Tom Moeller

U.S. sales of light vehicles in August recovered their decline during July and rose 9.3%, according to the Autodata Corporation. The latest sales level of 13.72M units, nevertheless, left sales for the year so far averaging 14.32M. [...]

U.S. August Light Vehicle Sales Recovered Modestly

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903h.jpg" align="left" border="0" height="265" width="353">
Euro Area 15 retail sales are off by 0.4% in July their second
straight month of declining. Food and nonfood sales each are off for
two months running as well. In the current quarter to date sales
volumes overall are falling at a 4.8% annual rate. For food alone the
new in-quarter drop is at a pace of -7.5% while nonfood sales are
contracting at a -2.3% annual rate.
The detail on sales lags the headline availability by one
month. Since May was a bit of an &#8216;up month&#8217; even the declines in June
do not produce much of a trend of weakness for the area by detailed
group. But by July the back-to-back declines in overall sales should
make the withering trends by retail sales component more apparent.
German sales volume trends ex autos are clearly pointing lower as are
even the lagged Italian trends. For the UK, however, sales trends are
still holding up as of July. May and June brought horrific sales swings
(offsetting) to the UK and will make trend reading a bit harder to make
sense of in the coming months.
The consumer is an important part of the Euro Area economy and
now retail sales are off sharply. Private consumption is 56% of Euro
Area GDP. But capital
spending at 23% is another huge chunk of it. Euro exports and imports
are each about 45% of GDP while in the US the comparable ratio is about
15%. So while the consumer is important for Europe at 56% of GDP the US
ratio of 70% makes the consumer relatively more of a force there.
Still, having such weakness for 56% of your economy is not a good sign.
And Europe is showing slowing across private consumption as well as
capital formation. Net exports have been gradually supplying less and
less of a boost to GDP. Losing
the consumer to the forces of negative growth will be a blow to the
European economies.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Euro
Area 15 Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Euro Area 15 Total</td>
<td>-0.4%</td>
<td>-0.8%</td>
<td>0.6%</td>
<td>-2.9%</td>
<td>-4.4%</td>
<td>-3.0%</td>
</tr>
<tr>
<td class="firstcol">Food</td>
<td>-0.8%</td>
<td>-0.7%</td>
<td>0.0%</td>
<td>-5.9%</td>
<td>-4.6%</td>
<td>-3.6%</td>
</tr>
<tr>
<td class="firstcol">NonFood</td>
<td>-0.1%</td>
<td>-0.9%</td>
<td>1.0%</td>
<td>-0.1%</td>
<td>-3.9%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>-2.6%</td>
<td>6.1%</td>
<td>11.3%</td>
<td>-0.7%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">Books news, etc</td>
<td>#N/A</td>
<td>-1.0%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>-1.6%</td>
</tr>
<tr>
<td class="firstcol">Pharmaceutical</td>
<td>#N/A</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>2.9%</td>
<td>1.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Other NonSpec</td>
<td>#N/A</td>
<td>-1.7%</td>
<td>0.6%</td>
<td>-1.0%</td>
<td>-1.8%</td>
<td>-2.8%</td>
</tr>
<tr>
<td class="firstcol">Mail Order</td>
<td>#N/A</td>
<td>-1.2%</td>
<td>-1.0%</td>
<td>1.1%</td>
<td>-5.3%</td>
<td>-3.4%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Country
detail;Volume</td>
</tr>
<tr>
<td class="firstcol">Germany:VolxAuto</td>
<td>-1.5%</td>
<td>-1.4%</td>
<td>1.3%</td>
<td>-6.2%</td>
<td>-5.4%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">Italy(Total; Value)</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>-1.1%</td>
<td>-1.3%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">UK(EU):Vol</td>
<td>0.8%</td>
<td>-4.3%</td>
<td>4.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>2.0%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Shaded areas
calculated on a
one-month lag due to lagging data.</td>
</tr>
</tbody>
</table>
</body></html>

Euro Area 15 retail sales are off by 0.4% in July their second straight month of declining. Food and nonfood sales each are off for two months running as well. In the current quarter to date sales volumes overall are falling at a 4.8% [...]

Retail Sales Trend are Slipping Everywhere in the Euro Area

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903g.jpg" width="353">
Factory inventories rose 0.5% during July, lifted by a 3.5% surge in inventories of nondefense aircraft &amp; parts. Less the transportation sector altogether the value of inventories rose 0.4%.
At petroleum refineries, inventories fell 1.9% (+37.1% y/y) after a revised 10.0% jump during June. The value still was up by more than one-half since December as prices have surged. Less petroleum, factory inventories rose 0.7% (5.8% y/y) during July after an upwardly revised 0.6% June increase. Inventories in the machinery sector rose 0.5% (5.8% y/y) while inventories of computers &amp; electronics rose 0.4% (7.2 y/y).
Factory shipments jumped again last month. The 2.1% spike was due to a 3.8% (-10.5% y/y) surge in shipments of transportation equipment and a 2.0% (13.3% y/y) rise in apparel shipments.
Total factory orders surged 1.3% during July after the upwardly revised 2.1% June jump. Expectations had been for a 1.0% rise. The strength reflected stronger petroleum orders (which equal shipments). They rose 0.6% (48.8% y/y). Less petroleum, orders rose 1.4% (0.3% y/y). Durable orders repeated their June strength and rose 1.3% which was the same as reported in the advance report.
Overall unfilled orders rose 0.7%, a rate of increase that was down from the 1.0% June rise. Order backlogs for electronic computers fell slightly but order backlogs of machinery surged (23.2% y/y).

