Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821d.jpg" width="353">
Inflation in Germany has largely been the result of rising energy costs as can be seen in the first chart which shows the total index of inflation and the core index excluding energy. The widening difference between the two series is due to the rising price of oil. So far there has been little evidence that the rise in energy prices has had secondary effects on the economy. In this connection, one series to watch is that of the monthly data on German hourly wages for the whole economy that was announced today.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821e.jpg" width="353">
Although the index declined 0.29% in June to 102.1 from 102.4 in May, it was 0.99% above June of 2005. Since the data are not seasonally adjusted, the year to year comparison is the more meaningful.While it is volatile, the second chart shows that wage growth is beginning to accelerate reversing the downward trend started in 2003. The annual increase in hourly wages was 2.68% in 2002, 2.03% in 2003, 1.17% in 2004 and 0.97% in 2005. For the first six months of this year, hourly wages have averaged an increase of 1.2% over the first six months of last year. With declines in the unemployment rate, union demands are likely to rise. Last week, IG Metall, the German steel and metalworkers&#39; union demanded a 7% pay rise for the steel industry. While such demands are likely to be moderated, it appears that the secondary effects of the rise in oil prices are beginning to be felt.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">Germany</a></th>
<th scope="col">Jun 06</th>
<th scope="col">May&nbsp;&nbsp; 06</th>
<th scope="col">Jun 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">Consumer Price Index (2000=100)</td>
<td>110.3</td>
<td>110.0</td>
<td>108.1</td>
<td>0.29</td>
<td>2.04</td>
<td>108.3</td>
<td>105.5</td>
<td>104.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Core Index, Total ex Energy&nbsp;</td>
<td>107.6</td>
<td>107.4</td>
<td>106.6</td>
<td>0.19</td>
<td>0.94</td>
<td>106.7</td>
<td>105.5</td>
<td>104.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Hourly Wages (NSA, 2000=100)</td>
<td>102.79</td>
<td>105.25</td>
<td>104.86</td>
<td>-1.40</td>
<td>-1.97</td>
<td>105.41</td>
<td>144.40</td>
<td>100.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Annual % Change</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>1.51</td>
<td>1.81</td>
<td>2.52</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflation in Germany has largely been the result of rising energy costs as can be seen in the first chart which shows the total index of inflation and the core index excluding energy. The widening difference between the two series is [...]

Are German Wage Increases Beginning to Have an Effect on Inflation?

Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821c.jpg" width="353">
Inflationary concerns were piqued by the up-trend in prices for gold &amp; oil. That trend reversed a bit last week as the price of West Texas Intermediate Crude Oil settled on Friday at $71.15 per barrel, down 7.6% from the near-high of $76.99 reached early the prior week. Gold prices also moved lower to $613.90, off 7.5% from the July high.
Evidence that higher oil prices forced cutbacks in the demand for gasoline as well as some diminution of political tensions could have caused the trend reversal. In fact, the latest monthly figures on real personal consumption expenditures indicate demand for gasoline &amp; oil fell 5.5% from the peak during January of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821b.jpg" width="353">
These gasoline demand figures through June were roughly consistent with the Department of Energy&#39;s estimates of lower demand, but during July &amp; August consumers seem to have grown accustomed to higher prices. Gasoline demand versus last year returned to the plus column.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821a.jpg" width="353">
The four week average of gasoline demand through mid-August rose 1.3% versus last year as a result of firm demand this Summer. Certainly that growth is well off the 4-8% rates of early 2004, but consumers&#39; resilience clearly is in evidence.
The just released figures from the Federal Highway Administration indicated that through 2004, the miles driven in the U.S. by passenger cars grew a steady 2.0% from the year earlier. These figures are available in Haver&#39;s USECON database under Highway Statistics.
The latest Short-Term Energy and Summer Fuels Outlook from the U.S. Energy Information Administration can be found <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/WEEKLY/@W4/@W403/@W40303/@W40303.HTM">US Weekly</a></th>
<th scope="col">08/15/06</th>
<th scope="col">12/31/05</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">Light Sweet Crude Oil, WTI (per BBL.)</td>
<td>$73.06</td>
<td>$58.16</td>
<td>10.5%</td>
<td>$57.59</td>
<td>$41.78</td>
<td>$32.781</td>
</tr>
<tr>
<td class="firstcol">Cash Gold Price, Handy &amp; Harmon</td>
<td>$625.50</td>
<td>$507.40</td>
<td>41.2%</td>
<td>$447.13</td>
<td>$411.72</td>
<td>$367.78</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflationary concerns were piqued by the up-trend in prices for gold & oil. That trend reversed a bit last week as the price of West Texas Intermediate Crude Oil settled on Friday at $71.15 per barrel, down 7.6% from the near-high of [...]

