Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061002f.jpg" width="353">
Business and consumers in Europe continue to be pleasantly surprised by their current situation, but to be anxious about the future.
In Germany, the IFO research institute in Munich reported today that its sentiment indicator based on a survey of about 7,000 executives fell to 104.9 (2000=100) from 105.0 in August. It is now 1.8% below the recent peak of 106.8 in June of this year. The sentiment indicator combines the views of business regarding the present situation and those regarding expectations six months ahead. The indicator of the present situation rose 2.4% in September to 111.3 from 108.3 in August and was 15.6% above September, 2005. The expectations indicator, on the other hand, declined 2.5% in September to 98.9 from 101.4 in August and was only 2.2% above September, 2005. The divergence between the Situation and Expectations indexes since midyear is shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926e.jpg" width="353">
Yesterday, the French INSEE (Institut National de Statistiques et Etudes Economique) announced that its Composite Business Climate Indicator was unchanged at 107 (2000=100) in September from August but was 1.8% below its recent peak of 109 in April of this year. Business sentiment in France has generally been higher than that in Germany as can be seen in the second chart.
Both Belgium and the Netherlands recently released their measures of business and consumer confidence. Belgium is the only country that so far has shown an increase in confidence in September. Both Belgium and the Netherlands express their measures of confidence as a percent balance. The Belgian measure increased from 3.1% to 4.5% in September, however, it is still below its recent peak of 10.1 in June, 2006. It has only been since last fall that the optimists among the Belgian and Dutch business began to exceed the pessimists as can be seen in the third chart.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926f.jpg" width="353">
Consumers in Belgium and the Netherlands have been even more pessimistic than business over the past five years. It was only in June of this year that the optimists outweighed the pessimists in the Netherlands. Pessimists continue to exceed optimists in Belgium, but the margin has narrowed to 2 percentage points in August and September. The fourth chart compares consumer confidence in Belgium and the Netherlands.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926g.jpg" width="353">
Given the improvement in the economy--above expectations--in Europe so far this year, it is not unusual that both business and consumers should express caution regarding the future. So far the confidence measures appear to be signaling just that--caution, not alarm.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Country</th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">Jul 05</th>
<th scope="col">M/M %</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">GERMANY&nbsp; (2000=100</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Overall</td>
<td>104.9</td>
<td>105.4</td>
<td>96.6</td>
<td>-0.10</td>
<td>8.59</td>
<td>95.6</td>
<td>95.5</td>
<td>91.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Present Situation</td>
<td>111.3</td>
<td>108.7</td>
<td>96.3</td>
<td>2.39</td>
<td>15.58</td>
<td>94.7</td>
<td>93.1</td>
<td>88.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>98.9</td>
<td>101.4</td>
<td>96.8</td>
<td>-2.47</td>
<td>2.17</td>
<td>96.3</td>
<td>97.8</td>
<td>95.6</td>
</tr>
<tr class="odd">
<td class="firstcol">FRANCE (2000=100</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Composite Business Climate Indicator ()</td>
<td>107</td>
<td>107</td>
<td>101</td>
<td>0.00</td>
<td>5.94</td>
<td>101</td>
<td>104</td>
<td>94</td>
</tr>
<tr class="odd">
<td class="firstcol">NETHERLANDS&nbsp; (% Bal)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>M/M&nbsp; Dif&nbsp;</td>
<td>Y/Y&nbsp; Dif&nbsp;&nbsp;</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business&nbsp;</td>
<td>7.9</td>
<td>8.2</td>
<td>6.3</td>
<td>-0.3</td>
<td>9.2</td>
<td>0.6</td>
<td>-0.1</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer</td>
<td>9</td>
<td>4</td>
<td>-26</td>
<td>0</td>
<td>35</td>
<td>-22</td>
<td>-25</td>
<td>-25</td>
</tr>
<tr>
<td class="firstcol">BELGIUM&nbsp;&nbsp; (% Bal)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Business&nbsp;</td>
<td>4.5</td>
<td>3.1</td>
<td>-5.6</td>
<td>1.4</td>
<td>10.1</td>
<td>-7.5</td>
<td>-2.3</td>
<td>-12.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Consumer</td>
<td>-2</td>
<td>-2</td>
<td>-14</td>
<td>0</td>
<td>12</td>
<td>-8</td>
<td>-4</td>
<td>-11</td>
</tr>
</tbody>
</table>
</body>
</html>

Business and consumers in Europe continue to be pleasantly surprised by their current situation, but to be anxious about the future. In Germany, the IFO research institute in Munich reported today that its sentiment indicator based on [...]

