Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215e.jpg" width="353">
The Empire State Index of General Business Conditions in manufacturing gave back all of its November rise with a 3.53 point decline to 23.13 in December. The decline was, however, less than Consensus expectations for a decline to 18.0. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The employment showed the sharpest decline to it lowest level in three months but new orders and shipments rose. The inventory index fell sharply to the lowest in four months, indicating decumulation.
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.
Pricing pressure reversed all of its prior month&#39;s improvement and fell to lowest level since August of last year. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215f.jpg" width="353">
The Empire State index of expected business conditions in six months rose for the second month to the highest level since January.
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. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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<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">Dec. &#39;05 </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>23.13</td>
<td>26.66</td>
<td>26.28</td>
<td>20.18</td>
<td>15.56</td>
<td>28.79</td>
</tr>
</tbody>
</table>
</body>
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The Empire State Index of General Business Conditions in manufacturing gave back all of its November rise with a 3.53 point decline to 23.13 in December. The decline was, however, less than Consensus expectations for a decline to [...]

Empire State Index Slipped Less Than Expected, Expectations Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215c.jpg" width="353">
Total U.S. industrial production ticked 0.2% higher last month but revisions generally had the effect of lowering the gains in output. Consensus expectations had been for a 0.1% November rise.
Revisions to the index of industrial production (IP) and the related measures of capacity &amp; capacity utilization reflect the 2004 and 2005 Annual Surveys of Manufactures and selected editions of the 2004 and 2005 Current Industrial Reports.
Factory sector output rose 0.3% but a 0.6% decline during October was double the initial estimate. During the last three months factory sector output is down 0.3% from its August peak.
With a 1.7% (-1.9% y/y) increase, production of durable consumer goods recovered about all of its revised 1.9% October decline as output of automotive products recovered 3.6% (-3.6% y/y). Output of appliances &amp; furniture, however, fell 0.5% (-4.9% y/y) and was off 6.6% from its peak in September 2005. Production of computers, video &amp; audio equipment remained firm and rose 2.3% (13.0% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215d.jpg" width="353">
Nondurable consumer goods output slipped 0.1% (2.2% y/y) for the second month in the last three. The gain was softened only by a 1.1% (2.3% y/y) increase in foods &amp; tobacco. Clothing output fell 0.6% (+0.5% y/y), chemical production fell 0.6% (+3.2% y/y) and production of paper products fell 1.4% (+2.2% y/y).
Business equipment production jumped 1.2% but October&#39;s increase was lessened to 0.2% from 0.7% reported initially. Output of information processing &amp; equipment rose 1.0% but the 9.9% y/y gain is down from the growth posted earlier this year and those earlier growth rates were revised down. Factory output overall less the hi-tech industries increased 0.1% (2.1% y/y) after two months of sharp decline. Output of transit equipment recovered 2.9% (15.9% y/y) due to a 7.1% (-0.2% y/y) surge in business vehicles.
Overall capacity utilization increased was unchanged from a downwardly revised 81.8% in October. Factory sector utilization, however, increased to 80.2% from a downwardly revised 80.0% in October. Factory sector capacity again rose a firm 0.2% and the 2.7% y/y gain was revised up slightly.
The Chinese Economy: Progress and Challenges is today&#39;s speech by Federal Reserve Board Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20061215/default.htm"> 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/output.htm">Production &amp; Capacity</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>0.2%</td>
<td>0.0%</td>
<td>3.8%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing (NAICS)</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>3.7%</td>
<td>4.0%</td>
<td>3.0%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>1.2%</td>
<td>2.8%</td>
<td>1.4%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.2%</td>
<td>0.2%</td>
<td>9.6%</td>
<td>7.9%</td>
<td>4.3%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.8%</td>
<td>81.8%</td>
<td>80.7% (11/05)</td>
<td>80.2%</td>
<td>78.1%</td>
<td>76.1%</td>
</tr>
</tbody>
</table>


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Total U.S. industrial production ticked 0.2% higher last month but revisions generally had the effect of lowering the gains in output. Consensus expectations had been for a 0.1% November rise. Revisions to the index of industrial [...]

Industrial Output Up Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215a.jpg" width="353">
In November, the consumer price index (CPI-U) remained unchanged following 0.5% declines during the prior two months. Consensus expectations had been for a 0.2% rise.
Prices less food &amp; energy also were unchanged after the weak 0.1% October increase. Core prices were last unchanged in June of 2005 and here too Consensus expectations had been for a 0.2% increase.
Core goods prices fell 0.4%. The decline was the fourth in the last five months and was the largest since October 2003. New &amp; used motor vehicle prices dropped 0.8% (-0.9% y/y), off for the third consecutive month, while apparel prices fell 0.3% (+0.2% y/y) for the second consecutive down month.
Household furnishings &amp; operation prices added to the list where prices fell with a 0.2% decline (+0.9% y/y). Also in the act of decline were medical care commodity prices which fell 0.4% (+2.3% y/y) and tobacco prices which fell 0.3% (+1.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215b.jpg" width="353">
With a 0.2% increase, core services prices posted the weakest gain since this past August. Most of the weakness owed to a 1.9% (-0.2% y/y) decline in public transportation costs, the third consecutive monthly decline. Shelter prices rose 0.4% (4.2% y/y) as the rental equivalence measure of owners&#39; primary residences rose 0.3% (4.3% y/y). Rents rose 0.4% (4.1% y/y) for the sixth consecutive month. Education costs rose a strong 0.5% (6.3% y/y) and medical care services prices increased 0.3% (4.0% y/y).
Energy prices fell 0.2% after two months of roughly 7.0% decline. Gasoline prices fell another 1.6% (-4.2% y/y) but have moved higher in December to an average $2.30 per gallon from $2.23 in November. Fuel oil prices last month rose 0.3% (-3.0% y/y) after two 6.1% m/m declines. Natural gas prices rose 4.7% (-19.9% y/y) but electricity prices fell 0.2% (+6.5% y/y) for the second consecutive month.
Food &amp; beverage prices slipped 0.1%. Dairy product prices fell 0.6% (-1.6% y/y) but prices for meats, poultry, fish &amp; eggs were unchanged (1.2% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases, fell 0.2 as did prices less food &amp; energy 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/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>2.0%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>3.7%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-0.2%</td>
<td>-7.0%</td>
<td>-3.6%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>1.9%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

In November, the consumer price index (CPI-U) remained unchanged following 0.5% declines during the prior two months. Consensus expectations had been for a 0.2% rise. Prices less food & energy also were unchanged after the weak 0.1% [...]