Oil & Gold Prices Down. A Trend Reversal?

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821c.jpg" width="353">
Inflationary concerns were piqued by the up-trend in prices for gold &amp; oil. That trend reversed a bit last week as the price of West Texas Intermediate Crude Oil settled on Friday at $71.15 per barrel, down 7.6% from the near-high of $76.99 reached early the prior week. Gold prices also moved lower to $613.90, off 7.5% from the July high.
Evidence that higher oil prices forced cutbacks in the demand for gasoline as well as some diminution of political tensions could have caused the trend reversal. In fact, the latest monthly figures on real personal consumption expenditures indicate demand for gasoline &amp; oil fell 5.5% from the peak during January of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821b.jpg" width="353">
These gasoline demand figures through June were roughly consistent with the Department of Energy&#39;s estimates of lower demand, but during July &amp; August consumers seem to have grown accustomed to higher prices. Gasoline demand versus last year returned to the plus column.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821a.jpg" width="353">
The four week average of gasoline demand through mid-August rose 1.3% versus last year as a result of firm demand this Summer. Certainly that growth is well off the 4-8% rates of early 2004, but consumers&#39; resilience clearly is in evidence.
The just released figures from the Federal Highway Administration indicated that through 2004, the miles driven in the U.S. by passenger cars grew a steady 2.0% from the year earlier. These figures are available in Haver&#39;s USECON database under Highway Statistics.
The latest Short-Term Energy and Summer Fuels Outlook from the U.S. Energy Information Administration can be found <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/WEEKLY/@W4/@W403/@W40303/@W40303.HTM">US Weekly</a></th>
<th scope="col">08/15/06</th>
<th scope="col">12/31/05</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">Light Sweet Crude Oil, WTI (per BBL.)</td>
<td>$73.06</td>
<td>$58.16</td>
<td>10.5%</td>
<td>$57.59</td>
<td>$41.78</td>
<td>$32.781</td>
</tr>
<tr>
<td class="firstcol">Cash Gold Price, Handy &amp; Harmon</td>
<td>$625.50</td>
<td>$507.40</td>
<td>41.2%</td>
<td>$447.13</td>
<td>$411.72</td>
<td>$367.78</td>
</tr>
</tbody>
</table>
Are German Wage Increases Beginning to Have an Effect on Inflation? 
by <a href="/comment/Curley.html">Louise Curley</a> August 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821d.jpg" width="353">
Inflation in Germany has largely been the result of rising energy costs as can be seen in the first chart which shows the total index of inflation and the core index excluding energy. The widening difference between the two series is due to the rising price of oil. So far there has been little evidence that the rise in energy prices has had secondary effects on the economy. In this connection, one series to watch is that of the monthly data on German hourly wages for the whole economy that was announced today.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060821e.jpg" width="353">
Although the index declined 0.29% in June to 102.1 from 102.4 in May, it was 0.99% above June of 2005. Since the data are not seasonally adjusted, the year to year comparison is the more meaningful.While it is volatile, the second chart shows that wage growth is beginning to accelerate reversing the downward trend started in 2003. The annual increase in hourly wages was 2.68% in 2002, 2.03% in 2003, 1.17% in 2004 and 0.97% in 2005. For the first six months of this year, hourly wages have averaged an increase of 1.2% over the first six months of last year. With declines in the unemployment rate, union demands are likely to rise. Last week, IG Metall, the German steel and metalworkers&#39; union demanded a 7% pay rise for the steel industry. While such demands are likely to be moderated, it appears that the secondary effects of the rise in oil prices are beginning to be felt.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">Germany</a></th>
<th scope="col">Jun 06</th>
<th scope="col">May&nbsp;&nbsp; 06</th>
<th scope="col">Jun 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">Consumer Price Index (2000=100)</td>
<td>110.3</td>
<td>110.0</td>
<td>108.1</td>
<td>0.29</td>
<td>2.04</td>
<td>108.3</td>
<td>105.5</td>
<td>104.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Core Index, Total ex Energy&nbsp;</td>
<td>107.6</td>
<td>107.4</td>
<td>106.6</td>
<td>0.19</td>
<td>0.94</td>
<td>106.7</td>
<td>105.5</td>
<td>104.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Hourly Wages (NSA, 2000=100)</td>
<td>102.79</td>
<td>105.25</td>
<td>104.86</td>
<td>-1.40</td>
<td>-1.97</td>
<td>105.41</td>
<td>144.40</td>
<td>100.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Annual % Change</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>1.51</td>
<td>1.81</td>
<td>2.52</td>
</tr>
</tbody>
</table>
</body>
</html>

