Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103g.jpg" align="left" border="0" height="265" width="353">
Brazilian industrial production increased 0.75% to 119.2
(2002=100) in September from 118.3 in August, a little short of
expectations, but still on the upward trend that began in January. The
three major marketing groups--capital goods, intermediate goods and
consumer goods--have all recovered from their falls in December as can
be seen in the first chart. The decline in capital goods was especially
severe and the recovery equally sharp.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103h.jpg" align="right" border="0" height="265" width="353">
Industrial production is a good proxy for Brazilian GDP.
Brazil reports real GDP on an index basis with 1995=100. We rebased the
Industrial production index to 1995=100 and aggregated the monthly
figures to quarterly. The second chart compares this index with the
index of real GDP. The correlation between the two series is strong at
.97. In the third quarter, industrial production increased 4.1%. A 3.9%
increase in industrial production was associated with a 1.9% increase
in real GDP. If the relationship between industrial production and real
GDP holds, Brazil's real GDP should show another roughly 2% rise in GDP
in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp;09</th>
<th scope="col">Sep 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production&nbsp;
(2002=100) as reported</td>
<td>109.2</td>
<td>118.3</td>
<td>129.7</td>
<td>0.75</td>
<td>-8.1</td>
<td>125.3</td>
<td>121.8</td>
<td>115.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>136.2</td>
<td>135.2</td>
<td>148.3</td>
<td>0.75</td>
<td>-8.1</td>
<td>143.2</td>
<td>139.2</td>
<td>131.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 09</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08</td>
<td>Q2 08</td>
<td>Q1 08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real GDP (1995=100)</td>
<td>&nbsp;</td>
<td>145.3</td>
<td>142.7</td>
<td>146.0</td>
<td>149.0</td>
<td>147.1</td>
<td>144.9</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>135.1</td>
<td>129.8</td>
<td>124.9</td>
<td>133.8</td>
<td>148.2</td>
<td>146.3</td>
<td>144.7</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Brazilian industrial production increased 0.75% to 119.2 (2002=100) in September from 118.3 in August, a little short of expectations, but still on the upward trend that began in January. The three major marketing groups--capital [...]

Brazil's Industrial Production Points To Good Third Quarter Growth In GDP

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103e.jpg" width="353">
Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications that it is. Factory inventories fell 1.0% during September, about as they did during the prior four months. Despite the strength of these declines, the 4.6% decline during the period is a clear moderation from the 6.5% rate during the five months through April.
The moderation in inventory decumulation rates continues spotty amongst various industries. Inventories of electrical equipment &amp; appliances have fallen at a reduced 6.6% rate during the period but decumulation of machinery inventories continued firm at a 7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate of decumulation of primary metals inventories also slowed as did cuts of motor vehicle &amp; parts inventories. Inventory reductions of computers &amp; electronic products continued firm but it may have bottomed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103f.jpg" width="353">
Factory shipments have started to rise moderately. On a three-month basis they&#39;re up at a 3.5% rate after the 40% plus rates of decline last Winter. Shipments of primary metals have firmed to a 52.5% growth rate over the last three months and computers &amp; electronics shipments rose at a 4.7% rate. Shipments of transportation equipment rose at a 25.1% rate led by a surge in shipments of nondefense aircraft &amp; parts. Shipments of basic chemicals also turned up as did shipments from textile mills. The shipments improvement has caused unfilled orders to fall at a much-reduced 3.9% rate through September.
Overall, the reduction of inventories in the factory sector has succeeded in lowering the inventory-to-sales ratio. The decline to 1.36 was to its lowest level since October of last year and down from the recent peak of 1.46.
Finally, new orders have improved. The 0.9% increase during September raised orders at a 6.0% rate during the last three months. It reflected improvement in orders for transportation equipment, machinery, primary metals and electrical equipment.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM" style="color:#FFFFFF">Factory Survey</a> (NAICS, %)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-14.1</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.9</td>
<td>-0.8</td>
<td>-17.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.8</td>
<td>0.3</td>
<td>-15.7</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.8</td>
<td>-0.2</td>
<td>-15.9</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.1</td>
<td>-0.1</td>
<td>-16.5</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-11.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>0.5</td>
<td>-0.1</td>
<td>-14.2</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications [...]

U.S. Factory Inventory Decumulation Rate Still Strong

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103d.jpg" align="left" border="0" height="265" width="353">
The auto sector is giving Europe a boost as incentive programs
are still helping to stimulate sales. Only Italy and Spain have
reported registrations for October but despite poor growth in both
regions auto sales are growing in strongly. Spain&#8217;s sales are up by
1.7% m/m in October and up at a 99% annual rate over three months even
as unemployment has hit a 10Year high there. Italy backed off in
October after a strong September.
Troubles in the financial sector have banks as less than
wiling lenders. Tough economic times have put consumers on the
sidelines. But government programs to stimulate demand with outright
subsidies linked to the scrappage of old poor-mileage vehicles has been
a way to stimulate demand and to vest theses programs with some sense
of a public purpose.
EMU Italy and Spain all saw sales crater at about the same
time. Despite different auto incentive programs in different countries
we see that Spain and Italy, two of the more challenged EMU economies,
with auto sectors that are very much in sync with the rest of Europe.
Evidence is that the recession in EMU is ending.
The EU Commission today issued a new outlook for the Zone and
confirmed that it sees recovery taking hold. It sees a contraction of
4.1% for the EU area this year followed by growth of 0.7% in 2010 and
of 1.6% in 2011 and roughly similar growth metrics for the Zone. This
outlook is a hike in its forecast from its previous stance than growth
in 2010 would contract by 0.1% in EMU.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E zone
Car Registrations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3Mo Trend From</td>
<td colspan="2">6Mo Trend From</td>
<td colspan="2">12Mo Trend From</td>
</tr>
<tr>
<td class="firstcol">All Seas Adj</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-1.6%</td>
<td>19.3%</td>
<td>-13.6%</td>
<td>5.8%</td>
<td>13.4%</td>
<td>16.1%</td>
<td>44.9%</td>
<td>14.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>1.7%</td>
<td>28.8%</td>
<td>-9.3%</td>
<td>99.0%</td>
<td>158.6%</td>
<td>117.0%</td>
<td>181.5%</td>
<td>25.8%</td>
<td>17.7%</td>
</tr>
<tr>
<td class="firstcol">base Month of Calc</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Oct-08</td>
<td>Sep-08</td>
</tr>
</tbody>
</table>
</body></html>

The auto sector is giving Europe a boost as incentive programs are still helping to stimulate sales. Only Italy and Spain have reported registrations for October but despite poor growth in both regions auto sales are growing in [...]

