Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020e.jpg" align="right" border="0" height="265" width="353">Pricing
power virtually evaporated last month with across-the-board declines in
goods prices. The PPI for finished goods fell 0.6%. It was the second
decline in the last three months and left prices down 4.7% from the
year-ago level. The decline compared to the Consensus expectation for
no change. Moreover, it was broad-based and included lower food
&amp; energy prices as well as the third decline in core prices in
the last five months. The 0.1% decline in the PPI less food &amp;
energy contrasted with expectations for a 0.1% increase and it pulled
the y/y change to 1.8%, the weakest since May 2007.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020d.jpg" align="right" border="0" height="265" width="353">Lower
finished energy prices led the decline in last month's PPI with a 2.4%
drop (-22.2% y/y). Though the decline has been partially reversed here
in October, last month it reflected a 5.4% fall in gasoline prices
(-37.5% y/y). Natural gas prices also fell by 1.9% (-24.5% y/y) and
fuel oil prices fell 24.1% (-40.5% y/y).
The PPI for finished consumer
goods less food &amp; energy slipped 0.1% but gained 2.2% y/y. That
was the weakest annual increase since June 2007. Finished durables
prices slipped 0.2% (+2.0% y/y) and prices of core finished consumer
nondurable goods slipped for the fourth month in the last six. The 2.3%
y/y increase was down from 5.9% as of last November. Capital equipment
prices also reflected economic weakness and slipped 0.1%. That pulled
the y/y increase down to 1.4% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020f.jpg" align="right" border="0" height="265" width="353">Prices for intermediate goods inched 0.2%
higher, paced by a firm 0.9%
increase in core prices. They were led by a 1.3% (-11.3% y/y) increase
in prices for materials for manufacturing. Intermediate food prices
fell 0.5% (-12.9% y/y) and energy prices also slipped 2.1% (-24.2%
y/y).
 The crude materials PPI fell 2.1%
and was led lower by a 5.4% decline (-42.6% y/y) in&nbsp; crude
energy prices. In contrast, core prices showed strength and increased
for the sixth straight month.
The producer price data is available in
Haver's USECON database. More detailed data is in
the PPI and in the PPIR
databases.&nbsp;
<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/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.6</td>
<td>1.7</td>
<td>-4.7</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.1</td>
<td>0.2</td>
<td>1.8</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.2</td>
<td>1.8</td>
<td>-11.6</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.9</td>
<td>0.6</td>
<td>-7.5</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.1</td>
<td>3.8</td>
<td>-31.5</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.6</td>
<td>6.0</td>
<td>&nbsp;-19.6</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>

</body></html>

Pricing power virtually evaporated last month with across-the-board declines in goods prices. The PPI for finished goods fell 0.6%. It was the second decline in the last three months and left prices down 4.7% from the year-ago level. [...]