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818e.jpg" width="353">
A surge in merchandise exports pushed Brazil&#39;s current account to a record surplus in July, $3043 million, as reported late August 17 by the Central Bank of Brazil. With seasonal adjustment by Haver Analytics, the balance is $2203 million, as seen in the table below, the second largest monthly amount after $2715 million in November.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818f.jpg" width="353">
Brazil sells oil, coffee and copper, among numerous other items. Obviously, two of these items have seen major price increases that have raised the value of Brazil&#39;s exports. They are up more than 23% from a year ago. This good gain, $2.6 billion, has more than offset a larger percentage increase in imports, nearly 32% on the year, or $1.9 billion.
Frequently, economists and other analysts assess a nation&#39;s trade and current account conditions over against the capital and financial accounts. But for Brazil, the more relevant comparison involves the trade balance versus the service and income flows. It is the large trade surplus that &quot;finances&quot; a modest deficit in services and a more significant deficit in income. Brazil has a sizable negative international investment position, -$340 billion at the end of last year, and it sends out considerable amounts of profits, dividends and interest payments. As noted below, the deficit on income exceeds $2.1 billion in most months.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818g.jpg" width="353">
Flows on the financial side are very erratic, but generally direct investment remains positive. So there are consistent flows of foreign equity funds into Brazil, suggesting that companies want increasingly to be represented in that sizable market. Portfolio and &quot;other&quot; investments swing widely from month to month, making it hard to characterize other investors&#39; attitudes toward the country.

<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/EMERGELA/@E2/@E208/@E208.HTM">Brazil</a> Mil. US$, Seas Adj.</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">July 2005</th>
Monthly Averages*
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Current Account</td>
<td>2203</td>
<td>578</td>
<td>524</td>
<td>1851</td>
<td>1183</td>
<td>973</td>
<td>348</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance</td>
<td>4945</td>
<td>3714</td>
<td>2908</td>
<td>4454</td>
<td>3729</td>
<td>2803</td>
<td>2066</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>12651</td>
<td>11007</td>
<td>10058</td>
<td>10304</td>
<td>9859</td>
<td>8040</td>
<td>6090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>7705</td>
<td>7292</td>
<td>7150</td>
<td>5850</td>
<td>6130</td>
<td>5236</td>
<td>4020</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-952</td>
<td>-747</td>
<td>-663</td>
<td>-632</td>
<td>-679</td>
<td>-390</td>
<td>-411</td>
</tr>
<tr class="odd">
<td class="firstcol">Income</td>
<td>-2102</td>
<td>-2764</td>
<td>-2113</td>
<td>-2253</td>
<td>-2164</td>
<td>-1710</td>
<td>-1546</td>
</tr>
</tbody>
</table>
</body>
</html>

A surge in merchandise exports pushed Brazil's current account to a record surplus in July, $3043 million, as reported late August 17 by the Central Bank of Brazil. With seasonal adjustment by Haver Analytics, the balance is $2203 [...]

