Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070530c.jpg" width="353">
Which data are telling the better story in Japan? Production or the labor market?
Today&#39;s industrial production report continues the theme of &quot;relapse&quot; that Bob Brusca was talking about here on May 15. Total industrial production fell 0.1% in April, a small decline to be sure, but the second in a row. Production in two key sources of prior strength, &quot;producer goods&quot; and the vehicle industry, contributed to the decline, the latter also for a second month. The peak in total output was actually back in December, at 109.6, just over 2 points above the April amount.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070530d.jpg" width="353">
In sharp contrast, the labor market looks good: employment has risen and unemployment declined. According to the April labor force survey, which was published May 29 in Japan, the number of people employed increased 23,000 in the month, a third consecutive rise, reaching 64,390,000, the highest since March 2001. In the Haver database &quot;G10+&quot;, we include seasonally adjusted data for a number of industry sectors. Manufacturing contributed 220,000 to the latest monthly increase.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070530e.jpg" width="353"> Construction also gained, and miscellaneous services rebounded from a sudden drop in March. The numbers employed in trade and finance decreased, however.
The unemployment rate went down in April to 3.8% from 4.0%, where it had been since November. The number unemployed fell to 2,560,000 in April from 2,690,000 in March. Importantly, this decline accompanied a small increase in labor force participation. As seen in the last graph, the participation rate edged up to 60.66% from 60.57% in March. This is the highest ratio of labor force or economically active to the population over age 15 since the summer of 2003. Sometimes, as we remind frequently here, the unemployment rate falls because discouraged workers back away from the labor force. But in this case, more Japanese people are actually working or are seeking work.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070530f.jpg" width="353"> This pattern suggests some confidence in the economy. Indeed, it goes along with an entirely separate gauge, the &quot;Living Anxiety&quot; survey, which fell 5 points from February to April. Measured bi-monthly, this private research index goes down when people feel less bad. That strikes us as an appropriate approach presently, when there are many questions about the economies of Japan and its neighbors: less emphasis on ebullience and more on being cautious. Employment goes up as production goes down: which force will prevail?

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN</th>
<th scope="col">Apr 2007*</th>
<th scope="col">Mar 2007*</th>
<th scope="col">Feb 2007*</th>
<th scope="col">Year Ago*</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production (2000=100)</td>
<td>107.5</td>
<td>107.6</td>
<td>107.9</td>
<td>104.9</td>
<td>106.2</td>
<td>101.3</td>
<td>100.2</td>
</tr>
<tr>
<td class="firstcol">Producer Goods</td>
<td>115.9</td>
<td>116.3</td>
<td>115.2</td>
<td>111.2</td>
<td>113.3</td>
<td>106.2</td>
<td>104.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport Goods**</td>
<td>127.9</td>
<td>130.9</td>
<td>132.7</td>
<td>125.8</td>
<td>127.6</td>
<td>118.2</td>
<td>113.5</td>
</tr>
<tr>
<td class="firstcol">&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 class="odd">
<td class="firstcol">Employment (10,000 people)</td>
<td>64.39</td>
<td>64.16</td>
<td>64.15</td>
<td>63.64</td>
<td>63.82</td>
<td>63.56</td>
<td>63.29</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>11.84</td>
<td>11.52</td>
<td>11.59</td>
<td>11.74</td>
<td>11.61</td>
<td>11.42</td>
<td>11.50</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>3.8</td>
<td>4.0</td>
<td>4.0</td>
<td>4.1</td>
<td>4.1</td>
<td>4.4</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">Participation Rate (%)</td>
<td>60.7</td>
<td>60.6</td>
<td>60.6</td>
<td>60.3</td>
<td>60.1</td>
<td>60.4</td>
<td>60.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Which data are telling the better story in Japan? Production or the labor market? Today's industrial production report continues the theme of "relapse" that Bob Brusca was talking about here on May 15. Total industrial production fell [...]

Japan's Labor Market Looks Its Best in Several Years, but Industry May Have Lost Steam

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525d.jpg" width="353">
The Federal Reserve released commercial bank &quot;loan performance&quot; data for Q1 2007 late yesterday, May 24. This information includes the dollar amounts of delinquent loans and loan charge-offs, which are taken as percentages of bank assets outstanding to produce delinquency and charge-off rates. Both kinds of rates are published with seasonal adjustment and the charge-off rates are annualized.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525e.jpg" width="353">
The overall delinquency rate for Q1 was 1.72%, up 0.03% from Q4&#39;s 1.69%. These are somewhat high compared with the last couple of years, but the period from 2000 to 2004 averaged 2.30%, that is, higher still. The latter time span included the recession following the tech boom/bust cycle. The charge-off rate in Q1 was 0.53%. As with delinquencies, this is higher than the most recent periods, but noticeably lower than the 0.82% average of 2000-2004. Delinquencies are loans overdue by 30 days or more; these remain active loans and continue to accrue interest. Charge-offs are loans removed from the books as uncollectible.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525f.jpg" width="353">
We illustrate the behavior of a few major types of bank loans. Total consumer loan delinquencies were just under 3% of the total amount of those loans, and as with total loans, larger than most recent quarters, but less than earlier times. In the second graph, we see that credit card debt, included within total consumer loans, has about a percentage point higher delinquency rate presently; this too has been higher in the past, both absolutely and relative to the total consumer loan amount.
The behavior of residential real estate credit highlights the secured nature of these loans. As widely publicized, the delinquency rate is rising. The new data here show that slightly more than 2% of banks&#39; residential mortgages were delinquent in Q1, the largest proportion since Q3 2002. As with other loans, these delinquencies also remain lower than most prior periods, although the steep rise from just 1.62% in Q2 last year is discomforting. As to charge-offs, they are much different because they are &quot;net&quot;; the bank forecloses on the house and then sells it, recouping a good part of its loan value. So the amount it must charge off is really quite modest, as seen in the third graph. In looking at the graph, recall that the charge-off rates are annualized, so 0.16% in Q1 is really 0.04% at a quarterly rate. In other measures of mortgage quality, such as those from the Mortgage Bankers&#39; Association, we focus on the foreclosure itself, so those rates are much higher than the net charge-off rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525g.jpg" width="353">
Business loans are seen to behave differently still. Delinquency rates in this sector are still going down, and Q1, at 1.18%, is the lowest in the 20-year history of the delinquency data. Charge-offs came at a 0.39% annual rate in Q1, also among the lowest for this series. These rates have ranged from 0.14% in Q2 1995 to 2.04% in Q3 2002. This latter would be quite severe: in that quarter 0.51% of business loans outstanding were deemed total losses. The US economy was coming out of a shallow recession, so the cyclical sensitivity of business credit is readily apparent.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Commercial Banks, SA</th>
<th scope="col">Q1 2007</th>
<th scope="col">Q4 2006</th>
<th scope="col">Q3 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">Avg 2000 -2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Delinquency Rate: Total </td>
<td>1.72</td>
<td>1.69</td>
<td>1.58</td>
<td>1.50</td>
<td>1.57</td>
<td>1.57</td>
<td>2.30</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Loans</td>
<td>2.96</td>
<td>2.96</td>
<td>2.95</td>
<td>2.79</td>
<td>2.90</td>
<td>2.81</td>
<td>3.40</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential Real Estate</td>
<td>2.04</td>
<td>1.94</td>
<td>1.76</td>
<td>1.59</td>
<td>1.75</td>
<td>1.55</td>
<td>1.93</td>
</tr>
<tr class="odd">
<td class="firstcol">Business*</td>
<td>1.18</td>
<td>1.18</td>
<td>1.26</td>
<td>1.39</td>
<td>1.27</td>
<td>1.51</td>
<td>2.92</td>
</tr>
<tr>
<td class="firstcol">Annual Rates</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Charge-Off Rate: Total </td>
<td>0.53</td>
<td>0.40</td>
<td>0.42</td>
<td>0.40</td>
<td>0.42</td>
<td>0.54</td>
<td>0.82</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Loans</td>
<td>2.44</td>
<td>2.18</td>
<td>2.15</td>
<td>1.84</td>
<td>2.06</td>
<td>2.75</td>
<td>2.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential Real Estate</td>
<td>0.16</td>
<td>0.13</td>
<td>0.11</td>
<td>0.09</td>
<td>0.11</td>
<td>0.08</td>
<td>0.16</td>
</tr>
<tr class="odd">
<td class="firstcol">Business*</td>
<td>0.39</td>
<td>0.31</td>
<td>0.31</td>
<td>0.26</td>
<td>0.30</td>
<td>0.26</td>
<td>1.14</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Reserve released commercial bank "loan performance" data for Q1 2007 late yesterday, May 24. This information includes the dollar amounts of delinquent loans and loan charge-offs, which are taken as percentages of bank [...]