U.S. PPI Declines With Lower Energy, Food And Core Prices

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020c.jpg" align="left" border="0" height="265" width="353">
The steep declines in new orders in France and Italy that the
recession exacted are beginning to show some signs of leveling out. New
orders in France and Italy on a three-month moving average basis that
smoothes out some of the month- to- month variation are shown in the
first chart. The turnaround in France appears stronger than that in
Italy. The index of French new orders in Manufacturing actually
increased 3.0% in August from 87.0 (2005=100) to 89.6 but it was still
13.8% below the year ago level. At the same time, the index of Italian
new orders actually declined 8.6% from 88.8 to 81.2 and was 29.8% below
the year ago level.
In general, the index of new orders in Italy has been higher
than that of France; and, in spite of France's better performance
relative to Italy's in August, the index of Italian new orders so far
this year has exceeded that of France. The average level of the index
of new orders over the period January through August was 87.3 for Italy
and 84.6 for France. It should be noted that comparisons of indexes
between countries say nothing about actual levels in the two countries;
they merely indicate that, currently, new orders in Italy compared to
their level in 2005 are higher than the corresponding measures in
France.
Foreign orders accounted for the big decline in the actual
index of Italian orders in August. Foreign orders dropped 12.8% from
96.8 in July to 84.4 in August. In France new foreign orders actually
increased 0.7% from 86.4 in July to 87.0 in August. However, on a three
month average basis, which is shown in the second chart, the July
increase in Italy's foreign orders has been followed by relative
stability in August. In France, the upward trend started in May and has
continued through August.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Year to Date Avg</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Aug 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y&amp;&nbsp;</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"> Total New Orders</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>87.1</td>
<td>81.2</td>
<td>88.8</td>
<td>115.7</td>
<td>-8.56</td>
<td>-29.82</td>
<td>115.8</td>
<td>121.4</td>
<td>114.1</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>84.6</td>
<td>89.6</td>
<td>87.0</td>
<td>103.9</td>
<td>2.99</td>
<td>-13.76</td>
<td>104.0</td>
<td>111.4</td>
<td>103.6</td>
</tr>
<tr>
<td class="firstcol" colspan="10">Foreign New Orders</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>71.4</td>
<td>84.4</td>
<td>96.8</td>
<td>120.1</td>
<td>-12.81</td>
<td>-29.73</td>
<td>121.8</td>
<td>131.3</td>
<td>117.8</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>64.0</td>
<td>87.0</td>
<td>86.4</td>
<td>101.7</td>
<td>-.69</td>
<td>-14.45</td>
<td>104.6</td>
<td>115.8</td>
<td>106.6</td>
</tr>
</tbody>
</table>
</body></html>

The steep declines in new orders in France and Italy that the recession exacted are beginning to show some signs of leveling out. New orders in France and Italy on a three-month moving average basis that smoothes out some of the [...]

Manufacturing New Orders in France and Italy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020a.jpg" width="353">
Continuing to show a loss of forward momentum was the housing sector. Housing starts ticked up slightly last month to 590,000 (AR) units versus 587,000 during August which was revised down slightly. The latest level, however, showed no growth from June. In addition, September&#39;s figure fell short of Consensus expectations for 610,000 starts.
The loss of momentum owes to weakness in the multi-family sector where starts fell 15.2% m/m during September. That decline reversed roughly all of the August increase and left multi-family starts near the postwar low. Starts of apartments, condominiums &amp; town houses remained down by roughly two-thirds from the 2006 peak.
Starts of single-family homes have shown more life recently. Single-family starts rose 3.9% last month to 501,000 units (AR) and reversed most of an August decline. They are now 40% above the low of this past winter. During the last ten years, there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.
By region, starts of single-family units last month were mixed. Single-family starts in the Northeast rose 13.0% to nearly their highest level since October (-8.8% y/y) while starts in the South also rose 14.3% (-5.9% y/y) to their highest level since last September. In the Midwest, starts posted a 5.7% (-4.6% y/y) decline after a dip during August and starts in the West fell 14.4% (-18.8% y/y) to their lowest level since May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020b.jpg" width="353">
Building permits fell 1.2% and gave back much of their increase during August. Permits remained just above their record low and were down by roughly one-half from last May. As with starts, permits to build a single-family home have been relatively strong, despite a moderate 3.0% decline during September. A leading indicator of starts, permits are one-third higher than their winter low.
The housing starts figures can be found in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Housing Starts (000s, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>590</td>
<td>587</td>
<td>-28.2%</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>501</td>
<td>482</td>
<td>-8.7</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>89</td>
<td>105</td>
<td>-67.4</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>573</td>
<td>580</td>
<td>-28.9</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>
</body>
</html>

Continuing to show a loss of forward momentum was the housing sector. Housing starts ticked up slightly last month to 590,000 (AR) units versus 587,000 during August which was revised down slightly. The latest level, however, showed [...]

