Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222e.jpg">
The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for November continued on a downtrend and remained in recession territory. The latest reading of -2.47 followed a short-lived October bounce back from two hurricanes. Since 1970 there has been a 75% correlation between the level of the index and the q/q change in real GDP.
The three-month moving average of the index of -2.49 was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_december2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222f.jpg">
Each category of the index including employment, production, income, consumption &amp; housing made a negative contribution to the November index.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during October to its lowest level since 1997. The auto sector continued to lead the weakness but the steel and machinery components also were weak.

<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">November</th>
<th scope="col">October</th>
<th scope="col">November &#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>-2.47</td>
<td>-1.27</td>
<td>-0.44</td>
<td>-0.40</td>
<td>-0.01</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.49</td>
<td>-2.40</td>
<td>-0.49</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>


</html>

The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for November continued on a downtrend and remained in recession territory. The latest reading of -2.47 followed a short-lived October bounce back from two [...]

Chicago Fed Index Well Into Recession Territory

Robert Brusca

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222c.jpg" align="left" border="0" height="265" width="353">
A rapid deceleration&#8230;The sharp drop in the growth rate for
orders in the current quarter is telling of the rapidity with which
this slowdown has struck Europe. Orders in the fourth quarter are
falling at annual rates of 50% in Germany, 57% in France, 37% in Italy
and nearly 70% in the United Kingdom. This obvious bespeaks of a sharp
slowing for growth in 2008-Q4. 
 

Severe real sector hit&#8230; While the headlines have focused on
the financial sector and banking problems and, although German consumer
sentiment has been supported, the hit to EMU MFG has been severe. Both
the EMU MFG and Services PMIs have taken sharp drops. These barometers
precede the availability of authentic activity measures. The purchaser
type surveys are merely &#8216;indicators&#8217; While variables such as industrial
output and retail sales are the actual results. 
 

Orders are an actual forward-looking series&#8230; The orders series
is also an actual result and not simply an &#8216;indicator&#8217;. Orders, while
not actual activity are true figures corresponding to activity that
been contracted ahead. The orders data are available for October but
PMI data for December already are in hand &#8211;and they continue to be weak. 
 

The recognition lag... It has taken some time but Germany
seems to have come around to the idea of more stimulus. The drop in the
HICP for the Zone (bringing the Yr/Yr headline pace to 2.1%) may also
free up the ECB to become less tentative. Both orders and sales are all
falling and orders are falling with uniform and shocking weakness
across EMU. The dramatic policy moves and in the US have been rekindles
euro FX strength. Is that a good sign or a signal how far behind Europe
is in adopting needed stimulus? There should be no question about the
severity of the weakness in Europe. It&#8217;s not just a banking problem. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col"> E-zone and UK Industrial Orders &amp; Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol"> Saar except m/m</td>
<td colspan="3">% m/m</td>
<td> Oct 08</td>
<td> Oct 08</td>
<td> Oct 08</td>
<td> Oct 07</td>
<td> Oct 06</td>
<td>Qtr-2 Date</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Ezone Detail</td>
<td>Oct 08</td>
<td> Sep 08</td>
<td> Aug 08</td>
<td> 3-Mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol"> MFG Sales</td>
<td>-1.3%</td>
<td>-1.6%</td>
<td>-0.8%</td>
<td>-13.7%</td>
<td>-6.7%</td>
<td>-0.7%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>-14.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>-2.8%</td>
<td>-2.2%</td>
<td>-1.1%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>-2.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital</td>
<td>-0.4%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>-5.0%</td>
<td>-4.1%</td>
<td>-0.5%</td>
<td>3.9%</td>
<td>4.6%</td>
<td>-4.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate</td>
<td>#N/A</td>
<td>-5.6%</td>
<td>-0.3%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>7.3%</td>
<td>8.0%</td>
<td>-15.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG Orders</td>
</tr>
<tr class="grey1">
<td class="firstcol"> Total Orders</td>
<td>-4.7%</td>
<td>-5.4%</td>
<td>-1.6%</td>
<td>-38.1%</td>
<td>-26.1%</td>
<td>-14.4%</td>
<td>8.8%</td>
<td>10.9%</td>
<td>-42.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Countries:</td>
<td>Oct 08</td>
<td> Sep 08</td>
<td> Aug 08</td>
<td> 3-Mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> Qtr-2 Date</td>
</tr>
<tr class="grey1">
<td class="firstcol">Germany:</td>
<td>-6.8%</td>
<td>-8.0%</td>
<td>3.1%</td>
<td>-38.9%</td>
<td>-29.1%</td>
<td>-16.4%</td>
<td>10.8%</td>
<td>9.1%</td>
<td>-50.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">France:</td>
<td>-11.3%</td>
<td>0.4%</td>
<td>-7.7%</td>
<td>-54.3%</td>
<td>-37.7%</td>
<td>-18.3%</td>
<td>4.7%</td>
<td>10.9%</td>
<td>-58.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>-2.5%</td>
<td>-1.9%</td>
<td>-33.1%</td>
<td>-18.6%</td>
<td>-10.1%</td>
<td>6.1%</td>
<td>12.7%</td>
<td>-37.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">UK(EU)</td>
<td>-28.3%</td>
<td>28.7%</td>
<td>-8.6%</td>
<td>-49.5%</td>
<td>-42.4%</td>
<td>-14.2%</td>
<td>5.0%</td>
<td>9.2%</td>
<td>-69.9%</td>
</tr>
</tbody>
</table>
</body></html>

