Kathleen Stephansen, CBE

Mortgage applications decreased 13.2% from two weeks earlier in the week ended December 30. These data come from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey, with data for the weeks ending December 23 and 30 released simultaneously. Applications declined by 3.3% (-66.1% y/y) in the week ended December 23 and by 10.3% (-67.8% y/y) in the week ended December 30. Applications for loans to purchase a house declined 0.2% (-41.0% y/y) in the week ended December 23 and by 12.0% (-42.2% y/y) in the week ended December 30. Applications for refinancing a loan decreased by 12.4% (-86.5% y/y) in the December 23 week and by 4.4% (-86.8% y/y) in the December 30 week.

The share of applications for refinancing an existing loan was 28.8% in the week of December 23 and increased to 30.3% in the week of December 30. The percentage of applications that were ARMs was 7.9% in the December 23 week and 7.3% the following week.

The effective rate on a 30-year fixed-rate loan continued to rise over the latest two-week period, by 10bps to 6.61% in the week ended December 23 and to 6.79% in the week ended December 30. Similarly, the rate on 15-year fixed-rate mortgages rose 18bps to 6.12% in the week of December 23 and to 6.23% in the December 30 week, its highest since October 2008. The rate on 30-year Jumbo loan rose 10bps to 6.22% in the December 23 week and to 6.26% the following week. The rate on the 5-year ARM edged up 2bps to 5.80% in the week of December 23 and to 5.83% in the week of December 30.

The average loan size rose 1.1% w/w to $362,400 in the week ended December 23 but decreased 4.1% w/w to $347,600 in the week ended December 30. The series high of $401,900 was reached in the week ended May 6. The average size of a purchase loan decreased 0.1% w/w to $397,600 in the week ended December 23 and by 2.5% w/w to $387,600 in the week ended December 30. The average loan size to refinance a mortgage rose 1.6% w/w to $275,400 in the December 23 week but declined 7.3% to $255,400 in the week ended December 30.

The Mortgage Bankers Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's **SURVEYS** database.

- Total mortgage applications dropped 13.2% in the week of December 30 from 2 weeks earlier.

- Applications for loans to purchase and to refinance dropped in the last two weeks of 2022.

- The average effective rates on fixed-rate loans remain at multi-year highs.

U.S. Mortgage Applications Dropped in the Latest Two-Week Period

Tom Moeller

Job openings slipped 0.5% (-4.2% y/y) to 10.458 million during November 2022 from 10.512 million in October, according to the Bureau of Labor Statistics' Job Openings and Labor Turnover report. The decline followed a 1.6% October drop and left openings 11.8% below the March 2022 high of 11.855 million. The job openings rate (job openings as a percentage of the sum of establishment employment plus openings) held m/m at 6.4% in November. The series high was 7.3% eight months earlier.

New hires weakened 0.9% (-9.7% y/y) to 6.055 million from 6.111 million in October. It left the level of new hires 11.4% below the February high of 6.832 million. The hiring rate eased to 3.9% from 4.0%. The hiring rate reached a peak of 4.5% in February 2022.

The total number of job separations increased 2.0% (-5.3% y/y) to 5.870 million from 5.756 million in October. Layoffs and discharges, involuntary separations, declined 6.6% in November (+4.2% y/y) to 1.350 from 1.445 million in October. They have been trending sideways since April 2021. The number of jobs quit rose 3.1% (-7.5% y/y) to 4.173 million. Fewer quits versus 2021 indicate that jobs became less readily available. The quit rate edged higher to 2.7% but remained below the December 2021 high of 3.0%.

Private-sector job openings eased 0.3% (-4.4% y/y) to 9.501 million following a 1.0% October decline. The private-sector job openings rate held m/m at 6.8% but remained down from the 7.7% high in March of last year. Leisure & hospitality job openings fell 8.8% y/y while factory sector openings weakened 3.3% y/y. Education & health services openings declined 1.6% y/y. Offsetting these declines was a 6.4% y/y rise in openings in the professional & business services sector.

Total hires in the private sector fell 1.3% (-10.5% y/y) to 5.645 million in October while total private-sector separations rose 2.2% (-5.3% y/y) to 5.503 million.

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

• The number of job openings are well below March 2022 high.

• New hires continue to decline.

• Layoffs & discharges remain low.

JOLTS: Job Openings & Hiring Weaken in November

Retail gasoline prices increased last week to $3.22 per gallon (-1.8% y/y) after falling to $3.09 per gallon during the previous week. Prices had been declining since the mid-June peak of $5.01 per gallon. The retail cost of diesel fuel rose to $4.58 per gallon (26.8% y/y) last week from $4.54 in the prior week. The price reached a peak of $5.81per gallon in the third week of June.

West Texas Intermediate crude oil prices rose to an average $79.33 per barrel (4.3% y/y) in the week ended December 30 from $77.26 per barrel in the prior week. It was the highest price in four weeks, though prices remained down from a high of $120.46 in the second week of June. Yesterday, the price was $76.93 per barrel. The average price of Brent crude oil rose to $81.98 per barrel last week (4.9% y/y) from $80.68 in the prior week. The price peaked at $127.40 in mid-June. Yesterday, the price was $80.36 per barrel.

The price of natural gas declined to $4.06/mmbtu (+14.0% y/y) in the week ended December 30 after easing to $6.35/mmbtu in the previous week, when prices were near a three-month high. Prices peaked at $9.56/mmbtu in the last week of August and were up from a low of $3.56/mmbtu in the last week of December, 2021. Yesterday, the price was $3.64/mmbtu.