CPI Unchanged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215a.jpg" width="353">
In November, the consumer price index (CPI-U) remained unchanged following 0.5% declines during the prior two months. Consensus expectations had been for a 0.2% rise.
Prices less food &amp; energy also were unchanged after the weak 0.1% October increase. Core prices were last unchanged in June of 2005 and here too Consensus expectations had been for a 0.2% increase.
Core goods prices fell 0.4%. The decline was the fourth in the last five months and was the largest since October 2003. New &amp; used motor vehicle prices dropped 0.8% (-0.9% y/y), off for the third consecutive month, while apparel prices fell 0.3% (+0.2% y/y) for the second consecutive down month.
Household furnishings &amp; operation prices added to the list where prices fell with a 0.2% decline (+0.9% y/y). Also in the act of decline were medical care commodity prices which fell 0.4% (+2.3% y/y) and tobacco prices which fell 0.3% (+1.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215b.jpg" width="353">
With a 0.2% increase, core services prices posted the weakest gain since this past August. Most of the weakness owed to a 1.9% (-0.2% y/y) decline in public transportation costs, the third consecutive monthly decline. Shelter prices rose 0.4% (4.2% y/y) as the rental equivalence measure of owners&#39; primary residences rose 0.3% (4.3% y/y). Rents rose 0.4% (4.1% y/y) for the sixth consecutive month. Education costs rose a strong 0.5% (6.3% y/y) and medical care services prices increased 0.3% (4.0% y/y).
Energy prices fell 0.2% after two months of roughly 7.0% decline. Gasoline prices fell another 1.6% (-4.2% y/y) but have moved higher in December to an average $2.30 per gallon from $2.23 in November. Fuel oil prices last month rose 0.3% (-3.0% y/y) after two 6.1% m/m declines. Natural gas prices rose 4.7% (-19.9% y/y) but electricity prices fell 0.2% (+6.5% y/y) for the second consecutive month.
Food &amp; beverage prices slipped 0.1%. Dairy product prices fell 0.6% (-1.6% y/y) but prices for meats, poultry, fish &amp; eggs were unchanged (1.2% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases, fell 0.2 as did prices less food &amp; energy 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/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>2.0%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>3.7%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-0.2%</td>
<td>-7.0%</td>
<td>-3.6%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>1.9%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
Industrial Output Up Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215c.jpg" width="353">
Total U.S. industrial production ticked 0.2% higher last month but revisions generally had the effect of lowering the gains in output. Consensus expectations had been for a 0.1% November rise.
Revisions to the index of industrial production (IP) and the related measures of capacity &amp; capacity utilization reflect the 2004 and 2005 Annual Surveys of Manufactures and selected editions of the 2004 and 2005 Current Industrial Reports.
Factory sector output rose 0.3% but a 0.6% decline during October was double the initial estimate. During the last three months factory sector output is down 0.3% from its August peak.
With a 1.7% (-1.9% y/y) increase, production of durable consumer goods recovered about all of its revised 1.9% October decline as output of automotive products recovered 3.6% (-3.6% y/y). Output of appliances &amp; furniture, however, fell 0.5% (-4.9% y/y) and was off 6.6% from its peak in September 2005. Production of computers, video &amp; audio equipment remained firm and rose 2.3% (13.0% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215d.jpg" width="353">
Nondurable consumer goods output slipped 0.1% (2.2% y/y) for the second month in the last three. The gain was softened only by a 1.1% (2.3% y/y) increase in foods &amp; tobacco. Clothing output fell 0.6% (+0.5% y/y), chemical production fell 0.6% (+3.2% y/y) and production of paper products fell 1.4% (+2.2% y/y).
Business equipment production jumped 1.2% but October&#39;s increase was lessened to 0.2% from 0.7% reported initially. Output of information processing &amp; equipment rose 1.0% but the 9.9% y/y gain is down from the growth posted earlier this year and those earlier growth rates were revised down. Factory output overall less the hi-tech industries increased 0.1% (2.1% y/y) after two months of sharp decline. Output of transit equipment recovered 2.9% (15.9% y/y) due to a 7.1% (-0.2% y/y) surge in business vehicles.
Overall capacity utilization increased was unchanged from a downwardly revised 81.8% in October. Factory sector utilization, however, increased to 80.2% from a downwardly revised 80.0% in October. Factory sector capacity again rose a firm 0.2% and the 2.7% y/y gain was revised up slightly.
The Chinese Economy: Progress and Challenges is today&#39;s speech by Federal Reserve Board Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20061215/default.htm"> 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/output.htm">Production &amp; Capacity</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>0.2%</td>
<td>0.0%</td>
<td>3.8%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing (NAICS)</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>3.7%</td>
<td>4.0%</td>
<td>3.0%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>1.2%</td>
<td>2.8%</td>
<td>1.4%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.2%</td>
<td>0.2%</td>
<td>9.6%</td>
<td>7.9%</td>
<td>4.3%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.8%</td>
<td>81.8%</td>
<td>80.7% (11/05)</td>
<td>80.2%</td>
<td>78.1%</td>
<td>76.1%</td>
</tr>
</tbody>
</table>
Empire State Index Slipped Less Than Expected, Expectations Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215e.jpg" width="353">
The Empire State Index of General Business Conditions in manufacturing gave back all of its November rise with a 3.53 point decline to 23.13 in December. The decline was, however, less than Consensus expectations for a decline to 18.0. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The employment showed the sharpest decline to it lowest level in three months but new orders and shipments rose. The inventory index fell sharply to the lowest in four months, indicating decumulation.
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.
Pricing pressure reversed all of its prior month&#39;s improvement and fell to lowest level since August of last year. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215f.jpg" width="353">
The Empire State index of expected business conditions in six months rose for the second month to the highest level since January.
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. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<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">Dec. &#39;05 </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>23.13</td>
<td>26.66</td>
<td>26.28</td>
<td>20.18</td>
<td>15.56</td>
<td>28.79</td>
</tr>
</tbody>
</table>
Q4 TANKAN Results Show Best Japanese Industry Performance  in Many Years 
by <a href="/comment/Stone.html">Carol Stone</a> December 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215g.jpg" width="353">
The Bank of Japan&#39;s widely watched TANKAN survey showed stronger results across the board in the December report released today in Tokyo.Generally, these surveys are reported just after the beginning of a new quarter, but December is an exception, with the release at mid-month, ahead of the year-end holidays.
Large manufacturers, the &quot;headline&quot; group, saw favorable business conditions at 25% more firms than experienced negative conditions.Three months ago, a balance of 24% expected favorable conditions in December.December&#39;s actual result was the best since Q3 2004 at 26%. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061215h.jpg" width="353">
Other firm-size and industry groups also had stronger results than they had forecast three months ago. Large firms in all industries experienced favorable business at a net of 23%, compared to 20% forecast; medium-size firms at 10% versus 7% expected and at small firms, the numbers with favorable and unfavorable business conditions were equal, the first time this has occurred in the present configuration of the TANKAN survey, which began in early 2004.
Expectations for coming March outcomes indicate some moderation. It is frequently the case that these aggregate forecasts point to less breadth of expansion. This might not be surprising because more firms have done better in the current quarter, so the base is higher from which to expect further improvement. Assuming, that is, that &quot;favorable&quot; can be equated with &quot;growing&quot;.
We take this opportunity, once again, to highlight Haver&#39;s &quot;purist&quot; interpretation of the TANKAN survey. In the 2004 reorganization, the fundamental definition of firm size was changed. It used to be based on the number of employees, but now, as seen in the table below, capital is used. This meant firms shifted from one category to another, particularly capital-intensive firms that have small numbers of employees but much capital; these include the important high-tech sector. So the very character of &quot;large&quot;, &quot;medium&quot; and &quot;small&quot; changed from what those categories meant before. With the passage of time, of course, more history becomes available on the behavior of these new size categories. In the meantime, in the database &quot;G10&quot;, we include a linked series of All Firms in All Industries (which is not affected by the change in &quot;size&quot; definition); the results here for Q4 2006 stand at +8%, the best reading in exactly 15 years, since Q4 1991.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Conditions:&nbsp; &nbsp;% Favorable minus % Unfavorable</th>
Dec 2006
Sept 2006
June 2006
<th scope="col">Mar 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Forecast for Mar</td>
<td>Actual</td>
<td>Forecast for Dec</td>
<td>Actual</td>
<td>Forecast for Sept</td>
<td>Actual</td>
<td>Forecast for Jun</td>
</tr>
<tr>
<td class="firstcol">All Firms</td>
<td>6</td>
<td>8</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms*</td>
<td>20</td>
<td>23</td>
<td>20</td>
<td>22</td>
<td>21</td>
<td>20</td>
<td>20</td>
</tr>
<tr>
<td class="firstcol">Manufacturing (&quot;Headline Series&quot;)</td>
<td>22</td>
<td>25</td>
<td>21</td>
<td>24</td>
<td>22</td>
<td>21</td>
<td>22</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonmanufacturing</td>
<td>20</td>
<td>22</td>
<td>21</td>
<td>20</td>
<td>21</td>
<td>20</td>
<td>19</td>
</tr>
<tr>
<td class="firstcol">Medium-Sized Firms**</td>
<td>6</td>
<td>10</td>
<td>7</td>
<td>9</td>
<td>9</td>
<td>8</td>
<td>8</td>
</tr>
<tr class="odd">
<td class="firstcol">Small Firms***</td>
<td>-4</td>
<td>0</td>
<td>-3</td>
<td>-3</td>
<td>-4</td>
<td>-2</td>
<td>-2</td>
</tr>
</tbody>
</table>