Bank Loan Delinquencies & Charge-Offs Increase in Q1, But Remain Lower than During Last Recession; Great Variation [...]

Robert Brusca

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524b.jpg" width="353">
New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down year/year but only by 10.6%. Conditions are still spotty. While Toll Brothers reported somewhat improved results, that home builder is still not comfortable enough with prospects to give earnings guidance. However, it did say that it had seen glimmerings of strength- not just an abatement of weakness. 
The new home sales report shows the small and volatile Northeast up by 43% Y/Y and the largest region, the South, off by just 3.4% Y/Y. The West and Midwest are off by Y/Y values in the range of 25% to 30%. 
Cleary the rise in sales is the big news in this report. But a rival bit of news is the drop in prices. Last month average and median pries were up Y/Y. But Median prices have swung from +7.9% Y/Y in March to -10.9% Y/Y in April. What&#146;s that line from Frank&#146;s song? Riding high in March, shot down in April &#133;hmmm not quite the verse, but those are the facts. Average prices have switched from a March gain of 8.7% Y/Y to a drop of 3.6% Y/Y in April. The relatively larger drop in median prices speaks of more weakness at the lower priced end of the market and may have something to do with sub-prime problems. Cleary builders have been cutting prices and just as clearly, the strategy has been working. 
If we look at trends in average new home prices around the time of the last recession, we see that builder capitulation on prices was the catalyst in that recession for spurring house prices back up and for ending the weakness in the sector as recovery took hold in the economy at large. House prices then snapped back up into a positive growth range quickly as the economy transitioned from recession to growth. House prices could be performing this same function again. The low prices jump start demand and get some inventory off homebuilder&#146;s hands giving the market a push and creating some buzz at the same time. With continued growth in the rest of the economy housing is able to move ahead and dig itself out of the slump. It looks like a good story to me&#133;Oh, and they all live happily ever after, too.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
New Single Family Home Sales
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="6">Momentum: Annualized Rates Of Change</td>
<td colspan="2">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">As of:</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr class="odd">
<td colspan="8">Month-to-month percent change</td>
</tr>
<tr>
<td class="firstcol">Apr.07</td>
<td>16.2%</td>
<td>3.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>8.5%</td>
<td>-11.1%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Mar.07</td>
<td>-1.4%</td>
<td>77.8%</td>
<td>1.6%</td>
<td>-8.9%</td>
<td>-2.9%</td>
<td>3.0%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Feb.07</td>
<td>-3.8%</td>
<td>-27.4%</td>
<td>-25.9%</td>
<td>-2.0%</td>
<td>21.2%</td>
<td>-1.7%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="8">Annualized Rates</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>40.9%</td>
<td>135.5%</td>
<td>-110.8%</td>
<td>56.1%</td>
<td>110.6%</td>
<td>-34.2%</td>
<td>-18.3%</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>6.1%</td>
<td>225.6%</td>
<td>-24.8%</td>
<td>12.9%</td>
<td>-25.7%</td>
<td>-16.3%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">1-Yr</td>
<td>-10.6%</td>
<td>43.1%</td>
<td>-28.1%</td>
<td>-3.4%</td>
<td>-25.4%</td>
<td>-10.9%</td>
<td>-3.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down [...]

New Home Sales Jump and Prices Dive. Bad News as Good?