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">July</th>
<th scope="col">June</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">Inventories</td>
<td>0.5</td>
<td>1.2</td>
<td>7.6</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.4</td>
<td>1.3</td>
<td>6.6</td>
<td>2.7</td>
<td>7.9</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>1.3</td>
<td>2.1</td>
<td>5.3</td>
<td>1.9</td>
<td>6.2</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>1.0</td>
<td>2.7</td>
<td>10.6</td>
<td>1.2</td>
<td>7.4</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>2.1</td>
<td>1.9</td>
<td>7.8</td>
<td>1.2</td>
<td>5.9</td>
<td>10.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>1.8</td>
<td>1.9</td>
<td>10.8</td>
<td>1.5</td>
<td>6.7</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>0.7</td>
<td>1.0</td>
<td>13.7</td>
<td>17.1</td>
<td>15.3</td>
<td>15.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>1.0</td>
<td>1.4</td>
<td>10.0</td>
<td>8.2</td>
<td>16.0</td>
<td>9.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories rose 0.5% during July, lifted by a 3.5% surge in inventories of nondefense aircraft & parts. Less the transportation sector altogether the value of inventories rose 0.4%. At petroleum refineries, inventories fell [...]

U.S. Factory Inventories Rose Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903d.jpg" align="left" border="0" height="265" width="353">
According to the International Council of Shopping Centers,
chain store sales inched up another 0.1% last week after the 0.2%
uptick during the week prior. For all of August sales rose 0.2% from
the July average after that month's 0.5% rise.
During the last ten years there has been a 45% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.
The ICSC-UBS retail
chain-store sales index is constructed using the same-store sales
(stores open for one year) reported by 78 stores of seven retailers:
Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS fell
0.3% (-4.4% y/y) and that reversed the prior week's increase.
The chain store sales figures are available in Haver's SURVEYW
database.
The Advantage of Flexible Targeting Rules
from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr339.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/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">08/29/08</th>
<th scope="col">08/22/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>495.1</td>
<td>494.7</td>
<td>2.2%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body></html>

According to the International Council of Shopping Centers, chain store sales inched up another 0.1% last week after the 0.2% uptick during the week prior. For all of August sales rose 0.2% from the July average after that month's [...]

U.S. Chain Store Sales Ticked Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903b.jpg" width="353">
The pump price for a gallon of regular gasoline was roughly unchanged last week at $3.68 per gallon, according to the U.S. Department of Energy survey. The price, nevertheless, has fallen by 44 cents, or more than ten percent from the peak in early July. For all grades of gasoline the average price fell last week by two cents to $3.72 per gallon.
Yesterday the spot market price for a gallon of regular gasoline dropped eight cents from Friday&#39;s level to $2.85 per gallon. Prices had run up, however, ahead of Hurricane Gustav. They have fallen now that oil facilities were largely missed by the storm. Prices are down another two cents this morning.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database, daily prices are in the DAILY database.
According to the U.S. Department of Energy, the demand for gasoline fell a slight 0.1% during the last four weeks and it was down 2.0% from a year earlier.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903c.jpg" width="353">
The DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil ticked up last week to an average $116.60 per barrel. That&#39;s down from the high early last month of $142.46.
Prices for natural gas ticked up w/w to an average $8.12 per mmbtu (+47.0% y/y). The high for natural gas prices was in early-July at $13.19/mmbtu.
What is the Monetary Standard, Or, How Did the Volcker-Greenspan FOMCs Tame Inflation? from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2008/hetzel.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">09/01/08</th>
<th scope="col">08/25/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>3.68</td>
<td>3.69</td>
<td>31.6%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>116.55</td>
<td>115.60</td>
<td>59.8%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The pump price for a gallon of regular gasoline was roughly unchanged last week at $3.68 per gallon, according to the U.S. Department of Energy survey. The price, nevertheless, has fallen by 44 cents, or more than ten percent from the [...]