European Confidence Measures Signaling Caution

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926c.jpg" width="353">
For September, the Conference Board indicated that consumer confidence recovered most of the prior month&#39;s drop, which was revised shallower, with a 4.3% increase to 104.5. Consensus expectations had been for a more moderate increase to 103.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation recovered 3.1% (15.7% y/y). The percentage of respondents who viewed business conditions as good (27.4%) rose back to the July level and the percentage that viewed jobs as hard to get (21.3%) rose for the second month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926d.jpg" width="353">
The index measuring consumers&#39; expectations also recovered the prior month&#39;s decline with a 5.5% rise (23.1% y/y). Expectations for better business conditions improved (16.3%) and more respondents expected an increase in jobs (14.4%).
Expectations for the inflation rate in twelve months dropped to 4.9%, the lowest level since March.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond. 
What Happens To Banks When House Prices Fall? U.S. Regional Busts of the 1980s and 1990s from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/06/09/Wheelock.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/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">September</th>
<th scope="col">August</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">Consumer Confidence</td>
<td>104.5</td>
<td>100.2</td>
<td>19.4%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>


</html>

For September, the Conference Board indicated that consumer confidence recovered most of the prior month's drop, which was revised shallower, with a 4.3% increase to 104.5. Consensus expectations had been for a more moderate increase [...]

Consumer Confidence Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported another drop in chain store sales last week. The 0.6% decline was the third drop in a as many weeks and left the average of sales in September 0.3% below August.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
Last week, the retail price for a gallon of regular unleaded gasoline dropped another twelve cents w/w to an average $2.38 (-15.3% y/y), the lowest level since early March. In spot market trading yesterday, the NY harbor price for regular unleaded gasoline continued its recent decline and fell three cents from Friday to $1.49, versus an average $1.53 last week. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926b.jpg" width="353">
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 gave back nearly all of the prior period&#39;s increase with a 0.6% decline last week (+0.5% y/y).
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/23/06</th>
<th scope="col">09/16/06</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">Total Weekly Chain Store Sales</td>
<td>464.2</td>
<td>466.8</td>
<td>4.2%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS reported another drop in chain store sales last week. The 0.6% decline was the third drop in a as many weeks and left the average of sales in September 0.3% below August.