A rapid deceleration…The sharp drop in the growth rate for orders in the current quarter is telling of the rapidity with which this slowdown has struck Europe. Orders in the fourth quarter are falling at annual rates of 50% in [...]

Orders Make Record Drop in Euro During October

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222a.jpg" width="353">
Japan announced today a 233 billion yen deficit in its foreign trade for the month of November. Monthly deficits in foreign trade are rare in Japan and this was the third deficit in the last four months. On a three month moving average of the seasonally unadjusted data, the results of the last few months are even more dramatic as can be seen in the first chart. These deficits of recent months are the first to have occurred since the late seventies and early eighties.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222b.jpg" width="353">
Exports were 27% below November 2008 due in part to the slowing of world demand and also to the rise in the yen. The rise in the yen over the past few months is compared with the performance of the dollar, the euro and the U.K. pound in the second chart. Between August 7 and December 19 (The recent low for the yen and the most recent), the broad trade weighted yen appreciated 32%, while the euro was virtually unchanged, the dollar was up 10% and the pound was down 18%. While a higher yen might ordinarily lead to higher imports, the current low level of the propensity to consume in Japan has actually resulted in a decline of 14% in imports from a year ago.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN&nbsp;</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct&nbsp;&nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp; 08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Balance Total (Bil Yen)</td>
<td>-233</td>
<td>-68</td>
<td>86</td>
<td>-332</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance USA&nbsp; (Bil Yen)</td>
<td>-696</td>
<td>-528</td>
<td>-764</td>
<td>-720</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Exports&nbsp; (Bil Yen)</td>
<td>5327</td>
<td>6924</td>
<td>7364</td>
<td>7050</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports&nbsp; (Bil Yen)</td>
<td>6660</td>
<td>6992</td>
<td>7278</td>
<td>7386</td>
</tr>
<tr>
<td class="firstcol">Trade Weighted Exchange Rates (2000=100)</td>
<td>Aug&nbsp; 7</td>
<td>Dec&nbsp; 18&nbsp;&nbsp;&nbsp;</td>
<td>% Chg&nbsp;</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">US Dollar</td>
<td>82.6</td>
<td>90.7</td>
<td>9.8</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro</td>
<td>139.3</td>
<td>139.6</td>
<td>0.2</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">UK Pound&nbsp;</td>
<td>94.5</td>
<td>77.9</td>
<td>-17.6</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">Yen</td>
<td>83.9</td>
<td>110.4</td>
<td>31.8</td>
<td>-</td>
</tr>
</tbody>
</table>
</body>
</html>

Japan announced today a 233 billion yen deficit in its foreign trade for the month of November. Monthly deficits in foreign trade are rare in Japan and this was the third deficit in the last four months. On a three month moving [...]

A Strong Yen And Falling World Demand Lead To Deficit In Japanese Foreign Trade

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222e.jpg" align="left" border="0" height="265" width="353">
The National Activity Index (CFNAI) from the Chicago Federal
Reserve Bank for November continued on a downtrend and remained in
recession territory. The latest reading of -2.47 followed a short-lived
October bounce back from two hurricanes. Since 1970 there has been a
75% correlation between the level of the index and the q/q change in
real GDP.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222f.jpg" align="right" border="0" height="265" width="353">
The three-month moving average of the index of -2.49
was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_december2008.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
Each category of the index including employment, production,
income, consumption &amp; housing made a negative contribution to
the November index.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during October to its lowest level
since 1997. The auto sector continued to lead the weakness but the
steel and machinery components also were weak.

