Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802b.jpg" width="353">
US light vehicle sales in July rose 5.8% m/m to 17.24M units, according to the Autodata Corporation. July sales were the highest since this past January and the figure beat Consensus expectations for sales of 16.6M units.
Despite the latest increase, sales fell 16.8% from July 2005 when the successful &quot;employee pricing&quot; plan was instituted for most car buyers.
Overall light truck sales rose 4.7% last month but a steep 28.7% decline versus July 2005 reflects both the success of last year&#39;s sales&#39; incentives and higher gasoline prices.
Domestic truck sales rose 4.3% but fell 32.8% y/y. During the first seven month of this year sales were down 12.2% from the first seven months of 2005. Sales of the relatively fuel efficient imported light trucks rose 7.1% m/m (6.8% y/y). Year to date sales of imported light trucks rose 9.0% from the first seven months of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802c.jpg" width="353">
Auto sales rose 7.0% (1.9% y/y) in July. Domestic car sales turned in a 5.1% gain but still fell 5.6% from last year. Year to date sales were up 0.3% versus last year. Sales of imported autos, in contrast, surged 10.7% (20.0% y/y). Year to date imported car sales rose 9.9% from last year.
Imports garnered a 24.6% share of the US light vehicle market during July, a monthly record, versus 20.4% during all of last year.
Deficits, Debt and Trust Funds from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20060801/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>17.24</td>
<td>16.30</td>
<td>-16.8%</td>
<td>16.92</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.23</td>
<td>7.69</td>
<td>1.9%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.01</td>
<td>8.61</td>
<td>-28.7%</td>
<td>9.27</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
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US light vehicle sales in July rose 5.8% m/m to 17.24M units, according to the Autodata Corporation. July sales were the highest since this past January and the figure beat Consensus expectations for sales of 16.6M units. Despite the [...]

U.S. Vehicle Sales Up, But Struggle Against Incentives Last Year

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802a.jpg" width="353">
The Nat&#39;l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls in July rose just 99,000.
For June the increase in ADP&#39;s measure of private nonfarm payrolls of 368,000 was accompanied by a 90,000 rise in private nonfarm payrolls as published by the Bureau of Labor Statistics. The July figure from BLS will be published this Friday.
ADP has compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 11,333 per month over the last year.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_July_NER_Report.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">July</th>
<th scope="col">June</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">Nonfarm Private Payroll Employment (Chg.)</td>
<td>99,000</td>
<td>368,000</td>
<td>2.0%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>-0.4%</td>
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</tbody>
</table>
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The Nat'l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls in July rose just 99,000. For June the increase in ADP's measure of private nonfarm payrolls of 368,000 was accompanied by a [...]