Chain Store Sales Down Again. Gasoline Prices Still Falling

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926c.jpg" width="353">
For September, the Conference Board indicated that consumer confidence recovered most of the prior month&#39;s drop, which was revised shallower, with a 4.3% increase to 104.5. Consensus expectations had been for a more moderate increase to 103.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation recovered 3.1% (15.7% y/y). The percentage of respondents who viewed business conditions as good (27.4%) rose back to the July level and the percentage that viewed jobs as hard to get (21.3%) rose for the second month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926d.jpg" width="353">
The index measuring consumers&#39; expectations also recovered the prior month&#39;s decline with a 5.5% rise (23.1% y/y). Expectations for better business conditions improved (16.3%) and more respondents expected an increase in jobs (14.4%).
Expectations for the inflation rate in twelve months dropped to 4.9%, the lowest level since March.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond. 
What Happens To Banks When House Prices Fall? U.S. Regional Busts of the 1980s and 1990s from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/06/09/Wheelock.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/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">September</th>
<th scope="col">August</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">Consumer Confidence</td>
<td>104.5</td>
<td>100.2</td>
<td>19.4%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>
Chain Store Sales Down Again. Gasoline Prices Still Falling 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported another drop in chain store sales last week. The 0.6% decline was the third drop in a as many weeks and left the average of sales in September 0.3% below August.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
Last week, the retail price for a gallon of regular unleaded gasoline dropped another twelve cents w/w to an average $2.38 (-15.3% y/y), the lowest level since early March. In spot market trading yesterday, the NY harbor price for regular unleaded gasoline continued its recent decline and fell three cents from Friday to $1.49, versus an average $1.53 last week. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926b.jpg" width="353">
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 gave back nearly all of the prior period&#39;s increase with a 0.6% decline last week (+0.5% y/y).
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/23/06</th>
<th scope="col">09/16/06</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">Total Weekly Chain Store Sales</td>
<td>464.2</td>
<td>466.8</td>
<td>4.2%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
European Confidence Measures Signaling Caution 
by <a href="/comment/Curley.html">Louise Curley</a> September 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926e.jpg" width="353">
Business and consumers in Europe continue to be pleasantly surprised by their current situation, but to be anxious about the future.
In Germany, the IFO research institute in Munich reported today that its sentiment indicator based on a survey of about 7,000 executives fell to 104.9 (2000=100) from 105.0 in August. It is now 1.8% below the recent peak of 106.8 in June of this year. The sentiment indicator combines the views of business regarding the present situation and those regarding expectations six months ahead. The indicator of the present situation rose 2.4% in September to 111.3 from 108.3 in August and was 15.6% above September, 2005. The expectations indicator, on the other hand, declined 2.5% in September to 98.9 from 101.4 in August and was only 2.2% above September, 2005. The divergence between the Situation and Expectations indexes since midyear is shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926f.jpg" width="353">
Yesterday, the French INSEE (Institut National de Statistiques et Etudes Economique) announced that its Composite Business Climate Indicator was unchanged at 107 (2000=100) in September from August but was 1.8% below its recent peak of 109 in April of this year. Business sentiment in France has generally been higher than that in Germany as can be seen in the second chart.
Both Belgium and the Netherlands recently released their measures of business and consumer confidence. Belgium is the only country that so far has shown an increase in confidence in September. Both Belgium and the Netherlands express their measures of confidence as a percent balance. The Belgian measure increased from 3.1% to 4.5% in September, however, it is still below its recent peak of 10.1 in June, 2006. It has only been since last fall that the optimists among the Belgian and Dutch business began to exceed the pessimists as can be seen in the third chart.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060926g.jpg" width="353">
Consumers in Belgium and the Netherlands have been even more pessimistic than business over the past five years. It was only in June of this year that the optimists outweighed the pessimists in the Netherlands. Pessimists continue to exceed optimists in Belgium, but the margin has narrowed to 2 percentage points in August and September. The fourth chart compares consumer confidence in Belgium and the Netherlands.
Given the improvement in the economy--above expectations--in Europe so far this year, it is not unusual that both business and consumers should express caution regarding the future. So far the confidence measures appear to be signaling just that--caution, not alarm.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Country</th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">Jul 05</th>
<th scope="col">M/M %</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">GERMANY&nbsp; (2000=100</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Overall</td>
<td>104.9</td>
<td>105.4</td>
<td>96.6</td>
<td>-0.10</td>
<td>8.59</td>
<td>95.6</td>
<td>95.5</td>
<td>91.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Present Situation</td>
<td>111.3</td>
<td>108.7</td>
<td>96.3</td>
<td>2.39</td>
<td>15.58</td>
<td>94.7</td>
<td>93.1</td>
<td>88.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>98.9</td>
<td>101.4</td>
<td>96.8</td>
<td>-2.47</td>
<td>2.17</td>
<td>96.3</td>
<td>97.8</td>
<td>95.6</td>
</tr>
<tr class="odd">
<td class="firstcol">FRANCE (2000=100</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Composite Business Climate Indicator ()</td>
<td>107</td>
<td>107</td>
<td>101</td>
<td>0.00</td>
<td>5.94</td>
<td>101</td>
<td>104</td>
<td>94</td>
</tr>
<tr class="odd">
<td class="firstcol">NETHERLANDS&nbsp; (% Bal)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>M/M&nbsp; Dif&nbsp;</td>
<td>Y/Y&nbsp; Dif&nbsp;&nbsp;</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business&nbsp;</td>
<td>7.9</td>
<td>8.2</td>
<td>6.3</td>
<td>-0.3</td>
<td>9.2</td>
<td>0.6</td>
<td>-0.1</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer</td>
<td>9</td>
<td>4</td>
<td>-26</td>
<td>0</td>
<td>35</td>
<td>-22</td>
<td>-25</td>
<td>-25</td>
</tr>
<tr>
<td class="firstcol">BELGIUM&nbsp;&nbsp; (% Bal)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Business&nbsp;</td>
<td>4.5</td>
<td>3.1</td>
<td>-5.6</td>
<td>1.4</td>
<td>10.1</td>
<td>-7.5</td>
<td>-2.3</td>
<td>-12.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Consumer</td>
<td>-2</td>
<td>-2</td>
<td>-14</td>
<td>0</td>
<td>12</td>
<td>-8</td>
<td>-4</td>
<td>-11</td>
</tr>
</tbody>
</table>