U.S. Gasoline Prices Unchanged Last Week, Down Eight Cents Yesterday

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903a.jpg" width="353">
Job cut announcements fell a sharp 14.1% last month and reversed roughly all of their 26.4% jump during July, according to the Challenger, Grey &amp; Christmas survey.
The three-month level layoffs also fell but remained near the highest level since early-2006.
The decline in layoffs fell last month was led by fewer job cuts in the entertainment/leisure, media, and financial industries. Large increases were logged in the transportation, automotive and the industrial goods industries.
During the last ten years there has been a 76% (inverse) correlation between the three-month moving average of announced job cuts and the three-month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell sharply m/m but they were up 17.1% y/y.
On the Evolution of Income Inequality in the United States from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2008/bryan_martinez.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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>88,736</td>
<td>103,312</td>
<td>11.7%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
</tr>
</tbody>
</table>


</html>

Job cut announcements fell a sharp 14.1% last month and reversed roughly all of their 26.4% jump during July, according to the Challenger, Grey & Christmas survey. The three-month level layoffs also fell but remained near the highest [...]

Challenger Layoffs Fell Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903g.jpg" align="left" border="0" height="265" width="353">
Factory inventories rose 0.5% during July, lifted by a 3.5%
surge in inventories of nondefense aircraft &amp; parts. Less the
transportation sector altogether the value of inventories rose 0.4%.
At petroleum refineries, inventories fell 1.9% (+37.1% y/y)
after a revised 10.0% jump during June. The value still was up by more
than one-half since December as prices have surged. Less petroleum,
factory inventories rose 0.7% (5.8% y/y) during July after an upwardly
revised 0.6 June increase. Inventories in the machinery sector rose
0.5% (5.8% y/y) while inventories of computers &amp; electronics
rose 0.4% (7.2 y/y).
Factory shipments jumped again last month. The 2.1% spike was
due to a 3.8% (-10.5% y/y) surge in shipments of transportation
equipment and a 2.0% (13.3% y/y) rise in apparel shipments.
Total factory orders surged 1.3% during July after the
upwardly revised 2.1% June jump. Expectations had been for a 1.0% rise.
The strength reflected stronger petroleum orders (which equal
shipments). They rose 0.6% (48.8% y/y). Less petroleum, orders rose
1.4% (0.3% y/y). Durable orders repeated their June strength and rose
1.3% which was the same as reported in the advance report.
Overall unfilled orders rose 0.7%, a rate of increase that was
down from the 1.0% June rise. Order backlogs for electronic computers
fell slightly but order backlogs of machinery surged (23.2% y/y).

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory
Survey</a> (NAICS, %)</th>
<th scope="col">July</th>
<th scope="col">June</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">Inventories</td>
<td>0.5</td>
<td>1.2</td>
<td>7.6</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.4</td>
<td>1.3</td>
<td>6.6</td>
<td>2.7</td>
<td>7.9</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>1.3</td>
<td>2.1</td>
<td>5.3</td>
<td>1.9</td>
<td>6.2</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>1.0</td>
<td>2.7</td>
<td>10.6</td>
<td>1.2</td>
<td>7.4</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>2.1</td>
<td>1.9</td>
<td>7.8</td>
<td>1.2</td>
<td>5.9</td>
<td>10.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>1.8</td>
<td>1.9</td>
<td>10.8</td>
<td>1.5</td>
<td>6.7</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>0.7</td>
<td>1.0</td>
<td>13.7</td>
<td>17.1</td>
<td>15.3</td>
<td>15.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>1.0</td>
<td>1.4</td>
<td>10.0</td>
<td>8.2</td>
<td>16.0</td>
<td>9.2</td>
</tr>
</tbody>
</table>
Challenger Layoffs Fell Sharply 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903a.jpg" align="left" border="0" height="265" width="353">
Job cut announcements fell a sharp 14.1% last month and
reversed roughly all of their 26.4% jump during July, according to the
Challenger, Grey &amp; Christmas survey.
The three-month level layoffs also fell but remained near the
highest level since early-2006.
The decline in layoffs fell last month was led by fewer job
cuts in the entertainment/leisure, media, and financial industries.
Large increases were logged in the transportation, automotive and the
industrial goods industries.
During the last ten years there has been a 76% (inverse)
correlation between the three-month moving average of announced job
cuts and the three-month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved
through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell
sharply m/m but they were up 17.1% y/y.
On the Evolution of Income Inequality in the United
States from the Federal Reserve Bank of Richmond can be found
<a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2008/bryan_martinez.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/@S3/@S301/@S301.HTM">Challenger,
Gray &amp; Christmas</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>88,736</td>
<td>103,312</td>
<td>11.7%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
</tr>
</tbody>
</table>
U.S. Gasoline Prices Unchanged
Last Week, Down Eight Cents Yesterday 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903b.jpg" align="left" border="0" height="265" width="353">




The pump price for a gallon of regular gasoline
was roughly unchanged last week at $3.68 per gallon, according to the
U.S. Department of Energy survey. The price, nevertheless, has fallen
by 44 cents, or more than ten percent from the peak in early July. For
all grades of gasoline the average price fell last week by two cents to
$3.72 per gallon. Yesterday the spot market price for a gallon of regular
gasoline dropped eight cents from Friday's level to $2.85 per gallon.
Prices had run up, however, ahead of Hurricane Gustav. They have fallen
now that oil facilities were largely missed by the storm. Prices are
down another two cents this morning. Weekly gasoline prices can be found in Haver's WEEKLY
database, daily prices are in the DAILY
database. According to the U.S. Department of Energy, the demand for
gasoline fell a slight 0.1% during the last four weeks and it was down
2.0% from a year earlier.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903c.jpg" align="right" border="0" height="265" width="353"> The DOE figures are available in Haver's OILWKLY
database.


