Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720h.jpg" width="353">
The Central Bank of Egypt today reported its balance of payments array for Q1 2006. The current account surplus increased to $934 million from $801 million in Q4 2005, although it was a bit smaller than Q1 2005 at $995 billion. For 2005 as a whole, Egypt had a current account surplus of $2.2 billion.
These numbers are small in absolute size. For instance, the balance on services in the US was $66.0 billion last year, nearly 9 times larger than Egypt&#39;s $7.6 billion. But some aspects of these Egyptian figures are quite fascinating and bear examination.
First, the current account itself shows a surplus. One frequently presumes that emerging market countries run perennial deficits and struggle constantly with debt and debt service issues. But presently, that situation is improving for Egypt. Its current account turned a surplus in its fiscal year 2002 (ended June 30, 2002) and has also achieved that every quarter since the quarterly data began in early 2004.
To be sure, the goods accounts are in deficit, which totaled $11.1 billion in calendar 2005 and continued with a $2.2 billion shortfall in Q1 2006. But Egypt has some oil and, as seen in the table below, is benefiting from the high prices with an increasing surplus in petroleum. This, of course, limits the overall deficit in goods.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720i.jpg" width="353">
The services accounts are important for Egypt. It collected nearly $3.5 billion last year in tolls from the Suez Canal, a strategic and lucrative asset for that nation. Egypt is able, too, to benefit from its ancient history as a tourist attraction, bringing a net of more than $5 billion to the country last year in travel accounts.
Lastly among the current accounts, the country receives substantial amounts of transfers. We in the US look at our transfer item as a drain, but sizable amounts of income go to Egypt, apparently from individuals working abroad. Total net transfers were $5.7 billion in 2005, with the portion from private sources amounting to almost exactly $5.0 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720j.jpg" width="353">
On the capital and financial account side, the most outstanding item is the recent huge increase in direct investment in Egypt. As seen below, capital inflows for investment projects more than doubled in 2005 to $5.3 billion from $2.0 billion in 2004. The Q1 amount continues the 2005 pace. Information from news sources indicates that these funds cover a wide variety of activities, including manufacturing and the rapidly growing tourism sector. Recently announced projects include a major expansion of port facilities at Suez, so these flows are likely to remain sizable for a considerable period. At the same time, bank lending patterns indicate a persistent net outflow of capital from that sector.
All told, Egypt&#39;s balance of payments accounts are running a positive overall balance, as services, transfers and some capital accounts more than offset a deficit on goods trade. As a result, Egypt&#39;s reserves are increasing, in Q1 by $713 million, following a substantial $6.3 billion in 2005.

<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/EMERGEMA/@M1/@M1.htm">Egypt: Mil. US$</a></th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>934</td>
<td>801</td>
<td>327</td>
<td>995</td>
<td>2,207</td>
<td>3,236</td>
</tr>
<tr>
<td class="firstcol">Balance on Goods</td>
<td>-2,222</td>
<td>-2,663</td>
<td>-1,028</td>
<td>-2,128</td>
<td>-11,127</td>
<td>-9,312</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Petroleum</td>
<td>1,518</td>
<td>1,188</td>
<td>985</td>
<td>638</td>
<td>2,562</td>
<td>1,730</td>
</tr>
<tr>
<td class="firstcol">Balance on Services</td>
<td>1,780</td>
<td>2,074</td>
<td>2,170</td>
<td>1,530</td>
<td>7,586</td>
<td>7,982</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Suez Canal</td>
<td>862</td>
<td>891</td>
<td>871</td>
<td>847</td>
<td>3,467</td>
<td>3,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Travel (Net)</td>
<td>1,257</td>
<td>1,200</td>
<td>1,928</td>
<td>994</td>
<td>5,222</td>
<td>4,868</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Transfers</td>
<td>1,376</td>
<td>1,390</td>
<td>1,355</td>
<td>1,593</td>
<td>5,748</td>
<td>4,567</td>
</tr>
<tr>
<td class="firstcol">Net Direct Investment</td>
<td>1,296</td>
<td>1,320</td>
<td>1,928</td>
<td>1,214</td>
<td>5,284</td>
<td>1,998</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</td>
<td>713</td>
<td>740</td>
<td>1,812</td>
<td>2,538</td>
<td>6,316</td>
<td>680</td>
</tr>
</tbody>
</table>
</body>
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The Central Bank of Egypt today reported its balance of payments array for Q1 2006. The current account surplus increased to $934 million from $801 million in Q4 2005, although it was a bit smaller than Q1 2005 at $995 billion. For [...]