U.S. Housing Starts Inch Higher During September But Are Flat Over Last Four Months

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020a.jpg" align="left" border="0" height="265" width="353">
Continuing to show a loss of forward momentum was the housing
sector. Housing starts ticked up slightly last month to 590,000 (AR)
units versus 587,000 during August which was revised down slightly. The
latest level, however, showed no growth from June. In addition,
September's figure fell short of Consensus expectations for 610,000
starts.
The loss of momentum owes to weakness in the multi-family
sector where starts fell 15.2% m/m during September. That decline
reversed roughly all of the August increase and left multi-family
starts near the postwar low. Starts of apartments, condominiums
&amp; town houses remained down by roughly two-thirds from the 2006
peak.
Starts of single-family homes have shown more life recently.
Single-family starts rose 3.9% last month to 501,000 units (AR) and
reversed most of an August decline. They are now 40% above the low of
this past winter. During the last ten years, there has been an 84%
correlation between the q/q change in single-family starts and their
contribution to quarterly GDP growth.
By region, starts of single-family units last month were
mixed. Single-family starts in the Northeast rose 13.0% to nearly their
highest level since October (-8.8% y/y) while starts in the South also
rose 14.3% (-5.9% y/y) to their highest level since last September. In
the Midwest, starts posted a 5.7% (-4.6% y/y) decline after a dip
during August and starts in the West fell 14.4% (-18.8% y/y) to their
lowest level since May. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020b.jpg" align="right" border="0" height="265" width="353">
Building permits fell 1.2% and gave back much of their
increase during August. Permits remained just above their record low
and were down by roughly one-half from last May. As with starts,
permits to build a single-family home have been relatively strong,
despite a moderate 3.0% decline during September. A leading
indicator of starts, permits are one-third higher than their winter low.
The housing starts figures can be found in Haver's USECON
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>590</td>
<td>587</td>
<td>-28.2%</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>501</td>
<td>482</td>
<td>-8.7</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>89</td>
<td>105</td>
<td>-67.4</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>573</td>
<td>580</td>
<td>-28.9</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>
 Manufacturing New Orders in France
and Italy 
by <a href="/comment/Curley.html">Louise
Curley</a> October 20, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020c.jpg" align="left" border="0" height="265" width="353">
The steep declines in new orders in France and Italy that the
recession exacted are beginning to show some signs of leveling out. New
orders in France and Italy on a three-month moving average basis that
smoothes out some of the month- to- month variation are shown in the
first chart. The turnaround in France appears stronger than that in
Italy. The index of French new orders in Manufacturing actually
increased 3.0% in August from 87.0 (2005=100) to 89.6 but it was still
13.8% below the year ago level. At the same time, the index of Italian
new orders actually declined 8.6% from 88.8 to 81.2 and was 29.8% below
the year ago level.
In general, the index of new orders in Italy has been higher
than that of France; and, in spite of France's better performance
relative to Italy's in August, the index of Italian new orders so far
this year has exceeded that of France. The average level of the index
of new orders over the period January through August was 87.3 for Italy
and 84.6 for France. It should be noted that comparisons of indexes
between countries say nothing about actual levels in the two countries;
they merely indicate that, currently, new orders in Italy compared to
their level in 2005 are higher than the corresponding measures in
France.
Foreign orders accounted for the big decline in the actual
index of Italian orders in August. Foreign orders dropped 12.8% from
96.8 in July to 84.4 in August. In France new foreign orders actually
increased 0.7% from 86.4 in July to 87.0 in August. However, on a three
month average basis, which is shown in the second chart, the July
increase in Italy's foreign orders has been followed by relative
stability in August. In France, the upward trend started in May and has
continued through August.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Year to Date Avg</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Aug 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y&amp;&nbsp;</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"> Total New Orders</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>87.1</td>
<td>81.2</td>
<td>88.8</td>
<td>115.7</td>
<td>-8.56</td>
<td>-29.82</td>
<td>115.8</td>
<td>121.4</td>
<td>114.1</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>84.6</td>
<td>89.6</td>
<td>87.0</td>
<td>103.9</td>
<td>2.99</td>
<td>-13.76</td>
<td>104.0</td>
<td>111.4</td>
<td>103.6</td>
</tr>
<tr>
<td class="firstcol" colspan="10">Foreign
New Orders</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>71.4</td>
<td>84.4</td>
<td>96.8</td>
<td>120.1</td>
<td>-12.81</td>
<td>-29.73</td>
<td>121.8</td>
<td>131.3</td>
<td>117.8</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>64.0</td>