The price for a barrel of West Texas Intermediate crude oil
ticked up last week to an average $116.60 per barrel. That's down from
the high early last month of $142.46. Prices for natural gas ticked up w/w to an average $8.12 per
mmbtu (+47.0% y/y). The high for natural gas prices was in early-July
at $13.19/mmbtu. What is the Monetary Standard, Or, How Did the
Volcker-Greenspan FOMCs Tame Inflation? from the Federal
Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2008/hetzel.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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">09/01/08</th>
<th scope="col">08/25/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon)</td>
<td>3.68</td>
<td>3.69</td>
<td>31.6%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>116.55</td>
<td>115.60</td>
<td>59.8%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Ticked Up 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903d.jpg" align="left" border="0" height="265" width="353">
According to the International Council of Shopping Centers,
chain store sales inched up another 0.1% last week after the 0.2%
uptick during the week prior. For all of August sales rose 0.2% from
the July average after that month's 0.5% rise.
During the last ten years there has been a 45% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.
The ICSC-UBS retail
chain-store sales index is constructed using the same-store sales
(stores open for one year) reported by 78 stores of seven retailers:
Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS fell
0.3% (-4.4% y/y) and that reversed the prior week's increase./p&gt;
The chain store sales figures are available in Haver's SURVEYW
database.
The Advantage of Flexible Targeting Rules
from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr339.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/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">08/29/08</th>
<th scope="col">08/22/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>495.1</td>
<td>494.7</td>
<td>2.2%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Retail Sales Trend are Slipping
Everywhere in the Euro Area 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903h.jpg" align="left" border="0" height="265" width="353">
Euro Area 15 retail sales are off by 0.4% in July their second
straight month of declining. Food and nonfood sales each are off for
two months running as well. In the current quarter to date sales
volumes overall are falling at a 4.8% annual rate. For food alone the
new in-quarter drop is at a pace of -7.5% while nonfood sales are
contracting at a -2.3% annual rate.
The detail on sales lags the headline availability by one
month. Since May was a bit of an &#8216;up month&#8217; even the declines in June
do not produce much of a trend of weakness for the area by detailed
group. But by July the back-to-back declines in overall sales should
make the withering trends by retail sales component more apparent.
German sales volume trends ex autos are clearly pointing lower as are
even the lagged Italian trends. For the UK, however, sales trends are
still holding up as of July. May and June brought horrific sales swings
(offsetting) to the UK and will make trend reading a bit harder to make
sense of in the coming months.
The consumer is an important part of the Euro Area economy and
now retail sales are off sharply. Private consumption is 56% of Euro
Area GDP. But capital
spending at 23% is another huge chunk of it. Euro exports and imports
are each about 45% of GDP while in the US the comparable ratio is about
15%. So while the consumer is important for Europe at 56% of GDP the US
ratio of 70% makes the consumer relatively more of a force there.
Still, having such weakness for 56% of your economy is not a good sign.
And Europe is showing slowing across private consumption as well as
capital formation. Net exports have been gradually supplying less and
less of a boost to GDP. Losing
the consumer to the forces of negative growth will be a blow to the
European economies.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="7" scope="col"> Euro
Area 15 Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Euro Area 15 Total</td>
<td>-0.4%</td>
<td>-0.8%</td>
<td>0.6%</td>
<td>-2.9%</td>
<td>-4.4%</td>
<td>-3.0%</td>
</tr>
<tr>
<td class="firstcol">Food</td>
<td>-0.8%</td>
<td>-0.7%</td>
<td>0.0%</td>
<td>-5.9%</td>
<td>-4.6%</td>
<td>-3.6%</td>
</tr>
<tr>
<td class="firstcol">NonFood</td>
<td>-0.1%</td>
<td>-0.9%</td>
<td>1.0%</td>
<td>-0.1%</td>
<td>-3.9%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>-2.6%</td>
<td>6.1%</td>
<td>11.3%</td>
<td>-0.7%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">Books news, etc</td>
<td>#N/A</td>
<td>-1.0%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>-1.6%</td>
</tr>
<tr>
<td class="firstcol">Pharmaceutical</td>
<td>#N/A</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>2.9%</td>
<td>1.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Other NonSpec</td>
<td>#N/A</td>
<td>-1.7%</td>
<td>0.6%</td>
<td>-1.0%</td>
<td>-1.8%</td>
<td>-2.8%</td>
</tr>
<tr>
<td class="firstcol">Mail Order</td>
<td>#N/A</td>
<td>-1.2%</td>
<td>-1.0%</td>
<td>1.1%</td>
<td>-5.3%</td>
<td>-3.4%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Country
detail;Volume</td>
</tr>
<tr>
<td class="firstcol">Germany:VolxAuto</td>
<td>-1.5%</td>
<td>-1.4%</td>
<td>1.3%</td>
<td>-6.2%</td>
<td>-5.4%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">Italy(Total; Value)</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>-1.1%</td>
<td>-1.3%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">UK(EU):Vol</td>
<td>0.8%</td>
<td>-4.3%</td>
<td>4.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>2.0%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Shaded areas
calculated on a
one-month lag due to lagging data.</td>
</tr>
</tbody>
</table>
</body></html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
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	background-color:#e2e2e2;
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<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080902f.jpg" width="353">
The value of construction put in place fell 0.6% during July and that reversed the 0.3% increases during the prior two months. The decline was as-expected.
Year-to-year, construction was down 4.8% but the level of activity so far this year continued roughly stable.
As in prior months, however, residential building activity continued to decline sharply, by 2.1% in July. Since it&#39;s peak it has fallen by just over one half. Single-family construction dropped an even larger 3.7% (-0.9% y/y) in July and that level is off by nearly two-thirds from its peak in early 2006. Building activity on multi-family units ticked up 0.2% (-1.7% y/y) while spending on improvements gave back the June gain and fell 1.0% (-5.5% y/y).
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The value of nonresidential building activity fell 0.7% after increasing in each month of this year. Despite the latest dip, office construction continued firm and increased 1.7% (13.7% y/y). Lodging spending dipped, however, by 0.1% but it was up by more than one-third from last year&#39;s level. Spending on multi-retail building rose 3.1% (4.7% y/y) while spending on health care facilities dipped 0.2% (+6.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080902g.jpg" width="353">
Public construction continued firm and rose by 1.4% (8.1% y/y). The value of construction spending on highways &amp; streets fell modestly for the third consecutive month but remained up 6.9% from last year. (The value of construction on highways &amp; streets is roughly one third of the value of total public construction spending.) Building activity of educational facilities surged 2.5% (7.4% y/y) during July.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.
The United States in the International Financial System: A Separate Reality? Resolving Two Puzzles in the International Accounts is yesterday&#39;s speech by Fed Governor Randall S. Kroszner and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/kroszner20080901a.htm">here</a>.
Regional Variation in the Potential Economic Effects of Climate Change from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-26.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/USECON/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</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>0.3</td>
<td>-4.8</td>
<td>-2.7</td>
<td>6.3</td>
<td>11.2</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.4</td>
<td>0.2</td>
<td>-9.2</td>
<td>-6.9</td>
<td>5.5</td>
<td>12.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.3</td>
<td>-1.4</td>
<td>-27.5</td>
<td>-19.8</td>
<td>1.0</td>
<td>14.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.7</td>
<td>1.7</td>
<td>16.0</td>
<td>19.6</td>
<td>16.2</td>
<td>7.8</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.4</td>
<td>0.4</td>
<td>8.1</td>
<td>12.3</td>
<td>9.3</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place fell 0.6% during July and that reversed the 0.3% increases during the prior two months. The decline was as-expected. Year-to-year, construction was down 4.8% but the level of activity so far this [...]