Egypt's Current Account Surplus Boosted by Large Canal Tolls, Tourism and Petroleum; Direct Investment Gains

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720f.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s July Index of General Business Conditions in the manufacturing sector dropped to 6.0 from an unrevised 13.1 during June. The decline exceeded Consensus expectation for a drop to 12.4.
The July decline was to the lowest level since this past January.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
The lower index reflected declines in the sub indexes of new orders, shipments, unfilled orders and delivery times. Moving in the other direction, the employment index advanced to its highest level in three months. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720g.jpg" width="353">
The prices paid index rose moderately. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months about doubled m/m in July but at 15.4 remained below the 2Q average. Expectations for employment fell m/m and the index also was below the 2Q average.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0706.html">here</a>.
The minutes to the latest Federal Open Market Committee meeting can be found <a href="http://www.federalreserve.gov/FOMC/MINUTES/20060629.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">July</th>
<th scope="col">June</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">General Activity Index</td>
<td>6.0</td>
<td>13.1</td>
<td>9.6</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>50.3</td>
<td>48.7</td>
<td>31.8</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
</body>
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The Philadelphia Federal Reserve Bank's July Index of General Business Conditions in the manufacturing sector dropped to 6.0 from an unrevised 13.1 during June. The decline exceeded Consensus expectation for a drop to 12.4. The July [...]

Philadelphia Fed Business Activity Index Lowest Since January

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720c.jpg" width="353">
The number of mass layoff events rose 2.1% during June. Though the number remained down sharply from last year, for all of 2Q the number of events rose 1.6% from 1Q 2006, the first q/q increase in nearly two years.
During the last ten years there has been a (negative) 85% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected in June by mass layoffs jumped 8.9% and rose 2.8% during 2Q. Layoffs in the transportation equipment sector (+29.0% y/y) dominated the rise in June and more than doubled m/m. Less transportation, the number of affected persons rose 1.6% (-10.6% y/y).
Increased layoffs in the apparel (69.8% y/y), machinery (35.1% y/y), furniture (153.0% y/y), textile mill, computer, metals and chemicals industries were damped by declines in electrical equipment (-76.0% y/y) and wholesale trade (-55.9% y/y).
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.

<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/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</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>
<td class="firstcol">All US Industries (# Events, SA)</td>
<td>1,097</td>
<td>1,074</td>
<td>-7.3%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>119,662</td>
<td>109,858</td>
<td>-6.8%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
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The number of mass layoff events rose 2.1% during June. Though the number remained down sharply from last year, for all of 2Q the number of events rose 1.6% from 1Q 2006, the first q/q increase in nearly two years. During the last ten [...]

Mass Layoffs Rose in June and During 2Q

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720d.jpg" width="353">
The Conference Board reported that the composite index of leading economic indicators ticked up 0.1% in June, the first increase in three months, and followed an unrevised 0.6% decline the prior month. Consensus expectations had been for a 0.2% increase.
Six month growth in the leaders fell to -0.6%, its weakest since early 2001. During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index improved sharply to 65% in June but over a six month span only 50% of the index components rose, the weakest breadth of six month gain since early 2005. In June, positive contributions from the money supply, consumer expectations, hours worked &amp; jobless claims were offset by lower stock prices, vendor performance and building permits .<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720e.jpg" width="353">
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.2% and during the last one &amp; six months all of the coincident series rose. Over the last ten years there has been a 69% correlation between the change in the coincident indicators and real GDP growth.
The lagging indicators jumped 0.6%. During June nearly all of the series&#39; components rose but during the last six months 42.9% rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, fell for the third consecutive month.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">6 Month Chg., AR</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">Leading</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.1%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board reported that the composite index of leading economic indicators ticked up 0.1% in June, the first increase in three months, and followed an unrevised 0.6% decline the prior month. Consensus expectations had been [...]

Leading Economic Indicators Nudged Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720a.jpg" width="353">
Initial claims for unemployment insurance fell 30,000 to 304,000 last week after an upwardly revised 20,000 increase during the prior week. Consensus expectations had been for a lesser decline to 320,000 claims.
The figure covers the survey period for July nonfarm payrolls and initial claims were down 5,000 (-1.6%) from the June period. During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720b.jpg" width="353">
The w/w decline reversed all of the increases during the prior four weeks and dropped claims to the lowest level in one month. The four-week moving average of initial claims fell to 316,750 (-1.6% y/y).
Continuing claims for unemployment insurance jumped 85,000 following a deepened 28,000 decline the previous week. Claims were at the highest level since February.
The insured rate of unemployment held steady at 1.9% where it has been since February.
Robust estimation and monetary policy with unobserved structural change from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2006/er1-16.pdf"> here</a>

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">07/15/06</th>
<th scope="col">07/08/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>304</td>
<td>334</td>
<td>-3.5%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,505</td>
<td>-3.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance fell 30,000 to 304,000 last week after an upwardly revised 20,000 increase during the prior week. Consensus expectations had been for a lesser decline to 320,000 claims. The figure covers the [...]