<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">November</th>
<th scope="col">October</th>
<th scope="col">November '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>-2.47</td>
<td>-1.27</td>
<td>-0.44</td>
<td>-0.40</td>
<td>-0.01</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.49</td>
<td>-2.40</td>
<td>-0.49</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
A Strong Yen And Falling World
Demand Lead To Deficit In Japanese Foreign Trade 
by <a href="/comment/Curley.html">Louise
Curley</a> December 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222a.jpg" align="left" border="0" height="265" width="353">
Japan announced today a 233 billion yen deficit in its foreign
trade for the month of November. Monthly deficits in foreign trade are
rare in Japan and this was the third deficit in the last four months.
On a three month moving average of the seasonally unadjusted data, the
results of the last few months are even more dramatic as can be seen in
the first chart. These deficits of recent months are the first to have
occurred since the late seventies and early eighties.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222b.jpg" align="right" border="0" height="265" width="353">
Exports were 27% below November 2008 due in part to the
slowing of world demand and also to the rise in the yen. The rise in
the yen over the past few months is compared with the performance of
the dollar, the euro and the U.K. pound in the second chart. Between
August 7 and December 19 (The recent low for the yen and the most
recent), the broad trade weighted yen appreciated 32%, while the euro
was virtually unchanged, the dollar was up 10% and the pound was down
18%. While a higher yen might ordinarily lead to higher imports, the
current low level of the propensity to consume in Japan has actually
resulted in a decline of 14% in imports from a year ago.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN&nbsp;</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct &nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp; 08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Balance Total
(Bil Yen)</td>
<td>-233</td>
<td>-68</td>
<td>86</td>
<td>-332</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance
USA&nbsp; (Bil Yen)</td>
<td>-696</td>
<td>-528</td>
<td>-764</td>
<td>-720</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Exports&nbsp;
(Bil Yen)</td>
<td>5327</td>
<td>6924</td>
<td>7364</td>
<td>7050</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports&nbsp;
(Bil Yen)</td>
<td>6660</td>
<td>6992</td>
<td>7278</td>
<td>7386</td>
</tr>
<tr>
<td class="firstcol">Trade Weighted
Exchange Rates (2000=100)</td>
<td>Aug&nbsp; 7</td>
<td>Dec&nbsp; 18&nbsp;&nbsp;&nbsp;</td>
<td>% Chg&nbsp;</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">US Dollar</td>
<td>82.6</td>
<td>90.7</td>
<td>9.8</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro</td>
<td>139.3</td>
<td>139.6</td>
<td>0.2</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">UK Pound&nbsp;</td>
<td>94.5</td>
<td>77.9</td>
<td>-17.6</td>
<td>-</td>
</tr>
<tr class="odd">
<td class="firstcol">Yen</td>
<td>83.9</td>
<td>110.4</td>
<td>31.8</td>
<td>-</td>
</tr>
</tbody>
</table>
Orders Make Record Drop in Euro
During October. 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222c.jpg" align="left" border="0" height="265" width="353">
A rapid deceleration&#8230;The sharp drop in the growth rate for
orders in the current quarter is telling of the rapidity with which
this slowdown has struck Europe. Orders in the fourth quarter are
falling at annual rates of 50% in Germany, 57% in France, 37% in Italy
and nearly 70% in the United Kingdom. This obvious bespeaks of a sharp
slowing for growth in 2008-Q4. 
 

Severe real sector hit&#8230; While the headlines have focused on
the financial sector and banking problems and, although German consumer
sentiment has been supported, the hit to EMU MFG has been severe. Both
the EMU MFG and Services PMIs have taken sharp drops. These barometers
precede the availability of authentic activity measures. The purchaser
type surveys are merely &#8216;indicators&#8217; While variables such as industrial
output and retail sales are the actual results. 
 

Orders are an actual forward-looking series&#8230; The orders series
is also an actual result and not simply an &#8216;indicator&#8217;. Orders, while
not actual activity are true figures corresponding to activity that
been contracted ahead. The orders data are available for October but
PMI data for December already are in hand &#8211;and they continue to be weak. 
 