U.S. Construction Spending Fell in July

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Winnie Tapasanun

260210N39.jpg

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Total retail sales were essentially flat m/m in December, falling short of expectations, following a 0.6% increase in November (unrevised) and a 0.2% decline in October (-0.1% previously), data from the U.S. Census Bureau showed. A 0.5% m/m December increase had been expected in the Action Economics Forecast Survey. The year-on-year growth rate decelerated to 2.4% in December, the lowest since September 2024, from 3.3% in November; this compared with 4.6% in December 2024 and remained far below a high of 17.1% in February 2022 and a record-high 51.8% in April 2021. For all of 2025, retail sales increased 4.0% after gains of 2.6% in 2024 and 3.5% in 2023.
Excluding motor vehicles & parts, retail sales were virtually unchanged (3.3% y/y) in December after a 0.4% rise in November (+0.5% initially), which marked the sixth consecutive m/m gain. A 0.4% m/m December increase had been expected. Sales of motor vehicles & parts fell 0.2% (-1.1% y/y) following a 1.2% November rebound; this compared to a 2.8% rise (-4.2% y/y) in unit light vehicle sales after a 2.7% November increase.

Sales in the retail control group, which excludes autos, building materials, gasoline stations, and food services, eased 0.1% (+3.4% y/y) in December, the first m/m decline since September, after a 0.2% increase in November. These sales are used in the construction of personal consumption expenditures in NIPA accounts. Nonauto sales excluding gasoline & building materials dipped 0.1% (+3.6% y/y), also down for the first time since September, following a 0.3% November rise.