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524a.jpg" width="353">
Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be strong as well. Excluding aircraft, nondefense capital goods orders are up strongly for two straight months. Shipments and most cuts on capital goods shipments were strong in the month. 
The chart for durable goods looks immediately better. 
While three-month growth rates for durable goods can be very volatile, the graphs on the left documents a strong rise in new orders. A reversal (one month only) in shipments growth now shows advance instead of decline. And, more impressive, is the reduction in the rate of slowing for the declining pace of inventory growth. If firms are no longer seeking to cut inventory growth that could be very helpful to the sector assuming, of course, that the shipment pick up and order pick up are for real. 
Diffusion to relieve confusion&#133; 
The statistics in the table below show that suddenly durable goods shipments and orders join unfilled orders in revealing that growth is broad-based across industries. Our (proprietary) diffusion readings are generally in the 70s or higher; 50 is neutral. These readings look for acceleration in sequential annualized growth rates (3-month Vs six-month, six-month Vs Yr/Yr, Yr/Yr Vs Yr ago, etc). We obtain these results from calculations of annualized growth rates performed across the main durables sectors. Diffusion calculations are helpful in this many-faceted report to distill common themes from an otherwise confusing array of components and subcomponent constructions. As of April, the various reading have begun to show signs of strength across most main sectors.
Sales have begun to exceed inventory growth in most industries over three and six months but are still lower in most for year/year growth (diffusion of 0.14 on this basis). Still, that weakness is an air-pocket of sorts since sales have begun to outpace inventories again just as they had done so one year ago. The report seems to show that the period of distress may have been put behind us even though the month&#146;s reading was no clarion call to growth. It was however a step in the right direction that followed two previous stronger steps.
Orders in the once weak machinery category have broken higher. Primary metals orders again are very strong and transportation orders are strong again. Shipments data show some spottiness across industries but where there is strength it is very strong: primary metals, machinery and electrical equipment.
The report is the most upbeat from durables that we have seen for sometime.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
All Main Industries DIFFUSION Category
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mo</td>
<td>6Mo</td>
<td>9Mo</td>
<td>12Mo</td>
<td>Year Ago</td>
</tr>
<tr class="odd">
<td colspan="6">Durables Diffusion</td>
</tr>
<tr>
<td class="firstcol"> Shipments</td>
<td>71.4</td>
<td>85.7</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Orders</td>
<td>100.0</td>
<td>71.4</td>
<td>42.9</td>
<td>57.1</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Unfilled Orders</td>
<td>100.0</td>
<td>100.0</td>
<td>85.7</td>
<td>100.0</td>
<td>85.7</td>
</tr>
<tr>
<td class="firstcol"> Inventories</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
<td>100.0</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> S&gt;I Diffusion</td>
<td>85.7</td>
<td>57.1</td>
<td>28.6</td>
<td>14.3</td>
<td>57.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be [...]

U.S. Durable Goods Orders: Rise and Shine, A New Dawn?