The recognition lag... It has taken some time but Germany
seems to have come around to the idea of more stimulus. The drop in the
HICP for the Zone (bringing the Yr/Yr headline pace to 2.1%) may also
free up the ECB to become less tentative. Both orders and sales are all
falling and orders are falling with uniform and shocking weakness
across EMU. The dramatic policy moves and in the US have been rekindles
euro FX strength. Is that a good sign or a signal how far behind Europe
is in adopting needed stimulus? There should be no question about the
severity of the weakness in Europe. It&#8217;s not just a banking problem. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="10" scope="col"> E-zone
and UK Industrial Orders &amp; Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol"> Saar except m/m</td>
<td colspan="3">% m/m</td>
<td> Oct 
08</td>
<td> Oct 
08</td>
<td> Oct 
08</td>
<td> Oct 
07</td>
<td> Oct 
06</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Ezone Detail</td>
<td>Oct 
08</td>
<td> Sep 
08</td>
<td> Aug 
08</td>
<td> 3-Mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol"> MFG Sales</td>
<td>-1.3%</td>
<td>-1.6%</td>
<td>-0.8%</td>
<td>-13.7%</td>
<td>-6.7%</td>
<td>-0.7%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>-14.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>-2.8%</td>
<td>-2.2%</td>
<td>-1.1%</td>
<td>5.5%</td>
<td>8.0%</td>
<td>-2.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital</td>
<td>-0.4%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>-5.0%</td>
<td>-4.1%</td>
<td>-0.5%</td>
<td>3.9%</td>
<td>4.6%</td>
<td>-4.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate</td>
<td>#N/A</td>
<td>-5.6%</td>
<td>-0.3%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>7.3%</td>
<td>8.0%</td>
<td>-15.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr class="grey1">
<td class="firstcol"> Total Orders</td>
<td>-4.7%</td>
<td>-5.4%</td>
<td>-1.6%</td>
<td>-38.1%</td>
<td>-26.1%</td>
<td>-14.4%</td>
<td>8.8%</td>
<td>10.9%</td>
<td>-42.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Countries:</td>
<td>Oct 
08</td>
<td> Sep 
08</td>
<td> Aug 
08</td>
<td> 3-Mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> 12-mo</td>
<td> Qtr-2 
Date</td>
</tr>
<tr class="grey1">
<td class="firstcol">Germany:</td>
<td>-6.8%</td>
<td>-8.0%</td>
<td>3.1%</td>
<td>-38.9%</td>
<td>-29.1%</td>
<td>-16.4%</td>
<td>10.8%</td>
<td>9.1%</td>
<td>-50.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">France:</td>
<td>-11.3%</td>
<td>0.4%</td>
<td>-7.7%</td>
<td>-54.3%</td>
<td>-37.7%</td>
<td>-18.3%</td>
<td>4.7%</td>
<td>10.9%</td>
<td>-58.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>-2.5%</td>
<td>-1.9%</td>
<td>-33.1%</td>
<td>-18.6%</td>
<td>-10.1%</td>
<td>6.1%</td>
<td>12.7%</td>
<td>-37.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">UK(EU)</td>
<td>-28.3%</td>
<td>28.7%</td>
<td>-8.6%</td>
<td>-49.5%</td>
<td>-42.4%</td>
<td>-14.2%</td>
<td>5.0%</td>
<td>9.2%</td>
<td>-69.9%</td>
</tr>
</tbody>
</table>
French Business Climate Goes South
for the Winter 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222d.jpg" align="left" border="0" height="265" width="353">
Business climate fell to 73 from 79 to a low since January of
1990 and tied for a life of series low last reached in June 1993 in
this 35 year series. The recent trend and likely trend responses are
also at their lowest since 2000. Order and foreign orders are now at
their lowest since 2000 but they are very weak, in the bottom 5% to 7%
of their respective ranges. 
 

With this survey in hand INSEE now looks for France to suffer
a deeper recession than previously thought. Exports are diving and
plummeting sales now restrain and depress the manufacturing sector. The
euro zone's second-biggest economy would probably contract by 0.8
percent quarter-on-quarter in the final three months of 2008 after
growing just 0.1 percent between July and September, INSEE said in a
quarterly report. In Q1 2009 INSEE forecasts that the economy will
shrink by 0.4 percent and by 0.1 percent in the following quarter. In
its previous quarterly report, published in October, INSEE had
predicted a 0.1 percent decline in gross domestic product (GDP) in the
third and fourth quarters of 2008. Its view clearly has worsened.
Slowing global demand will continue to harm French exports, limiting
any advantage gained from recent softening in the euro, the statistics
office said (of course since this time the euro has strengthened
significantly making this point all the more forceful). INSEE said that
companies' efforts to run down surplus stocks are a further restraining
factor on manufacturing output, especially in the fourth quarter. 