Sales by category showed mixed performance in December. To the downside, furniture & home furnishing store sales slid 0.9% (-5.6% y/y) in December, the fourth m/m slide in five months, after a 0.1% easing in November. Miscellaneous store sales fell 0.9% (+9.4% y/y), the first m/m fall since August, after a 1.3% November rise. Clothing & accessory store sales declined 0.7% (+5.1% y/y), the first m/m decrease in three months, reversing a 0.5% November increase. Electronics & appliance store sales fell 0.4% (+2.1% y/y) after rising 0.2% in November and October. General merchandise store sales slipped 0.1% (+1.2% y/y) for the second consecutive month in December; within this grouping, department store sales fell 0.7% (-0.3% y/y), the third m/m fall in four months, following a 3.1% November drop.

To the upside, building materials & garden equipment store sales climbed 1.2% (0.5% y/y) for the second successive month in December, the first m/m gain since August. Sporting goods, hobby, book & music store sales rose 0.4% (6.0% y/y), the fifth m/m rise in six months, after a 0.9% November increase. Gasoline station sales grew 0.3% (1.6% y/y), the sixth m/m gain in seven months, on top of a 1.7% November rebound. Nonstore retail sales were up 0.1% (5.3% y/y) in December after virtually unchanged in November.

In the nondiscretionary sales categories, health & personal care store sales fell 0.2% (+6.4% y/y) in December, down for the second time in three months, following a 0.3% increase in November. Food & beverage store sales rose 0.2% (1.1% y/y) after a 0.1% November dip.
Consumers appeared to dine out less frequently in December amid still-high inflation (December CPI +0.3% m/m, +2.7% y/y; core CPI +0.2% m/m, +2.6% y/y). Restaurant & drinking place sales eased 0.1% (+4.7% y/y) in December, the second m/m decline in three months, following an upwardly revised 0.7% rise in November (+0.6% initially).

Retail Sales data can be found in Haver's **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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260210Q39.jpg

- December total retail sales -0.02%, below expectations; +2.4% y/y, lowest since Sept. ’24.
- Ex-auto sales +0.02% (+3.3% y/y) after six straight m/m rises; auto sales -0.2% (-1.1% y/y).
- Declines m/m: furniture stores (-0.9%), misc. stores (-0.9%), clothing stores (-0.7%).
- Gains m/m: bldg. materials (+1.2%), sporting goods (+0.4%), gasoline stations (+0.3%).

U.S. Retail Sales Hold Steady in December Following November’s Rebound

Sandy Batten

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The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October. Therefore, the charts here have a gap for October between the September and the November and December values.

Import prices rose 0.1% m/m (unchanged y/y) in December from November, in line with the expectations of the Action Economics Forecast Survey. Since there was no value for October value, a monthly change for November could not be calculated. Import prices fell 0.1% y/y in November. Export prices rose 0.3% m/m in December. Again, a monthly change for November could not be calculated. The Action Economics Forecast Survey expected a 0.1% monthly increase in December. The y/y reading fell to 3.1% in December from 3.2% in November.

Note that these indexes are not directly affected by tariffs because they measure the price of goods before taxes. Tariffs are considered taxes and thus are excluded from these calculations.

For imports, a 3.3% monthly decline in prices of imported petroleum and petroleum products restrained the rise in overall prices. Prices of nonpetroleum imports rose 0.4% m/m (1.0% y/y). Prices of imported food increased 0.5% m/m while prices of imported industrial supplies rose 0.4% m/m even with a 0.8% monthly decline in prices of fuels and lubricants. Prices of the remaining end-use categories were little changed in December. Given the recent weakness of the foreign exchange value of the dollar, there could be further upward pressure on nonpetroleum import prices in coming months.

For exports, prices of agricultural products 0.2% m/m (2.1% y/y) in December following a 0.9% m/m jump in November. Prices of nonagricultural exports increased 0.3% m/m in December. A monthly change could not be calculated for November. The y/y rate slowed to 3.1% in December from 3.3%. Exported food prices rose 0.4% m/m, down from a 1.1% monthly jump in November. Prices of exported industrial supplies also increased 0.4% m/m in December. Prices of exported consumer goods excluding autos jumped 0.8% m/m in December, their largest monthly increase since January 2023.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Import prices rose 0.1% m/m in December, in line with expectations.
- The December increase reflected a 0.2% monthly gain in non-fuel import prices and a 0.8% m/m decline in fuel prices.
- Export prices rose 0.3% m/m against expectations of a 0.1% m/m increase. Both agricultural and nonagricultural prices rose in December.


U.S. Import and Export Prices Rise in December

Tian Yong Woon

In our Letter this week, we explore Asia in two parts. The first reviews key developments from the past week, focusing on snap election outcomes in Japan (chart 1) and Thailand (chart 2), both of which delivered victories for incumbent parties and helped reduce near-term political uncertainty.