ADP Nat'l Employment Report: Slower Job Growth in July

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802a.jpg" width="353">
The Nat&#39;l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls in July rose just 99,000.
For June the increase in ADP&#39;s measure of private nonfarm payrolls of 368,000 was accompanied by a 90,000 rise in private nonfarm payrolls as published by the Bureau of Labor Statistics. The July figure from BLS will be published this Friday.
ADP has compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 11,333 per month over the last year.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_July_NER_Report.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">July</th>
<th scope="col">June</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">Nonfarm Private Payroll Employment (Chg.)</td>
<td>99,000</td>
<td>368,000</td>
<td>2.0%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>-0.4%</td>
</tr>
</tbody>
</table>
U.S. Vehicle Sales Up, But Struggle Against Incentives Last Year 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802b.jpg" width="353">
US light vehicle sales in July rose 5.8% m/m to 17.24M units, according to the Autodata Corporation. July sales were the highest since this past January and the figure beat Consensus expectations for sales of 16.6M units.
Despite the latest increase, sales fell 16.8% from July 2005 when the successful &quot;employee pricing&quot; plan was instituted for most car buyers.
Overall light truck sales rose 4.7% last month but a steep 28.7% decline versus July 2005 reflects both the success of last year&#39;s sales&#39; incentives and higher gasoline prices.
Domestic truck sales rose 4.3% but fell 32.8% y/y. During the first seven month of this year sales were down 12.2% from the first seven months of 2005. Sales of the relatively fuel efficient imported light trucks rose 7.1% m/m (6.8% y/y). Year to date sales of imported light trucks rose 9.0% from the first seven months of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802c.jpg" width="353">
Auto sales rose 7.0% (1.9% y/y) in July. Domestic car sales turned in a 5.1% gain but still fell 5.6% from last year. Year to date sales were up 0.3% versus last year. Sales of imported autos, in contrast, surged 10.7% (20.0% y/y). Year to date imported car sales rose 9.9% from last year.
Imports garnered a 24.6% share of the US light vehicle market during July, a monthly record, versus 20.4% during all of last year.
Deficits, Debt and Trust Funds from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20060801/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>17.24</td>
<td>16.30</td>
<td>-16.8%</td>
<td>16.92</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.23</td>
<td>7.69</td>
<td>1.9%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.01</td>
<td>8.61</td>
<td>-28.7%</td>
<td>9.27</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
Mortgage Applications Down Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802d.jpg" width="353">
A 1.2% decline last week in the total number of mortgage applications extended the recent decline to three consecutive weeks. Applications for all of July fell 1.9% from June when applications fell 1.5% from May.
Lower purchase applications led last week&#39;s decline with 3.3% drop which pulled the July average 2.1% below June, the third consecutive down month.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance added 2.3% to the prior week&#39;s 0.6% recovery to limit the decline during all of July to 1.8% versus June. Refis fell 3.1% during June from the May average.
The effective interest rate on a conventional 30-year mortgage fell nine basis points w/w to 6.82%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell to 6.53% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/28/06</th>
<th scope="col">07/21/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>527.6</td>
<td>533.8</td>
<td>-29.8%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>376.2</td>
<td>389.0</td>
<td>-23.9%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,417.2</td>
<td>1,385.2</td>
<td>-37.0%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Local Employment Data Show Gulf Port Cities Still Struggle 9 Months After Katrina, But Houston Gains 
by <a href="/comment/Stone.html">Carol Stone</a> August 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802e.jpg" width="353">
As the first potential hurricane of 2006, Chris, forms near the Dominican Republic and Cuba, we are reminded, of course, of the drastic impact of last year&#39;s Katrina. This morning, the BLS released the household survey data for June for metropolitan areas, and we can get an assessment of economic conditions now in some of the affected cities. These data are carried in Haver&#39;s EMPLR database. Series for labor force, employment, unemployment and the unemployment rate are included for hundreds of metro areas, micro areas, and the other standard combinations of urban communities in all 50 States, the District of Columbia and Puerto Rico.
In New Orleans, the center of Katrina&#39;s damage, the number of people employed is up about 25,000 from its October low, but is clearly still well off the pre-storm numbers. Unemployment, while not at the extreme of October, remains higher than 2003 and 2004, suggesting that even with a reduced labor force, job opportunities are not relatively as plentiful.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802f.jpg" width="353">
Gulfport-Biloxi is also continuing to face strained economic conditions. Unemployment remains far higher than before and also higher than in New Orleans, even though the unemployment rates in the two areas were about the same in the 2003-04 period.
Other cities in the region are doing better. Baton Rouge, the State Capital, saw its unemployment rate shoot up immediately after Katrina, as workers from New Orleans poured into the area. As seen in the table, the rate rose even as the number of employed persons expanded by slightly more than 10,000. Since then, however, employment has fallen back to its pre-storm level and so has unemployment, as the transient workers apparently returned home or moved on.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802g.jpg" width="353">
Cities in Texas also received people from the storm-damaged region. Beaumont-Port Arthur, very near the Louisiana state line, experienced a spike in its labor force and its unemployment rate, but this dissipated. Presently, employment is running about the same as in 2004 and 2005, and the unemployment rate is actually somewhat lower than previously.
Finally, in Houston, the labor force expanded by 25,400 in September and for the most part, these people stayed. Employment rose even more and unemployment fell. Only in June did some of this labor market vigor fade a bit, with a somewhat larger-than-normal June rise in the unemployment rate. So Houston generally was able to absorb its new workers and find jobs for them, and the labor force in Houston is nearly 2.5% larger than a year ago, compared with 1.5% in the nation as a whole.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMPLR/@H01/@H0102/@H0102.HTM">Employment, NSA, Thous</a></th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Oct 2005</th>
<th scope="col">June 2005</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">New Orleans, LA*</td>
<td>412.0</td>
<td>404.5</td>
<td>388.5</td>
<td>610.9</td>
<td>n.m.</td>
<td>587.6</td>
<td>578.7</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.2</td>
<td>6.4</td>
<td>17.1</td>
<td>6.1</td>
<td>n.m.</td>
<td>5.1</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Gulfport-Biloxi, MS</td>
<td>95.4</td>
<td>94.1</td>
<td>97.9</td>
<td>118.4</td>
<td>n.m.</td>
<td>115.5</td>
<td>114.1</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>12.5</td>
<td>12.9</td>
<td>21.2</td>
<td>6.9</td>
<td>n.m.</td>
<td>5.2</td>
<td>5.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Baton Rouge, LA</td>
<td>341.0</td>
<td>339.3</td>
<td>348.3</td>
<td>338.2</td>
<td>n.m.</td>
<td>329.7</td>
<td>319.9</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.3</td>
<td>4.4</td>
<td>9.7</td>
<td>6.7</td>
<td>n.m.</td>
<td>5.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Beaumont-Port Arthur, TX</td>
<td>164.0</td>
<td>164.1</td>
<td>163.2</td>
<td>166.4</td>
<td>164.9</td>
<td>163.6</td>
<td>165.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.1</td>
<td>6.3</td>
<td>11.2</td>
<td>7.6</td>
<td>7.7</td>
<td>8.3</td>
<td>8.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Houston, TX*</td>
<td>2544.0</td>
<td>2532.2</td>
<td>2521.0</td>
<td>2480.3</td>
<td>2484.4</td>
<td>2419.1</td>
<td>2379.2</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.6</td>
<td>5.0</td>
<td>5.4</td>
<td>5.7</td>
<td>5.5</td>
<td>6.2</td>
<td>6.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801i.jpg" width="353">
Incoming data on economic conditions in the Euro Zone suggests that the second quarter growth is likely to exceed the 2.53% annual rate of GDP growth in the first quarter. If so, it will be the first time since 2001 when the annual rate of growth in the Euro Zone exceeded that of the United States. The seasonally adjusted annual rates of GDP growth for the Euro Zone and the U. S are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801j.jpg" width="353">
The unemployment rate for the Euro Zone fell to 7.8% in June, the lowest value since August, 2001. The average for the second quarter was 7.9% compared with 8.1 % in the first quarter. Most of the other current economic indicators, such as production, new orders, shipments and sales, have been positive, but are available only through May. However, the Center for Economic Policy Research (CEPR) based in London produces an indicator, EuroCOINTM, of the monthly growth in real GDP that is used in their analysis of the business cycle. This indicator tracks the quarterly changes in real GDP reasonably well as can be seen in the second chart.According to CEPR, if the value of the indicator is above the long term average of the monthly growth rate--0.59% (the monthly average growth of the sample period, 1988-2003)--this suggests that the economy is growing at a rate faster than the long term norm. In June, the indicator was .633 and for the second quarter it averaged .620 suggesting that second quarter growth is above average. 