</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925c.jpg" width="353">
China&#39;s total exports in July at $80.3 billion exceeded the seasonally unadjusted exports of the United States at $79.2 billion for the first time. US data for August has not yet been published, but Chinese exports in August took another jump to reach $90.7 billion. As the first chart shows, the growth in China&#39;s exports suggests that it will not be long before China becomes the world&#39;s biggest exporter, ousting the United States from its long standing position.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925d.jpg" width="353">
In all the major geographic areas, Chinese exports are growing faster than those of the US. As an example, the second chart compares China and US exports to Europe. Even in areas where the US is still a dominant supplier, such as Latin America, the year to year growth in China&#39;s export to that region has greatly exceeded that of the US, as shown in the third chart.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925e.jpg" width="353">
China&#39;s status as the Number One Exporter in the world is not without its problems. As a result of the large current account surplus that has resulted from China&#39;s fast growing exports and slow growing imports, China&#39;s international reserves are close to $1.0 trillion. The management of the reserves has become increasingly burdensome and risky. And China&#39;s reluctance to appreciate its currency is becoming increasingly under attack.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Exports (Billions USD)</th>
<th scope="col">Aug&nbsp; 06</th>
<th scope="col">Jul 06</th>
<th scope="col">Jul 06</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>China</td>
<td>China</td>
<td>US</td>
</tr>
<tr>
<td class="firstcol">Total&nbsp;&nbsp;</td>
<td>90.7</td>
<td>80.3</td>
<td>79.2</td>
</tr>
<tr class="odd">
<td class="firstcol">To Europe</td>
<td>20.7</td>
<td>17.8</td>
<td>18.4</td>
</tr>
<tr>
<td class="firstcol">To Latin America</td>
<td>3.6</td>
<td>3.1</td>
<td>16.9</td>
</tr>
</tbody>
</table>
</body>
</html>

China's total exports in July at $80.3 billion exceeded the seasonally unadjusted exports of the United States at $79.2 billion for the first time. US data for August has not yet been published, but Chinese exports in August took [...]

China Close to Ousting the United States as Number One Exporter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925a.jpg" width="353">
 Total existing home sales fell just 0.5% during August to 6.30M according to the National Association of Realtors, and it was the sixth decline this year. Though it lowered sales 13.3% below the peak in June of 2005, the decline compared favorably to Consensus expectations for a deeper drop 6.20M.
The data cover sales closed in the latest and previous months, and contrast to the new home sales data which tally sales at the signing of a contract.
Weakness in home sales perhaps was mitigated by price concessions which lowered the median price of an existing single-family home by 2.3%. The y/y change in prices, at -1.7%, was negative for the first time a modest decline in 1995 and the deepest since a 1.1% drop in early 2003. The price figures are not seasonally adjusted.
Sales of single-family homes were unchanged but have fallen during six months this year and are down 13.0% from the peak in June of 2005. Versus the first eight months of 2005 sales this year are down 6.2%.
Single family home sales were unchanged last month both in the South (-6.5% y/y) and in the Midwest (-12.5% y/y). In the Northeast sales posted a 2.7% rise (-10.5% y/y) which was offset by a 1.7% decline (-22.4% y/y) in the West.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925b.jpg" width="353">
The inventory of unsold existing homes rose another 1.5% (37.9% y/y). The supply of unsold single family homes rose 1.2% (36.2% y/y) and the supply of condos &amp; coops for sale rose 3.1% m/m (49.1% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.
Slowdown in housing won&#39;t shut down economic growth from the Federal Reserve Bank of St. Louis can be found <a href="http://stlouisfed.org/publications/re/2006/c/pages/pres_message.html"> here</a>.
Residential mortgage default from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/br_q3-2006-3_residential_mortgage.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/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">August</th>
<th scope="col">July</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 Home Sales</td>
<td>&nbsp;6,300</td>
<td>6,330</td>
<td>-12.6%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,510</td>
<td>5,510</td>
<td>-12.3%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price (000) </td>
<td>$225.7 </td>
<td>$230.9 </td>
<td>-1.7% </td>
<td>$217.5</td>
<td>$192.8 </td>
<td>$178.3 </td>
</tr>
</tbody>
</table>