The second, and larger, section builds on last week’s discussion of Asia and AI, shifting the focus to AI’s potential impact on the region from an end-user perspective. On the upside, Asia stands to benefit meaningfully from the eventual large-scale adoption of AI-powered robotics, reflecting the region’s relatively high share of manufacturing value added (chart 3). That said, important considerations remain, including the cost viability of transitioning towards humanoid robotics given the sizeable upfront capital expenditure involved. Beyond manufacturing, AI adoption could also deliver gains in healthcare, particularly as many Asian economies grapple with ageing populations—implying a growing care burden alongside a shrinking domestic caregiver base (chart 4). However, regulatory, ethical, and implementation challenges persist. 

At the same time, the AI transition will likely displace certain jobs, making this a race not only of adoption but of adaptability, where education—while an imperfect proxy—offers some insight into which economies may be better positioned to adjust (chart 5). Finally, bureaucratic frictions also matter (chart 6), although even traditionally more bureaucratic economies have begun introducing fast-track frameworks to avoid falling behind in what could prove to be a pivotal transition reshaping the regional, and potentially global, economic landscape.

**Japan’s snap election**
Following a snap election held on Sunday, Japanese Prime Minister Takaichi’s Liberal Democratic Party (LDP) secured a historic landslide victory, winning a more than two-thirds majority in Japan’s 456-seat Lower House. The LDP’s coalition partner, the Japan Innovation Party, also expanded its presence to 36 seats. The outcome suggests that Takaichi’s political gamble to capitalise on strong opinion polling has paid off. While the election result has removed a key source of near-term political uncertainty for Japan, attention now turns to the policy agenda enabled by the government’s newly strengthened mandate. Among the first expected moves, Takaichi appears set to proceed with a temporary food tax pause, reducing the 8% consumption tax on food to 0% for two years. This proposal reinforces the perception that her policy stance is fiscally accommodative, even as critics raise concerns around fiscal discipline and long-term sustainability. As for the market reaction, Japanese equities rallied on stimulus expectations, bond yields rose on prospects of increased issuance to fund higher spending, while the yen recorded only muted net moves (chart 1)—prompting some speculation that some intervention may have taken place.

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**Thailand’s snap election**
Thailand also held snap elections last Sunday, which saw the incumbent deliver a strong showing at the polls. Unlike Japan’s election outcome, however, the scale of the increase in the incumbent Bhumjaithai (BJT) Party’s parliamentary footprint came as a surprise to many observers. That said, despite these sizable gains, the BJT Party fell short of an outright majority, securing 193 of the 500 seats in parliament, implying that a coalition government will likely still be required to pass legislation smoothly. Thai equities and the baht nevertheless rallied on the election results (chart 2). Attention now turns to whether—and how—Prime Minister Anutin will follow through on key campaign promises, including the revival of a popular shopping subsidy programme. While such measures would provide a near-term boost to consumption, they would also raise concerns around fiscal sustainability. Beyond the parliamentary vote, Thai voters also approved a proposal to replace the constitution. If pursued, this could pave the way for deeper structural reforms to Thailand’s economy.

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**AI’s (potential) impact on Asia**
We now turn to the longer, second part of this week’s letter, where we examine AI’s potential impact on Asia. In contrast to last week’s discussion, the focus here is on Asia’s role as an end-user of AI, rather than its position within the global AI supply chain. While AI broadly promises substantial productivity gains if deeply embedded across economies, one sector where Asia may benefit disproportionately is manufacturing. This reflects the relatively high share of manufacturing value added in GDP across many Asian economies compared with the global average (chart 3). In particular, Asia stands to reap significant productivity gains through the widespread adoption of AI-powered robotics. Cost, however, remains a key consideration: relative to the overall cost of human labour, AI-enabled robots have yet to become unequivocally competitive once high upfront capital outlays are taken into account. That said, recent advances in humanoid, AI-enabled robots have demonstrated increasingly broad and sophisticated capabilities in replicating human tasks, including delicate and precision operations. Over time, this could meaningfully alleviate a persistent structural challenge facing many advanced Asian economies—ageing populations and the associated labour constraints.

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Digging deeper into the ageing population challenge faced by many Asian economies, another area where AI and robotics could play a meaningful role is healthcare. Ageing societies face a twin burden: a rising number of elderly individuals requiring care alongside a shrinking pool of working-age caregivers, absent offsetting labour inflows. One proxy for this imbalance is the old-age dependency, which, as shown in chart 4, is already relatively high in several Asian economies, including China, Japan, and South Korea. That said, adoption remains at a very early stage. Significant barriers to widespread deployment persist, including regulatory and ethical considerations, high implementation costs, and questions around the consistency, reliability, and safety of AI-enabled systems in delivering healthcare-related tasks.