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524a.jpg" width="353">
Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be strong as well. Excluding aircraft, nondefense capital goods orders are up strongly for two straight months. Shipments and most cuts on capital goods shipments were strong in the month. 
The chart for durable goods looks immediately better. 
While three-month growth rates for durable goods can be very volatile, the graphs on the left documents a strong rise in new orders. A reversal (one month only) in shipments growth now shows advance instead of decline. And, more impressive, is the reduction in the rate of slowing for the declining pace of inventory growth. If firms are no longer seeking to cut inventory growth that could be very helpful to the sector assuming, of course, that the shipment pick up and order pick up are for real. 
Diffusion to relieve confusion&#133; 
The statistics in the table below show that suddenly durable goods shipments and orders join unfilled orders in revealing that growth is broad-based across industries. Our (proprietary) diffusion readings are generally in the 70s or higher; 50 is neutral. These readings look for acceleration in sequential annualized growth rates (3-month Vs six-month, six-month Vs Yr/Yr, Yr/Yr Vs Yr ago, etc). We obtain these results from calculations of annualized growth rates performed across the main durables sectors. Diffusion calculations are helpful in this many-faceted report to distill common themes from an otherwise confusing array of components and subcomponent constructions. As of April, the various reading have begun to show signs of strength across most main sectors.
Sales have begun to exceed inventory growth in most industries over three and six months but are still lower in most for year/year growth (diffusion of 0.14 on this basis). Still, that weakness is an air-pocket of sorts since sales have begun to outpace inventories again just as they had done so one year ago. The report seems to show that the period of distress may have been put behind us even though the month&#146;s reading was no clarion call to growth. It was however a step in the right direction that followed two previous stronger steps.
Orders in the once weak machinery category have broken higher. Primary metals orders again are very strong and transportation orders are strong again. Shipments data show some spottiness across industries but where there is strength it is very strong: primary metals, machinery and electrical equipment.
The report is the most upbeat from durables that we have seen for sometime.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
All Main Industries DIFFUSION Category
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mo</td>
<td>6Mo</td>
<td>9Mo</td>
<td>12Mo</td>
<td>Year Ago</td>
</tr>
<tr class="odd">
<td colspan="6">Durables Diffusion</td>
</tr>
<tr>
<td class="firstcol"> Shipments</td>
<td>71.4</td>
<td>85.7</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Orders</td>
<td>100.0</td>
<td>71.4</td>
<td>42.9</td>
<td>57.1</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Unfilled Orders</td>
<td>100.0</td>
<td>100.0</td>
<td>85.7</td>
<td>100.0</td>
<td>85.7</td>
</tr>
<tr>
<td class="firstcol"> Inventories</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
<td>100.0</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> S&gt;I Diffusion</td>
<td>85.7</td>
<td>57.1</td>
<td>28.6</td>
<td>14.3</td>
<td>57.1</td>
</tr>
</tbody>
</table>
New Home Sales Jump and Prices Dive. Bad News as Good? 
by <a href="/comment/Brusca.html">Robert Brusca</a> May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524b.jpg" width="353">
New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down year/year but only by 10.6%. Conditions are still spotty. While Toll Brothers reported somewhat improved results, that home builder is still not comfortable enough with prospects to give earnings guidance. However, it did say that it had seen glimmerings of strength- not just an abatement of weakness. 
The new home sales report shows the small and volatile Northeast up by 43% Y/Y and the largest region, the South, off by just 3.4% Y/Y. The West and Midwest are off by Y/Y values in the range of 25% to 30%. 
Cleary the rise in sales is the big news in this report. But a rival bit of news is the drop in prices. Last month average and median pries were up Y/Y. But Median prices have swung from +7.9% Y/Y in March to -10.9% Y/Y in April. What&#146;s that line from Frank&#146;s song? Riding high in March, shot down in April &#133;hmmm not quite the verse, but those are the facts. Average prices have switched from a March gain of 8.7% Y/Y to a drop of 3.6% Y/Y in April. The relatively larger drop in median prices speaks of more weakness at the lower priced end of the market and may have something to do with sub-prime problems. Cleary builders have been cutting prices and just as clearly, the strategy has been working. 
If we look at trends in average new home prices around the time of the last recession, we see that builder capitulation on prices was the catalyst in that recession for spurring house prices back up and for ending the weakness in the sector as recovery took hold in the economy at large. House prices then snapped back up into a positive growth range quickly as the economy transitioned from recession to growth. House prices could be performing this same function again. The low prices jump start demand and get some inventory off homebuilder&#146;s hands giving the market a push and creating some buzz at the same time. With continued growth in the rest of the economy housing is able to move ahead and dig itself out of the slump. It looks like a good story to me&#133;Oh, and they all live happily ever after, too.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
New Single Family Home Sales
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="6">Momentum: Annualized Rates Of Change</td>
<td colspan="2">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">As of:</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr class="odd">
<td colspan="8">Month-to-month percent change</td>
</tr>
<tr>
<td class="firstcol">Apr.07</td>
<td>16.2%</td>
<td>3.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>8.5%</td>
<td>-11.1%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Mar.07</td>
<td>-1.4%</td>
<td>77.8%</td>
<td>1.6%</td>
<td>-8.9%</td>
<td>-2.9%</td>
<td>3.0%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Feb.07</td>
<td>-3.8%</td>
<td>-27.4%</td>
<td>-25.9%</td>
<td>-2.0%</td>
<td>21.2%</td>
<td>-1.7%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="8">Annualized Rates</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>40.9%</td>
<td>135.5%</td>
<td>-110.8%</td>
<td>56.1%</td>
<td>110.6%</td>
<td>-34.2%</td>
<td>-18.3%</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>6.1%</td>
<td>225.6%</td>
<td>-24.8%</td>
<td>12.9%</td>
<td>-25.7%</td>
<td>-16.3%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">1-Yr</td>
<td>-10.6%</td>
<td>43.1%</td>
<td>-28.1%</td>
<td>-3.4%</td>
<td>-25.4%</td>
<td>-10.9%</td>
<td>-3.6%</td>
</tr>
</tbody>
</table>
-3.6% 
by <a href="/comment/Brusca.html">Robert Brusca</a> Germany’s IFO Steadies But Index Shows Threat of Decay May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524c.jpg" width="353">
Germany&#146;s IFO index steadied at 108.6 in May a tick below its current cycle peak at 108.7 reached in December 2006. The reading continues to be a strong one and it is said to point to further expansion. But the index is slowing its rate of ascent, as the accompanying chart shows. On that score the good news this month is that expectations improved (to 104.8 in May from 104.3 in April) and that was enough to hike the growth rate for expectations and stave off a decay in the growth of the overall index. The index&#146;s peak growth rate came in mid- 2006 and it has been slowing ever since. The pace of decline reached a local low in March of this year but the renewed upward momentum in the growth rate is without conviction. Right now the trend is up for grabs even though the expectations index moved into a positive growth phase this month following four straight months of negative readings. The current situation index continues to improve at a decelerating pace.
While the index is said to portray conditions of continuing growth, we can see the opposite signal may well be waiting in the wings to supplant it. 
The diffusion readings for the IFO are up to date for May although much of the sector detail for this report is held back for another week. The diffusion indexes show us that overall conditions have been little changed month to month. The overall diffusion index is a tick lower at 16.3. Manufacturing is a bit stronger moving up to 27.6 from 27.1. Construction, however, is slipping. The wholesale sector improved sharply in May rising to 18.4 from a 17.2 in April to 18.4 in May. Retail, however gave ground as did the services sector. 
However the service sector is still at a relatively strong reading in its range (top 5%), while retailing is weak (middle of range at 56.6 percentile). Manufacturing is still the flagship of strength sitting at the top of its range of values back to 1991. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Summary of IFO Sector Climate Readings
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>&nbsp;</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>May-07</td>
<td>Apr-07</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>16.3</td>
<td>16.4</td>
<td>-8.8</td>
<td>-9.6</td>
<td>16.5</td>
<td>-30.6</td>
<td>47.1</td>
<td>99.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>27.6</td>
<td>27.1</td>
<td>-1.2</td>
<td>0.3</td>
<td>27.6</td>
<td>-35.6</td>
<td>63.2</td>
<td>100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-14.6</td>
<td>-13.9</td>
<td>-29.1</td>
<td>-32.2</td>
<td>1.4</td>
<td>-50.7</td>
<td>52.1</td>
<td>69.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale</td>
<td>18.4</td>
<td>17.2</td>
<td>-14.8</td>
<td>-16.5</td>
<td>23.3</td>
<td>-39.6</td>
<td>62.9</td>
<td>92.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-3.2</td>
<td>-0.5</td>
<td>-14.7</td>
<td>-14.8</td>
<td>25.2</td>
<td>-40.3</td>
<td>65.5</td>
<td>56.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>26.5</td>
<td>28.5</td>
<td>8.2</td>
<td>7.8</td>
<td>28.5</td>
<td>-15.7</td>
<td>44.2</td>
<td>95.5%</td>
</tr>
<tr>
<td colspan="4">* May 2001 for Services</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
95.5% 
by <a href="/comment/Stone.html">Carol Stone</a> Canada Corporations Operating Profits Bolstered by Higher Commodity Prices, But ROE Edges Down May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524d.jpg" width="353">
Corporate profits in Canada picked up vigorously in Q1, by 12.2% at an annual rate over Q4 2006 to C$63.8 billion, a record high. While profits have expanded more strongly in recent years, they had slowed in 2006, so this was the best performance since Q4 2005.
As might be expected, the gain was generated in commodity-related industries, where prices have been rising rapidly. A prime example is the oil &amp; gas sector, which staged something of a rebound from a steep decline in Q4. Metals processing industries within the manufacturing sector also saw increases, with manufacturing as a whole up 7.4% on the quarter (at a quarterly rate) and 15.2% from a year ago. Manufacturing profits, as evident in the second graph, struggled in 2005 and 2006, so this Q1 year-on-year performance is the best since late 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524e.jpg" width="353">
Among non-manufacturing sectors, retailing, information and culture, and business services had bounces in their operating profits after weak periods. Real estate and transportation extended trends of less dramatic but consistent growth.
Financial industries, in contrast, saw their profits fall, particularly among security dealers and insurance companies. The financial sector as a whole experienced a decline of 2.5% on the quarter; however, they had been strong in Q4, so the year-on-year result was up 10.4%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524f.jpg" width="353">
These generally good operating results were offset by lower non-operating revenues and higher expenses and taxes, so that profits after tax rose only slightly, from C$41.6 billion in Q4 to C$42.0 billion. On a not seasonally adjusted basis, this was actually a small decline from Q4, cutting the rate of return on shareholders&#39; equity from 11.94% to 11.76%.
All of these data are contained in Haver&#39;s CANSIM database from Statistics Canada.The profits series are reported under &quot;National Accounts&quot;, and the non-operating data in &quot;Balance Sheet and Income Statement&quot; and &quot;Statement of Change in Cash Position&quot; in the &quot;Financial&quot; section. Data are available for 17 nonfinancial industries and five financial industries. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CANADA, Bil.C$</th>
<th scope="col">Q1 2007*</th>
<th scope="col">Q4 2006*</th>
<th scope="col">Q1 2006*</th>
Quarterly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">Total Operating Profit</td>
<td>63.8</td>
<td>62.0</td>
<td>59.6</td>
<td>60.9</td>
<td>55.9</td>
<td>48.5</td>
</tr>
<tr>
<td class="firstcol">% Change (Qtrs at Ann Rate)</td>
<td>12.2%</td>
<td>4.1%</td>
<td>7.5% (Yr/Yr)</td>
<td>8.8%</td>
<td>15.3%</td>
<td>19.9%</td>
</tr>
<tr>
<td class="firstcol">Nonfinancial Industries</td>
<td>46.2</td>
<td>43.9</td>
<td>43.8</td>
<td>44.1</td>
<td>41.1</td>
<td>35.1</td>
</tr>
<tr>
<td class="firstcol">Oil &amp; Gas Extraction</td>
<td>7.4</td>
<td>7.1</td>
<td>8.6</td>
<td>8.1</td>
<td>7.4</td>
<td>5.1</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>11.8</td>
<td>10.9</td>
<td>10.5</td>
<td>10.7</td>
<td>11.1</td>
<td>11.3</td>
</tr>
<tr>
<td class="firstcol">Finance &amp; Insurance </td>
<td>17.6</td>
<td>18.1</td>
<td>15.9</td>
<td>16.8</td>
<td>14.9</td>
<td>13.5</td>
</tr>
<tr>
<td class="firstcol">Total Net Profit</td>
<td>42.0</td>
<td>41.6</td>
<td>37.8</td>
<td>42.1</td>
<td>39.4</td>
<td>33.1</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. Durable Goods Orders: Rise and Shine: A New Dawn?