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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/061214e.jpg" width="353">
Four Central European countries reported their October current account results during the day yesterday, December 13. Yesterday in this commentary, we noted that the improvement in Japan&#39;s surplus in the month resulted from lower petroleum imports, which were augmented by complementary advances in other current account components. Today, we see that for Poland, Bulgaria, Slovenia and Serbia, developments in those other current account items &#150; services, income and transfers &#150; helped during the summer to mitigate the impact on the current account of larger petroleum imports. But this counterbalance can&#39;t be counted on every month and sometimes such increases in merchandise trade deficits are enlarged.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214f.jpg" width="353">
Poland is a good example: its current account deficit widened to $1.23 billion in October from just $82 million in September and $940 million a year ago. As seen in the graph, in most months, the trade portion is only about half the total current account balance. The deficit on income, particularly rising income payments abroad, make for a more complex current account situation.
In Bulgaria, the current account deficit has been steady the last three months at just over $500 million, even as imports of goods have fallen from their August peak of $2,139 million to $1,896 billion. Goods exports also fell and the net on services, generally a surplus in Bulgaria, declined to virtually zero. The moves are small, but they still indicate the intricacy of international trade and financial flows. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214g.jpg" width="353">
Serbia&#39;s current account position receives considerable support from transfer payments. As seen in the graph, the deficit on goods and services is heavily offset by transfer receipts. As we point out here, though, the flows do not come in lockstep, so in October transfers went down at the same time as the goods and services balance.
Finally in Slovenia, the trade deficit is offset to some degree by a continuing small surplus in services, although income accounts generally show net outflows and transfers are erratic in both directions.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@EQ/@EQ9/@EQ91/@EQ91A/@EQ91A.HTM">Current Account Balances</a><a href="http://www.haverselect.com/dlx/EMERGECW/@EQ/@EQ9/@EQ91/@EQ91A/@EQ91A.HTM">:&nbsp;</a> SA, Mil.$</th>
<th scope="col">Oct 2006</th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">Year-Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005&nbsp; </td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Poland</td>
<td>-1,234</td>
<td>-82</td>
<td>-1,192</td>
<td>-940</td>
<td>-427</td>
<td>-891</td>
<td>-386</td>
</tr>
<tr class="odd">
<td class="firstcol">Bulgaria</td>
<td>-527</td>
<td>-509</td>
<td>-539</td>
<td>-311</td>
<td>-255</td>
<td>-122</td>
<td>-87</td>
</tr>
<tr>
<td class="firstcol">Serbia (NSA)</td>
<td>-330</td>
<td>-132</td>
<td>-334</td>
<td>-344</td>
<td>-174</td>
<td>-244</td>
<td>-161</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovenia</td>
<td>-58</td>
<td>-271</td>
<td>-92</td>
<td>-33</td>
<td>-56</td>
<td>-74</td>
<td>-18</td>
</tr>
</tbody>
</table>