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**Asia’s challenges in AI adoption**
That said, the outlook is not entirely positive for Asia in the context of widespread AI adoption. As with previous waves of transformative technology, AI will inevitably render some jobs—at least in their current form—obsolete, even as it creates new roles and reshapes others. This implies that many Asian economies will need to navigate a significant structural adjustment in their labour markets, as certain types of work are displaced while demand for new skill sets emerges. How effectively Asia manages this transition will be critical in determining whether its economies move ahead of—or fall behind—the global shift towards AI. At present, and using education quality as a rough proxy, some Asian economies appear better positioned to manage this adjustment than others. As illustrated in chart 5, economies such as China, Singapore, Japan, and South Korea seem relatively well placed to absorb and adapt to the coming changes. That said, education quality is only an imperfect indicator. Other factors will also matter, including the capacity to rapidly retool and reskill the workforce, as well as the inclusiveness of the transition. Ensuring that lower-skilled and more vulnerable segments of society are not left behind will be an important determinant of the long-term economic and social outcomes of AI adoption across the region.

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Another potential hurdle relates to bureaucratic costs, which—when elevated—can act as a meaningful source of friction in the adoption of new AI-driven technologies. On this front, some Asian economies stand out for having comparatively low bureaucratic burdens, notably Singapore, Taiwan, and South Korea, while others, such as Vietnam, the Philippines, and China, tend to lag (chart 6). That said, as with many broad-based indicators, this picture masks important nuances. Several of these economies have introduced industry-specific—particularly AI-focused—fast-tracking initiatives aimed at accelerating development within targeted domestic sectors. Even so, in an increasingly competitive and intensifying global race to adopt AI and capture its economic upside, we may see a growing tendency toward an “adopt first, regulate later” approach in the years ahead. This is likely to persist unless and until major incidents or heightened concerns emerge that materially slow the pace of AI adoption.

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Asia

Economic Letter from Asia: Of Ballots and Bots

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Japan's economy watchers index has flattened out and backed off slightly for the current and future outlooks depending on the time horizon that you seek. However, what's clear is that the index reached the low point around the middle of last year, has been rebounding and now the rebound has either run out of gas or slowed after the index has rebuilt itself considerably.  

It is certainly too early to get pessimistic on Japan's economy, with Prime Minister Sanae Takaichi having just won a significant - essentially a landslide - snap election that she called after recently having been elected. The LDP would appear to be back in the driver's seat, and she has her sights set on more fiscal stimulus and expanded military spending. She is apparently much more on the same wavelength as Donald Trump in the United States. Mr. Trump was an Abe supporter, and Ms. Takaichi is a disciple of Mr. Abe.

At the moment, Japan would seem to have a groundswell of support behind the government and that government is set to try to rekindle some growth which could potentially put the Bank of Japan in a more decisively defensive track as far as setting rates and potentially raising rates.

**Economy watchers index is trending**
In January, the economy watchers index backed off for the second month in a row. However, it still has a percentile standing in its 51-percentile, slightly above its median standing since early-2005. The headline and all the components have standings above their respective 50th percentiles on this timeline, with the exception of housing, services, and employment; three readings that are extremely important to consumers. Housing has a 26.1 percentile standing, services (the employment sector) have a 45.8 percentile standing, while employment has a 22.9 percentile standing. Despite the otherwise solid and strong set of readings, there are these three significant flies in the ointment. Corporate Japan is doing extremely well with corporations having a 66.8 percentile standing; manufacturers and nonmanufacturers, separately, each come in with readings in their mid-to-upper 60th percentiles.

**The future index**
The future readings from the economy watchers index show continued but slight increases over the last few months. Only two future readings weaken month-to-month: housing and employment—once again two key readings as far as consumers are concerned. However, in terms of current monthly diffusion readings, the assessment of households, retailing, housing, and employment all have current diffusion values below 50, indicating net declines rather than increases. The percentile standing is for the future index are, like those for the current index, generally upbeat - and generally stronger than for the current indexes - with the future headline posting a 66.4 percentile standing in January. However, like the current index, the standing for housing is at its 21.3 percentile and the standing for employment is at its 30th percentile, both well below the neutral level that would place the ranking at the 50th percentile. Corporations show high readings, higher for the future indexes than for the current index standings. There also are high readings and standings for eating and drinking places as well as services. It's good to see services come up with a strong rating since it creates hope for the future for employment because services are the core employment sector. It will be interesting to see how this value changes in the coming months as Takaichi’s new policies are implemented and take hold.

**Summing up**
On balance, the economy watchers index has been firm to strong. There is some slight give-back in the current index in terms of trend. But beyond the index, there's more immediate reason to be more positive because Japan has just executed a very decisive and pro-growth snap election that is going to put the new Prime Minister Takaichi and strong control of the economy at a time where she seeks to cement economic strength. These elections were just completed over the weekend, and we will see the results reflected in data in the weeks and months to come.

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Japan

Economy Watchers Indexes Show Firmness; Impact of Takaichi Election to Come in Months Ahead

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

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**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Economy in Brief

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