Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215f.jpg" align="right" border="0" height="265" width="353">
The National Association of Home Builders' (NAHB) indicated
that its December Composite Housing Market Index remained stable m/m at
a reading of 9. The latest level was the lowest in the series' history
which extends back to 1984 and it was down by 90% from the high during
2005.
During the last twenty years there has been an 83% correlation
between the y/y change in the Composite Index and the change in single
family housing starts.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215g.jpg" align="right" border="0" height="265" width="353">
The index for single-family detached homes dipped slightly m/m
to a new series' low while builders' view of single-family home sales
during the next six months also fell to the series' low.
Traffic of prospective home buyers held steady m/m at the
series' low.
Except for a modest uptick in the West, the builders' index in
the country's regions continued to decline or held steady at the record
low level.
The NAHB index is a diffusion index based on a survey of
builders. Readings above 50 signal that more builders view conditions
good than poor.
Visit the <a href="http://www.nahb.org">National
Association of Home Builders</a>.
The Great Recapitalization from the Federal
Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/es/08/ES0829.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">December</th>
<th scope="col">November
&nbsp;</th>
<th scope="col">December '07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>9</td>
<td>9</td>
<td>18</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
</tbody>
</table>
</body></html>

The National Association of Home Builders' (NAHB) indicated that its December Composite Housing Market Index remained stable m/m at a reading of 9. The latest level was the lowest in the series' history which extends back to 1984 and [...]

U.S. NAHB Housing Market Index Stable At A Record Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215d.jpg" align="right" border="0" height="265" width="353">
The Empire State Index of manufacturing actor activity for
December, reported by the Federal Reserve Bank of New York, remained as
negative as it was during the prior month. At -25.73 the index was the
lowest in the series' short eight year history. A reading of -27 had
been the Consensus expectation.
The figure is a diffusion index. Since the series' inception
in 2001 there has been a 58% correlation between its level and the
three-month change in U.S. factory sector industrial production.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215e.jpg" align="right" border="0" height="265" width="353">
The index of pricing pressure also fell to an eight year low
of -7.45, down over twenty five points from November. That was the
lowest level since December 2001. Since inception in 2001, there has
been an 81% correlation between the index of prices paid and the
three-month change in the core intermediate materials PPI.
The indexes for new orders, shipments and unfilled orders all
remained about as negative as during November.
The employment index improved just slightly m/m but remained
near its lowest level since late 2001, negative for the sixth
consecutive month. In the history of the NY employment index, there has
been an 86% correlation between it and the three-month growth in
overall factory sector employment.
Like the Philadelphia Fed Index of General Business
Conditions, the Empire State Business Conditions Index reflects answers
to an independent survey question; it is not a weighted combination of
the components.
The Empire State index of expected business
conditions in six months improved slightly to 19.48 from
13.02. It was still close to its lowest since the recession of 2001.
The subseries for shipments improved but employment and new orders
remained low. The pricing index collapsed to the lowest level since
2001.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State conducted by the Federal Reserve Bank
of New York. Participants from across the state in a variety of
industries respond to a questionnaire and report the change in a
variety of indicators from the previous month. Respondents also state
the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including
methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire
State Manufacturing Survey</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December '07&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>-25.76</td>
<td>-25.43</td>
<td>9.89</td>
<td>-10.13</td>
<td>17.23</td>
<td>20.24</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>-7.45</td>
<td>20.48</td>
<td>35.00</td>
<td>46.99</td>
<td>35.64</td>
<td>41.88</td>
</tr>
</tbody>
</table>
</body></html>

The Empire State Index of manufacturing actor activity for December, reported by the Federal Reserve Bank of New York, remained as negative as it was during the prior month. At -25.73 the index was the lowest in the series' short [...]