</html>

Total existing home sales fell just 0.5% during August to 6.30M according to the National Association of Realtors, and it was the sixth decline this year. Though it lowered sales 13.3% below the peak in June of 2005, the decline [...]

U.S. Existing Home Sales Hold Up As Prices Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925a.jpg" width="353">
 Total existing home sales fell just 0.5% during August to 6.30M according to the National Association of Realtors, and it was the sixth decline this year. Though it lowered sales 13.3% below the peak in June of 2005, the decline compared favorably to Consensus expectations for a deeper drop 6.20M.
The data cover sales closed in the latest and previous months, and contrast to the new home sales data which tally sales at the signing of a contract.
Weakness in home sales perhaps was mitigated by price concessions which lowered the median price of an existing single-family home by 2.3%. The y/y change in prices, at -1.7%, was negative for the first time a modest decline in 1995 and the deepest since a 1.1% drop in early 2003. The price figures are not seasonally adjusted.
Sales of single-family homes were unchanged but have fallen during six months this year and are down 13.0% from the peak in June of 2005. Versus the first eight months of 2005 sales this year are down 6.2%.
Single family home sales were unchanged last month both in the South (-6.5% y/y) and in the Midwest (-12.5% y/y). In the Northeast sales posted a 2.7% rise (-10.5% y/y) which was offset by a 1.7% decline (-22.4% y/y) in the West.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925b.jpg" width="353">
The inventory of unsold existing homes rose another 1.5% (37.9% y/y). The supply of unsold single family homes rose 1.2% (36.2% y/y) and the supply of condos &amp; coops for sale rose 3.1% m/m (49.1% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.
Slowdown in housing won&#39;t shut down economic growth from the Federal Reserve Bank of St. Louis can be found <a href="http://stlouisfed.org/publications/re/2006/c/pages/pres_message.html"> here</a>.
Residential mortgage default from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/br_q3-2006-3_residential_mortgage.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/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">August</th>
<th scope="col">July</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 Home Sales</td>
<td>&nbsp;6,300</td>
<td>6,330</td>
<td>-12.6%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,510</td>
<td>5,510 </td>
<td>-12.3%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price (000) </td>
<td>$225.7 </td>
<td>$230.9 </td>
<td>-1.7% </td>
<td>$217.5</td>
<td>$192.8 </td>
<td>$178.3 </td>
</tr>
</tbody>
</table>
China Close to Ousting the United  States as Number One Exporter 
by <a href="/comment/Curley.html">Louise Curley</a> September 25, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925c.jpg" width="353">
China&#39;s total exports in July at $80.3 billion exceeded the seasonally unadjusted exports of the United States at $79.2 billion for the first time. US data for August has not yet been published, but Chinese exports in August took another jump to reach $90.7 billion. As the first chart shows, the growth in China&#39;s exports suggests that it will not be long before China becomes the world&#39;s biggest exporter, ousting the United States from its long standing position.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925d.jpg" width="353">
In all the major geographic areas, Chinese exports are growing faster than those of the US. As an example, the second chart compares China and US exports to Europe. Even in areas where the US is still a dominant supplier, such as Latin America, the year to year growth in China&#39;s export to that region has greatly exceeded that of the US, as shown in the third chart.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060925e.jpg" width="353">
China&#39;s status as the Number One Exporter in the world is not without its problems. As a result of the large current account surplus that has resulted from China&#39;s fast growing exports and slow growing imports, China&#39;s international reserves are close to $1.0 trillion. The management of the reserves has become increasingly burdensome and risky. And China&#39;s reluctance to appreciate its currency is becoming increasingly under attack.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Exports (Billions USD)</th>
<th scope="col">Aug&nbsp; 06</th>
<th scope="col">Jul 06</th>
<th scope="col">Jul 06</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>China</td>
<td>China</td>
<td>US</td>
</tr>
<tr>
<td class="firstcol">Total&nbsp;&nbsp;</td>
<td>90.7</td>
<td>80.3</td>
<td>79.2</td>
</tr>
<tr class="odd">
<td class="firstcol">To Europe</td>
<td>20.7</td>
<td>17.8</td>
<td>18.4</td>
</tr>
<tr>
<td class="firstcol">To Latin America</td>
<td>3.6</td>
<td>3.1</td>
<td>16.9</td>
</tr>
</tbody>
</table>