Selected Car Registrations In Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103a.jpg" width="353">
Divergent trends within the construction sector haven&#39;t yet added up to any meaningful improvement in the total but it could be on the way. Reported yesterday, September construction spending rose 0.8% following steady monthly declines during the last two years. Consensus estimates had been for yet another decline. Nevertheless, improvement in activity in the residential sector has picked up to a degree which may foreshadow improvement elsewhere.
Residential building activity increased firmly for the second consecutive month. The 3.9% m/m rise followed a similar gain in August and lifted the level of building activity to its highest since February. Single-family construction rose 2.4% (-35.0% y/y) for the fourth consecutive strong monthly increase. Spending on improvements also firmed by 7.2% (-12.5% y/y) in September after a 5.7% August increase. Offsetting the strength here has been a steady decline in multifamily building (-41.2% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103b.jpg" width="353">
Poor corporate profitability and reduced economic activity generally continued to negatively affect nonresidential building activity. It fell 1.8% during September following similar declines during the prior three months. Over the four months combined, nonresidential outlays overall dropped 10.2%. Spending by the food &amp; beverage industries declined 26.2% during those four months as it did in the automotive sector. Hotel &amp; motel spending fell 19.0%; commercial &amp; amusements also fell 19.3% and office building dropped 11.6%. Relatively firm was the four-month spending decline in the education sector which totaled 6.2%. Spending on health care structures was down 3.5% but building activity in the religious sector actually rose 1.3% during the four months.
Public construction overall has been firm, up 6.1% y/y. Spending recouped the August decline with a 1.3% increase. Building activity by state &amp; local governments on power facilities rose 8.6% (32.0% y/y). The transportation area increased 2.7% (23.1% y/y). Public spending on health care facilities 3.4% (4.0% y/y and spending on highways &amp; streets rose 1.0% (2.8% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103c.jpg" width="353">
The construction put-in-place figures are available in Haver&#39;s USECON database.
Incentive Compensation, Risk Management, and Safety and Soundness is yesterday&#39;s speech by Federal Reserve Board Governor Daniel K. Tarullo an it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091102a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Construction (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8</td>
<td>-0.1</td>
<td>-1.2</td>
<td>-13.0</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5</td>
<td>0.4</td>
<td>-1.8</td>
<td>-20.6</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>3.9</td>
<td>3.8</td>
<td>0.1</td>
<td>-27.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-15.4</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.3</td>
<td>-1.1</td>
<td>0.1</td>
<td>6.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Divergent trends within the construction sector haven't yet added up to any meaningful improvement in the total but it could be on the way. Reported yesterday, September construction spending rose 0.8% following steady monthly [...]

