the U.S. Department of Energy survey, the price was the lowest since October of 2007. The latest decline was accompanied by a drop in the average price for all grades of gasoline to $2.97 per gallon.
The spot market price for a gallon of regular gasoline during the last two days reversed some of its earlier weakness and rose to $1.92 after touching $1.78 last Thursday. In futures trading the November contract closed at $1.72 per gallon.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021b.jpg" width="353">
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
According to the U.S. Department of Energy, the demand for gasoline fell 4.8% during the last four weeks versus the same four weeks last year. The y/y decline was the largest since late 1995.
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 $75.21 per barrel, down by nearly one half from the high in July of $145.66. In futures trading, the two-month price for crude oil fell yesterday to $74.39 per barrel.
Last week prices for natural gas fell to their lowest level since August of last year. At an average $6.67 per mmbtu prices were down 6.6% year-to-year. The decline stabilized yesterday and prices rose to $6.99 per mmbtu. The high for natural gas prices was in early-July at $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">10/20/08</th>
<th scope="col">10/13/08</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>2.91</td>
<td>3.15</td>
<td>3.2%</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>75.21</td>
<td>86.23</td>
<td>-14.8%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
Chicago Fed Index Fell Deeper Into Negative Territory 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 21, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021c.jpg" width="353">
The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was then associated with -6.4% (AR) growth in real GDP during 1Q 1982.
The three-month moving average of the index also fell to -1.78 from -1.18 during August. The latest was its lowest since the last recession, early in 1991.
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%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The production and income categories made the largest negative contribution to the total index&#39;s decline during September, though each of the component categories added a negative influence.
Inflationary pressure also was indicated to be low for the coming year with price index at it&#39;s lowest since 1990.
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. The August index level reversed its recent improvement and fell to the lowest level since 2003. A decline in the auto sector component of the series led the weakness.
Revisiting Useful Approaches to Data-Rich Macroeconomic Forecasting from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr327.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.57</td>
<td>-1.61</td>
<td>-0.30</td>
<td>-0.43</td>
<td>-0.03</td>
<td>0.27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-1.78</td>
<td>-1.18</td>
<td>-0.32</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 21, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021d.jpg" width="353">
According to the International Council of Shopping Centers, chain store sales fell 1.6% last week. The decline more than reversed the gains of the prior two weeks. The level of sales so far October were 1.0% below the September average which fell 1.9% from August.
The level of sales during the latest week was near the lowest since December of last year.
During the last ten years there has been a 45% 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.
The leading indicator of chain store sales from ICSC-Goldman Sachs fell 0.2% (-4.8% y/y).
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">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>477.0</td>
<td>484.7</td>
<td>0.9%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
The Global Financial Crisis Hits British Industry 
by <a href="/comment/Curley.html">Louise Curley</a> October 21, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021e.jpg" width="353">
The Confederation of Business Industry (CBI) released the results of its latest surveys of industrial trends. The quarterly survey gathers the opinions of manufacturers on a number of trends--the general business outlook, trends in their own output, orders, including foreign, capital spending, employment, prices and inventories. The monthly survey updates the opinions on trends in orders, inventories, prices and output--past and expected.
The latest quarterly survey shows that only 4% of the respondents were more optimistic about the general business situation than they had been in the previous survey, while 64% were more pessimistic, resulting in a -60 for the quarter. This was the most pessimistic reading of business confidence measure since the third quarter of 1980 when the excess of pessimists was 70%. The first chart shows the history of the CBI&#39;s confidence measure.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021f.jpg" width="353">
Most of the components of the survey showed low points not seen for some time. For example, 31% more of the respondents expected output over the next three months to be lower than those expecting it to be higher. It is necessary to go back to the fourth quarter of 1980 to find as many pessimists on the outlook. A few of the components are shown in the table below together with the date when a comparable figure occurred.
Ian McCafferty, Chief Economic Adviser of CBI remarked that &quot;.....the sharp falls in orders and output show that the slowdown in the UK economy is now spreading to sectors previously resilient to the weakness in the banking and housing sectors. It is also of serious concern that constraints on capital now appear to be affecting manufacturers, in a way that had not been the case earlier.&quot; Indeed, there were spikes in the current quarter in the percentage of respondents who said credit or finance might be a factor in their negative appraisal of output, orders and capital spending, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UNITED KINGDOM CBI INDUSTRIAL TRENDS SURVEY&nbsp;</th>
<th scope="col">Q4&nbsp; 08</th>
<th scope="col">Q3&nbsp;&nbsp;&nbsp; 08&nbsp;</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1&nbsp; 08&nbsp;</th>
<th scope="col">PRE- VIOUS&nbsp;</th>
<th scope="col">DATE&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output over next 3 months</td>
<td>-31</td>
<td>-7</td>
<td>0</td>
<td>8</td>
<td>-31</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">Capital Spending Buildings</td>
<td>-44</td>
<td>-24</td>
<td>-21</td>
<td>-21</td>
<td>-49</td>
<td>1996:4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Capital Spending Plant &amp; Equipment</td>
<td>-38</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>-46</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Domestic Orders</td>
<td>-42</td>
<td>-21</td>
<td>-9</td>
<td>-3</td>
<td>-42</td>
<td>1991:1</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Orders</td>
<td>-21</td>
<td>-8</td>
<td>5</td>
<td>0</td>
<td>-34</td>
<td>2001:4</td>
</tr>
</tbody>
</table>