U.S. Empire State Index Remained Negative; Prices Paid Index Lower Still

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215b.jpg" align="right" border="0" height="265" width="353">
Industrial production fell 0.7% during November after a
revised 1.5% rise (initially reported at 1.3%) during October. That
earlier increase was lifted by recoveries from Hurricanes Gustav
&amp; Ike and an end to the strike at Boeing. Last month's decline
about matched Consensus expectations.The -5.5% y/y change in industrial
output was nearly sharpest drop since the recession of 1982.
The weakness in factory output was worse than the total IP
figure suggested. In fact a 1.4% decline in manufacturing production
was double that of the total and nearly the worst since 1982. Output of
consumer goods fell 0.7% and that pulled the y/y change to -3.8% as
production of motor vehicles &amp; parts declined 2.8% (-21.4%
y/y). Outside of the auto sector the news was quite bad and production
fell 1.4% for a 6.3% y/y decline.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215c.jpg" align="right" border="0" height="265" width="353">
Industrial production in the high-tech sector is in steep
recession. Output fell 1.9% during November, about as it did during the
prior three months. The figure was pulled lower by a 1.1% (-2.9% y/y)
shortfall in the output of computers &amp; peripherals which was
the sixth consecutive monthly drop.
Output declines extend well beyond autos and high-tech. Less
those two sectors, production fell 1.4% last month for a y/y decline of
6.9%. Indeed, the industry detail further reflected widespread
recession in the factory sector. Output of furniture &amp; related
products fell 2.9% last month for an 18.8% y/y decline, the largest y/y
drop since the recession of 1975. Machinery production continued to
reflect recession. The 2.3% (-8.8% y/y) was the third such consecutive
drop. Output of electrical equipment production again joined the
recession show and fell 2.2% (-5.0% y/y). Apparel output in the
"recession-resistant" nondurables sector slipped 0.3% after much
heftier declines during the prior two months but it is down just 4.0%
y/y. Production of chemicals reversed much of an October increase and
fell 3.6% (-8.7% y/y).
Utility output surged 1.6% (-0.3% y/y) with colder
temperatures.
Capacity utilization fell to 75.4% after its brief October
recovery. It was close to its lowest level since 2003. Utilization in
the factory sector of 72.2% also was near the lowest since 2003.
Capacity in the factory sector increased a firm 1.7% y/y).
The Financial Tsunami and the Federal Reserve
is today's speech delivered by Philadelphia Fed President Charles I.
Plosser and it can be found <a href="http://www.philadelphiafed.org/publications/speeches/plosser/2008/12-02-08_university-of-rochester.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">INDUSTRIAL
PRODUCTION (SA, %)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output </td>
<td>-0.7</td>
<td>1.5</td>
<td>-5.5</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>-1.4</td>
<td>0.7</td>
<td>-7.3</td>
<td>1.8</td>
<td>2.8</td>
<td>4.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>-0.7</td>
<td>1.6</td>
<td>-3.8</td>
<td>1.7</td>
<td>0.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>3.3</td>
<td>-2.6</td>
<td>-7.4</td>
<td>3.3</td>
<td>10.4</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-3.3</td>
<td>-1.4</td>
<td>-9.7</td>
<td>-2.5</td>
<td>2.2</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>1.6</td>
<td>0.7</td>
<td>-0.3</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>75.4</td>
<td>76.0</td>
<td>81.1 (Nov.'07)</td>
<td>81.0</td>
<td>80.9</td>
<td>80.2</td>
</tr>
</tbody>
</table>
</body></html>

Industrial production fell 0.7% during November after a revised 1.5% rise (initially reported at 1.3%) during October. That earlier increase was lifted by recoveries from Hurricanes Gustav & Ike and an end to the strike at Boeing. [...]