<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> INSEE
Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec 
08</td>
<td>Nov 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate</td>
<td>73</td>
<td>79</td>
<td>87</td>
<td>91</td>
<td>0.0</td>
<td>221</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Production</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
</tr>
<tr>
<td class="firstcol">Recent Trend</td>
<td>-72</td>
<td>-68</td>
<td>-65</td>
<td>-41</td>
<td>0.0</td>
<td>222</td>
<td>44</td>
<td>-72</td>
<td>116</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol">Likely trend</td>
<td>-35</td>
<td>-26</td>
<td>-19</td>
<td>-9</td>
<td>0.0</td>
<td>222</td>
<td>30</td>
<td>-35</td>
<td>65</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders/Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Orders &amp; Demand</td>
<td>-56</td>
<td>-43</td>
<td>-31</td>
<td>-26</td>
<td>6.9</td>
<td>216</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-15</td>
</tr>
<tr>
<td class="firstcol">Fgn Orders &amp; Demand</td>
<td>-53</td>
<td>-47</td>
<td>-26</td>
<td>-27</td>
<td>5.6</td>
<td>214</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Likely Sales Price Trend</td>
<td>-8</td>
<td>-1</td>
<td>9</td>
<td>14</td>
<td>31.9</td>
<td>176</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>1</td>
</tr>
</tbody>
</table>
</body></html>

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081222d.jpg" align="left" border="0" height="265" width="353">
Business climate fell to 73 from 79 to a low since January of
1990 and tied for a life of series low last reached in June 1993 in
this 35 year series. The recent trend and likely trend responses are
also at their lowest since 2000. Order and foreign orders are now at
their lowest since 2000 but they are very weak, in the bottom 5% to 7%
of their respective ranges. 
 

With this survey in hand INSEE now looks for France to suffer
a deeper recession than previously thought. Exports are diving and
plummeting sales now restrain and depress the manufacturing sector. The
euro zone's second-biggest economy would probably contract by 0.8
percent quarter-on-quarter in the final three months of 2008 after
growing just 0.1 percent between July and September, INSEE said in a
quarterly report. In Q1 2009 INSEE forecasts that the economy will
shrink by 0.4 percent and by 0.1 percent in the following quarter. In
its previous quarterly report, published in October, INSEE had
predicted a 0.1 percent decline in gross domestic product (GDP) in the
third and fourth quarters of 2008. Its view clearly has worsened.
Slowing global demand will continue to harm French exports, limiting
any advantage gained from recent softening in the euro, the statistics
office said (of course since this time the euro has strengthened
significantly making this point all the more forceful). INSEE said that
companies' efforts to run down surplus stocks are a further restraining
factor on manufacturing output, especially in the fourth quarter. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> INSEE Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec 08</td>
<td>Nov 08</td>
<td>Oct 08</td>
<td>Sep 08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate</td>
<td>73</td>
<td>79</td>
<td>87</td>
<td>91</td>
<td>0.0</td>
<td>221</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Production</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
</tr>
<tr>
<td class="firstcol">Recent Trend</td>
<td>-72</td>
<td>-68</td>
<td>-65</td>
<td>-41</td>
<td>0.0</td>
<td>222</td>
<td>44</td>
<td>-72</td>
<td>116</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol">Likely trend</td>
<td>-35</td>
<td>-26</td>
<td>-19</td>
<td>-9</td>
<td>0.0</td>
<td>222</td>
<td>30</td>
<td>-35</td>
<td>65</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders/Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Orders &amp; Demand</td>
<td>-56</td>
<td>-43</td>
<td>-31</td>
<td>-26</td>
<td>6.9</td>
<td>216</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-15</td>
</tr>
<tr>
<td class="firstcol">Fgn Orders &amp; Demand</td>
<td>-53</td>
<td>-47</td>
<td>-26</td>
<td>-27</td>
<td>5.6</td>
<td>214</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Likely Sales Price Trend</td>
<td>-8</td>
<td>-1</td>
<td>9</td>
<td>14</td>
<td>31.9</td>
<td>176</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>1</td>
</tr>
</tbody>
</table>
</body></html>

Business climate fell to 73 from 79 to a low since January of 1990 and tied for a life of series low last reached in June 1993 in this 35 year series. The recent trend and likely trend responses are also at their lowest since 2000. [...]