Brazil's Large Exports Yield Record Current Account Surplus in July

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818c.jpg" width="353">
Consumer sentiment in early August dropped sharply to the lowest level since last October, according to the University of Michigan. The 7.1% m/m decline in the sentiment index to 78.7 compared to consensus expectations for stability at 84.0.
During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending and during those ten years sentiment has a 68% correlation with the change in nonfarm payrolls.
Expectations for the economy posted a notable 11.0% m/m drop to the lowest level last October. The decline was led by a sharp decline in expected 12 month business conditions to the lowest level since September and a more moderate drop in expected conditions during the next five years. The expected change in personal finances also fell sharply to the lowest level since May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818d.jpg" width="353">
The reading of current economic conditions fell moderately for the second straight month. Details indicate that the index of current personal finances dropped to the lowest level since May but perceived buying conditions for large household goods slipped just modestly m/m (-4.3% y/y).
Consumers&#39; opinion about gov&#39;t economic policy slipped a modest 2.4% m/m (-5.9% y/y) after sharp improvement during July. Expected inflation during the next year surged m/m to 4.9%, its highest level in nearly a year. The five to ten year expected rate of inflation also rose to 3.5%, its highest since May.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">August (Prelim)</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">Consumer Sentiment</td>
<td>78.7</td>
<td>84.7</td>
<td>-11.7%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>100.8</td>
<td>103.5</td>
<td>-6.8%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>64.5</td>
<td>72.5</td>
<td>-16.1%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer sentiment in early August dropped sharply to the lowest level since last October, according to the University of Michigan. The 7.1% m/m decline in the sentiment index to 78.7 compared to consensus expectations for stability [...]

U.S. Consumer Sentiment Sagged

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818a.jpg" width="353">
For August, the Philadelphia Federal Reserve Bank&#39;s Index of General Business Conditions in the manufacturing sector improved to 18.5 from an unrevised 6.0 during July. The rebound by far outpaced Consensus expectations for an uptick to 8.0 and was to the highest level since April of last year.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
A higher level of shipments drove much of the improvement as the index rose twelve points to 22.3, its highest since March. The new orders sub-index also recovered most of the prior month&#39;s sharp decline. Moving in the other direction, the employment index reversed most of its July rebound but still indicated positive growth in factory payrolls. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818b.jpg" width="353">
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index fell sharply to the lowest level since April. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months reversed about all of its July improvement and during the third quarter the average monthly level (11.4) is down sharply from 2Q (19.2). Notably, expectations for orders and employment were either stable or improved during 3Q versus the 2Q average.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0806.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>18.5</td>
<td>6.0</td>
<td>15.5</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>45.3</td>
<td>50.3</td>
<td>26.9</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
</body>
</html>

For August, the Philadelphia Federal Reserve Bank's Index of General Business Conditions in the manufacturing sector improved to 18.5 from an unrevised 6.0 during July. The rebound by far outpaced Consensus expectations for an uptick [...]