U.S. Factory Output Off As Recession Worsens

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215b.jpg" align="right" border="0" height="265" width="353">
Industrial production fell 0.7% during November after a
revised 1.5% rise (initially reported at 1.3%) during October. That
earlier increase was lifted by recoveries from Hurricanes Gustav
&amp; Ike and an end to the strike at Boeing. Last month's decline
about matched Consensus expectations.The -5.5% y/y change in industrial
output was nearly sharpest drop since the recession of 1982.
The weakness in factory output was worse than the total IP
figure suggested. In fact a 1.4% decline in manufacturing production
was double that of the total and nearly the worst since 1982. Output of
consumer goods fell 0.7% and that pulled the y/y change to -3.8% as
production of motor vehicles &amp; parts declined 2.8% (-21.4%
y/y). Outside of the auto sector the news was quite bad and production
fell 1.4% for a 6.3% y/y decline.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215c.jpg" align="right" border="0" height="265" width="353">
Industrial production in the high-tech sector is in steep
recession. Output fell 1.9% during November, about as it did during the
prior three months. The figure was pulled lower by a 1.1% (-2.9% y/y)
shortfall in the output of computers &amp; peripherals which was
the sixth consecutive monthly drop.
Output declines extend well beyond autos and high-tech. Less
those two sectors, production fell 1.4% last month for a y/y decline of
6.9%. Indeed, the industry detail further reflected widespread
recession in the factory sector. Output of furniture &amp; related
products fell 2.9% last month for an 18.8% y/y decline, the largest y/y
drop since the recession of 1975. Machinery production continued to
reflect recession. The 2.3% (-8.8% y/y) was the third such consecutive
drop. Output of electrical equipment production again joined the
recession show and fell 2.2% (-5.0% y/y). Apparel output in the
"recession-resistant" nondurables sector slipped 0.3% after much
heftier declines during the prior two months but it is down just 4.0%
y/y. Production of chemicals reversed much of an October increase and
fell 3.6% (-8.7% y/y).
Utility output surged 1.6% (-0.3% y/y) with colder
temperatures.
Capacity utilization fell to 75.4% after its brief October
recovery. It was close to its lowest level since 2003. Utilization in
the factory sector of 72.2% also was near the lowest since 2003.
Capacity in the factory sector increased a firm 1.7% y/y).
The Financial Tsunami and the Federal Reserve
is today's speech delivered by Philadelphia Fed President Charles I.
Plosser and it can be found <a href="http://www.philadelphiafed.org/publications/speeches/plosser/2008/12-02-08_university-of-rochester.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">INDUSTRIAL
PRODUCTION (SA, %)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output </td>
<td>-0.7</td>
<td>1.5</td>
<td>-5.5</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>-1.4</td>
<td>0.7</td>
<td>-7.3</td>
<td>1.8</td>
<td>2.8</td>
<td>4.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>-0.7</td>
<td>1.6</td>
<td>-3.8</td>
<td>1.7</td>
<td>0.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>3.3</td>
<td>-2.6</td>
<td>-7.4</td>
<td>3.3</td>
<td>10.4</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-3.3</td>
<td>-1.4</td>
<td>-9.7</td>
<td>-2.5</td>
<td>2.2</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>1.6</td>
<td>0.7</td>
<td>-0.3</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>75.4</td>
<td>76.0</td>
<td>81.1 (Nov.'07)</td>
<td>81.0</td>
<td>80.9</td>
<td>80.2</td>
</tr>
</tbody>
</table>
U.S. Empire State Index Remained
Negative; Prices Paid Index Lower Still 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 15, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215d.jpg" align="right" border="0" height="265" width="353">
The Empire State Index of manufacturing actor activity for
December, reported by the Federal Reserve Bank of New York, remained as
negative as it was during the prior month. At -25.73 the index was the
lowest in the series' short eight year history. A reading of -27 had
been the Consensus expectation.
The figure is a diffusion index. Since the series' inception
in 2001 there has been a 58% correlation between its level and the
three-month change in U.S. factory sector industrial production.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215e.jpg" align="right" border="0" height="265" width="353">
The index of pricing pressure also fell to an eight year low
of -7.45, down over twenty five points from November. That was the
lowest level since December 2001. Since inception in 2001, there has
been an 81% correlation between the index of prices paid and the
three-month change in the core intermediate materials PPI.
The indexes for new orders, shipments and unfilled orders all
remained about as negative as during November.
The employment index improved just slightly m/m but remained
near its lowest level since late 2001, negative for the sixth
consecutive month. In the history of the NY employment index, there has
been an 86% correlation between it and the three-month growth in
overall factory sector employment.
Like the Philadelphia Fed Index of General Business
Conditions, the Empire State Business Conditions Index reflects answers
to an independent survey question; it is not a weighted combination of
the components.
The Empire State index of expected business
conditions in six months improved slightly to 19.48 from
13.02. It was still close to its lowest since the recession of 2001.
The subseries for shipments improved but employment and new orders
remained low. The pricing index collapsed to the lowest level since
2001.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State conducted by the Federal Reserve Bank
of New York. Participants from across the state in a variety of
industries respond to a questionnaire and report the change in a
variety of indicators from the previous month. Respondents also state
the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including
methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire
State Manufacturing Survey</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December '07&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>-25.76</td>
<td>-25.43</td>
<td>9.89</td>
<td>-10.13</td>
<td>17.23</td>
<td>20.24</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>-7.45</td>
<td>20.48</td>
<td>35.00</td>
<td>46.99</td>
<td>35.64</td>
<td>41.88</td>
</tr>
</tbody>
</table>
U.S. NAHB Housing Market Index
Stable At A Record Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 15, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215f.jpg" align="right" border="0" height="265" width="353">
The National Association of Home Builders' (NAHB) indicated
that its December Composite Housing Market Index remained stable m/m at
a reading of 9. The latest level was the lowest in the series' history
which extends back to 1984 and it was down by 90% from the high during
2005.
During the last twenty years there has been an 83% correlation
between the y/y change in the Composite Index and the change in single
family housing starts.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215g.jpg" align="right" border="0" height="265" width="353">
The index for single-family detached homes dipped slightly m/m
to a new series' low while builders' view of single-family home sales
during the next six months also fell to the series' low.
Traffic of prospective home buyers held steady m/m at the
series' low.
Except for a modest uptick in the West, the builders' index in
the country's regions continued to decline or held steady at the record
low level.
The NAHB index is a diffusion index based on a survey of
builders. Readings above 50 signal that more builders view conditions
good than poor.
Visit the <a href="http://www.nahb.org">National
Association of Home Builders</a>.
The Great Recapitalization from the Federal
Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/es/08/ES0829.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">December</th>
<th scope="col">November
&nbsp;</th>
<th scope="col">December '07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>9</td>
<td>9</td>
<td>18</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
</tbody>
</table>
Growth in Chinese Industrial
Production Slows: A Proxy for GDP Growth 
by <a href="/comment/Curley.html">Louise
Curley</a> December 15, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215i.jpg" align="left" border="0" height="265" width="353">
Chinese industrial production increased 5.4% in November, the
smallest increase since 2002. Growth in industrial production declined
intermittently for a year after reaching a monthly year to year peak of
19.5% in June, 2007, but in the last five months it has been in a free
fall, from 16.0% to 5.4%. The year to year changes in the growth of
industrial production are shown in the first chart.
Some of the components of industrial production are showing
declines of more than a month for first time. Production of electricity
has been down for the last two months, that of steel for the last three
months and the of pig iron for the last four months as shown in the
second chart.
China's National Bureau of Statistics measures industrial
production in terms of gross value added in 1990 prices. It is
therefore a much broader measure than the indexes of industrial
production of most other countries and is a good proxy for Real Gross
Domestic Product. The similarity between the trends of the GDP and GVA
, shown in the third chart, is apparent. The slow down in industrial
production growth in October and November, suggest that the growth in
the fourth quarter of GDP will be well below the 9% of the third
quarter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215h.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215j.jpg" border="0" height="265" width="312">