</html>

Four Central European countries reported their October current account results during the day yesterday, December 13. Yesterday in this commentary, we noted that the improvement in Japan's surplus in the month resulted from lower [...]

Current Accounts in Central Europe: Services, Income and Transfers Play Significant Role

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214c.jpg" width="353">
Initial unemployment insurance claims fell a sharp 20,000 last week to 304,000 following an unrevised 34,000 drop during the prior week. The decline was to the lowest level since mid-October and by far surpassed Consensus expectations for a slight decline to 320,000 claims.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims eased slightly to 327,750 (+2.6% y/y).
Continuing claims for unemployment insurance fell 33,000 after a downwardly revised 43,000 increase during the prior week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214d.jpg" width="353">
The insured rate of unemployment remained at 1.9% for the sixth consecutive week and equaled the average rate since February.
Beyond the Outsourcing Angst: Making America More Productive from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2006/el0602.html"> here</a>.
How Labor Market Policies Shape Immigrants&#146; Opportunities, also from the Federal Reserve Bank of Dallas, is available <a href="http://dallasfed.org/research/eclett/2006/el0607.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">12/09/06</th>
<th scope="col">12/02/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>304</td>
<td>324</td>
<td>-5.3%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,477</td>
<td>-4.5%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>


</html>

Initial unemployment insurance claims fell a sharp 20,000 last week to 304,000 following an unrevised 34,000 drop during the prior week. The decline was to the lowest level since mid-October and by far surpassed Consensus expectations [...]

Initial Claims For Jobless Insurance at Two Month Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214a.jpg" width="353">
Overall import prices increased 0.2% last month following two months of sharp decline and compared to Consensus expectations for no change. 
The increase occurred despite a 1.6% decline in the prices of petroleum imports after October&#39;s 10.1% plunge, which was deeper than initially reported. So far in December the price of Brent crude oil has risen roughly four dollars from the $59.36 per bbl. averaged in November.
Less petroleum import prices reversed the October decline with a 0.7% increase. During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies.
Prices for nonoil industrial supplies &amp; materials reversed all of the prior month&#39;s decline with a 2.9% (1.7% y/y) increase. Prices for nondurables less petroleum jumped 6.5% (-10.9% y/y) in November following several months of decline this year. Prices for durable industrial supplies &amp; materials (14.7% y/y) were strong early this year but m/m price gains have evaporated. These prices are unchanged since June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214b.jpg" width="353">
Capital goods prices were unchanged for the fourth straight month (0.2% y/y) and excluding a 0.1% (-3.6% y/y) increase in computers, capital goods prices also were unchanged (2.0% y/y) in November. Prices for nonauto consumer goods additionally were unchanged (1.1% y/y).
Export prices rose 0.4% after two months of decline as nonagricultural commodities prices ticked up 0.1% (3.4% y/y) and agricultural export prices surged 4.4% (10.4% y/y).
The Adjustment of Global External Imbalances: Does Partial Exchange Rate Pass-through to Trade Prices Matter? from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/ifdp/2006/850/ifdp850.pdf"> here</a>.
The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr255.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/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.2%</td>
<td>-2.3%</td>
<td>1.2%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-1.6%</td>
<td>-10.1%</td>
<td>1.5%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>1.3%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>3.9%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
</body>
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Overall import prices increased 0.2% last month following two months of sharp decline and compared to Consensus expectations for no change. The increase occurred despite a 1.6% decline in the prices of petroleum imports after [...]