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523a.jpg" width="353">
Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in data seasonally adjusted by Haver Analytics. On a year-to-year basis, the more closely watched not-seasonally-adjusted figure was up 5.8%, the largest growth since Q2 2005.
Among industries, the boost to year/year growth came from the leader in Chile, copper mining (6.2% of GDP in 2006), which escalated from a mere 0.5% in Q4 to 7.1% in the latest period. Another major contributor was the trade and hotel/restaurant sector (10.0% of GDP), which picked up from 3.8% in Q4 to 6.9% in Q1. Other gains were widespread as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523b.jpg" width="353">
The Chilean economy does appear to be diversifying. While copper mining remains the keystone, other industry sectors are moving ahead. The value-added data for industries are available since 2003. In the second graph, we&#39;ve indexed the NSA figures for Q2 2003 and then applied a 4-quarter moving average. This illustrates the &quot;nested function&quot; feature of the new DLXVG3, now in internal testing here at Haver. We&#39;ve also edited the titles a bit -- you can already do that, of course -- but ordinarily they will show the database &quot;code&quot; for the series to signal to the analyst that calculations are in &quot;nested&quot; mode. Anyway, this graph indicates that copper production has held basically steady over the last four years, but financial services are growing more rapidly than GDP. Other service sectors, especially communications, are also expanding.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523c.jpg" width="353">
On the demand side, every major line item performed well in Q1. Private consumption was up 7.7% from the year earlier versus 6.7% in Q4. Fixed investment accelerated to 7.9% in Q1 from 3.0% in Q4. And exports surged by 9.5% following &quot;just&quot; 2.3%, while imports grew 10.0% compared with 8.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CHILE (% Changes)</th>
<th scope="col">Q1 2007(SAQR*)</th>
<th scope="col">Q4 2006 (SAQR*)</th>
<th scope="col">Q3 2006 (SAQR*) </th>
<th scope="col">Year/Year</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>3.0</td>
<td>2.0</td>
<td>-0.3</td>
<td>5.8</td>
<td>4.0</td>
<td>5.7</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">Copper Industry</td>
<td>5.3</td>
<td>6.7</td>
<td>-4.5</td>
<td>7.1</td>
<td>0.1</td>
<td>-2.5</td>
<td>4.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&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">Private Consumption</td>
<td>3.9</td>
<td>1.3</td>
<td>1.3</td>
<td>7.7</td>
<td>7.1</td>
<td>7.9</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Gross Fixed Investment</td>
<td>5.2</td>
<td>0.6</td>
<td>3.0</td>
<td>7.9</td>
<td>4.0</td>
<td>21.9</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">Exports G &amp; S</td>
<td>6.2</td>
<td>-1.0</td>
<td>3.1</td>
<td>9.5</td>
<td>4.2</td>
<td>3.5</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports G &amp; S</td>
<td>3.8</td>
<td>2.6</td>
<td>2.5</td>
<td>10.0</td>
<td>9.4</td>
<td>17.7</td>
<td>16.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in [...]

Chile GDP Growth Picks Up in Q1; Copper Up, but Other Sectors Also Expanding

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523d.jpg" width="353">
The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The services line seems to be accelerating. But a closer look at the data shows that services lay off events for January and February are below the levels in 2006; cumulative layoff events did rise in March above what is seasonably normal and that has boosted the year to date total to be even with 2006, after being below it for January and February.
As far as the number of workers laid off, those figures are lower in Q1 2007 than in Q1 2006. Their pattern has been choppy.
The big picture trend seems to show some slight upward pressure on the incidence of layoff events.
But if we construct the same sort of chart on the number of persons laid off, instead of events, the layoff total for Q1 is down sharply. So while the number of incidents may have risen in the service sector for April, for Q1, taken as a whole, the number of workers laid off is down sharply. Actually, the number of service workers laid off in mass events according to the definition* is closer to half of that for Q1 last year. For MFG the number of workers laid off is also low relative to last year and relative to this expansion cycle. Construction layoffs are up significantly in Q1 2007 compared to Q1 2006, at 27,000 compared to 21,341 in the year-ago quarter. But the number of construction layoffs is still moderate by the standards of the past six years where layoffs in Q1 had previously averaged 26,036. 
On balance there is no evidence of layoffs rising in a significant way in any sector although there is some tentative evidence that the incidence of layoff events - apparently smaller events -- may have stepped up its pace. Construction may yet prove to be an exception though the data are not clear.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Mass Corporate Layoffs
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="4">Number of Separations</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Manufacturing</td>
<td>Services</td>
<td>Construction</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>51,424</td>
<td>59,545</td>
<td>27,457</td>
</tr>
<tr>
<td colspan="4">Change Yr Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>-11,712</td>
<td>-38,688</td>
<td>6,116</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-06</td>
<td>22,079</td>
<td>17,573</td>
<td>5,572</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-06</td>
<td>530</td>
<td>-47,862</td>
<td>5,611</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-06</td>
<td>15,456</td>
<td>32,559</td>
<td>710</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The [...]