French Business Climate Goes South for the Winter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081218f.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated, with its December Business Activity Index, a level of U.S. economic weakness that rivals the lows of the series&#39; forty year history. The bank reported that its December Index of General Business conditions in the manufacturing sector did improve slightly from November to -32.9 from this cycle&#39;s November low of -39.2, but the latest was still near the lowest level since the recession of 1990. It also wasn&#39;t far above the lows of earlier recessions. A reading of -40 had been expected for this month.
During the last ten years there has been a 61% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub-indexes. The business conditions index reflects a separate survey question.
Amongst the sub-indexes, the new orders index improved the most m/m to its highest level since September. However, it remained quite negative and near the lowest level since the recession of 1990. The shipments index deteriorated to a new cycle low. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081218g.jpg" width="353">
The employment index fell another 3.5 points to a new cycle low and that was the lowest level since the recession year of 1982. Forty two percent of respondents expected to reduce employment levels, the highest since 1981, while only 12.9% expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.
The prices paid index fell to another record low of -33.2. During the last ten years there has been a 67% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 82% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months also fell to near its lowest level since 2001. The expectations index for new orders fell further to a new cycle low. The expectations index for employment fell to a new record low while the expected prices paid figure fell further to a new record low.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2008/bos1208.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">Philadelphia Fed (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December&nbsp; &#39;07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-32.9</td>
<td>-39.3</td>
<td>-1.6</td>
<td>-21.2</td>
<td>5.1</td>
<td>8.1</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-33.2</td>
<td>&nbsp;-30.7</td>
<td>&nbsp;36.5</td>
<td>36.1</td>
<td>26.4</td>
<td>36.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank indicated, with its December Business Activity Index, a level of U.S. economic weakness that rivals the lows of the series' forty year history. The bank reported that its December Index of General [...]

Philadelphia Fed Index Ticked Up in December But Still Near Cycle Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081218d.jpg" width="353">
The Conference Board indicated that it&#39;s composite index of leading economic indicators fell during November by 0.4% after a slightly revised 0.9% October decline. The peak for the index was in July of last year and the six-month percent change fell to -5.6%, the largest rate of decline since 1990.
Six of the ten components of the leading index fell last month with the largest decline coming from building permits which alone subtracted 0.5% from the leading index. Higher initial claims for jobless insurance in addition subtracted 0.3% and lower stock prices subtracted 0.4%. Also down were weekly hours, vendor performance, and consumer expectations. A steeper yield curve and faster money supply growth together added back 1.0% to the index level.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081218e.jpg" width="353">
The breadth of one-month increase amongst the leaders&#39; 10 components improved slightly to 40% but over a six-month period the breadth of gain amongst the components remained quite low at 30%.
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators reversed the prior month&#39;s gain and fell 0.3%. Three quarters of the index components fell m/m but over six months 12.5% rose. Over the last ten years there has been an 86% correlation between the y/y changes in the coincident indicators and real GDP.
The lagging index ticked up 0.1% after no change in October. The ratio of coincident-to-lagging indicators (a measure of economic excess) fell back to its lowest level since 1975.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September </th>
<th scope="col">August 6-Month % (AR)</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">Leading</td>
<td>-0.4</td>
<td>-0.9</td>
<td>0.0</td>
<td>-5.6</td>
<td>-0.4</td>
<td>1.3</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.3</td>
<td>0.3</td>
<td>-1.0</td>
<td>-3.5</td>
<td>1.7</td>
<td>2.4</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1</td>
<td>0.0</td>
<td>0.6</td>
<td>3.6</td>
<td>2.9</td>
<td>3.1</td>
<td>3.1</td>
</tr>
</tbody>
</table>


</html>

The Conference Board indicated that it's composite index of leading economic indicators fell during November by 0.4% after a slightly revised 0.9% October decline. The peak for the index was in July of last year and the six-month [...]

U.S. Leading Indicators Continued Lower

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081218c.jpg" align="left" border="0" height="265" width="353">
The IFO index fell to 82.6 in December from 85.8 in November.
The current situation index fell to 88.8 in Dec. from 94.9 in Nov.
Business expectations decreased to 76.8 from 77.6. The IFO index is
much weaker in 2008 than it was in 2001. But the EU sentiment index is
only about as week in 2008 as it was in 2001. 
 