U.S. Construction Spending Increases Moderately But Residential Recovery Firms

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103a.jpg" align="left" border="0" height="265" width="353">
Divergent trends within the construction sector haven't yet
added up to any meaningful improvement in the total but it could be on
the way. Reported yesterday, September construction spending rose 0.8%
following steady monthly declines during the last two years. Consensus
estimates had been for yet another decline. Nevertheless, improvement
in activity in the residential sector has picked up to a degree which
may foreshadow improvement elsewhere.
Residential building activity increased firmly for the second
consecutive month. The 3.9% m/m rise followed a similar gain in August
and lifted the level of building activity to its highest since
February. Single-family construction rose 2.4% (-35.0% y/y) for the
fourth consecutive strong monthly increase. Spending on improvements
also firmed by 7.2% (-12.5% y/y) in September after a 5.7% August
increase. Offsetting the strength here has been a steady decline in
multifamily building (-41.2% y/y). <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103b.jpg" align="right" border="0" height="265" width="353">
Poor corporate profitability and reduced economic activity
generally continued to negatively affect nonresidential building
activity. It fell 1.8% during September following similar declines
during the prior three months. Over the four months combined,
nonresidential outlays overall dropped 10.2%. Spending by the food
&amp; beverage industries declined 26.2% during those four months
as it did in the automotive sector. Hotel &amp; motel spending fell
19.0%; commercial &amp; amusements also fell 19.3% and office
building dropped 11.6%. Relatively firm was the four-month spending
decline in the education sector which totaled 6.2%. Spending on health
care structures was down 3.5% but building activity in the religious
sector actually rose 1.3% during the four months.
Public construction overall has been firm, up 6.1% y/y.
Spending recouped the August decline with a 1.3% increase. Building
activity by state &amp; local governments on power facilities rose
8.6% (32.0% y/y). The transportation area increased 2.7% (23.1% y/y).
Public spending on health care facilities 3.4% (4.0% y/y and spending
on highways &amp; streets rose 1.0% (2.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103c.jpg" align="left" border="0" height="265" width="353">
The construction put-in-place figures are available in Haver's
USECON database.
Incentive Compensation, Risk Management, and Safety
and Soundness is yesterday's speech by Federal Reserve Board
Governor Daniel K. Tarullo an it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091102a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Construction
(%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8</td>
<td>-0.1</td>
<td>-1.2</td>
<td>-13.0</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5</td>
<td>0.4</td>
<td>-1.8</td>
<td>-20.6</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>3.9</td>
<td>3.8</td>
<td>0.1</td>
<td>-27.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-15.4</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.3</td>
<td>-1.1</td>
<td>0.1</td>
<td>6.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
 Selected Car Registrations In
Europe 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 03, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103d.jpg" align="left" border="0" height="265" width="353">
The auto sector is giving Europe a boost as incentive programs
are still helping to stimulate sales. Only Italy and Spain have
reported registrations for October but despite poor growth in both
regions auto sales are growing in strongly. Spain&#8217;s sales are up by
1.7% m/m in October and up at a 99% annual rate over three months even
as unemployment has hit a 10Year high there. Italy backed off in
October after a strong September.
Troubles in the financial sector have banks as less than
wiling lenders. Tough economic times have put consumers on the
sidelines. But government programs to stimulate demand with outright
subsidies linked to the scrappage of old poor-mileage vehicles has been
a way to stimulate demand and to vest theses programs with some sense
of a public purpose.
EMU Italy and Spain all saw sales crater at about the same
time. Despite different auto incentive programs in different countries
we see that Spain and Italy, two of the more challenged EMU economies,
with auto sectors that are very much in sync with the rest of Europe.
Evidence is that the recession in EMU is ending.
The EU Commission today issued a new outlook for the Zone and
confirmed that it sees recovery taking hold. It sees a contraction of
4.1% for the EU area this year followed by growth of 0.7% in 2010 and
of 1.6% in 2011 and roughly similar growth metrics for the Zone. This
outlook is a hike in its forecast from its previous stance than growth
in 2010 would contract by 0.1% in EMU.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E zone
Car Registrations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3Mo Trend From</td>
<td colspan="2">6Mo Trend From</td>
<td colspan="2">12Mo Trend From</td>
</tr>
<tr>
<td class="firstcol">All Seas Adj</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-1.6%</td>
<td>19.3%</td>
<td>-13.6%</td>
<td>5.8%</td>
<td>13.4%</td>
<td>16.1%</td>
<td>44.9%</td>
<td>14.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>1.7%</td>
<td>28.8%</td>
<td>-9.3%</td>
<td>99.0%</td>
<td>158.6%</td>
<td>117.0%</td>
<td>181.5%</td>
<td>25.8%</td>
<td>17.7%</td>
</tr>
<tr>
<td class="firstcol">base Month of Calc</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Oct-08</td>
<td>Sep-08</td>
</tr>
</tbody>
</table>
 U.S. Factory Inventory
Decumulation Rate Still Strong 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 03, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103e.jpg" align="left" border="0" height="265" width="353">
Factory inventories continued lower during September as the
stage continued to be set for a firm rebound in manufacturing activity.
Of course that rebound is dependant on whether demand improves, and
there are tentative indications that it is. Factory inventories fell
1.0% during September, about as they did during the prior four months.
Despite the strength of these declines, the 4.6% decline during the
period is a clear moderation from the 6.5% rate during the five months
through April.
The moderation in inventory decumulation rates continues
spotty amongst various industries. Inventories of electrical equipment
&amp; appliances have fallen at a reduced 6.6% rate during the
period but decumulation of machinery inventories continued firm at a
7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate
of decumulation of primary metals inventories also slowed as did cuts
of motor vehicle &amp; parts inventories. Inventory reductions of
computers &amp; electronic products continued firm but it may have
bottomed.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103f.jpg" align="right" border="0" height="265" width="353">
Factory shipments have started to rise moderately. On a
three-month basis they're up at a 3.5% rate after the 40% plus rates of
decline last Winter. Shipments of primary metals have firmed to a 52.5%
growth rate over the last three months and computers &amp;
electronics shipments rose at a 4.7% rate. Shipments of transportation
equipment rose at a 25.1% rate led by a surge in shipments of
nondefense aircraft &amp; parts. Shipments of basic chemicals also
turned up as did shipments from textile mills. The shipments
improvement has caused unfilled orders to fall at a much-reduced 3.9%
rate through September.
Overall, the reduction of inventories in the factory sector
has succeeded in lowering the inventory-to-sales ratio. The decline to
1.36 was to its lowest level since October of last year and down from
the recent peak of 1.46.
Finally, new orders have improved. The 0.9% increase during
September raised orders at a 6.0% rate during the last three months. It
reflected improvement in orders for transportation equipment,
machinery, primary metals and electrical equipment.
The Manufacturers' Shipments, Inventories and Orders (MSIO)
data is available in Haver's USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM" style="color: rgb(255, 255, 255);">Factory Survey</a>
(NAICS, %)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-14.1</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.9</td>
<td>-0.8</td>
<td>-17.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.8</td>
<td>0.3</td>
<td>-15.7</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.8</td>
<td>-0.2</td>
<td>-15.9</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.1</td>
<td>-0.1</td>
<td>-16.5</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-11.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>0.5</td>
<td>-0.1</td>
<td>-14.2</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
 Brazil's Industrial Production
Points To Good Third Quarter Growth In GDP 
by <a href="/comment/Curley.html">Louise
Curley</a> November 3, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103g.jpg" align="left" border="0" height="265" width="353">
Brazilian industrial production increased 0.75% to 119.2
(2002=100) in September from 118.3 in August, a little short of
expectations, but still on the upward trend that began in January. The
three major marketing groups--capital goods, intermediate goods and
consumer goods--have all recovered from their falls in December as can
be seen in the first chart. The decline in capital goods was especially
severe and the recovery equally sharp.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103h.jpg" align="right" border="0" height="265" width="353">
Industrial production is a good proxy for Brazilian GDP.
Brazil reports real GDP on an index basis with 1995=100. We rebased the
Industrial production index to 1995=100 and aggregated the monthly
figures to quarterly. The second chart compares this index with the
index of real GDP. The correlation between the two series is strong at
.97. In the third quarter, industrial production increased 4.1%. A 3.9%
increase in industrial production was associated with a 1.9% increase
in real GDP. If the relationship between industrial production and real
GDP holds, Brazil's real GDP should show another roughly 2% rise in GDP
in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp;09</th>
<th scope="col">Sep 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production&nbsp;
(2002=100) as reported</td>
<td>109.2</td>
<td>118.3</td>
<td>129.7</td>
<td>0.75</td>
<td>-8.1</td>
<td>125.3</td>
<td>121.8</td>
<td>115.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>136.2</td>
<td>135.2</td>
<td>148.3</td>
<td>0.75</td>
<td>-8.1</td>
<td>143.2</td>
<td>139.2</td>
<td>131.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 09</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08</td>
<td>Q2 08</td>
<td>Q1 08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real GDP (1995=100)</td>
<td>&nbsp;</td>
<td>145.3</td>
<td>142.7</td>
<td>146.0</td>
<td>149.0</td>
<td>147.1</td>
<td>144.9</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>135.1</td>
<td>129.8</td>
<td>124.9</td>
<td>133.8</td>
<td>148.2</td>
<td>146.3</td>
<td>144.7</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
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U.S. Construction SpendingIncreases Moderately But Residential Recovery Firms