U.S. Mass Corporate Layoffs Still Are Subdued

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523a.jpg" width="353">
Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in data seasonally adjusted by Haver Analytics. On a year-to-year basis, the more closely watched not-seasonally-adjusted figure was up 5.8%, the largest growth since Q2 2005.
Among industries, the boost to year/year growth came from the leader in Chile, copper mining (6.2% of GDP in 2006), which escalated from a mere 0.5% in Q4 to 7.1% in the latest period. Another major contributor was the trade and hotel/restaurant sector (10.0% of GDP), which picked up from 3.8% in Q4 to 6.9% in Q1. Other gains were widespread as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523b.jpg" width="353">
The Chilean economy does appear to be diversifying. While copper mining remains the keystone, other industry sectors are moving ahead. The value-added data for industries are available since 2003. In the second graph, we&#39;ve indexed the NSA figures for Q2 2003 and then applied a 4-quarter moving average. This illustrates the &quot;nested function&quot; feature of the new DLXVG3, now in internal testing here at Haver. We&#39;ve also edited the titles a bit -- you can already do that, of course -- but ordinarily they will show the database &quot;code&quot; for the series to signal to the analyst that calculations are in &quot;nested&quot; mode. Anyway, this graph indicates that copper production has held basically steady over the last four years, but financial services are growing more rapidly than GDP. Other service sectors, especially communications, are also expanding.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523c.jpg" width="353">
On the demand side, every major line item performed well in Q1. Private consumption was up 7.7% from the year earlier versus 6.7% in Q4. Fixed investment accelerated to 7.9% in Q1 from 3.0% in Q4. And exports surged by 9.5% following &quot;just&quot; 2.3%, while imports grew 10.0% compared with 8.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CHILE (% Changes)</th>
<th scope="col">Q1 2007(SAQR*)</th>
<th scope="col">Q4 2006 (SAQR*)</th>
<th scope="col">Q3 2006 (SAQR*) </th>
<th scope="col">Year/Year</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>3.0</td>
<td>2.0</td>
<td>-0.3</td>
<td>5.8</td>
<td>4.0</td>
<td>5.7</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">Copper Industry</td>
<td>5.3</td>
<td>6.7</td>
<td>-4.5</td>
<td>7.1</td>
<td>0.1</td>
<td>-2.5</td>
<td>4.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&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">Private Consumption</td>
<td>3.9</td>
<td>1.3</td>
<td>1.3</td>
<td>7.7</td>
<td>7.1</td>
<td>7.9</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Gross Fixed Investment</td>
<td>5.2</td>
<td>0.6</td>
<td>3.0</td>
<td>7.9</td>
<td>4.0</td>
<td>21.9</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">Exports G &amp; S</td>
<td>6.2</td>
<td>-1.0</td>
<td>3.1</td>
<td>9.5</td>
<td>4.2</td>
<td>3.5</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports G &amp; S</td>
<td>3.8</td>
<td>2.6</td>
<td>2.5</td>
<td>10.0</td>
<td>9.4</td>
<td>17.7</td>
<td>16.9</td>
</tr>
</tbody>
</table>
U.S. Mass Corporate Layoffs Still Are Subdued 
by <a href="/comment/Brusca.html">Robert Brusca</a> May 23, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523d.jpg" width="353">
The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The services line seems to be accelerating. But a closer look at the data shows that services lay off events for January and February are below the levels in 2006; cumulative layoff events did rise in March above what is seasonably normal and that has boosted the year to date total to be even with 2006, after being below it for January and February.
As far as the number of workers laid off, those figures are lower in Q1 2007 than in Q1 2006. Their pattern has been choppy.
The big picture trend seems to show some slight upward pressure on the incidence of layoff events.
But if we construct the same sort of chart on the number of persons laid off, instead of events, the layoff total for Q1 is down sharply. So while the number of incidents may have risen in the service sector for April, for Q1, taken as a whole, the number of workers laid off is down sharply. Actually, the number of service workers laid off in mass events according to the definition* is closer to half of that for Q1 last year. For MFG the number of workers laid off is also low relative to last year and relative to this expansion cycle. Construction layoffs are up significantly in Q1 2007 compared to Q1 2006, at 27,000 compared to 21,341 in the year-ago quarter. But the number of construction layoffs is still moderate by the standards of the past six years where layoffs in Q1 had previously averaged 26,036. 
On balance there is no evidence of layoffs rising in a significant way in any sector although there is some tentative evidence that the incidence of layoff events - apparently smaller events -- may have stepped up its pace. Construction may yet prove to be an exception though the data are not clear.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Mass Corporate Layoffs
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="4">Number of Separations</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Manufacturing</td>
<td>Services</td>
<td>Construction</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>51,424</td>
<td>59,545</td>
<td>27,457</td>
</tr>
<tr>
<td colspan="4">Change Yr Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>-11,712</td>
<td>-38,688</td>
<td>6,116</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-06</td>
<td>22,079</td>
<td>17,573</td>
<td>5,572</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-06</td>
<td>530</td>
<td>-47,862</td>
<td>5,611</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-06</td>
<td>15,456</td>
<td>32,559</td>
<td>710</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

Persistent negative US economic surprises leading to big rate-cut expectations

Germany is Euro area weakling

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

**Energy and labour markets**
Chart 1 below highlights two key trends: the real consumer price of energy in the OECD economies (indexed to 1970) has shown significant volatility, with sharp spikes during periods of energy crises (e.g., 1970s oil shocks, 2008, and post-pandemic supply constraints) and declines following market adjustments or advances in energy production. Meanwhile, the US labour share of business output has experienced a steady decline since the 1980s, reflecting structural changes in the economy such as globalization, technological advances, a shift in bargaining power away from labour toward capital as well as higher real energy prices. These trends and the interplay between them will arguably form the basis of several policy choices that will be made (or already are being made) by a new US administration.

250123Z1.jpg

**Electricity prices**
Energy prices, their level and their volatility, arguably play a much bigger role in broader macroeconomic fluctuations than they are given credit for. Chart 2 below shows electricity prices (a 2-year average) across six major developed economies. It shows that the US has faced the cheapest electricity at around $44/MWh. The UK and Germany, in contrast, have faced the most expensive electricity at respectively $106/MWh and $94/MWh. This disparity reflects a mix of factors: European countries, particularly the UK and Germany, face elevated prices due to heavy reliance on natural gas imports, exacerbated by geopolitical tensions (e.g., reduced Russian supply), higher renewable energy integration costs, and carbon pricing mechanisms. The US, in contrast, enjoys lower electricity costs due to more abundant domestic energy resources, particularly natural gas, and less exposure to international energy markets. Against this backdrop it is hardly a surprise that the US economy has flourished (relative to other advanced economies) while the UK and Germany have floundered.