Initial Claims for Unemployment Insurance At One Month Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720f.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s July Index of General Business Conditions in the manufacturing sector dropped to 6.0 from an unrevised 13.1 during June. The decline exceeded Consensus expectation for a drop to 12.4.
The July decline was to the lowest level since this past January.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
The lower index reflected declines in the sub indexes of new orders, shipments, unfilled orders and delivery times. Moving in the other direction, the employment index advanced to its highest level in three months. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720g.jpg" width="353">
The prices paid index rose moderately. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months about doubled m/m in July but at 15.4 remained below the 2Q average. Expectations for employment fell m/m and the index also was below the 2Q average.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0706.html">here</a>.
The minutes to the latest Federal Open Market Committee meeting can be found <a href="http://www.federalreserve.gov/FOMC/MINUTES/20060629.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">July</th>
<th scope="col">June</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">General Activity Index</td>
<td>6.0</td>
<td>13.1</td>
<td>9.6</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>50.3</td>
<td>48.7</td>
<td>31.8</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
Leading Economic Indicators Nudged Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720d.jpg" width="353">
The Conference Board reported that the composite index of leading economic indicators ticked up 0.1% in June, the first increase in three months, and followed an unrevised 0.6% decline the prior month. Consensus expectations had been for a 0.2% increase.
Six month growth in the leaders fell to -0.6%, its weakest since early 2001. During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index improved sharply to 65% in June but over a six month span only 50% of the index components rose, the weakest breadth of six month gain since early 2005. In June, positive contributions from the money supply, consumer expectations, hours worked &amp; jobless claims were offset by lower stock prices, vendor performance and building permits .<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720e.jpg" width="353">
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.2% and during the last one &amp; six months all of the coincident series rose. Over the last ten years there has been a 69% correlation between the change in the coincident indicators and real GDP growth.
The lagging indicators jumped 0.6%. During June nearly all of the series&#39; components rose but during the last six months 42.9% rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, fell for the third consecutive month.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">6 Month Chg., AR</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">Leading</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.1%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
Mass Layoffs Rose in June and During 2Q 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720c.jpg" width="353">
The number of mass layoff events rose 2.1% during June. Though the number remained down sharply from last year, for all of 2Q the number of events rose 1.6% from 1Q 2006, the first q/q increase in nearly two years.
During the last ten years there has been a (negative) 85% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected in June by mass layoffs jumped 8.9% and rose 2.8% during 2Q. Layoffs in the transportation equipment sector (+29.0% y/y) dominated the rise in June and more than doubled m/m. Less transportation, the number of affected persons rose 1.6% (-10.6% y/y).
Increased layoffs in the apparel (69.8% y/y), machinery (35.1% y/y), furniture (153.0% y/y), textile mill, computer, metals and chemicals industries were damped by declines in electrical equipment (-76.0% y/y) and wholesale trade (-55.9% y/y).
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</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>
<td class="firstcol">All US Industries (# Events, SA)</td>
<td>1,097</td>
<td>1,074</td>
<td>-7.3%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>119,662</td>
<td>109,858</td>
<td>-6.8%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance At One Month Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720a.jpg" width="353">
Initial claims for unemployment insurance fell 30,000 to 304,000 last week after an upwardly revised 20,000 increase during the prior week. Consensus expectations had been for a lesser decline to 320,000 claims.
The figure covers the survey period for July nonfarm payrolls and initial claims were down 5,000 (-1.6%) from the June period. During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720b.jpg" width="353">
The w/w decline reversed all of the increases during the prior four weeks and dropped claims to the lowest level in one month. The four-week moving average of initial claims fell to 316,750 (-1.6% y/y).
Continuing claims for unemployment insurance jumped 85,000 following a deepened 28,000 decline the previous week. Claims were at the highest level since February.
The insured rate of unemployment held steady at 1.9% where it has been since February.
Robust estimation and monetary policy with unobserved structural change from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2006/er1-16.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">07/15/06</th>
<th scope="col">07/08/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>304</td>
<td>334</td>
<td>-3.5%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,505</td>
<td>-3.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
Egypt's Current Account Surplus Boosted by Large Canal Tolls, Tourism and Petroleum; Direct Investment Gains 
by <a href="/comment/Stone.html">Carol Stone</a> July 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720h.jpg" width="353">
The Central Bank of Egypt today reported its balance of payments array for Q1 2006. The current account surplus increased to $934 million from $801 million in Q4 2005, although it was a bit smaller than Q1 2005 at $995 billion. For 2005 as a whole, Egypt had a current account surplus of $2.2 billion.
These numbers are small in absolute size. For instance, the balance on services in the US was $66.0 billion last year, nearly 9 times larger than Egypt&#39;s $7.6 billion. But some aspects of these Egyptian figures are quite fascinating and bear examination.
First, the current account itself shows a surplus. One frequently presumes that emerging market countries run perennial deficits and struggle constantly with debt and debt service issues. But presently, that situation is improving for Egypt. Its current account turned a surplus in its fiscal year 2002 (ended June 30, 2002) and has also achieved that every quarter since the quarterly data began in early 2004.
To be sure, the goods accounts are in deficit, which totaled $11.1 billion in calendar 2005 and continued with a $2.2 billion shortfall in Q1 2006. But Egypt has some oil and, as seen in the table below, is benefiting from the high prices with an increasing surplus in petroleum. This, of course, limits the overall deficit in goods.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720i.jpg" width="353">
The services accounts are important for Egypt. It collected nearly $3.5 billion last year in tolls from the Suez Canal, a strategic and lucrative asset for that nation. Egypt is able, too, to benefit from its ancient history as a tourist attraction, bringing a net of more than $5 billion to the country last year in travel accounts.
Lastly among the current accounts, the country receives substantial amounts of transfers. We in the US look at our transfer item as a drain, but sizable amounts of income go to Egypt, apparently from individuals working abroad. Total net transfers were $5.7 billion in 2005, with the portion from private sources amounting to almost exactly $5.0 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720j.jpg" width="353">
On the capital and financial account side, the most outstanding item is the recent huge increase in direct investment in Egypt. As seen below, capital inflows for investment projects more than doubled in 2005 to $5.3 billion from $2.0 billion in 2004. The Q1 amount continues the 2005 pace. Information from news sources indicates that these funds cover a wide variety of activities, including manufacturing and the rapidly growing tourism sector. Recently announced projects include a major expansion of port facilities at Suez, so these flows are likely to remain sizable for a considerable period. At the same time, bank lending patterns indicate a persistent net outflow of capital from that sector.
All told, Egypt&#39;s balance of payments accounts are running a positive overall balance, as services, transfers and some capital accounts more than offset a deficit on goods trade. As a result, Egypt&#39;s reserves are increasing, in Q1 by $713 million, following a substantial $6.3 billion in 2005.