<td>87.0</td>
<td>86.4</td>
<td>101.7</td>
<td>-.69</td>
<td>-14.45</td>
<td>104.6</td>
<td>115.8</td>
<td>106.6</td>
</tr>
</tbody>
</table>
 U.S. PPI Declines With Lower
Energy, Food And Core Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 20, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020e.jpg" align="right" border="0" height="265" width="353">Pricing
power virtually evaporated last month with across-the-board declines in
goods prices. The PPI for finished goods fell 0.6%. It was the second
decline in the last three months and left prices down 4.7% from the
year-ago level. The decline compared to the Consensus expectation for
no change. Moreover, it was broad-based and included lower food
&amp; energy prices as well as the third decline in core prices in
the last five months. The 0.1% decline in the PPI less food &amp;
energy contrasted with expectations for a 0.1% increase and it pulled
the y/y change to 1.8%, the weakest since May 2007.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020d.jpg" align="right" border="0" height="265" width="353">Lower
finished energy prices led the decline in last month's PPI with a 2.4%
drop (-22.2% y/y). Though the decline has been partially reversed here
in October, last month it reflected a 5.4% fall in gasoline prices
(-37.5% y/y). Natural gas prices also fell by 1.9% (-24.5% y/y) and
fuel oil prices fell 24.1% (-40.5% y/y).
The PPI for finished consumer
goods less food &amp; energy slipped 0.1% but gained 2.2% y/y. That
was the weakest annual increase since June 2007. Finished durables
prices slipped 0.2% (+2.0% y/y) and prices of core finished consumer
nondurable goods slipped for the fourth month in the last six. The 2.3%
y/y increase was down from 5.9% as of last November. Capital equipment
prices also reflected economic weakness and slipped 0.1%. That pulled
the y/y increase down to 1.4% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020f.jpg" align="right" border="0" height="265" width="353">Prices for
intermediate goods inched 0.2%
higher, paced by a firm 0.9%
increase in core prices. They were led by a 1.3% (-11.3% y/y) increase
in prices for materials for manufacturing. Intermediate food prices
fell 0.5% (-12.9% y/y) and energy prices also slipped 2.1% (-24.2%
y/y).
 The crude materials PPI fell 2.1%
and was led lower by a 5.4% decline (-42.6% y/y) in&nbsp; crude
energy prices. In contrast, core prices showed strength and increased
for the sixth straight month.
The producer price data is available in
Haver's USECON database. More detailed data is in
the PPI and in the PPIR
databases.&nbsp;
<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/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.6</td>
<td>1.7</td>
<td>-4.7</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.1</td>
<td>0.2</td>
<td>1.8</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.2</td>
<td>1.8</td>
<td>-11.6</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.9</td>
<td>0.6</td>
<td>-7.5</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.1</td>
<td>3.8</td>
<td>-31.5</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.6</td>
<td>6.0</td>
<td>&nbsp;-19.6</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>
 Weekly Gasoline Prices Increase
With Stronger Crude Oil Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 20, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020g.jpg" align="left" border="0" height="265" width="353">
The pump price for regular gasoline increased
last week to $2.57 per gallon and the gain reversed most of the decline
since early last month. Moreover, prices remain up from the December
low of $1.61. In addition, prices recently moved even higher and the
wholesale gasoline price broached the $2.00 level for the first time
since early-August. This level is nearly the highest in one year. The
figures are reported by the U.S. Department of Energy and can be found
in Haver's WEEKLY &amp; DAILY databases.
The crude oil market certainly has firmed
and light sweet crude prices (WTI) rose to $75.74 per barrel last week,
up from the December low of $32.37. Yesterday, the spot market price
for light sweet crude oil rose even further to $79.61 per barrel.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020h.jpg" align="right" border="0" height="265" width="353">
Behind the increase in energy prices is an increase in the
demand for gasoline. Last week, it posted a 4.0% rise versus one year
ago. The gain was the strongest since the fall of 2006. Demand for
residual fuel oil also increased 12.6% y/y while distillate demand
halved its recent decline to 11.3% y/y. Finally, oil remains plentiful
as evidenced by a 13.0% y/y rise in inventories of crude oil &amp;
petroleum products. The gain in inventories of gasoline has eased
sharply, however, to 7.9% versus last year. The figures on crude oil
production and inventories are available in Haver's OILWKLY database.
Natural gas prices increased again last week, ahead of the
winter heating season, to an average of $3.63 per mmbtu (-45.8% y/y)
but they remained down by three-quarters from the high reached in
early-July of last year of $13.19/mmbtu. Yesterday prices increased
further to $4.00/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">10/19/09</th>
<th scope="col">10/12/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.57</td>
<td>2.49</td>
<td>-11.7%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>75.74</td>
<td>70.86</td>
<td>0.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>