<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/EUROSTAT/@U2/@U219/@U219.HTM">Euro Zone</a></th>
<th scope="col">Jun&nbsp; 06</th>
<th scope="col">May 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>
<td class="firstcol">Unemployment Rate %&nbsp;</td>
<td>7.8</td>
<td>7.9</td>
<td>8.6</td>
<td>-0.1</td>
<td>-0.8</td>
<td>8.6</td>
<td>8.9</td>
<td>8.7</td>
</tr>
<tr>
<td class="firstcol">EuroCOIN&nbsp;</td>
<td>.633</td>
<td>.617</td>
<td>.365</td>
<td>.016</td>
<td>.268</td>
<td>.442</td>
<td>.497</td>
<td>.527</td>
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Incoming data on economic conditions in the Euro Zone suggests that the second quarter growth is likely to exceed the 2.53% annual rate of GDP growth in the first quarter. If so, it will be the first time since 2001 when the annual [...]

Euro Zone 2nd Quarter GDP Annual Rate of Growth May Exceed the 2.46% of the U. S.

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801h.jpg" width="353">
Weekly chain store sales rose another 0.9% last week after a 0.2% increase the prior period, according to the International Council of Shopping Centers (ICSC)-UBS survey.
The moderate increases continued to leave sales below earlier levels. As a result sales this month are running 0.6% below the June average.
Both the June &amp; May average sales levels fell 0.4% from the prior month. During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS fell another 0.1% (-1.4% y/y) in the latest week.
Retail gasoline prices during the last week of July ticked up slightly and the average retail price for regular unleaded gas settled at $3.00 per gallon (31.1% y/y) and prices in July averaged $2.98.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/29/06</th>
<th scope="col">07/22/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>471.2</td>
<td>467.1</td>
<td>1.8%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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Weekly chain store sales rose another 0.9% last week after a 0.2% increase the prior period, according to the International Council of Shopping Centers (ICSC)-UBS survey. The moderate increases continued to leave sales below earlier [...]