The all &#8211;sector reading of the IFO is weaker than any
individual sector in terms of its position in its range. That result is
a testament to how this crisis is leaving no sector untouched.
Construction is the best relative performing sector as it stands in the
39th percentile of its range. This is mostly because construction has
remained weak in recovery. The next strongest sector is wholesaling at
a -21.8 net reading. At that it stands in the bottom quarter of its
range. The service sector, the most stable of them all, registers a raw
net reading of -7.3 but that resides in the bottom 18 percentile of its
range. Retailing and MFG are in, roughly, the bottom 10 percent of
their respective ranges, since early 1991. 
 

The IFO is showing great weakness and the detailed readings
(not yet available) for December have been showing more weakness in the
important export sector. The IMF is urging Germany to do more to
stimulate its economy. The German economics ministry is cutting its own
outlook for growth. It said: "The outlook for the economic development
has deteriorated further. The weakening of the world economy will be
stronger than previously assumed. At the same time, the situation on
international financial markets is still severely strained," the German
economics ministry continued in its December monthly report to discuss
the outlook. "The outlook for the export-driven German economy is
gloomier." It said economic indicators are signaling that that the
contraction of real gross domestic product, which was down 0.5% in the
third quarter, has probably continued at a faster pace and there is no
sign of any change in the weakening trend.&#8221; This of course is exactly
the message from the day&#8217;s IFO report, too. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Summary of IFO Sector Diffusion readings: CLIMATE </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>Last Mo</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>average</td>
<td>Median</td>
<td>Max</td>
<td>Min</td>
<td>range</td>
<td>% range</td>
</tr>
<tr class="odd">
<td class="firstcol">All Sectors</td>
<td>-29.0</td>
<td>-20.2</td>
<td>-7.7</td>
<td>-8.4</td>
<td>16.9</td>
<td>-30.9</td>
<td>47.8</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>-29.6</td>
<td>-18.9</td>
<td>-0.2</td>
<td>1.6</td>
<td>27.0</td>
<td>-35.9</td>
<td>62.9</td>
<td>10.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-30.2</td>
<td>-27.7</td>
<td>-28.2</td>
<td>-30.3</td>
<td>1.3</td>
<td>-50.5</td>
<td>51.8</td>
<td>39.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale</td>
<td>-21.8</td>
<td>-15.1</td>
<td>-13.2</td>
<td>-15.7</td>
<td>23.6</td>
<td>-39.3</td>
<td>62.9</td>
<td>27.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-33.5</td>
<td>-25.1</td>
<td>-14.2</td>
<td>-14.5</td>
<td>28.7</td>
<td>-39.7</td>
<td>68.4</td>
<td>9.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-7.3</td>
<td>-4.3</td>
<td>11.0</td>
<td>9.5</td>
<td>28.5</td>
<td>-15.2</td>
<td>43.7</td>
<td>18.1%</td>
</tr>
<tr>
<td colspan="9" class="firstcol">* June 2001 for Services</td>
</tr>
</tbody>
</table>
</body></html>

The IFO index fell to 82.6 in December from 85.8 in November. The current situation index fell to 88.8 in Dec. from 94.9 in Nov. Business expectations decreased to 76.8 from 77.6. The IFO index is much weaker in 2008 than it was in [...]

IFO Index Drops

Surging orders for computers and electronics propelling durable goods orders

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

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

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

US is big leader in global surge in private AI investment

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

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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Winnie Tapasanun

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

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

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

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

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

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

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

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

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

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

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

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

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

France

French Industry and Services Confidence Diverge in June

Andrew Cates

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

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

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

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

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

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

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

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/7ru7psqeY4U7sp8qLdH3J7?utm_source=generator&si=328378479dd94509" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Calmer Waters, New Currents

Michael J. Moran

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

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

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

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

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

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

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

Personal Income, Consumption, and Prices in May

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

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

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

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

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

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

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

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

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

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Chicago Fed Index Well Into Recession Territory

Orders Make Record Drop in Euro During October

A Strong Yen And Falling World Demand Lead To Deficit In Japanese Foreign Trade

Chicago Fed Index Well Into Recession Territory

French Business Climate Goes South for the Winter

Philadelphia Fed Index Ticked Up in December But Still Near Cycle Low

U.S. Leading Indicators Continued Lower

IFO Index Drops