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CHINA
INDUSTRIAL PRODUCTION (GROSS VALUE ADDED) 
&nbsp;Y/Y PERCENT CHANGE&nbsp;</th>
<th scope="col">Nov 08</th>
<th scope="col">Oct 08&nbsp;</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
<th scope="col">Jul&nbsp; 08&nbsp;
&nbsp;</th>
<th scope="col">Jun&nbsp; 08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>5.4</td>
<td>8.2</td>
<td>11.4</td>
<td>12.8</td>
<td>14.7</td>
<td>16.0</td>
</tr>
<tr>
<td class="firstcol">Output of Selected
Products</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Electricity</td>
<td>-7.79</td>
<td>-3.04</td>
<td>4.80</td>
<td>5.71</td>
<td>9.59</td>
<td>8.06</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Steel</td>
<td>-11.34</td>
<td>-16.36</td>
<td>-7.25</td>
<td>2.37</td>
<td>8.81</td>
<td>11.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Pig Iron</td>
<td>-16.00</td>
<td>-16.36</td>
<td>-4.97</td>
<td>-1.86</td>
<td>-5.80</td>
<td>-8.38</td>
</tr>
</tbody>
</table>
Japan Tankan Survey Drops Sharply 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 15, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215k.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s Tankan for 2008 Q4 shows dramatic weakening. The
headline pace for large enterprises in manufacturing has dropped to -24
from -3 in 2008-Q4. Non MFG has turned negative to -9 in Q4 from +1 in
Q3. The all industries index is at -16 in 2008-Q4 down from flat in
2008-Q3. Of the main sectors, Construction. Real estate, Wholesaling,
Retailing, Transportation, Services for businesses, Personal services
and Restaurants and hotels all are on their weakest respective readings
since 2003-Q3 except Construction. That sector reading lies in the
bottom quarter of its range. 
 

Even construction is weak as its average has been a reading of
-3.0 while its actual reading in 2008 Q4 is -10. Manufacturing&#8217;s
average score has been -13.5 and that is now at -24.0. 
 