</body></html>

U.S. Housing Starts Inch HigherDuring September But Are Flat Over Last Four Months

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019i.jpg" align="left" border="0" height="265" width="353">
Housing continues to turn the corner toward recovery, but of
late that recovery stuttered. The National Association of Home Builders
reported that its October Composite Housing Market Index fell to 18
from 19 in September. Though the index remained double the low of 8
this past January, it's rate of improvement has slowed since the
Spring. The index is compiled from survey questions asking builders to
rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to
&#8220;very low&#8221;. The figure is a diffusion index,
therefore, numerical results over 50 indicate a predominance of &#8220;good&#8221;
readings.
The sub-index of sales during the next six months fell to 27
which was the lowest level since August. The present sales index also
fell to 17 which equaled the 3Q average. Much of easing in the October
composite index was due to a sharp decline in the West (+27.3% y/y). In
the Midwest (+30.5% y/y) and in the South (+12.5% y/y) the index fell
slightly while in the Northeast (+56.3% y/y) there was a continued gain.
The Home Builders' Association also reported that traffic of
prospective buyers slipped during October after firm gains this past
Spring and Summer.
The Home Builders' Housing Opportunity Index, which is the
share of homes sold that could be considered affordable to a family
earning the median income, fell slightly in the second quarter. It had
jumped earlier to a record high of 72.5% buoyed by lower home prices,
lower interest rates and higher income. (There is a break in the series
from 2002 to 2003.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019j.jpg" align="right" border="0" height="265" width="353">
The NAHB has compiled the Housing Market Index
since 1985. The weights assigned to the
individual index components are .5920 for single family detached sales,
present time; .1358 for single family detached sales, next six months;
and .2722 for traffic of prospective buyers. The results, along with
other housing and remodeling indexes from NAHB Economics, are included
in Haver&#8217;s SURVEYS database.
Asia and the Global Financial Crisis is
today's speech by Fed Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20091019a.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/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">&nbsp;October '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>18</td>
<td>19</td>
<td>14</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>17</td>
<td>18</td>
<td>14</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>27</td>
<td>29</td>
<td>19</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>14</td>
<td>17</td>
<td>11</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</tbody>
</table>
</body></html>

Housing continues to turn the corner toward recovery, but of late that recovery stuttered. The National Association of Home Builders reported that its October Composite Housing Market Index fell to 18 from 19 in September. Though the [...]