<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/EMERGEMA/@M1/@M1.htm">Egypt: Mil. US$</a></th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>934</td>
<td>801</td>
<td>327</td>
<td>995</td>
<td>2,207</td>
<td>3,236</td>
</tr>
<tr>
<td class="firstcol">Balance on Goods</td>
<td>-2,222</td>
<td>-2,663</td>
<td>-1,028</td>
<td>-2,128</td>
<td>-11,127</td>
<td>-9,312</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Petroleum</td>
<td>1,518</td>
<td>1,188</td>
<td>985</td>
<td>638</td>
<td>2,562</td>
<td>1,730</td>
</tr>
<tr>
<td class="firstcol">Balance on Services</td>
<td>1,780</td>
<td>2,074</td>
<td>2,170</td>
<td>1,530</td>
<td>7,586</td>
<td>7,982</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Suez Canal</td>
<td>862</td>
<td>891</td>
<td>871</td>
<td>847</td>
<td>3,467</td>
<td>3,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Travel (Net)</td>
<td>1,257</td>
<td>1,200</td>
<td>1,928</td>
<td>994</td>
<td>5,222</td>
<td>4,868</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Transfers</td>
<td>1,376</td>
<td>1,390</td>
<td>1,355</td>
<td>1,593</td>
<td>5,748</td>
<td>4,567</td>
</tr>
<tr>
<td class="firstcol">Net Direct Investment</td>
<td>1,296</td>
<td>1,320</td>
<td>1,928</td>
<td>1,214</td>
<td>5,284</td>
<td>1,998</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</td>
<td>713</td>
<td>740</td>
<td>1,812</td>
<td>2,538</td>
<td>6,316</td>
<td>680</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719h.jpg" width="353">
As the following charts and table illustrate, there&#39;s been something of a building boom in South Africa. Over the last few months, however, some areas of construction have been slowing.
Statistics South Africa reported today that total building plans passed declined in May to ZAR 3.92 billion from ZAR 4.00 billion in April (seasonally adjusted, 2000 prices. &quot;ZAR&quot; is the ISO code for the South African Rand). This amount is 3.2% below May 2005. This collection of data begins in 2000 and remains relatively erratic, so caution should be used in assessing just one month&#39;s figures. Indeed, Statistics South Africa highlights 3-month moving averages and year-to-date data in its press releases.
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719i.jpg" width="353">By type, there is an emerging downtrend in residential construction, while nonresidential building remains strong. Additions and alterations have been fairly steady. In the residential sector, small houses (under 80 square meters, about 861 square feet) are quite vigorous, with a 6-month moving average ending May up 70% from a year ago. Larger houses, though, are trailing off: in May the 6-month average was up 9.2% year-on-year, but a 3-month average was up only 4.1%.
Within the nonresidential sector, data are available not seasonally adjusted in nominal terms for offices, shopping centers, and industrial and warehouse structures. Perhaps in line with the residential sector&#39;s general slowing, shopping space construction plans have been flat now for about six months. Offices and banks, though, are still advancing, and industrial and warehousing facilities were up in May by nearly 63% from a year ago, based on 3-month average figures. This is large, but considerably more moderate than the 100%+ pace that characterized the latter part of 2005.
These are building &quot;plans&quot;. With the recent surge in plans, many projects, especially nonresidential buildings will take some time for the construction. Thus, buildings completed, a separate measure, is much smaller than the plans figure. In May, a 3-month average of that total (seasonally adjusted) was ZAR 2.12 billion, up 23.9% from May 2005.