The manufacturing outlook has also deteriorated. The Q1
outlook if for a reading of -36 compared to an outlook for -4 for
2008-Q4. Similarly for Nonmanufacturing the outlook has slipped to -14
in 2009-Q1 from what was -1 for 2008-Q4. 
 

The outlook and current assessments for small and medium-sized
firms is just as bad or worse. In Japan the large enterprise survey is
the bellwether. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Tankan
Results Large Enterprises</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Readings</td>
<td colspan="2">Averages</td>
<td>PERCENTILES</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-24.0</td>
<td>-3.0</td>
<td>5.0</td>
<td>11.0</td>
<td>-13.5</td>
<td>16.3</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Nonmanufacturing</td>
<td>-9.0</td>
<td>1.0</td>
<td>10.0</td>
<td>12.0</td>
<td>-4.0</td>
<td>13.8</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>-16.0</td>
<td>0.0</td>
<td>7.0</td>
<td>12.0</td>
<td>-8.0</td>
<td>15.1</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-10.0</td>
<td>-7.0</td>
<td>-1.0</td>
<td>-9.0</td>
<td>-8.5</td>
<td>-3.8</td>
<td>22.2%</td>
</tr>
<tr>
<td class="firstcol">Real Estate</td>
<td>-7.0</td>
<td>5.0</td>
<td>22.0</td>
<td>21.0</td>
<td>-1.0</td>
<td>29.2</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>-7.0</td>
<td>11.0</td>
<td>12.0</td>
<td>14.0</td>
<td>2.0</td>
<td>17.5</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-18.0</td>
<td>-5.0</td>
<td>0.0</td>
<td>0.0</td>
<td>-11.5</td>
<td>4.5</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Transportation</td>
<td>-7.0</td>
<td>6.0</td>
<td>16.0</td>
<td>17.0</td>
<td>-0.5</td>
<td>13.9</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Services for Business</td>
<td>-1.0</td>
<td>4.0</td>
<td>20.0</td>
<td>22.0</td>
<td>1.5</td>
<td>22.2</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Personal Services</td>
<td>-11.0</td>
<td>6.0</td>
<td>10.0</td>
<td>13.0</td>
<td>-2.5</td>
<td>9.6</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Restaurants &amp; Hotels</td>
<td>-32.0</td>
<td>-13.0</td>
<td>-14.0</td>
<td>-3.0</td>
<td>-22.5</td>
<td>4.5</td>
<td>0.0%</td>
</tr>
<tr class="even">
<td colspan="8">Forecast</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr>
<td class="firstcol">Manufacturing - Outlook</td>
<td>-36.0</td>
<td>-4.0</td>
<td>4.0</td>
<td>7.0</td>
<td>-7.3</td>
<td>13.6</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Nonmanufacturing - Outlook</td>
<td>-14.0</td>
<td>-1.0</td>
<td>8.0</td>
<td>13.0</td>
<td>1.5</td>
<td>13.2</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">All Industry-Outlook</td>
<td>-25.0</td>
<td>-2.0</td>
<td>6.0</td>
<td>10.0</td>
<td>-2.8</td>
<td>13.3</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Factory Output Off AsRecession Worsens

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081215a.jpg" align="left" border="0" height="265" width="353">
The contribution to growth from IP is weakening sharply. The
decline in IP, one that is an inflation-adjusted reading, is at a
-13.5% rate in Q4. Consumer goods output is the strong sector, oddly
enough, falling at a -3.8% pace early in Q4. Intermediate goods output
is falling at a 19% annual rate in the quarter. Capital goods output is
falling at a 15% annual rate in Q4. The fourth quarter is cropping up
to be extremely weak. 
 

The sequential growth rates from 12-mo to 6-Mos to 3Mos also
show that the annual rate of decline in output is generally getting
worse or staying near its worst growth rates across industries. 
 

The results for the key large countries mirror the overall
findings. Spain whose numbers are simply more volatile that the rest,
shows the smallest quarter to date decline. I suspect that will change
as more numbers roll in. Spain is not doing well. Germany, France and
Italy each show a larger Yr/Yr decline in IP than the EMU-wide average
for the current quarter. For Yr/Yr growth in IP France, Italy and Spain
are worse than the EMU-wide average for MFG output. 
 