U.S. Home Builders' Index Recovery Stuttering This Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019h.jpg" align="right" border="0" height="265" width="353">
While
purchasing power parity (PPP) is not a major factor in determining a
country's actual exchange rate, it can be used as a rough guide in
deciding whether a particular currency is under or over
valued.&nbsp;&nbsp; Most developing countries with growing
current account balances, have preferred to pile up foreign exchange
reserves rather than let their currencies appreciate.&nbsp;
Meanwhile, the purchasing power parity of their currencies has
generally increased slowly and steadily as their economies have
prospered. As a result their currencies have continued to be
undervalued.
 Data on the purchasing power parity of currencies can be
derived from data in the Haver data base, The World
Development Indicators.&nbsp;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019f.jpg" align="right" border="0" height="265" width="353">
The data are annual so the
latest data point is 2008.&nbsp; PPP conversion factors for the
world countries are included in the section "Exchange Rates and
Prices".&nbsp; We&nbsp; chose four countries as examples:
China, Korea, Singapore and Brazil and the PPP Conversion
Factor (GDP) to market exchange rate ratio.
The conversion
factor is the ratio of PPP exchange rate to the actual exchange rate.
One minus the conversion factor, therefore is the percentage of under
or over valuation of the particular exchange rate relative to the
dollar.&nbsp; Thus for Korea,&nbsp; the conversion factor of
.684 in 2008 means that the Korea's actual exchange rate was 31.6%
undervalued relative to the dollar.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019g.jpg" align="right" border="0" height="265" width="353">
Since the actual exchange
rate is 1102.09 Won/$, a conversion factor of .684 means that the PPP
exchange rate is 753.98 Won/$ (.684 * 1102.09).&nbsp; The actual
exchange rates, the PPP exchange rates and the percent of
undervaluation of the currencies of the four countries are shown in the
table below.· Brazil has allowed its currency to appreciate
considerably.&nbsp; From an undervaluation of 61.9 in 2002, the
Rial was only 18.4% undervalued in 2008, as shown in the first
chart.&nbsp; By contrast, China has permitted only moderate
appreciation of the yuan as shown in the same chart. The Singapore
dollar has steadily reduced its undervaluation as can be seen in the
second chart.&nbsp; Korea, on the other hand experienced a sharp
increase in its undervaluation in 2008, also shown in the second
chart.
 The third chart brings up to date the actual exchange
rates of the four countries.&nbsp; They have, to varying degrees,
appreciated in 2009.&nbsp; Again, the Chinese Yuan has appreciated
the least and the Brazilian Real, the most. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">2002 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Actual exchange rate
(Yuan/$)</td>
<td>6.95</td>
<td>7.61</td>
<td>7.97</td>
<td>8.19</td>
<td>8.28</td>
<td>8.28</td>
<td>8.28</td>
</tr>
<tr>
<td class="firstcol">PPP exchange rate</td>
<td>3.39</td>
<td>3.38</td>
<td>3.46</td>
<td>3.45</td>
<td>3.43</td>
<td>3.29</td>
<td>3.28</td>
</tr>
<tr>
<td class="firstcol">Undervaluation (%)
(1-Conversion factor)</td>
<td>51.1</td>
<td>55.5</td>
<td>56.6</td>
<td>57.9</td>
<td>58.6</td>
<td>60.1</td>
<td>60.3</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Korea</td>
</tr>
<tr>
<td class="firstcol">Actual exchange rate (Won/$)</td>
<td>1102.1</td>
<td>929.3</td>
<td>954.8</td>
<td>1024.1</td>
<td>1145.3</td>
<td>1191.1</td>
<td>1251.1</td>
</tr>
<tr>
<td class="firstcol">PPP exchange rate</td>
<td>754.0</td>
<td>747.9</td>
<td>760.7</td>
<td>788.9</td>
<td>794.3</td>
<td>795.7</td>
<td>769.8</td>
</tr>
<tr>
<td class="firstcol">Undervaluation (%)
(1-Conversion factor)</td>
<td>31.5</td>
<td>19.3</td>
<td>20.3</td>
<td>23.0</td>
<td>30.7</td>
<td>32.2</td>
<td>38.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Singapore</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Actual exchange rate
(S$/US$)</td>
<td>1.41</td>
<td>1.51</td>
<td>1.59</td>
<td>1.66</td>
<td>1.69</td>
<td>1.74</td>
<td>1.79</td>
</tr>
<tr>
<td class="firstcol">PPP exchange rate</td>
<td>1.08</td>
<td>1.09</td>
<td>1.06</td>
<td>1.08</td>
<td>1.10</td>
<td>1.09</td>
<td>1.12</td>
</tr>
<tr>
<td class="firstcol">Undervaluation (%)
(1-Conversion factor)</td>
<td>&nbsp;23.7</td>
<td>27.7</td>
<td>33.3</td>
<td>35.7</td>
<td>34.9</td>
<td>37.6</td>
<td>37.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Brazil</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Actual exchange rate
(Rial/$)</td>
<td>1.83</td>
<td>1.94</td>
<td>2.18</td>
<td>2.43</td>
<td>2.93</td>
<td>3.08</td>
<td>2.93</td>
</tr>
<tr>
<td class="firstcol">PPP exchange rate</td>
<td>1.50</td>
<td>1.41</td>
<td>1.40</td>
<td>1.36</td>
<td>1.31</td>
<td>1.22</td>
<td>1.11</td>
</tr>
<tr>
<td class="firstcol">Undervaluation (%)
(1Conversion
factor)</td>
<td>&nbsp;18.4</td>
<td>27.6</td>
<td>35.8</td>
<td>44.2</td>
<td>55.3</td>
<td>57.6</td>
<td>61.9</td>
</tr>
</tbody>
</table>