U.S. Import Prices Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214a.jpg" width="353">
Overall import prices increased 0.2% last month following two months of sharp decline and compared to Consensus expectations for no change. 
The increase occurred despite a 1.6% decline in the prices of petroleum imports after October&#39;s 10.1% plunge, which was deeper than initially reported. So far in December the price of Brent crude oil has risen roughly four dollars from the $59.36 per bbl. averaged in November.
Less petroleum import prices reversed the October decline with a 0.7% increase. During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies.
Prices for nonoil industrial supplies &amp; materials reversed all of the prior month&#39;s decline with a 2.9% (1.7% y/y) increase. Prices for nondurables less petroleum jumped 6.5% (-10.9% y/y) in November following several months of decline this year. Prices for durable industrial supplies &amp; materials (14.7% y/y) were strong early this year but m/m price gains have evaporated. These prices are unchanged since June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214b.jpg" width="353">
Capital goods prices were unchanged for the fourth straight month (0.2% y/y) and excluding a 0.1% (-3.6% y/y) increase in computers, capital goods prices also were unchanged (2.0% y/y) in November. Prices for nonauto consumer goods additionally were unchanged (1.1% y/y).
Export prices rose 0.4% after two months of decline as nonagricultural commodities prices ticked up 0.1% (3.4% y/y) and agricultural export prices surged 4.4% (10.4% y/y).
The Adjustment of Global External Imbalances: Does Partial Exchange Rate Pass-through to Trade Prices Matter? from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/ifdp/2006/850/ifdp850.pdf"> here</a>.
The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr255.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/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.2%</td>
<td>-2.3%</td>
<td>1.2%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-1.6%</td>
<td>-10.1%</td>
<td>1.5%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>1.3%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>3.9%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
Initial Claims For Jobless Insurance at Two Month Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 14, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214c.jpg" width="353">
Initial unemployment insurance claims fell a sharp 20,000 last week to 304,000 following an unrevised 34,000 drop during the prior week. The decline was to the lowest level since mid-October and by far surpassed Consensus expectations for a slight decline to 320,000 claims.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims eased slightly to 327,750 (+2.6% y/y).
Continuing claims for unemployment insurance fell 33,000 after a downwardly revised 43,000 increase during the prior week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214d.jpg" width="353">
The insured rate of unemployment remained at 1.9% for the sixth consecutive week and equaled the average rate since February.
Beyond the Outsourcing Angst: Making America More Productive from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2006/el0602.html"> here</a>.
How Labor Market Policies Shape Immigrants&#146; Opportunities, also from the Federal Reserve Bank of Dallas, is available <a href="http://dallasfed.org/research/eclett/2006/el0607.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">12/09/06</th>
<th scope="col">12/02/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>304</td>
<td>324</td>
<td>-5.3%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,477</td>
<td>-4.5%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Current Accounts in Central Europe: Services, Income and Transfers Play Significant Role 
by <a href="/comment/Stone.html">Carol Stone</a> December 14, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214e.jpg" width="353">
Four Central European countries reported their October current account results during the day yesterday, December 13. Yesterday in this commentary, we noted that the improvement in Japan&#39;s surplus in the month resulted from lower petroleum imports, which were augmented by complementary advances in other current account components. Today, we see that for Poland, Bulgaria, Slovenia and Serbia, developments in those other current account items &#150; services, income and transfers &#150; helped during the summer to mitigate the impact on the current account of larger petroleum imports. But this counterbalance can&#39;t be counted on every month and sometimes such increases in merchandise trade deficits are enlarged.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214f.jpg" width="353">
Poland is a good example: its current account deficit widened to $1.23 billion in October from just $82 million in September and $940 million a year ago. As seen in the graph, in most months, the trade portion is only about half the total current account balance. The deficit on income, particularly rising income payments abroad, make for a more complex current account situation.
In Bulgaria, the current account deficit has been steady the last three months at just over $500 million, even as imports of goods have fallen from their August peak of $2,139 million to $1,896 billion. Goods exports also fell and the net on services, generally a surplus in Bulgaria, declined to virtually zero. The moves are small, but they still indicate the intricacy of international trade and financial flows. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214g.jpg" width="353">
Serbia&#39;s current account position receives considerable support from transfer payments. As seen in the graph, the deficit on goods and services is heavily offset by transfer receipts. As we point out here, though, the flows do not come in lockstep, so in October transfers went down at the same time as the goods and services balance.
Finally in Slovenia, the trade deficit is offset to some degree by a continuing small surplus in services, although income accounts generally show net outflows and transfers are erratic in both directions.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@EQ/@EQ9/@EQ91/@EQ91A/@EQ91A.HTM">Current Account Balances</a><a href="http://www.haverselect.com/dlx/EMERGECW/@EQ/@EQ9/@EQ91/@EQ91A/@EQ91A.HTM">:&nbsp;</a> SA, Mil.$</th>
<th scope="col">Oct 2006</th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">Year-Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005&nbsp; </td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Poland</td>
<td>-1,234</td>
<td>-82</td>
<td>-1,192</td>
<td>-940</td>
<td>-427</td>
<td>-891</td>
<td>-386</td>
</tr>
<tr class="odd">
<td class="firstcol">Bulgaria</td>
<td>-527</td>
<td>-509</td>
<td>-539</td>
<td>-311</td>
<td>-255</td>
<td>-122</td>
<td>-87</td>
</tr>
<tr>
<td class="firstcol">Serbia (NSA)</td>
<td>-330</td>
<td>-132</td>
<td>-334</td>
<td>-344</td>
<td>-174</td>
<td>-244</td>
<td>-161</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovenia</td>
<td>-58</td>
<td>-271</td>
<td>-92</td>
<td>-33</td>
<td>-56</td>
<td>-74</td>
<td>-18</td>
</tr>
</tbody>
</table>


</html>

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

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Andrew Cates

**Faster-than-Expected Monetary Easing**
Our first potential upside risk for 2026 is that monetary policy across most major advanced economies is loosened further and by more than markets and forecasters currently anticipate. Monetary policy cycles have a history of being underestimated in both length and magnitude—in large part because of the powerful feedback loops between interest rates, inflation, and economic behaviour. On the way up, higher policy rates feed into mortgage costs, debt-service burdens, rents, and the general cost of doing business, reinforcing wage pressures and inflation persistence. But these same channels work in reverse on the way down. As rates fall, debt servicing eases, housing and rental inflation softens, and cost pressures across the economy unwind more rapidly than expected—allowing inflation to decelerate faster and creating scope for further easing. A risk, therefore, is that if disinflation becomes self-reinforcing, central banks find themselves cutting rates more aggressively than currently priced, not because of economic distress, but because restrictive policy proves increasingly unnecessary.