The sting of decline is sharp in EMU and it has hit very hard
in the last two months IP has been in sporadic decline in EMU as it had
fallen (m/m) five times in 2007. But through October in 2008 IP already
has fallen in seven of ten months. Moreover the declines in Sept and
Oct have been severe and, of course, back to back. Output has dropped
in five of the past six months. The outlook for the final two months is
for the figures to stay bad or to get worse. No wonder the EU finally
got around to approving a stimulus plan worth about 1.5% of GDP as the
IMF suggested. There is no VAT cut as Germany&#8217;s Merkel has been opposed
to that. But the EU may review further stimulus options later. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">E-zone
MFG IP </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Ezone Detail</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Aug 
08</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-4</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>-1.3%</td>
<td>-1.9%</td>
<td>0.7%</td>
<td>-9.8%</td>
<td>-6.0%</td>
<td>-9.0%</td>
<td>-5.7%</td>
<td>-5.1%</td>
<td>-2.7%</td>
<td>-13.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>0.0%</td>
<td>-0.7%</td>
<td>-0.5%</td>
<td>-4.8%</td>
<td>-4.8%</td>
<td>-5.3%</td>
<td>-3.5%</td>
<td>-3.3%</td>
<td>-3.1%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">C-Durables</td>
<td>-1.4%</td>
<td>-2.5%</td>
<td>0.8%</td>
<td>-11.4%</td>
<td>-10.0%</td>
<td>-13.2%</td>
<td>-7.1%</td>
<td>-8.1%</td>
<td>-6.5%</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">C-Non-durables</td>
<td>0.3%</td>
<td>-0.8%</td>
<td>-0.4%</td>
<td>-3.5%</td>
<td>-5.0%</td>
<td>-3.7%</td>
<td>-3.7%</td>
<td>-2.4%</td>
<td>-2.9%</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-2.0%</td>
<td>-3.0%</td>
<td>1.2%</td>
<td>-13.9%</td>
<td>-8.4%</td>
<td>-11.8%</td>
<td>-7.2%</td>
<td>-6.9%</td>
<td>-3.7%</td>
<td>-19.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>-2.0%</td>
<td>-1.9%</td>
<td>1.3%</td>
<td>-9.9%</td>
<td>-4.2%</td>
<td>-11.0%</td>
<td>-3.3%</td>
<td>-4.7%</td>
<td>-0.9%</td>
<td>-15.6%</td>
</tr>
<tr>
<td colspan="11" class="firstcol">Main
E-zone Countries and
UK IP in MFG</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Only</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Aug 
08</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-2 
Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany:</td>
<td>-2.2%</td>
<td>-3.6%</td>
<td>3.3%</td>
<td>-9.8%</td>
<td>-8.5%</td>
<td>-11.0%</td>
<td>-6.6%</td>
<td>-3.9%</td>
<td>-1.8%</td>
<td>-19.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">France:IPx Construct'n</td>
<td>-2.7%</td>
<td>-0.8%</td>
<td>-0.5%</td>
<td>-14.7%</td>
<td>0.0%</td>
<td>-12.3%</td>
<td>-4.9%</td>
<td>-7.2%</td>
<td>-2.3%</td>
<td>-18.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-1.1%</td>
<td>-2.9%</td>
<td>0.1%</td>
<td>-14.6%</td>
<td>-15.2%</td>
<td>-12.9%</td>
<td>-9.8%</td>
<td>-6.8%</td>
<td>-6.5%</td>
<td>-16.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.3%</td>
<td>2.8%</td>
<td>-10.1%</td>
<td>-26.1%</td>
<td>15.3%</td>
<td>-29.4%</td>
<td>14.1%</td>
<td>-11.2%</td>
<td>-4.7%</td>
<td>-8.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>-1.3%</td>
<td>-1.0%</td>
<td>-0.6%</td>
<td>-10.8%</td>
<td>-7.2%</td>
<td>-8.3%</td>
<td>-6.2%</td>
<td>-4.9%</td>
<td>-3.2%</td>
<td>-12.1%</td>
</tr>
</tbody>
</table>
</body></html>

The contribution to growth from IP is weakening sharply. The decline in IP, one that is an inflation-adjusted reading, is at a -13.5% rate in Q4. Consumer goods output is the strong sector, oddly enough, falling at a -3.8% pace early [...]

Decline is 'Everywhere' !