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102k.jpg" align="right" border="0" height="265" width="353">Japanese
household consumption expenditures in the third quarter will not be
known until the "First Preliminary Release" of GDP for the third
quarter due November 16 is released.&nbsp; Some indication of what
the consumers is doing can be gleaned from recent monthly data from the
Family Income and Expenditure Survey and the data on wages and
employment.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102l.jpg" align="right" border="0" height="265" width="353">Results of
Japan's Family Income and Expenditure Survey
for September were released over the week end.&nbsp; In nominal
terms, the index of living expenditures declined in July to 95.0 (2005
= 100) from 97.0 in June, but rose in August and September to 96.9 and
97.3, respectively.&nbsp; Nevertheless, for the quarter, living
expenditures in nominal terms were 2.4% below the year ago
figure.&nbsp; As a result of continued deflation in the Japanese
economy, real living expenditures increased in August and September and
for the quarter were up 0.4% from the third quarter of 2008 as can be
seen in the first chart.
On the whole, the Family Income and
Expenditure Surveys for the last three months suggest that real
consumer spending may show a small increase in the third quarter.The
outlook for consumer incomes and hence their ability to spend is
mixed.&nbsp; Seasonally unadjusted wages in nominal terms have
continued to decline on a year to year basis--5.6% in July, 2.7% in
August and 1.59% in September.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102m.jpg" align="right" border="0" height="265" width="353">
But again adjusted for
deflation, real wages were up 0.9% in September over September, 2008
one of the few year over year increases in real wages that has occurred
over the past three years as can be seem in the second Chart.&nbsp;
Employment&nbsp; increased&nbsp; and unemployment decreased
marginally&nbsp; in August and September&nbsp; as can be seen
in the third chart.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp; 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">Mar 09</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real Living Expenditures (Y/Y %
Chg)</td>
<td>1.25</td>
<td>1.68</td>
<td>-1.75</td>
<td>0.84</td>
<td>-0.82</td>
<td>-1.16</td>
<td>-0.93</td>
<td>-18.4</td>
<td>-5.54</td>
</tr>
<tr>
<td class="firstcol">Nominal Living Expenditures
(Y/Y % Chg)</td>
<td>-1.22</td>
<td>-1.22</td>
<td>-4.62</td>
<td>-1.02</td>
<td>-1.81</td>
<td>-1.94</td>
<td>-0.92</td>
<td>-1.82</td>
<td>-5.76</td>
</tr>
<tr class="odd">
<td class="firstcol">Real Wages (Y/Y % Chg)&nbsp;</td>
<td>0.88</td>
<td>-0.12</td>
<td>-3.02</td>
<td>-5.2</td>
<td>-1.35</td>
<td>-2.64</td>
<td>-3.66</td>
<td>-2.44</td>
<td>-2.63</td>
</tr>
<tr>
<td class="firstcol">Nominal Wages (Y/Y % Chg)</td>
<td>-1.59</td>
<td>-2.71</td>
<td>-5.60</td>
<td>-7.01</td>
<td>-2.53</td>
<td>-2.73</td>
<td>-3.85</td>
<td>-2.43</td>
<td>-2.72</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment&nbsp; (10,000
Persons)</td>
<td>6264</td>
<td>6260</td>
<td>6231</td>
<td>6233</td>
<td>6201</td>
<td>6305</td>
<td>6311</td>
<td>6373</td>
<td>6395</td>
</tr>
<tr>
<td class="firstcol">Unemployment&nbsp;</td>
<td>352</td>
<td>362</td>
<td>376</td>
<td>336</td>
<td>343</td>
<td>334</td>
<td>320</td>
<td>295</td>
<td>276</td>
</tr>
</tbody>
</table>

</body></html>

Japanese household consumption expenditures in the third quarter will not be known until the "First Preliminary Release" of GDP for the third quarter due November 16 is released. Some indication of what the consumers is doing can be [...]

Japanese Consumers: Recent Trends In Spending And Income

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102j.jpg" align="right" border="0" height="265" width="353">
Without question, the sales price of most homes is under
pressure. Demand is down and supply is up. Nevertheless, home prices
recently have turned around after a decline that began early in 2006.
On a month-to-month basis home prices have risen for the last five
months, as measured by First American CoreLogic. Moreover, the y/y
decline is half that logged early this year. Nevertheless, prices still
are down 10.1% from August of 2008 and they have fallen 28.1% from the
peak during the spring of 2006. 
Until 2006, measuring the degree to which prices were affected
by distressed sales hadn't been much of an issue. Recently, however, it
has become relevant in providing perspective on home price performance.
When distressed sales are stripped out prices also are down y/y, but
the depth of the decline is less dramatic than the total. These prices
have risen for just the last four months, but the y/y change of -6.3%
is notably moderate. Since the peak these prices have fallen 20.8%. 
The Loan
Performance House Price Index (HPI) is a repeat-sales index that tracks
increases and decreases in sales prices for
the same homes over time. This approach provides a more accurate
"constant-quality"
view of pricing trends than basing analysis on all home sales. The data
are
developed by First American CoreLogic and are available from Haver's USECON
database.
Seasonal adjustment of the data is done by Haver Analytics.&nbsp;
Residential
and commercial real estate is the title of this morning's
testimony by Jon
D. Greenlee, Associate Director, Division of Banking Supervision and
Regulation
and it can be found here <a href="http://www.federalreserve.gov/newsevents/testimony/greenlee20091102a.htm">here</a>. 