250123Z2.jpg

**The UK labour market**
This week’s labour market data additionally suggest that the UK will probably struggle to keep pace with the US economy in the period immediately ahead. The data specifically revealed that employment growth is slowing on all measures, and the PAYE measure of payrolls in particular (see chart 3 below). And while private sector pay growth has also slowed, the 6-month annualised rates of growth still stood at a relatively lofty 5.8% in December. Weaker employment growth will encourage the BoE to cut rates again before too long (probably in February) but weaker wage growth could also be necessary for a much looser policy stance to be enacted over the next few months.

250123Z3.jpg

**Household savings and labour market activity**
At a broader global level, a key risk to the economic outlook at present concerns restrictive monetary policy and its impact on labour market activity and household spending. Chart 4 below shows that household saving rates in the world’s major economies have – on the whole – been rebounding over the past two years. Simultaneously, the unemployment rate in advanced economies has begun to climb. These trends align with the tightening of monetary policy that’s been enacted in recent years and economic uncertainty. But if that combination persists, it could place a bigger brake on the world economy this year than many analysts are anticipating.

250123Z4.jpg

**China’s credit impulse**
Another big source of uncertainty, at present, concerns China. Chart 5 below compares the Citigroup Economic Surprise Index for emerging markets (EM) and Haver’s calculations for China’s credit impulse (the change in new credit as a percentage of GDP). The chart suggests that China's credit growth influences broader EM economic fluctuations. During periods of robust credit growth (e.g., 2020-2021), driven by stimulus measures, EM economies benefited from improved liquidity and demand from China. Conversely, periods of credit tightening (e.g., 2017 and 2023-2024) weighed on economic surprises, reflecting weaker support for growth. These dynamics underline China’s outsized role in shaping sentiment and economic conditions in emerging markets. That its credit impulse, moreover, remained negative in Q4 (of 2024) underscores how China might continue to exert downward pressure on the world economy in the period immediately ahead.

250123Z5.jpg

**South Korean trade**
Another source of uncertainty for the world economy, at present, is the optimism surrounding AI. While proponents highlight its transformative potential to boost productivity, efficiency, and innovation across industries, sceptics question the timeline for a meaningful economic impact. With that in mind it would be inappropriate to draw strong conclusions from chart 6 below but it is certainly of note that South Korea – which has been heavily reliant on AI-fuelled trade – saw a big slowdown in export growth in the first 20 days of January. Much of that slowdown, moreover, could be traced to a big drop in semiconductor trade.

250123Z6.jpg

Financial markets have enjoyed a notable lift in sentiment over recent days, driven by renewed optimism about the domestic economic policies of a new US administration. Investors have certainly been cheered by early signals of a pro-growth strategy, with the energy sector taking centre stage following a ceasefire between Israel and Gaza and the announcement of measures aimed at reducing US energy costs (see charts 1 and 2). Meanwhile, China’s stronger-than-expected growth figures last week and softer-than-expected inflation readings from both the US and the UK have fuelled gains across equity and bond markets, bolstering risk appetite in other markets. However, despite the prevailing optimism, several factors warrant caution. Chief among them is the global uncertainty that surrounds the policy choices of a new US administration. The policy choices of central banks will also be critical, particularly as labour market strength could keep inflation risks alive (charts 3 and 4). Questions also linger about China’s ability to sustain its growth momentum, especially as its property sector and consumer demand face ongoing challenges (chart 5). Finally, while artificial intelligence is increasingly seen as a driver of future growth and productivity, doubts persist over its near-term potential to meaningfully transform the world economy (chart 6). For now, investors appear content to ride the wave of positive sentiment, but vigilance over these risks will be critical as the economic landscape continues to evolve.

Charts of the Week: Trump Cards

Tom Moeller

250123A1.jpg

250123B1.jpg

Initial claims for unemployment insurance rose to 223,000 in the third week of January from an unrevised 217,000 during the prior week. A 215,000 increase in initial claims had been expected in the Action Economics Forecast Survey. Initial claims have risen from a 203,000 low in the first week of January. During the last four weeks, initial claims averaged 213,500, down from 226,750 four weeks earlier.

Continuing claims for jobless insurance increased 46,000 (7.8% y/y) to 1.899 million in the week ended January 11 from 1.853 million in the prior week. Ongoing claims have risen from a low of 1.834 million in the third week of December. The four week moving average of continuing jobless insurance claims eased to 1.866 million, down from a 1.888 million high in the third week of November.

The insured rate of unemployment was 1.2% for the fourth straight week. This level was increased from a 2022 low of 0.9% and compares to the rise in the overall unemployment rate to 4.1% from 3.4% over the same period.

Unemployment rates vary widely across states. The Labor Department reports that for the week ended January 4, the insured unemployment rate was highest in Rhode Island (3.22%), New Jersey (3.07%), Minnesota (2.73%), Washington (2.52%) and Massachusetts (2.41%). The insured unemployment rates were lowest in Florida (0.33%), Virginia (0.43%), Tennessee (0.58%) and Alabama (0.52%) and the Virgin Islands (0.67%). Rates in other notable states include California (2.32%), Pennsylvania (2.24%), New York (2.08%) and Texas (1.13%). These state rates 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

250123C1.jpg

250123D1.jpg

- Initial jobless claims increase to highest level in six weeks. 
- Continuing claims approach four-week high.
- The insured unemployment rate remains low.

U.S. Unemployment Insurance Claims Rise in Latest Week

250123E.jpg

EU order trends ‘improved’ slightly in January as the net diffusion reading rose from -40 to -34. Still, that improvement leaves orders below their 3-month, 6-month, or 12-month averages. The queue standard of January orders is in the lower 14th percentile of its historic queue of data. Obviously, it remains a historically weak reading. The order series is volatile as the chart shows. But it is still in a clear downtrend even with the uptick this month.

Export orders have approximately the same profile as for orders overall. But export orders weaken slightly in January compared to December. Export orders overall have a slightly weaker queue standing than total orders at a 13.4 percentile level.

The diffusion readings for stocks of finished goods weakened in January but even with its weaker January assessment, stocks have a firm-to-strong 72.5 percentile standing.