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081212i.jpg" width="353">
October business inventories dropped 0.6% from September. That month, in turn, was revised from a 0.2% decline to 0.4%. Total business sales -- manufacturers, wholesalers and retailers -- dropped a whopping 3.5% in October, following a 2.4% decline in September and 2.2% in August. So despite the reduction in inventories, the big drops in sales mean that the inventory/sales ratio increased to 1.34 in October from 1.30 and 1.27 in September and August, respectively. While 1.34 is not high by historical standards -- it was in fact always higher that than prior to mid-2003 -- the two successive monthly increases in the ratio indicate the worst deterioration in the aggregate inventory position since the midst of the 1981-82 recession.
Manufacturers&#39; stocks fell 0.6% in October and the previous month was revised down slightly, making a 0.8% drop instead of 0.7% reported initially. The combined decline of 1.4% basically reverses the 1.2% increase of the prior two months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081212j.jpg" width="353">
Inventories at wholesalers plunged 1.1% in the latest month, following 0.4% the month before, also producing a 1.4% drop over the two months. As Tom Moeller pointed out here a month ago, these moves have been heavily influenced by falling petroleum prices, as &quot;tank farms&quot; are included among the rolls of wholesalers. However, large as these price declines have been, they didn&#39;t account for the entire decline in wholesale inventories, which otherwise was still 0.4% in October and 0.3% in September.
At retailers, stocks edged down just 0.1%, following a 0.2% increase in September and a 0.7% decline in August. Here, of course, it&#39;s the motor vehicle sector that pushes things around the most. But recent anecdotes about dealers running out of parking lot for all of their unsold merchandise, even if true on a broad scale, are too recent to be covered in these data. In this report, inventories show little change, down 0.4% in September and just 0.1% in October. Among other retailers, inventories rose 0.4% in September but then also declined 0.1% in October. The weaker October sales meant that the inventory/sales ratio rose, though, to 1.32 from 1.28 in September, the largest month-to-month increase since December 1991.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081212k.jpg" width="353">
Since petroleum prices are so important at this time, we made some calculations subtracting sales of petroleum products from wholesale and retail sectors and also netting out the relevant inventories. We&#39;re disappointed to see that the resulting sales figure is still down 2.5%, even as inventories fall just 0.4% for October. So the I/S ratio still rises sharply, to 1.36 months from 1.33 in September and 1.27 back in July. Possibly lower interest rates will help businesses finance these inventory positions, cushioning the blow to production that such an increase in the overhang might portend. But one thing we have learned in recent months is that it&#39;s best not to draw a firm conclusion on this. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Inventories</th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.6%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>4.6%</td>
<td>3.8%</td>
<td>5.9%</td>
<td>6.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>3.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Auto</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-0.2%</td>
<td>1.3%</td>
<td>2.7%</td>
<td>4.9%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-1.1%</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>8.0%</td>
<td>5.5%</td>
<td>8.3%</td>
<td>7.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.6%</td>
<td>-0.8%</td>
<td>0.7%</td>
<td>6.2%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>8.9%</td>
</tr>
</tbody>
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October business inventories dropped 0.6% from September. That month, in turn, was revised from a 0.2% decline to 0.4%. Total business sales -- manufacturers, wholesalers and retailers -- dropped a whopping 3.5% in October, following [...]

U.S. Business Inventories Decrease in October, But Sales Plunge, Leaving a Still Larger Overhang

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081212f.jpg" width="353">
The mid-December reading of consumer sentiment from the University of Michigan recovered slightly from the the dismal November level. At 59.1 the figure was up 6.9% from November and it was the highest level since September. It still was down, however, by nearly one quarter from last year. The reading for December beat Consensus expectations for 55.0.
During the last ten years there has been a 55% correlation between the level of sentiment and the three-month change in real consumer spending.
Weak prices most likely pushed up the index of buying conditions for large household goods by one-third from November. The view of current personal finances improved slightly from November&#39;s record low level, and the figure remained off by nearly one half from last year&#39;s average. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081212g.jpg" width="353">
The expectations component of consumer sentiment continued to fall. A 2.8% m/m decline returned the series to nearly its lowest since 1990 and close to the low of 1980. Expectations for business conditions during the next year did drop to the lowest since 1980 and expectations for conditions during the next five years fell as well. The expected change in personal finances improved slightly for the second consecutive month.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081212h.jpg" width="353">
The opinion of government policy, which apparently influences economic expectations, ticked up slightly for the second month (-29.7% y/y). A higher 42% thought that a fair job was being done but a lesser 4% thought that a good job was being done. That was nearly the lowest percentage on record.
Recent economic weakness and lower oil prices caused inflation expectations to fall. The mean expected rate of inflation during the next year fell further to 1.9%. It was as high as 7.0% in May. The expected inflation rate during the next five years fell to 2.7%, a record low for the series which dates back to 1980.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">December y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>59.1</td>
<td>55.3</td>
<td>57.6</td>
<td>-21.7%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.4</td>
<td>57.5</td>
<td>58.4</td>
<td>-23.7</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>52.4</td>
<td>53.9</td>
<td>57.0</td>
<td>-20.1</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
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The mid-December reading of consumer sentiment from the University of Michigan recovered slightly from the the dismal November level. At 59.1 the figure was up 6.9% from November and it was the highest level since September. It still [...]