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**Energy Supply Dynamics Prove More Supportive**
The second chart reinforces the message from the first: easing monetary policy may be accompanied—and amplified—by a more benign energy backdrop. Recent projections from the EIA point to a renewed build-up in OECD crude oil and liquids inventories over the year ahead, a dynamic that has historically been associated with downward pressure on oil prices. If inventories continue to rise as supply growth outpaces demand, spot prices for crude could undershoot current forecasts, keeping energy inflation subdued. That, in turn, would reinforce disinflationary forces already in play—lowering headline CPI, easing cost pressures for firms and households, and giving central banks greater confidence to loosen policy further. In that sense, softer oil prices would not just be a standalone positive shock, but part of a reinforcing feedback loop alongside rate cuts, supporting real incomes, financial conditions, and global growth into 2026.


251218Z2.jpg

**AI-Driven Productivity Gains Materialise More Quickly** 
The third chart shows a clear pickup in US nonfinancial productivity growth, reviving the debate around whether AI-driven efficiency gains may arrive sooner than many forecasters expect. While the longer-term productivity potential of AI remains uncertain and uneven across sectors, there are reasons to think that at least some near-term gains could prove more tangible than currently assumed. Rather than transformative breakthroughs, early benefits are likely to come from incremental improvements—automation of routine processes, better scheduling and logistics, more efficient use of capital and labour, and modest reductions in overhead costs—areas where US firms are already well positioned to implement new technologies quickly. If these gains accumulate and diffuse more broadly, the implications would still be meaningful. Even a modest, sustained uplift in productivity would help contain unit labour costs, support real income growth, and raise the economy’s speed limit without generating renewed inflation pressure. In that scenario, productivity would not need to “revolutionise” the economy to matter: incremental efficiency gains could nonetheless provide a supportive backdrop for growth, earnings, and policy easing into 2026—representing a genuine upside risk to the outlook.


251218Z3.jpg

**The US Economy Proves Resilient Again**
The next chart highlights a further upside risk to the 2026 outlook: the possibility that the US economy once again outperforms its peers. Unlike the typical pre-recession backdrop, there is little evidence of meaningful financial stress in the US private sector. After a prolonged period of balance-sheet repair, private-sector debt ratios have been trending lower in recent years, while the sector as a whole is running a healthy financial surplus. This stands in stark contrast to previous late-cycle episodes, which were characterised by rising leverage, widening deficits, and growing dependence on credit expansion. The absence of private-sector excesses reduces the economy’s vulnerability to higher rates and external shocks, and helps explain why growth has remained more durable than expected. If households and firms continue to prioritise balance-sheet strength rather than forced deleveraging, the usual mechanisms that tip the economy into recession may fail to materialise. In that environment, even modest easing in financial conditions could translate into renewed spending and investment, allowing the US to sustain above-trend growth into 2026—representing another upside risk to the global outlook.


251218Z4.jpg

**India’s Growth Engine Accelerates Further** 
Chart 5 points to another potential upside risk for 2026 emanating from India’s economy. After a period of relative pessimism earlier in the year, consensus growth forecasts for 2026 have been revised modestly higher, even as inflation projections have continued to drift lower. This combination—firmer growth expectations alongside easing inflation pressures—creates scope for a more supportive policy backdrop than markets currently assume. With real interest rates no longer rising and financial conditions stabilising, India’s investment cycle, already underpinned by public infrastructure spending and improving corporate balance sheets, could prove more durable than forecast. If these trends persist, India may deliver growth that is both stronger and more internally driven than expected, providing a meaningful demand impulse to the broader global economy. Given India’s increasing weight in global growth, even small upside surprises would have outsized effects on trade, commodity demand, and regional activity—reinforcing the case that the global outlook for 2026 may be skewed to the upside.


251218Z5.jpg

**The Global South Becomes a More Independent Source of Demand** 
The final chart points to a broader upside risk for the global economy in 2026: that economies across the so-called Global South generate more durable momentum than currently assumed. With a few notable exceptions—such as China and Thailand—many emerging economies continue to benefit from stronger growth in their working-age populations and/or faster real GDP per capita growth than their advanced-economy counterparts. These demographic and income dynamics are helping to underpin domestic consumption, support labour-force expansion, and attract capital inflows, as reflected in the pattern of net FDI across countries. In contrast, much of the advanced world faces binding demographic constraints and lower steady-state growth rates, limiting the scope for demand to re-accelerate organically. If growth in the Global South proves more resilient and internally driven—rather than overly dependent on exports to advanced economies—it could provide a more stable and geographically diversified source of global demand. In that scenario, global growth in 2026 would be less reliant on a narrow set of advanced economies, reinforcing the case that risks to the outlook may be skewed to the upside.


251218Z6.jpg

_This marks our final Charts of the Week publication for 2025 The next edition will be released on Thursday 8 January._

Last week’s Charts of the Week focused on the darker tail risks hanging over the 2026 outlook: the possibility of monetary policy mis-calibration, that geopolitics and trade fragmentation further disrupt supply chains, and that elevated debt levels—particularly in the public sector—reassert themselves as a drag on growth. This week’s charts take a deliberately different tack. Taken together, they highlight a set of upside risks that are possibly underappreciated in current forecasts. For example, policy easing across advanced economies may extend further than expected as disinflation feeds on itself (chart 1); oil prices could surprise on the downside as inventories rebuild (chart 2); US productivity may deliver incremental but meaningful gains sooner than assumed (chart 3); the US economy itself could continue to benefit from an absence of private-sector financial stress (chart 4); India’s growth momentum might firm again as inflation pressures recede (chart 5); and, more broadly, parts of the Global South appear increasingly capable of generating their own demand impulse, supported by favourable demographics and income growth (chart 6). None of these forces is guaranteed, and each carries its own caveats—but together they suggest that, having spent much of the past year fixated on downside risks, the risks to global growth in 2026 may be more evenly balanced than is widely assumed.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/6tL5l7g70DuLWxKOokuRit?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: The Upside Risks

Kathleen Stephansen, CBE

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251218B4.jpg

Initial claims for unemployment insurance dropped 13,000 to 224,000 during the week of December 13, from 237,000 during the week of December 6, revised from 236,000. The four-week moving average of initial claims was 217,500, an increase of 500 from the previous week, which was revised to 217,000 from 216,750.