<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/SURVEYS/@S2/@S201/@S201.HTM">House
Price</a> (SA) </th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total (year-to-year)</td>
<td>-10.1</td>
<td>-11.7</td>
<td>-14.6</td>
<td>-4.4</td>
<td>-7.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
month-to-month</td>
<td>0.7</td>
<td>1.5</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Distress Sales Excluded (y/y)</td>
<td>-6.3</td>
<td>-6.9</td>
<td>-10.9</td>
<td>-3.0</td>
<td>-6.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
month-to-month</td>
<td>0.1</td>
<td>0.7</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>


</body></html>

Without question, the sales price of most homes is under pressure. Demand is down and supply is up. Nevertheless, home prices recently have turned around after a decline that began early in 2006. On a month-to-month basis home prices [...]

U.S. Home Prices On The Rise; Distressed Sales Matter

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102g.jpg" align="right" border="0" height="265" width="353">
Housing
demand is increasing faster than generally expected. The National
Association of Realtors (NAR) reported that September pending home
sales increased 6.1%. The gain was similar to the August increase and
continued stronger than June's 3.6% and July's 3.2% gains. Consensus
expectations had been for a slight m/m sales decline. The index level
of 110.1 was at its highest since December 2006 and up 26.9% from the
January low. The base for the index is 2001=100.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102h.jpg" align="right" border="0" height="265" width="353">
September sales likely were boosted by the pending expiration of an
$8,000 first-time home buyers tax credit; due to expire later this
month. Congress currently is considering extending the credit through
April of next year. In this report only the Northeast region of the
country failed to participate in the September sales gain. Sales in the
West jumped 10.2% after a 16.0% rise during August. The sales index
here was at its all-time high. Elsewhere, sales in the Midwest gained
8.1% on top of a 3.1% rise in August. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102i.jpg" align="right" border="0" height="265" width="353">
They were up more than one-third
from the January low. Sales in the South were the laggards with just a
4.9% gain but they also were up one-third from the January trough.
Sales in the Northeast slipped 2.0% during September, down for the
second month in the last three but still 44.6% higher than the January
low. These home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001.The pending home sales
data are available in Haver's PREALTOR database.
The number of homes on the market and prices are in the REALTOR
database.&nbsp;&nbsp;
<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/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>110.1</td>
<td>103.8</td>
<td>97.6</td>
<td>&nbsp;&nbsp; 21.1%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>83.6</td>
<td>85.3</td>
<td>78.8</td>
<td>16.9</td>
<td>73.1</td>
<td>85.9</td>
<td>98.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>98.2</td>
<td>90.8</td>
<td>88.1</td>
<td>17.7</td>
<td>80.6</td>
<td>89.5</td>
<td>101.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>109.7</td>
<td>104.6</td>
<td>103.8</td>
<td>22.8</td>
<td>89.6</td>
<td>107.3</td>
<td>127.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>143.8</td>
<td>130.5</td>
<td>112.5</td>
<td>23.6</td>
<td>99.5</td>
<td>92.3</td>
<td>109.6</td>
</tr>
</tbody>
</table>
</body></html>

Housing demand is increasing faster than generally expected. The National Association of Realtors (NAR) reported that September pending home sales increased 6.1%. The gain was similar to the August increase and continued stronger than [...]

U.S. Pending Home Sales Rise To Highest Since 2006

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Winnie Tapasanun

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Industrial production (IP) rose a more-than-expected 0.4% m/m in December following a 0.4% rise in November (+0.2% initially) and a 0.3% decline in October (-0.1% previously), data from the Federal Reserve Board showed. December marked the third m/m gain in four months. A 0.1% m/m December increase had been expected in the Action Economics Forecast Survey. The year-on-year growth rate slowed to 2.0% in December, the lowest since September, from 2.5% in November; this compared with a 0.3% y/y decline in December 2024. The December IP index at 102.3 was 3.1% above a low of 99.2 in January 2024. IP rose 0.2% q/q in Q4 2025 after a 0.6% q/q gain in Q3 2025, increasing at a 0.7% annualized rate following a 2.3% Q3 annualized pace. In 2025, IP rose 1.3% after declines of 0.7% in 2024 and 0.2% in 2023.

By **industry groups**, manufacturing production grew 0.2% (2.0% y/y) in December, up for the third time in four months, following a 0.3% increase in November (0.0% initially) and a 0.6% drop in October (-0.4% previously). Durable goods production edged up 0.1% (3.1% y/y) in December, the first m/m increase since September, after a 0.1% downtick in November. Within durables, the following categories rose m/m in December, including output rises of 2.4% (3.5% y/y) in primary metals, 1.7% (1.3% y/y) in electrical equipment, appliances & components, 1.5% (17.2% y/y) in aerospace & miscellaneous transportation equipment, 0.8% (-2.2% y/y) in furniture & related products, 0.2% (4.8% y/y) in machinery, and 0.1% (7.4% y/y) in computer & electronic products. Notably, aircraft & parts production climbed 2.1% (30.0% y/y), the third m/m increase in four months, reversing a 2.1% November drop. To the downside, the following durable goods categories fell m/m in December, including drops of 2.3% (-5.5% y/y) in wood products, 1.1% (-2.8% y/y) in motor vehicles & parts, 1.1% (-1.0% y/y) in nonmetallic mineral products, 0.1% (+2.6% y/y) in fabricated metal products, and 0.1% (-3.7% y/y) in miscellaneous durables goods.

Nondurable goods production increased 0.3% (1.0% y/y) in December, the third m/m gain in four months, after a 0.8% rebound in November. The December increase reflected m/m output rises of 1.8% (2.1% y/y) in petroleum & coal products, 0.5% (1.9% y/y) in food, beverages & tobacco, and 0.3% (-0.2% y/y) in plastics & rubber products. In contrast, the following nondurable goods categories declined m/m in December, including output drops of 1.3% (-0.8% y/y) in textiles & product mills, 1.1% (-0.5% y/y) in apparel & leather goods, 0.3% (-3.1% y/y) in paper, 0.3% (-3.4% y/y) in printing & related support activities, and 0.1% (+1.6% y/y) in chemicals.

Utilities output recovered 2.6% (2.3% y/y) in December, the third m/m rise in four months, following a 0.3% decline in November (-0.4% initially), reflecting a 1.2% rebound (1.3% y/y) in electric utilities output and a 12.0% jump (8.7% y/y) in natural gas utilities output. Mining activity, however, fell 0.7% (+1.7% y/y), the third m/m slide in four months, after an unrevised 1.7% November gain.