</body></html>

While purchasing power parity (PPP) is not a major factor in determining a country's actual exchange rate, it can be used as a rough guide in deciding whether a particular currency is under or over valued. Most developing countries [...]

Actual Exchange Rates in the Developing World and Purchasing Power Parity

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019e.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s Tertiary index (service sector index) rose in August
for the third month in a row. The chart above puts these increases in
perspective. While a nice, stable uptrend is emerging, the pace of the
rise is relatively moderate; yet the level of the index is well short
of the past cycle peak. 
 

The mining/MFG index fell extremely sharply in the depth of
the recession and while it has had a very sharp bounce back, it is too
soon to tell if the bounce-back will be complete. At a level of 83.9
the mining/MFG index is up sharply from its low of 69.5 but is still
&#8216;light-years&#8217; away from the past peak at 110.1. 
 

The rebound in the various sector indices is a good sign for
Japan&#8217;s beleaguered economy. Even so these bounces have a long way to
go to restore Japan to its precession levels of activity. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">Up to date Japan Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes; Range</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Aug-2009</td>
<td>Jul-2009</td>
<td>Jun-2009</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining and MFG</td>
<td>83.9</td>
<td>82.6</td>
<td>80.9</td>
<td>82.5</td>
<td>78.7</td>
<td>83.4</td>
<td>110.1</td>
<td>69.5</td>
<td>35.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Tertiary</td>
<td>97.1</td>
<td>96.8</td>
<td>96.1</td>
<td>96.7</td>
<td>96.1</td>
<td>97.8</td>
<td>103.5</td>
<td>89.1</td>
<td>55.6%</td>
</tr>
<tr>
<td colspan="10">Ranges, Max, Min since 1993</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s Tertiary index (service sector index) rose in August for the third month in a row. The chart above puts these increases in perspective. While a nice, stable uptrend is emerging, the pace of the rise is relatively moderate; yet [...]