Philadelphia Fed Index Highest Since 2005

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818c.jpg" width="353">
Consumer sentiment in early August dropped sharply to the lowest level since last October, according to the University of Michigan. The 7.1% m/m decline in the sentiment index to 78.7 compared to consensus expectations for stability at 84.0.
During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending and during those ten years sentiment has a 68% correlation with the change in nonfarm payrolls.
Expectations for the economy posted a notable 11.0% m/m drop to the lowest level last October. The decline was led by a sharp decline in expected 12 month business conditions to the lowest level since September and a more moderate drop in expected conditions during the next five years. The expected change in personal finances also fell sharply to the lowest level since May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818d.jpg" width="353">
The reading of current economic conditions fell moderately for the second straight month. Details indicate that the index of current personal finances dropped to the lowest level since May but perceived buying conditions for large household goods slipped just modestly m/m (-4.3% y/y).
Consumers&#39; opinion about gov&#39;t economic policy slipped a modest 2.4% m/m (-5.9% y/y) after sharp improvement during July. Expected inflation during the next year surged m/m to 4.9%, its highest level in nearly a year. The five to ten year expected rate of inflation also rose to 3.5%, its highest since May.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">August (Prelim)</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">Consumer Sentiment</td>
<td>78.7</td>
<td>84.7</td>
<td>-11.7%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>100.8</td>
<td>103.5</td>
<td>-6.8%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>64.5</td>
<td>72.5</td>
<td>-16.1%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Highest Since 2005 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 18, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818a.jpg" width="353">
For August, the Philadelphia Federal Reserve Bank&#39;s Index of General Business Conditions in the manufacturing sector improved to 18.5 from an unrevised 6.0 during July. The rebound by far outpaced Consensus expectations for an uptick to 8.0 and was to the highest level since April of last year.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
A higher level of shipments drove much of the improvement as the index rose twelve points to 22.3, its highest since March. The new orders sub-index also recovered most of the prior month&#39;s sharp decline. Moving in the other direction, the employment index reversed most of its July rebound but still indicated positive growth in factory payrolls. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818b.jpg" width="353">
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index fell sharply to the lowest level since April. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months reversed about all of its July improvement and during the third quarter the average monthly level (11.4) is down sharply from 2Q (19.2). Notably, expectations for orders and employment were either stable or improved during 3Q versus the 2Q average.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0806.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>18.5</td>
<td>6.0</td>
<td>15.5</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>45.3</td>
<td>50.3</td>
<td>26.9</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
Brazil's Large Exports Yield Record Current Account Surplus in July 
by <a href="/comment/Stone.html">Carol Stone</a> August 18, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818e.jpg" width="353">
A surge in merchandise exports pushed Brazil&#39;s current account to a record surplus in July, $3043 million, as reported late August 17 by the Central Bank of Brazil. With seasonal adjustment by Haver Analytics, the balance is $2203 million, as seen in the table below, the second largest monthly amount after $2715 million in November.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818f.jpg" width="353">
Brazil sells oil, coffee and copper, among numerous other items. Obviously, two of these items have seen major price increases that have raised the value of Brazil&#39;s exports. They are up more than 23% from a year ago. This good gain, $2.6 billion, has more than offset a larger percentage increase in imports, nearly 32% on the year, or $1.9 billion.
Frequently, economists and other analysts assess a nation&#39;s trade and current account conditions over against the capital and financial accounts. But for Brazil, the more relevant comparison involves the trade balance versus the service and income flows. It is the large trade surplus that &quot;finances&quot; a modest deficit in services and a more significant deficit in income. Brazil has a sizable negative international investment position, -$340 billion at the end of last year, and it sends out considerable amounts of profits, dividends and interest payments. As noted below, the deficit on income exceeds $2.1 billion in most months.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060818g.jpg" width="353">
Flows on the financial side are very erratic, but generally direct investment remains positive. So there are consistent flows of foreign equity funds into Brazil, suggesting that companies want increasingly to be represented in that sizable market. Portfolio and &quot;other&quot; investments swing widely from month to month, making it hard to characterize other investors&#39; attitudes toward the country.

<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/EMERGELA/@E2/@E208/@E208.HTM">Brazil</a> Mil. US$, Seas Adj.</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">July 2005</th>
Monthly Averages*
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Current Account</td>
<td>2203</td>
<td>578</td>
<td>524</td>
<td>1851</td>
<td>1183</td>
<td>973</td>
<td>348</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance</td>
<td>4945</td>
<td>3714</td>
<td>2908</td>
<td>4454</td>
<td>3729</td>
<td>2803</td>
<td>2066</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>12651</td>
<td>11007</td>
<td>10058</td>
<td>10304</td>
<td>9859</td>
<td>8040</td>
<td>6090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>7705</td>
<td>7292</td>
<td>7150</td>
<td>5850</td>
<td>6130</td>
<td>5236</td>
<td>4020</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-952</td>
<td>-747</td>
<td>-663</td>
<td>-632</td>
<td>-679</td>
<td>-390</td>
<td>-411</td>
</tr>
<tr class="odd">
<td class="firstcol">Income</td>
<td>-2102</td>
<td>-2764</td>
<td>-2113</td>
<td>-2253</td>
<td>-2164</td>
<td>-1710</td>
<td>-1546</td>
</tr>
</tbody>
</table>
</body>
</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060817d.jpg" width="353">
The German Federal Statistics Office today published the employment data that are inputs to the national accounts. So we can compare changes in GDP to changes in employment, yielding a rough measure of productivity in the German economy.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060817e.jpg" width="353">
As reported Monday, GDP expanded 0.9% in Q2, an annual rate of 3.6%. Total domestic employment in Germany rose 1.1%, annualized, producing a gain in GDP/employee of 2.5%; this followed 3.0% in Q1. Thus, the first half-year saw this proxy for productivity increase at a 2.77% annual rate, which is the strongest two quarters since early 1998, eight years ago.
Employment is now also available by industry for Q2, and as seen in the table below, it continues to decline in the goods-producing sectors. This has been almost continuous since the combined data for East and West Germany begin in 1991. During that time, &quot;industry&quot; has declined from 30% of employment to right at 20% in Q1 and Q2 this year. To give this some context, in the US, the goods-producing sector (which also includes construction) has declined from 21% of nonfarm payrolls in early 1991 to 16.6% in the first half of 2006. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060817f.jpg" width="353">
Among individual German industries, finance and other business services have shown the greatest growth, with Q2 up 2.7% from a year ago, while total employment gained just 0.5%. The second ranking growth has been in government, health and other community services, which are up 0.9% in Q2 over Q2 2005.