By **market groups**, business equipment output advanced 0.8% (10.1% y/y) in December, up for the third time in four months, after a 0.3% increase in November. Consumer goods output rose 0.7% (0.7% y/y) after a 0.7% November rebound, reflecting a 0.7% decline (-3.5% y/y) in durable consumer goods and a 1.1% gain (1.8% y/y) in nondurable consumer goods. Materials production grew 0.2% (1.7% y/y), the third m/m increase in four months, after a 0.5% November rise. In contrast, construction supplies production fell 0.3% (+1.3% y/y) in December, the second m/m fall in three months, reversing a 0.3% increase in November.

In **special classifications**, factory output of selected high-tech industries rose 0.7% (10.9% y/y) in December, the third successive m/m rise, following a downwardly revised 0.5% gain in November (+1.1% initially). Manufacturing production excluding selected high-tech industries grew 0.2% (1.7% y/y) in December, the third m/m gain in four months, after a 0.3% increase in November. Meanwhile, manufacturing production excluding selected high-tech and motor vehicles & parts rose 0.3% (2.1% y/y), also up for the third time in four months, after a 0.4% November increase.

Capacity utilization rose to 76.3% in December, the highest since July, from 76.1% in November (76.0% initially). The Action Economics Forecast Survey forecasted 76.0%. The December reading was 3.2 percentage points below its long-run (1972–2024) average. Manufacturing capacity utilization held at 75.6% in December and November (75.4% previously); the December rate was 2.6 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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- December IP +0.4% (+2.0% y/y), third m/m rise in four months, led by a 2.6% gain in utilities.
- Manufacturing +0.2% (+2.0% y/y), w/ durables +0.1% and nondurables +0.3%.
- Selected high-tech +0.7%, third consecutive m/m rise; motor vehicles -1.1%, fourth straight m/m fall.
- Mining -0.7%, third m/m decline in four months.
- Key categories in market groups mostly increase.
- Capacity utilization at a five-month-high 76.3%; mfg. capacity utilization steady at 75.6%.

U.S. Industrial Production Increases in December on Utilities Rebound

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The European Monetary Union has concluded a year of weak-to-moderate growth with inflation largely toeing the line. As always, the inflation picture is more complicated than a simple statement. When we look at inflation, we look at the headline, we look at the core, to make sure that the volatile food & energy elements aren't dominating the index, and then we look across some of the main participants to see if the trend for inflation is shared broadly across the largest countries in the Monetary Union. When we apply those kinds of standards, the grading for the year is reduced. However, based on the headline alone, it was an excellent year for the ECB.

**Headline Inflation in 2025**
Headline inflation in 2025 rose by 2%, exactly on the target of the European Central Bank. It rose over six months at a 2% annual rate and then concluded the year over the last three months, rising at a 1.6% annual rate with some margin below the target set by the central bank itself.

**Country Headline Inflation Trends**
On a country basis, the performance is not nearly as good. While year-on-year results look pretty good, with Germany at 2%, France at 0.7% and Italy at 1.3%, Spain comes in at 3.1%. So the three largest monetary union economies come in at or below 2% with Spain as a rogue observation. When we look further at the sequence of inflation within the year, we see Germany at 2% over 12 months, rising to 3.1% over 6 months, rising further to 4% over 3 months. Inflation is accelerating at the end of the year even as Germany hits the target! This is something to keep an eye on. For France, the inflation rate also accelerates slightly but stays below the bar of 2% over three months, six months, and 12 months. For Italy, inflation is decelerating from 1.3% over 12 months to -0.3% over six months, and then inflation in Italy is contracting at a 1.9% annual rate over three months. Spanish inflation shows clear trouble with a 3.1% 12-month pace, rising to 4.6% at an annual rate over six months, and rising further to 5.9% at an annual rate over three months.

**Core Inflation**
For core inflation, the Monetary Union’s consolidated numbers are not yet compiled. However, for the four largest economies, we do have core or ex-energy inflation. For Germany, it's inflation excluding energy. On that basis, German inflation is 2.2% over 12 months, it rises to 2.7% over six months, then falls back to a 2% annual pace over three months All-in-all not a bad performance. For France, core inflation is below 2% over 12 months, six months, and three months. In Italy, once again, we see inflation decelerating: Italian inflation is 2% over 12 months - right on the ECB target. It falls to a 1.3% annual rate over six months and then falls further to a 0.3% annual rate over three months. For Spain, the core has another very difficult story for the Monetary Union. Inflation is 2.7% over 12 months, it rises to 3.1% over six months and stays at an annual rate of about 3% over three months. This is too high and it looks stubborn, particularly because it is the core.

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**Across the Big Four**
On balance, what we see is that the ECB grades-out well, based on headline inflation and based on its sequential performance for the European economic union as a whole. But large countries, show headline inflation building some steam particularly in the largest economy, Germany, and in Spain, the smallest of the BIG-4 economies. Inflation is once again mixed in the Monetary Union with German and Spanish inflation too high and with French and Italian inflation running either at or below the 2% mark and with Italy showing a tendency towards weaker prices for both the headline and the core. The change in prices over these various periods shows inflation gets the most help from oil prices over 12 months where Brent, measured in euros, falls by 22.6%; over six months Brent prices fall by 37% at an annual rate; and over three months Brent oil prices are unchanged, so that the headline isn't getting help at all from oil prices except through lagged effects.

**Summing Up**
Meanwhile, there are some signs of stronger growth taking root in Europe, especially in Germany with better industrial production being logged and with German industrial production looking significantly stronger than the PMI data, suggesting that perhaps PMI data are missing something about the rebound that is developing. Nonetheless, it was a good year for inflation and the ECB; however, it doesn't exactly end the year in the catbird’s seat. On the other hand, it does not end the year behind the curve. There are scattered pressures and needs among member countries which always makes monetary policy difficult. When some countries need higher interest rates and others need lower interest rates, the ECB is in a difficult spot. Clearly, Spain and Germany are experiencing different phenomenon than France and Italy. That could be the policy challenge for the year ahead.