Michigan Consumer Sentiment Recovered Slightly

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Last month U.S. finished producer prices fell 2.2%, about as they did during October when they were down 2.8%. Finished energy prices (-16.1% y/y) were down about as they were in October, by 11.2%. Gasoline prices led the decline with a one-third drop (-40.1% y/y).
Other oil based prices were down as well as home heating oil prices fell by one-quarter (-21.9% y/y). Natural gas prices fell for the fourth consecutive month but the 1.7% m/m decline left them still up 7.3% y/y. Bucking a steep downtrend residential electric power costs slipped 0.4% but they were up 6.5% y/y. (All of these energy price series are not seasonally adjusted.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081212d.jpg" width="353">
Finished consumer food prices were unchanged after their 0.2% drop during October. Strength in food prices still is evident in a 6.8% y/y gain led by a 18.5% rise in meat prices and a 10.1% rise in bakery product prices. Fresh &amp; dried vegetable prices also were strong, up 12.1% y/y, but fruit prices fell 12.2%.
Less food &amp; energy prices, the increase moderated to 0.1% after a 0.4% October rise. Consensus expectations were for a for a 0.1% uptick. The moderation follows four consecutive monthly increases between 0.4% and 0.6%. The y/y gain in the core PPI of 4.2% was near the strongest since late-1989. Prices of core finished consumer goods ticked up 0.1% (4.4% y/y), nearly the strongest since 1989. Durable consumer goods prices were unchanged (2.4% y/y). Appliance prices firmed and posted a 4.0% y/y rise following the 1.1% increase during 2007. Core nondurable goods prices also strengthened and rose 5.9% y/y, the fastest gain since early 1999. Prices for capital equipment also firmed. Though they ticked up just 0.1% last month, the 3.7% y/y gain is double the rise during last year and the strongest since 1989.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081212e.jpg" width="353">
Intermediate goods prices fell 4.3% as energy prices dropped further. Excluding food &amp; energy prices fell for the third consecutive month but the 2.3% m/m fall still left these prices up 6.4% y/y, more than double the increase last year.
The crude materials PPI was down sharply for the fourth straight month and the 12.5% decline about matched the earlier drops. Energy prices led the fall with an 18.7% (-28.8% y/y) drop. Crude food prices also were off 1.2% (-5.2% y/y). Less food &amp; energy crude prices fell 20.4% with the drop in commodity prices.

<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/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a> (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-2.2</td>
<td>-2.8</td>
<td>0.2</td>
<td>3.9</td>
<td>3.0</td>
<td>&nbsp;4.9&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1</td>
<td>0.4</td>
<td>4.2</td>
<td>1.9</td>
<td>1.5</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-4.3</td>
<td>-3.9</td>
<td>2.5</td>
<td>4.1</td>
<td>6.4</td>
<td>&nbsp;8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-2.3</td>
<td>-1.7</td>
<td>6.4</td>
<td>2.8</td>
<td>6.0</td>
<td>&nbsp;5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-12.5</td>
<td>-18.6</td>
<td>-19.2</td>
<td>12.1</td>
<td>1.4</td>
<td>14.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-20.4</td>
<td>-17.0</td>
<td>&nbsp;-22.2</td>
<td>15.6</td>
<td>20.8</td>
<td>4.9</td>
</tr>
</tbody>
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Last month U.S. finished producer prices fell 2.2%, about as they did during October when they were down 2.8%. Finished energy prices (-16.1% y/y) were down about as they were in October, by 11.2%. Gasoline prices led the decline with [...]

U.S. PPI Fell Again; Core Pricing Power Eased

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).

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Charts of the Week: Calmer Waters, New Currents

Michael J. Moran

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

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

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

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

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

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

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

Personal Income, Consumption, and Prices in May

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

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

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

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

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

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

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

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

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