Looking ahead, the outlook for output volume over the next three months improved sharply from its stunning weak reading of -31 in December. However, the rise to -19 in January represents only a 4.8 percentile standing.

Unfortunately, average output prices for three months ahead has reading of +27 in January, up from +23 in December and +11 in November; the backtracking in prices expected, has brought the expectation level for the current reading to a high, 90-percentile standing. These rising inflation expectations are going to be a real problem for the Bank of England.

IP data lag the CBI survey responses. The manufacturing IP growth rate, year-on-year, has a 17.4 percentile standing as of its most recent observation in November 2024. That is also very weak. The CBI results are not giving a different message from the industrial production data, but they are timelier.

The ramp up in inflation expectation is not good new with CPI-H inflation at 3.5% year-over-year and with the core pace at 4.2%. Core inflation, sequentially, is looking stable around the 4.2% pace; for the headline, the pace has accelerated from 3.5% over 12 months to a pace of 5.4% over three months. These results, coupled with the rise in CBI expectations, are not good news for the U.K. or for the BOE.

250123.jpg

United Kingdom

U.K. Order Trends Are Still Eroding

250122F11.jpg

250122G11.jpg

The Conference Board's Leading Economic Index fell 0.1% (-3.0% y/y) during December, following a 0.4% November rise, revised from 0.3%, and a 0.3% October decline, revised from -0.4%. A 0.1% easing in the December index had been expected in the Action Economics Forecast Survey. The Leading Index is comprised of 10 components which tend to precede changes in overall economic activity. The index has been trending lower since January 2022, contrasting with positive real economic growth.

During December, component changes amongst the leaders diverged. Series which contributed positively to the index change included a longer factory sector workweek, improved factory orders for consumer goods, an increase in orders for nondefense capital goods excluding aircraft, higher stock prices in the S&P 500 index and the leading credit index. Series contributing negatively were higher initial unemployment insurance claims, a lower ISM new orders index, falling building permits, the interest rate yield curve and consumer expectations for business/economic conditions.

The Coincident Economic Index rose 0.4% last month (1.6% y/y) after rising 0.2% in November and holding steady in October. Movement amongst the four components was uniformly positive in December. Industrial production jumped by the largest amount since February, real personal income strengthened steadily, payroll employment improved on prior two months’ increases while real manufacturing & trade sales rose steadily.

The Lagging Economic Index improved 0.1% last month (0.3% y/y) after rising 0.2% in November and remaining unchanged in October. The 6-month change in the services CPI, the 6-month change in unit labor costs and the ratio of consumer installment credit-to-personal income contributed positively to the index change. The business inventory-to-sales ratio contributed nothing to the index change. The duration of unemployment, the prime interest rate charged by banks and commercial & industrial loans outstanding contributed negatively to the index change.

The ratio of coincident-to-lagging indicators, considered another leading indicator, rose 0.3% last month after holding steady for two straight months.

The Conference Board figures are available in Haver's **BCI** database; the components are available there, and most are also in **USECON**. The expectations are in the **AS1REPNA** database. Visit the Conference Board's [website](https://www.conference-board.org/us/) for coverage of leading indicator series from around the world.

250122H11.jpg

250122I11.jpg

- Movement in leading indicator components remains mixed.
- Coincident indicators strengthen.
- Lagging indicators edge higher.

U.S. Leading Indicators Ease

250122C2.jpg

250122D2.jpg

Retail gasoline prices for all grades rose to an average $3.23 per gallon (1.5% y/y) in the week ending January 20 from $3.16 in the prior week. The all-time high of $5.11 was in the week ending June 13, 2022. The retail price for on-highway diesel fuel jumped	to $3.72 per gallon (-3.2% y/y) in the week of January 20, the highest level since early-August, from $3.60 in the prior week. The latest price was down from a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil rose to $78.58 per barrel (7.3% y/y) in the week ending January 17 after increasing to $74.32 in the prior week. It was the highest level in five months but still below the peak of $120.46 in the week of June 10, 2022. Yesterday, the price was $75.89 per barrel. The price of European Brent crude oil rose to $82.53 per barrel (3.0% y/y) in the week of January 17 from $78.14 in the prior week. Prices remained below a peak of $127.40 in the week of June 10, 2022. Yesterday’s price was $80.57 per barrel.

Natural gas prices surged to an average $5.47/mmbtu (87.3% y/y) in the week of January 17 from $3.93 in the prior week, posting the highest level since a high of $5.11/mmbtu in the week of January 12, 2024. Prices reached a low of $1.40/mmbtu in the week of March 15, 2024 and a peak of $9.56 in the week of August 26, 2022. Yesterday, the price was $4.40/mmbtu.

Gasoline demand rose 0.8% y/y in the four weeks ending January 10 on top of a 1.2% y/y gain in the prior four weeks. Demand for all petroleum products increased 1.1% y/y in the four weeks ending January 10. Crude oil input to refineries increased 1.2% y/y in the four weeks ending January 10 after a 1.5% y/y rise in the prior four weeks.

Gasoline inventories fell 1.8% y/y in the week ending January 10 after a 3.0% y/y decline in the prior week. In contrast, residual fuel oil inventories fell 12.1% y/y in the week of January 10 following a 5.7% y/y decrease in the prior week. Crude oil inventories rose 2.7% y/y in the week of January 10, the same as during the prior week.

Measured in days’ supply, gasoline inventories rose to 28.7 days in the week of January 10 from 27.5 days in the prior	 week, registering the highest reading since the end of February 2024. The recent low was 22.9 days in the week of November 8. The supply of crude oil was little changed at 24.6 days in the week of January 10, still near the lowest number since a low of 24.8 days in the week of September 20, 2024 and below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline prices reach three-month high.
- Crude oil costs surge.
- Natural gas prices strengthen to two-year high.

Economy in Brief: May 2007

Jump to:

Japan's Labor Market Looks Its Best in Several Years, but Industry May Have Lost Steam

Bank Loan Delinquencies & Charge-Offs Increase in Q1, But Remain Lower than During Last Recession; Great Variation [...]

New Home Sales Jump and Prices Dive. Bad News as Good?

U.S. Durable Goods Orders: Rise and Shine, A New Dawn?

U.S. Durable Goods Orders: Rise and Shine: A New Dawn?

Chile GDP Growth Picks Up in Q1; Copper Up, but Other Sectors Also Expanding

U.S. Mass Corporate Layoffs Still Are Subdued

Chile GDP Growth Picks Up in Q1; Copper Up, but Other Sectors Also Expanding