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

**The growth consensus for 2026** 
Consensus growth forecasts for 2026 have continued to firm over the past six months, with upward revisions most pronounced in economies that are more directly exposed to the global AI investment cycle. Taiwan stands out, reflecting its central role in advanced semiconductor manufacturing and the spillovers from sustained AI-related capex across the global tech supply chain. The US has also seen a sizeable upgrade, consistent with strong domestic investment in AI infrastructure and data-centre capacity, alongside resilient demand for high-value tech services. Elsewhere in Asia, upgrades to South Korea and, to a lesser extent, China and India point to a broader regional benefit from the AI-driven electronics and capital-goods cycle, even as underlying macro conditions remain mixed. Canada has also seen modest upward revisions, likely reflecting its close integration with US investment trends. By contrast, revisions across much of Europe and Japan have been more muted, while forecasts for Russia remain under downward pressure.

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**The next steps for central bank policy** 
Based on responses to the special questions in the latest Blue Chip survey, the chart highlights how uncertain panelists remain about the precise timing of the next policy move, even where there is broad agreement on direction. Expectations for both the Fed and the Bank of England are now loosely centred on March 2026 as the most likely window for the next easing step, but the spread of responses points to limited conviction and a high sensitivity to incoming data. By contrast, panelists continue to see the ECB as largely through its easing cycle, with a clear majority expecting any further move only later, if at all. The Bank of Japan remains the clear outlier: while further tightening is still the central expectation, views are split on timing, with panelists divided between a March move and a hike pushed beyond April 2026—highlighting ongoing uncertainty over the durability of domestic inflation and wage dynamics.

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**The UK economy and BoE policy** 
While Blue Chip panelists remain divided on the precise timing of the Bank of England’s next policy cut, the latest run of UK data is tilting market expectations toward an earlier move. Economic releases have increasingly fallen short of expectations, a pattern that has coincided with a steady decline in short-dated gilt yields. The negative surprise profile reflects a combination of weak household demand and softer labour-market indicators. This has generated downside momentum in the data, reinforcing the case—at least from a market perspective—for earlier or deeper policy easing.

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**The impact of Artificial Intelligence**
Responses to the special questions in the latest Blue Chip survey also suggest that panelists are divided over the timing of AI’s macroeconomic impact in the US. A sizeable share already reports seeing noticeable effects, consistent with the rapid pace of AI-related investment and adoption over the past year. At the same time, a similarly large group expects AI’s impact to become more evident only over the next one to three years, implying a belief that productivity and growth effects will materialise with a lag. These views are notable given that a majority of panelists continue to judge anticipated AI-related gains as being overstated in financial markets, underscoring the risk of disappointment—and potential equity market volatility—if realised outcomes fail to match elevated expectations.

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**US business formation and productivity growth**
The chart points to a renewed pick-up in US productivity growth alongside a marked step-up in business applications, a combination that has naturally fuelled interest in the role of AI. The acceleration in output per hour over the past year coincides with a surge in corporate formations, potentially reflecting both heightened investment in new technologies and the emergence of new, AI-enabled business models. That said, productivity growth has historically been highly cyclical, often strengthening late in the cycle or during periods of labour hoarding and cost discipline, before fading again. As such, while AI may be contributing at the margin, it remains too early to conclude that the recent improvement marks a durable, technology-driven shift rather than another cyclical upswing.

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**China’s export growth**
This week’s China trade data revealed that its export growth has continued to rotate away from the US and toward Europe and ASEAN, a pattern that has become more pronounced over the past year. While exports to the US have fallen sharply on a year-on-year basis, shipments to both Europe and ASEAN have held up markedly better, and in recent months have returned to positive growth. This divergence is consistent with the tightening of US trade policy toward China, including higher tariffs, expanded export controls and broader efforts to “de-risk” supply chains. By contrast, trade with Europe and ASEAN appears to be benefiting from trade diversion and re-routing, as Chinese firms redirect exports toward markets where barriers remain lower and supply-chain integration is deeper.

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The global backdrop remains unsettled, reflected in rising gold prices amid geopolitical tensions—most recently around Venezuela—and renewed political noise, including questions over Federal Reserve independence. At the same time, however, many major equity indices remain at or close to all-time highs, buoyed by optimism around AI and reinforced by a run of relatively benign US inflation readings. Against this mixed backdrop, the charts this week point to a global outlook that is becoming more differentiated rather than uniformly weaker. Blue Chip forecasts for 2026 growth have edged higher over the past six months, with upgrades concentrated in economies most exposed to the AI investment cycle, notably the US and parts of Asia (chart 1). Central bank expectations remain fluid: while panelists broadly anticipate easing by the Fed and Bank of England, conviction around timing is limited, and the Bank of Japan remains an outlier with further tightening still expected (chart 2). In the UK, that uncertainty sits alongside a deteriorating data flow, with negative economic surprises increasingly tilting market expectations toward an earlier BoE rate cut (chart 3). Turning to the US, special questions highlight a divide over whether AI is already having a noticeable macro impact or whether its effects will emerge more gradually, a tension that mirrors concerns about over-optimism in financial markets (chart4). That debate is echoed in the recent pick-up in US productivity growth and the step-change in business formation—developments that may reflect AI-related dynamics but which also warrant caution given the historically cyclical nature of productivity (chart 5). Finally, China’s trade data point to a continued re-orientation of export growth away from the US and toward Europe and ASEAN, consistent with evolving US trade policy and broader supply-chain realignment (chart 6).

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Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October to include with the November report. The charts above have a gap in October, and the November figures are represented by a small dot.

Import prices have been remarkably stable in the past three years, as shown by the sideways movement in the level of the import price index (left chart). Focusing on percent changes (i.e. inflation rates) rather than the level of the index shows deflation in 2023 and early 2024 followed by higher prices more recently (right chart). Still, the net change in the past 12 months has totaled only 0.1% and the cumulative change in the past three years amounted to a decline of 0.4%.

A calm environment in the energy sector has helped to restrain import prices, as the price of crude oil showed little change in 2023 and 2024 and declined in 2025. Import prices excluding petroleum products have increased in recent years, but the changes have been modest: 0.9 in the past 12 months and 1.3% in the past three years.