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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020f.jpg" align="left" border="0" height="265" width="353">
China's
real Gross Domestic Product in the third quarter of this year, just
released, was 9% over the third quarter of last year.&nbsp; The
increase was below consensus and was the fifth quarter in a row in
which the rate of increase declined, as can be seen in the first
chart.&nbsp; Last year China's economy grew by 11.6%.&nbsp; So
far this year the economy is growing 9.9% over the corresponding period
of&nbsp; 2007.&nbsp; With the outlook for continued slowing of
the economy, the growth for this year as a whole is unlikely to be that
high.&nbsp;&nbsp;
The only sector to show growth
increasing this year is the primary sector that includes farming,
forestry, animal husbandry and fishing.&nbsp; This is the smallest
sector of the economy and the one with the lowest growth
rate.&nbsp; The secondary sector that includes mining and
quarrying, manufacturing, production and supply of electricity, water
and gas, is the largest sector and has experienced the sharpest
deceleration in growth in the economy in the current year
.&nbsp;&nbsp;
The tertiary sector that includes all industries not included
in the
primary or secondary sectors, experienced a slightly smaller
deceleration in growth.&nbsp; The second chart shows the year to
date growth in the total economy and in the three sectors.&nbsp;
The third chart shows the relative magnitudes of the three sectors
in&nbsp; nominal terms (billions of yuan).

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020h.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020g.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CHINA
&nbsp;</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1&nbsp; 08&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">GDP Y/Y % Change</td>
<td>9.0</td>
<td>10.1</td>
<td>10.6</td>
<td>11.6</td>
<td>10.7</td>
<td>9.9</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP (YTD %)</td>
<td>9.9</td>
<td>10.4</td>
<td>10.6</td>
<td>11.9*</td>
<td>11.6*</td>
<td>10.4*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Primary
Industry&nbsp; (YTD %)</td>
<td>4.5</td>
<td>3.5</td>
<td>2.8</td>
<td>3.7*</td>
<td>5.0*</td>
<td>5.2*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Secondary
Industry (YTD %)&nbsp;&nbsp;&nbsp;</td>
<td>10.5</td>
<td>11.3</td>
<td>11.5</td>
<td>13.4*</td>
<td>13.0*</td>
<td>11.7*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tertiary
Industry (YTD %)</td>
<td>10.3</td>
<td>10.5</td>
<td>10.9</td>
<td>12.6*</td>
<td>12.1*</td>
<td>10.5*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Primary
Industry&nbsp; (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>2891</td>
<td>2470</td>
<td>2272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Secondary
Industry (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>12138</td>
<td>10200</td>
<td>8621</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tertiary
Industry (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>9633</td>
<td>8270</td>
<td>7340</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">*These are Q4 to Q4 changes.</td>
</tr>
</tbody>
</table>

</body></html>

China's real Gross Domestic Product in the third quarter of this year, just released, was 9% over the third quarter of last year. The increase was below consensus and was the fifth quarter in a row in which the rate of increase [...]

China's Real GDP Continues to Slow

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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Robert Brusca

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.

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**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.

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**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.

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**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.

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**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.

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**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.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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