Weekly Chain Store Sales Up Moderately

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801c.jpg" width="353">
Challenger, Grey &amp; Christmas reported that announced job cuts in July more than reversed the prior month&#39;s gain and dropped 44.7% to 37,178, the lowest level since June of 2000.
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
Layoffs fell sharply m/m in the automotive (-57.2% y/y), computer (-85.5% y/y), financial (-85.1% y/y), health care (65.8% y/y), industrial goods (-35.8% y/y) and pharmaceutical (-86.0% y/y) industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
A m/m increase in the level of layoffs was reported in the electronics (-91.5% y/y), chemical (-66.1% y/y) and the entertainment &amp; leisure (+24.4% y/y) industries.
Challenger also reported that announced hiring plans more than doubled m/m (27.1% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">July</th>
<th scope="col">June</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">Announced Job Cuts</td>
<td>37,178</td>
<td>67,176</td>
<td>-63.9%</td>
<td>1,072,054</td>
<td>1,039,935</td>
<td>1,236,426</td>
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Challenger, Grey & Christmas reported that announced job cuts in July more than reversed the prior month's gain and dropped 44.7% to 37,178, the lowest level since June of 2000. During the last ten years there has been an 83% [...]

Challenger Layoffs Lowest Since 2000

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<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801d.jpg" width="353">
The value of construction put in place rose 0.3% in June following a slight May decline that was upwardly revised. Consensus expectations had been for a 0.1% increase.
Another strong gain in nonresidential building, up 2.7%, bolstered the June total. Office construction jumped 1.9% (12.6% y/y) while multi-retail building surged another 3.1% (52.5% y/y) and a 10.5% spike during May was double the initial estimate. Building by the factory sector surged 8.1% (34.7% y/y).
Residential building activity fell for the third straight month. The 1.0% decline was led by 2.1% drop in new single family building (-1.2% y/y). That&#39;s the first y/y decline since late 2000. Spending on multi-family projects ticked up 0.1% (14.7% y/y) while the value of spending on improvements jumped 1.6% (-1.6% y/y) but the prior month&#39;s surge was revised away.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801e.jpg" width="353">
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP. During April and May the value of residential building activity was down 1.3% from the 1Q average.
Public construction spending increased 0.8%. Construction activity on highways &amp; streets, nearly one third of the value of public construction spending, rose just 0.1% (19.7% y/y) but the prior month&#39;s 0.1% gain reported initially was revised to a 4.3% surge.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>-0.0%</td>
<td>6.8%</td>
<td>10.7%</td>
<td>11.5%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.1%</td>
<td>-0.5%</td>
<td>6.0%</td>
<td>12.0%</td>
<td>14.3%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-1.0%</td>
<td>-1.4%</td>
<td>-0.1%</td>
<td>13.9%</td>
<td>18.6%</td>
<td>12.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>2.7%</td>
<td>1.6%</td>
<td>21.6%</td>
<td>7.4%</td>
<td>5.3%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.8%</td>
<td>1.6%</td>
<td>9.7%</td>
<td>6.2%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
</tbody>
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</body>
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The value of construction put in place rose 0.3% in June following a slight May decline that was upwardly revised. Consensus expectations had been for a 0.1% increase. Another strong gain in nonresidential building, up 2.7%, bolstered [...]

U.S. Construction Spending Supported By Nonresidential

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<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801f.jpg" width="353">
In July, the Composite Index of factory sector activity more than recovered the prior month&#39;s decline and rose to 54.7, reported the Institute for Supply Management. Consensus expectations had been for a slight decline to 53.5.
During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
The production index rose to 57.5, the highest level since April but new orders gave back half of a June increase. New export orders fell to the lowest level (51.9) since June of last year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801g.jpg" width="353">
The employment index recovered half of the prior month&#39;s decline and rose to 50.7. During the last twenty years there has been a 66% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.
The price index surged to the highest level (78.5) since last October. During the last twenty years there has been a 91% correlation between the price index and the three month change in the PPI for intermediate goods less food &amp; energy.

<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/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">Jun</th>
<th scope="col">July &#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">Composite Index</td>
<td>54.7</td>
<td>53.8</td>
<td>56.4</td>
<td>55.5</td>
<td>60.5</td>
<td>53.3</td>
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In July, the Composite Index of factory sector activity more than recovered the prior month's decline and rose to 54.7, reported the Institute for Supply Management. Consensus expectations had been for a slight decline to 53.5. During [...]

ISM Index Recovered in July

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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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.

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

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

Sandy Batten

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

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

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

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

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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