The non-oil components of import prices have traced various patterns in recent years, but shifts have been largely offsetting. Prices of food and autos increased noticeably in 2023 and 2024, but they gave back much of those increases in 2025. Prices of capital goods were stable in 2023 and 2024, but they started to increase in 2025. Prices of consumer goods have been volatile, showing bursts of higher prices followed by discounting, leaving a modest net increase in the past three years.

The calm energy environment also seemed to play a role on the export side, as the industrial supply category showed little net change in prices over 2023 and 2024 before jumping in early 2025. Food prices followed a similar pattern, showing two years of restraint before moving higher in 2025. These two categories account for much of the upward movement in overall export prices in 2025. Prices of consumer goods also started to move higher in 2025 after little net change in the prior two years. Prices of capital goods and automobiles have traced reasonably steady upward paths.

Many observers might try to use the import component of this report to gain insight into the effect of tariffs on prices. That will be difficult because the figures from this report are pre-tariff; there will be no independent upward pressure on prices in this report because of tariffs. In fact, one should look for lower import prices in searching for a tariff effect. That is, if a foreign exporter were to absorb the tariff burden, that would be accomplished by reducing the pre-tariff price in order to keep the after-tariff price steady.

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Some exporters to the US may have made such efforts. The nearby chart shows the month-to-month change in import prices in 2025, and May and June both showed lower prices. These months were especially important because they followed the announcement by President Trump of marked increases in tariffs in April. Also, some of the downward pressure occurred in components that would be sensitive to price (autos and consumer goods). Of course, May and June might be too soon after the announcement of draconian tariffs for foreign exporters to assess and change their pricing strategy.

The chart on monthly changes ends in September because the absence of an October reading prevents the calculation of the month-to-month changes for October and November. However, the two-month change from September to November is easily calculated, and the increase of 0.4% suggests little or no effort to absorb the burden of tariffs.

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

- Import prices have changed little in the past three years.
- Export prices were stable in 2023-24, but moved higher in 2025.

Import & Export Prices: Generally Modest Changes

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The Empire State Manufacturing Index of General Business Conditions rose to a higher-than-expected 7.7 in January following a 17.2-drop to -3.7 in December, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 1.0 for January had been expected in the Action Economics Forecast Survey. The positive January figure indicated that the business activity in New York State expanded for the third time in four months; it was an improvement from -7.4 in January 2025 and a low of -29.7 in January 2024, though still below a high of 16.8 in November 2024. The percentage of respondents reporting an increase in general business conditions was 34.2% in January, up from 31.7% in December; the percentage reporting a decrease was 26.5%, down from December’s 35.4%. The latest survey was conducted between January 2 and January 9.

The headline index reflects the answer to a single question concerning the state of economic activity and is not calculated from the components. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index increased to 51.2 in January following a 4.2-point decline to the neutral-level 50.0 in December (the lowest level since September); it was slightly up from 50.7 in January 2025 and well above a low of 43.0 in January 2024. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index rose to 6.6 in January after a 10.6-point drop to -1.0 in December, marking the third m/m gain in orders in four months and a sharp improvement from a low of -30.7 in January 2024. The shipments index jumped to 16.3 in January, the highest level since November 2024, following a 16.5-point fall to -5.0 in December; it was well above a low of -21.7 in April 2024. The unfilled orders index improved to -8.2 in January after a 9.1-point decrease to -14.9 in December, indicating that unfilled orders contracted for the eighth straight month but at a less severe pace; the index reached a low of -24.2 in January 2024. The inventories index fell to -2.1 in January, the lowest level since September, after a 2.7-point decline to 4.0 in December, signaling the first inventory contraction since October. Meanwhile, the delivery times index increased to 0.0 in January from -5.9 in December, with 12.4% of respondents reporting longer delivery times and an identical 12.4% reporting shorter times, indicating that delivery times were unchanged.

On the labor front, the number of employees index fell to -9.0 in January after a 1.0-point increase to 7.5 in December, indicating that employment contracted for the first time since September and reached its lowest level since January 2024. The index remained well below a peak of 24.9 in February 2022. In January, only 7.9% of respondents reported an increase in employment while a higher 16.8% reported a decline. The average workweek index dropped to -5.4 in January from 2.5 in December, turning negative for the first time since October and hitting the lowest level since April 2025.

Inflation pressures eased in January but remained high. The prices paid index fell to 42.8 in January, the lowest level since March 2025, after a 5.9-point decrease to 44.2 in December. Although still well below a peak of 84.9 in April 2022, the index remained above a low of 25.9 in December 2024 and a low of 20.8 in December 2023. In January, 44.5% of respondents reported higher prices paid while only 1.7% reported lower prices paid. The prices received index fell to 14.4 in January, the lowest reading since January 2025, from 25.4 in December. The index was up from a low of 7.5 in December 2024 and a low of 7.7 in July 2023 but far below a high of 51.9 in March 2022. In January, 18.9% of respondents reported higher prices received while 4.4% reported lower prices received.

Firms remained fairly optimistic about the future business outlook in the latest survey. The index for future business conditions eased to 30.3 in January after rising to 33.5 in December, with 50.6% of respondents expecting business conditions to improve over the next six months. Future new orders edged down to 33.3 in January from 34.5 in December, while future shipments rose to 34.9—the highest level since March 2022—from December’s 30.7. Growth in future employment strengthened to 14.9, the highest reading since November 2024, from December’s 7.8. Capital spending plans remained positive for the third consecutive month in January, with the future capital expenditures index rising to 10.3 from December’s 6.9. Expected prices paid fell to 52.6 in January from 55.4 in December and expected prices received fell to 36.5 from 41.6, with both measures at their lowest levels since December 2024.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- General Business Conditions Index up 11.4 pts. to 7.7 in January.
- Positive: Shipments (16.3, highest since Nov. ’24) and new orders (6.6).
- Negative: Employment (-9.0, lowest since Jan. ’24), unfilled orders (-8.2), and inventories (-2.1, a four-month low).
- Prices paid at a 10-month-low 42.8 and prices received at a one-year-low 14.4.
- Firms fairly optimistic: Future Business Conditions Index down to a still-positive 30.3; future prices paid at a one-year-low 52.6.

Economy in Brief: 2009

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