Federal government employees initially filed 1091 (NSA) jobless insurance claims in the week ended December 6, after filing 643 claims in the week ended November 29.

Continuing claims for unemployment insurance rose 67,000 to 1,897,000 in the week ending December 6, following a sharp decline of 107,000 to 1,830,000 in the prior week, revised from 1,838,000. The four-week moving average was 1,902,000 in the week ending December 6, a decrease of 14,000 from 1,916,00 in the week ended November 29, revised from 1,918,000. The insured unemployment rate stood at 1.2% in the week of December 6, unchanged from the prior week.

Federal government employees’ continuing benefits rose to 14,077 (NSA) in the week of November 29 from 12,732 (NSA) in the week ended November 22.

The insured unemployment rate varied greatly across individual states and territories. In the week ending November 29, the highest unemployment rates were in Washington (2.48%), New Jersey (2.42%), California (2.26%), Minnesota (2.16%), and Massachusetts (2.10%). The lowest rates were in Florida (0.34%), South Dakota (0.40%), North Carolina (0.41%), Louisiana (0.44%), Alabama (0.46%), Virginia (0.47%), and Tennessee (0.49%). Rates in other notable states include New York (1.81%), Illinois and Pennsylvania (both 1.67%), and Texas (1.22%). These state data are not seasonally adjusted.

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



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- Initial claims dropped from the prior week.
- Continuing claims rebounded from the prior week sharp decline.
- The insured unemployment rate was unchanged.


U.S. Initial Claims for Unemployment Insurance Eased in Latest Week

251217A2.jpg

251217B2.jpg

Mortgage applications dropped 3.8% w/w (+40.9% y/y) in the week of December 12 after a rise of 4.8% w/w (45.4% y/y) in the week of December 5, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 2.8% w/w (+12.3% y/y) in the latest week after declining 2.4% w/w (+17.2% y/y) in the week of December 5. Applications for loan refinancing dropped 3.6% w/w (+86.0% y/y) in the week of December 12, following the 14.3% (87.8% y/y) jump in the week ended December 5.

The effective interest rate on a 30-year fixed-rate loan rose 6bps to 6.56% in the week ending December 12, from 6.50% in the week ending December 5. The rate on 15-year fixed-rate mortgages rose 4bps to 5.91% in the latest week from 5.87% in the December 5 week. The rate on 30-year jumbo edged down 2bps to 6.55% in the December 12 week from 6.57% in the prior week. The rate on a 5-year ARM eased 4bps to 5.76% in the latest week from 5.80% in the December 5 week.

The share of applications for refinancing an existing loan rose to 59.0% of total applications in the December12 week from 58.2% in the week ending December 5. The adjustable-rate mortgage (ARM) share of activity rose to 7.2% in the latest week from 7.0% in the December 5 week.

The average size of a mortgage loan rose 1.5% (6.4% y/y) to $400,000 in the December 12 week, following a decline of 0.7% (+7.1% y/y) to $394,200 in the December 5 week. The average size of a purchase loan edged up 0.6% (-0.3% y/y) to $424,200 in the latest week, after dropping 0.4% (+1.3% y/y) to $421,700 in the December 5 week. The average size of a loan to refinance a mortgage rose 2.4% (19.8% y/y) to $383,300 in the week ending December 12 after rising 0.2% (19.4% y/y) to $374,500 in the December 5 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase applications fell 2.8% w/w; refinancing loan applications fell 3.6% w/w.
- Effective interest rate on 30-year fixed loans rose to 6.56%.
- Average loan size rose moderately.

U.S. Mortgage Applications Retreated in the Week of December 12

Robert Brusca

251217E.jpg

U.K. inflation has moderated in November, posting a 0.1% drop on the HICP, a 0.1% gain in the CPI-H headline measure as well as a 0.1% gain in the CPI-H core (excluding energy, food, alcohol, and tobacco). The sequential trend in core inflation points lower and is eroding but continues to run over the 2% mark set as a target by the Bank of England for overall inflation (over 12 months). The headline is excessive as well but also eroding.

Sequentially the CPI-H gains 3.5% over 12 months, slows to a 2.8% annual rate over six months and then dips to 1.4% annual rate over three months. The CPI-H core rises by 3.6% over 12 months, ticks down to a 3.0% pace over six months, and then runs at a 2.4% annualized pace over three months.

The trend for the CPI core, and for the headline, both are quite good and would be completely consistent with the Bank of England cutting rates, a move that is widely expected – although the 12-month pace for each is excessive.

Not only is inflation showing signs of falling into the Bank of England's target zone, but the economy has been weak although the unemployment rate currently is only hovering around the 4% mark. Still, recent economic data have been weak, and the recent monthly GDP report posted a negative reading, further unsettling the outlook. The October monthly GDP change was estimated at -0.1% while the year-over-year increase in GDP in October produced a gain of just 1.1%. These metrics have put the U.K. economy on recession watch at a time when there has been a sharp revision in the budget process that will be much more constrictive. A sharp pullback in the manufacturing of motor vehicles is blamed for the sudden weakness in GDP in October. The three-month drop in GDP is the first such drop since December 2023.

Meanwhile, the headline and the core inflation statistics are progressing. The table calculates breadth statistics on how widespread inflation acceleration has been and we see that it has not been prevalent (over 50%) in September or November, although breadth did touch the 58% mark in October. Sequentially, inflation acceleration has been tamed: over 12 months (when it is neutral), six months, and three months. Over 12 months, inflation accelerated in only 50% of the categories. And inflation according to the CPI headline and in the core over six months continues to show deceleration to accompany narrowing breadth - only 8.3%. That reading indicates that there was more inflation deceleration than acceleration by a wide margin over six months. At 50%, inflation acceleration and deceleration forces are balanced. Readings below 50% indicate relatively more deceleration, and that is now the more common condition. Inflation acceleration is extremely rare across categories over six months and three months.