</html>

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/060922d.jpg" width="353">
Employment in Taiwan is trending steadily higher, even and especially in the manufacturing sector. August data published on September 22 by the Directorate-General for Budgets, Analysis and Statistics (DGBAS) shows a 21,000 increase in total employment in the month, a 2.0% advance over a year ago and following a 42,000 increase in July. Unemployment in Taiwan is declining, and the August rate, 3.8%, is the lowest since February 2001; it peaked at 5.3% in early 2002.
The most distinctive aspect to Taiwan&#39;s labor situation is the uptrend in manufacturing. The number of factory workers has increased by 61,000 over the last year, a gain of 2.2%. After the tech recession in 2001, Taiwan&#39;s manufacturing rebounded promptly and has shown fairly consistent growth since. Its neighbors haven&#39;t fared nearly as well. Until the last few months, South Korea has continued to see job reductions in that sector and Hong Kong&#39;s manufacturing jobs are just managing to hold steady at their cycle low.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060922e.jpg" width="353"> 
Clearly too, Taiwan&#39;s manufacturing employment is stronger than in the West. In Taiwan, this key goods-producing sector accounts for just over 27% of all employment. This contrasts with 18.4% recently in the EuroZone (includes mining), about 12% in the US and 11% in the UK. In Europe, too, factory jobs are falling markedly; in the UK, they are also falling, although the rate of decline is easing. In the US, total factory employment has finally stabilized and the number of production workers is actually rising a bit. But by far, Taiwan&#39;s sector is out-performing many other of the world&#39;s markets.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEPR/@P5/@P55/@P55.HTM">Taiwan: SA*, 000s</a></th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">Year Ago</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 Employment</td>
<td>10,141</td>
<td>10,120</td>
<td>10,078</td>
<td>9,951</td>
<td>9,942</td>
<td>9,786</td>
<td>9,573</td>
</tr>
<tr>
<td class="firstcol">Change/ % Chg</td>
<td>21</td>
<td>42</td>
<td>7</td>
<td>2.0%</td>
<td>1.6%</td>
<td>2.2%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing </td>
<td>2,783</td>
<td>2,777</td>
<td>2,765</td>
<td>2,722</td>
<td>2,726</td>
<td>2,672</td>
<td>2,590</td>
</tr>
<tr>
<td class="firstcol">Change/ % Chg</td>
<td>6</td>
<td>12</td>
<td>9</td>
<td>2.2%</td>
<td>2.0%</td>
<td>3.2%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate, %</td>
<td>3.8%</td>
<td>3.9%</td>
<td>3.9%</td>
<td>4.1%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>5.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

Employment in Taiwan is trending steadily higher, even and especially in the manufacturing sector. August data published on September 22 by the Directorate-General for Budgets, Analysis and Statistics (DGBAS) shows a 21,000 increase [...]

Taiwan Employment Grows, Even in Factories; Unemployment Lowest in 5-1/2 Years

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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**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Robert Brusca

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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.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). 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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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief

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