<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/EMERGEMA/@M2/@M210/@M210.HTM">South Africa</a><a href="http://www.haverselect.com/dlx/EMERGEMA/@M2/@M210/@M210.HTM">:</a>&nbsp; SA, Mil.2000.Rand</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">Year Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Building Plans Passed</td>
<td>3925</td>
<td>4001</td>
<td>3886</td>
<td>3996</td>
<td>3912</td>
<td>2707</td>
<td>2013</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential</td>
<td>2006</td>
<td>2048</td>
<td>2227</td>
<td>2403</td>
<td>2230</td>
<td>1624</td>
<td>1146</td>
</tr>
<tr>
<td class="firstcol">Nonresidential</td>
<td>847</td>
<td>881</td>
<td>613</td>
<td>591</td>
<td>651</td>
<td>395</td>
<td>334</td>
</tr>
<tr class="odd">
<td class="firstcol">Additions &amp; Alterations</td>
<td>1072</td>
<td>1072</td>
<td>1046</td>
<td>1002</td>
<td>1031</td>
<td>688</td>
<td>533</td>
</tr>
<tr>
<td class="firstcol">Buildings Completed</td>
<td>1915</td>
<td>2064</td>
<td>2371</td>
<td>1884</td>
<td>1943</td>
<td>1417</td>
<td>1147</td>
</tr>
</tbody>
</table>
</body>
</html>

As the following charts and table illustrate, there's been something of a building boom in South Africa. Over the last few months, however, some areas of construction have been slowing. Statistics South Africa reported today that [...]

Building Plans Moderate in South Africa, but Recent Strength Puts Plans Well Ahead of Completions

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719g.jpg" width="353">
A 4.6% decline in the total number of mortgage applications last week reversed most of the increases during the prior two weeks and left applications early in July about even (+0.2%) with the June average which fell 1.5% from May.
Purchase applications fell a hard 6.2% w/w and left applications in July only 1.5% above the June average which fell 0.8% from May.
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 fell 1.6% for the second week and the early July average was 2.2% below June. Refis during all of June fell 3.1% from the May average.
The effective interest rate on a conventional 30-year mortgage slipped w/w to 6.96% and the rate on 15-year financing also fell to 6.63%. 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.
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">07/14/06</th>
<th scope="col">07/07/06</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>540.8</td>
<td>566.8</td>
<td>-32.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>398.5</td>
<td>425.0</td>
<td>-18.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,377.6</td>
<td>1,400.5</td>
<td>-47.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
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A 4.6% decline in the total number of mortgage applications last week reversed most of the increases during the prior two weeks and left applications early in July about even (+0.2%) with the June average which fell 1.5% from May. [...]

Mortgage Applications Confirm Housing Soft 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.

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**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.

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**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.

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

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

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

Robert Brusca

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

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**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief

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