251217.jpg

On balance, inflation by the headline and by the core measures is well disciplined and falling into line although still excessive over 12 months. The breadth statistics reinforce the view that inflation is broadly coming to heel at the same time the real economy data are showing a cooling in the economy- and perhaps an excessive slowing at that. The new budget should put the economy under additional downward pressure, further restraining inflation and causing growth to moderate. In this situation, a rate cut from the Bank of England is the odds-on bet. Perhaps the only question now is how large a cut? How much will the Bank think that circumstance have changed and that key trends have been altered in a significant way? Will policy react mostly to lower trend tempered by an excessive 12-month pace, or will it be willing to look farther forward and weight heavily the deteriorating economic trend as well?

United Kingdom

U.K. Inflation Moderates Open Door for BOE Rate Cut

Sandy Batten

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251216B4.jpg

The Bureau of Labor Statistics released establishment survey data for both October and November today. With the government shutdown during the month of October, there was no household survey for that month. Today’s release contained only November data for households. Nonfarm payrolls (from the establishment survey) increased 64,000 in November but fell 105,000 in October. The 119,000 increase previously reported for September was revised down to a 108,000 rise. The Action Economics Forecast Survey had expected an 80,000 decrease in October and a 35,000 increase in November. The three-month average change in payrolls rebounded to 22,000 in November from -8,000 in October. However, this figure has trended down since early this year, pointing to a modest softening of labor-market conditions. 

This softening was reinforced by a 0.2%-point jump in the unemployment rate, measured in the household survey, to 4.6% in November from 4.4% in September. (As already noted, there was no household survey in October.) The unemployment rate, including employees working part-time for economic reasons plus all marginally attached workers, surged to 8.7% in November from 8.0% in September. For both series, these were the highest readings since September 2021.

Average hourly earnings (AHE), a key variable for the Federal Reserve, showed a further slowing in wage growth. AHE edged up 0.1% m/m in November after a 0.4% monthly jump in October. Importantly, the y/y rate slowed to 3.5%, the slowest since May 2021, from 3.7% in both September and October. The annual pace of the rise in service-producing wages slowed to 3.4% in November from 3.7% in both September and October while the annual growth of goods-producing wages was unchanged at 4.0%. Depending on your estimate of productivity growth, the current pace of total AHE growth is likely still a little too fast to be consistent with the Fed’s 2% inflation target. But clearly, it is moving in the desired direction.

In the **establishment survey**, much of the recent softening reflects declines in federal government employment. Federal government employment fell again in November (-6,000). This follows a sharp decline of 162,000 in October, as some federal employees who accepted a deferred resignation offer came off federal payrolls. Federal government employment is down by 271,000 since reaching a peak in January. (Note however that federal employees on furlough during the government shutdown were counted as employed in the establishment survey because they received pay, even if later than usual, for the pay period that included the 12th of the month. Employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey.)

Private-sector employment rose 69,000 in November and 52,000 in October following an upwardly revised 104,000 increase in September (previously 97,000). Goods sector employment rebounded in November, rising 19,000 after a 9,000 fall in October. Construction jobs increased 28,000 in November, their largest monthly gain in more than a year, but slipped 1,000 in October. Manufacturing jobs continued to decline, falling 5,000 in November and 9,000 in October. They have now declined for seven consecutive months, not the result that the Trump Administration new tariff policy had intended.

Private-sector service-producing jobs gained 50,000 in November on top of a 61,000 increase in October and an 87,000 rise in September. A 46,000 increase in healthcare jobs on top of a 44,000 increase in October and an 18,000 gain in social assistance jobs in November after a 21,000 increase in October led the overall increases in the past two months. Other major sectors mostly experienced either job declines or minimal gains in October and November.

251216C4.jpg

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The length of the workweek increased to 34.3 hours in November from 34.2 hours in August, September and October. The goods-producing workweek edged up to 39.8 hours in November from 39.6 hours in October while the private service-producing workweek was unchanged at 33.2 hours in November.

In the **household survey**, the unemployment rate jumped to 4.6% in November, the highest since September 2021 and up from a recent low of 3.4% in April 2023, from 4.4% in September (again, no data for October). The labor force increased 323,000 in November from September after a 470,000 monthly gain in September. The gain in employment slowed in November with the number of employed rising only 96,000 from September following a 251,000 monthly increase in September. The number of unemployed increased 228,000 in November from September following a 219,000 monthly increase in September. The labor force participation rate rose to 62.5% in November, its highest since April, from 62.4% in September. On a slightly brighter note, the average duration of unemployment slipped to 23.0 weeks in November from 24.1 weeks in September while the median duration of unemployment fell to 9.5 weeks, the lowest since May, from 10.0 weeks in September.

The employment/population ratio for all workers slipped to 59.6% in November from 59.7% in September. It remained below the recent peak reading of 61.1% in February 2020 just prior to the pandemic. For men, the rate slipped to 64.6% in November from 64.8% in September and 65.0% in August, and for women, the rate was unchanged at 54.8% in November.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Total payrolls rose 64k in November but fell 105k in October
- The October decline was more than accounted for by a 157k decline in government employment
- The unemployment rate jumped to 4.6% in November from 4.4% in September.
- There were no household survey data collected for October.

Economy in Brief

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Empire State Index Slipped Less Than Expected, Expectations Up

Industrial Output Up Slightly

CPI Unchanged

CPI Unchanged

Current Accounts in Central Europe: Services, Income and Transfers Play Significant Role

Initial Claims For Jobless Insurance at Two Month Low

U.S. Import Prices Up

U.S. Import Prices Up