<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/GERMANY/GERMANY.HTM">Germany</a> Millions, Seas Adj</th>
<th scope="col">Q2 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</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 Domestic Employment</td>
<td>38.96</td>
<td>38.85</td>
<td>38.88</td>
<td>38.77</td>
<td>38.82</td>
<td>38.85</td>
<td>38.72</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>7.42</td>
<td>7.43</td>
<td>7.46</td>
<td>7.52</td>
<td>7.51</td>
<td>7.63</td>
<td>7.75</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>2.12</td>
<td>2.13</td>
<td>2.15</td>
<td>2.17</td>
<td>2.16</td>
<td>2.25</td>
<td>2.32</td>
</tr>
<tr>
<td class="firstcol">Trade, Hotels, Transportation, Etc.</td>
<td>9.80</td>
<td>9.75</td>
<td>9.77</td>
<td>9.75</td>
<td>9.76</td>
<td>9.80</td>
<td>9.72</td>
</tr>
<tr class="odd">
<td class="firstcol">Finance, Business Services</td>
<td>6.55</td>
<td>6.49</td>
<td>6.46</td>
<td>6.37</td>
<td>6.40</td>
<td>6.30</td>
<td>6.13</td>
</tr>
<tr>
<td class="firstcol">Gov&#39;t, Community Services</td>
<td>11.85</td>
<td>11.83</td>
<td>11.81</td>
<td>11.74</td>
<td>11.76</td>
<td>11.63</td>
<td>11.54</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP Growth (%, SWDAAR)</td>
<td>3.6</td>
<td>2.7</td>
<td>1.1</td>
<td>2.4</td>
<td>1.1</td>
<td>0.8</td>
<td>-0.2</td>
</tr>
<tr>
<td class="firstcol">Employment Growth (%, SWDAAR)</td>
<td>1.1</td>
<td>-0.3</td>
<td>0.6</td>
<td>0.5</td>
<td>-0.1</td>
<td>0.4</td>
<td>-0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP/Employee (%, SWDAAR)</td>
<td>2.5</td>
<td>3.0</td>
<td>0.5</td>
<td>1.9</td>
<td>1.2</td>
<td>0.4</td>
<td>0.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The German Federal Statistics Office today published the employment data that are inputs to the national accounts. So we can compare changes in GDP to changes in employment, yielding a rough measure of productivity in the German [...]

German Employment Grows in Q2 -- and So Does Productivity

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

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

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


Privacy Policy

Disclaimer

Contact us

Service Health

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

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

**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.

260205Z6.jpg

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

260206E.jpg

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.

260206.jpg

**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

260205X15.jpg

260205Y15.jpg

**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.

260205C15.jpg

260205D15.jpg

- 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

260205A2.jpg

260205B2.jpg

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.

260205C2.jpg

260205D2.jpg

- 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

260205E.jpg

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

Jump to:

Are German Wage Increases Beginning to Have an Effect on Inflation?

Oil & Gold Prices Down. A Trend Reversal?

Oil & Gold Prices Down. A Trend Reversal?

Brazil's Large Exports Yield Record Current Account Surplus in July

U.S. Consumer Sentiment Sagged

Philadelphia Fed Index Highest Since 2005

U.S. Consumer Sentiment Sagged

German Employment Grows in Q2 -- and So Does Productivity