So Far, So Good: Japan Service Sector Advance Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019a.jpg" align="right" border="0" height="265" width="353">The U.S. government ran a budget deficit of $1.417 trillion
during Fiscal Year 2009. The figure was by far a record and more than
tripled the 2008 deficit of $454.8 billion. While somewhat below the
Congressional Budget Office's recent estimate for a deficit of $1.7
trillion, it nevertheless reached roughly 10% of GDP, the largest since
1945.
The recession in the U.S. economy drove the deficit higher
last year as revenues lagged sharply and spending increased. Net
revenues during FY09 were down 16.6% from FY08. Individual income tax
receipts fell 20.1% reflecting higher unemployment while corporate tax
receipts fell by more than one-half as profits dried up. Social
security contributions fell for the first time since 1995 and estate
&amp; gift taxes fell 18.6% after 10.8% growth last fiscal year.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019b.jpg" align="right" border="0" height="265" width="353">
The wars in Iraq &amp; Afghanistan and the U.S. recession
boosted overall Federal spending by 18.2% versus FY08, double last
year's growth. Defense spending (19% of total outlays) rose 7.1% during
FY09. Though outlays for military personnel rose just 6.1% last year
after 8.9% growth during FY08, Army procurement jumped 15.8% after
36.9% growth during '08. On the home front, growth in Medicare
expenditures (12% of outlays) doubled and "income security" spending
(11% of outlays) jumped by one-quarter with higher unemployment. Social
security payments rose an elevated 10.7% but net interest payments
continued to fall sharply with lower interest rates.
Net outlays under the Government's Troubled Asset Relief
Program (TARP) started to fall by the end of FY09 but, for the fiscal
year as a whole, they amounted to $333.3B. The U.S. Treasury has
adopted the view that these TARP expenditures should be counted like
any other spending. When the banks repay the Treasury, these funds will
be counted as revenue. Accounted for in this way, TARP causes a surge
in the budget deficit when the funds are distributed to the banks, but
leads to a smaller deficit, or perhaps a surplus, when repayments are
received.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091019c.jpg" align="right" border="0" height="265" width="353">
The Government's financial data are available in Haver's USECON
database, with extensive detail available in the specialized GOVFIN.
The Office of Management &amp; Budget's 2010
Budget can be found <a href="http://www.whitehouse.gov/omb/"> here.</a>
The Budget &amp; Economic Outlook: An Update from
the Congressional Budget Office can be found <a href="http://www.cbo.gov/ftpdocs/105xx/doc10521/08-25-BudgetUpdate.pdf">
here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US
Government Finance</a> &nbsp;</th>
<th scope="col">FY 2009</th>
<th scope="col">FY 2008</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>-$1,417.1B</td>
<td>-$454.8B</td>
<td>-$161.5B</td>
<td>-$248.197B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; as a
percent of GDP</td>
<td>-10.0%</td>
<td>-3.2%</td>
<td>-1.2%</td>
<td>-1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Net
Revenues (Y/Y % Change)</td>
<td>-16.6%</td>
<td>-1.7%</td>
<td>6.7%</td>
<td>11.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Individual Income Taxes</td>
<td>-20.1</td>
<td>-1.5</td>
<td>11.5</td>
<td>12.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Corporate Income Taxes</td>
<td>-54.6</td>
<td>-17.8</td>
<td>4.6</td>
<td>27.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Social Insurance Taxes</td>
<td>-1.0</td>
<td>3.5</td>
<td>3.8</td>
<td>5.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Net
Outlays (Y/Y % Change)</td>
<td>18.2</td>
<td>9.1</td>
<td>2.8</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Nat'l Defense</td>
<td>7.6</td>
<td>11.8</td>
<td>4.1</td>
<td>6.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Health</td>
<td>19.1</td>
<td>5.4</td>
<td>5.5</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Medicare</td>
<td>10.1</td>
<td>4.1</td>
<td>13.8</td>
<td>10.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Income Security</td>
<td>24.9</td>
<td>16.8</td>
<td>3.5</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Social Security</td>
<td>10.7</td>
<td>5.3</td>
<td>6.9</td>
<td>4.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Interest</td>
<td>-24.5</td>
<td>6.3</td>
<td>5.0</td>
<td>23.2</td>
</tr>
</tbody>
</table>
</body></html>

The U.S. government ran a budget deficit of $1.417 trillion during Fiscal Year 2009. The figure was by far a record and more than tripled the 2008 deficit of $454.8 billion. While somewhat below the Congressional Budget Office's [...]

U.S. FY '09 Federal Budget Deficit Tops $1.4 Trillion

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Winnie Tapasanun

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

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

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

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

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

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

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

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

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260116U23.jpg

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

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

260116E.jpg

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

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

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

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

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

260115Z5.jpg

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

260115Z6.jpg

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

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2mhM227WWeJJ6kRv7sJMiE?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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260115K.jpg

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

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

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

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

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

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

260115L.jpg

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

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

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

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

Import & Export Prices: Generally Modest Changes

260115J39.jpg

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

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

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

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

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

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

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

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

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

Economy in Brief: 2009

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