In the four weeks ended December 23, gasoline demand declined 6.7% from a year earlier after falling 7.1% y/y during the prior four weeks. These declines compare to 15.2% y/y growth at the end of last year. Demand for all petroleum products weakened 2.8 y/y in the latest four weeks in contrast to the 14.4% growth at the end of 2021. Crude oil input to refineries increased 3.0% y/y.

Gasoline inventories edged 0.2% higher y/y in the week ended December 23, while crude oil inventories declined 21.8% y/y.

Measured in days' supply, gasoline inventories in the week ended December 23 slipped w/w to 25.7 days and remained lower than the 29.2 days in early-February. The supply of crude oil fell to 25.8 days and remained down from 41.8 days in early-March of last year.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price data can be found in Haver’s **WEEKLY** and **DAILY** databases. Greater detail on prices, as well as the demand, production and inventory data are in **USENERGY**.

- Gasoline prices rebound.

- Crude oil prices continue to rise.

- Natural gas prices fall sharply.

U.S. Gasoline and Crude Oil Prices Increase

The value of construction put-in-place improved 0.2% during November following a 0.2% October weakening. The 8.5% y/y gain compared to a February high of 11.7% y/y. A 0.5% November decline had been expected in the Action Economics Forecast Survey.

Private nonresidential building led the overall November gain in activity with a 1.7% increase (12.6% y/y) after a 0.6% October decline. Factory construction rose 6.5% (43.2% y/y) while power construction increased 1.2% (-11.0% y/y). Health care construction improved 0.1% (6.9% y/y). A 2.0% decline (+10.6% y/y) in amusement & recreation building offset these gains while office building eased 0.1% (+2.3% y/y).

Private residential construction declined 0.5% in November (+5.3% y/y), the sixth straight month of decline. Single-family construction fell 2.9% (-10.2% y/y) for the second straight month. Multi-family building rose 2.4% (10.7% y/y), also for the second consecutive month. Spending on improvements increased 1.3% (27.6% y/y).

The value of public building eased 0.1% in November (+10.4% y/y) after two straight 1.6% increases. Office building rose 3.0% (5.9% y/y) but commercial construction fell 1.4% (+17.8% y/y). Highways & streets building fell 1.0% (+14.5% y/y) but education building edged 0.1% higher (1.5% y/y). Water supply construction declined 2.0% (+31.6% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

- Small increase reverses October decline.

- Nonresidential building leads improvement.

- Single-family construction weakens further.

U.S. Construction Spending Edges Higher in November

Carol Stone, CBE

The ISM-Chicago Purchasing Managers Business Barometer recovered moderately in December after its fall in November. The overall PMI index was 44.9, up from 37.2 which had marked a drop from October’s 45.2. Haver Analytics has constructed an ISM-adjusted index with methodology similar to the national ISM Composite Index; for December, that measure was 45.0, up from 44.7 in November. These overall indexes, which are below the break-even 50 level, still indicate that activity is decreasing, but by less than in November. The December improvement still leaves the survey results weaker than many months through September. However, the December result is better than had been expected in the Action Economics forecast survey, which called for a reading of 40.0.

The recovery in the overall December index reflects advances in several basic components, especially order backlogs, which registered 53.7, up from 36.1 in November and the highest since last June’s 55.2. The backlog increase was accompanied by increases in new orders from 30.7 to 44.1 and in production from 35.9 to 39.2. So clearly production remains relatively weak, but it didn’t slow as much in December has it had in November. Supply delivery times then lengthened to 52.7 from 49.9.

Three of the sub-indexes did slow in December. Inventories were 48.0, down from 59.8. Employment was 40.8, down from 47.1 and prices paid were 64.1 down from 66.2. This last item obviously still reflects substantial inflationary pressure, just somewhat less than in November and, indeed, markedly less than the recent high of 94.1 in October 2021. So there is still certainly inflationary pressure.

The Chicago Business Barometer is considered to be a leading indicator of the U.S. economy. Readings above 50 indicate expansion while those below 50 suggest contraction. Summary data are contained in Haver’s **USECON** database with detail, including the ISM-style index, in the **SURVEYS** database. The expectation figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

- Order backlogs move up above 50, to 53.7.

- Production up modestly to 39.2.

- Employment down to 40.8.

U.S. Chicago Business Barometer Shows Some Recovery, but Still Under 50

Initial claims for unemployment insurance rose to 225,000 (6.6% y/y) during the week ended December 24 from the previous week's unrevised level of 216,000. A level of 220,000 had been expected in the Action Economics Forecast Survey.

The 4-week moving average of initial claims was 221,000, a decrease from the previous week's average of 221,250, revised from 221,750. It remained well below an early-August high of 249,500 but also well above an early-April low of 170,500.

In the week ended December 17, continued weeks claimed for unemployment insurance increased to 1.710 million (-4.6% y/y) from 1.669 million in the prior week, revised down from 1.672 million. The 4-week moving average was 1.680 million, a rise of 25,250 from the previous week's 1.654 million, revised from 1.657 million.

The insured unemployment rate in the week ended December 17 was steady at 1.2%. The insured unemployment rate edged up to 1.2% in late November from 1.0% in early that month. It had been as low as 0.9% between May and July.

In the week ended December 10, the total number of continued weeks claimed in all unemployment insurance programs was 1.620 million (-15.7% y/y) up from 1.528 million the week prior. This total includes federal employees, newly discharged veterans, extended benefits and other specialized programs and is not seasonally adjusted. Claims in the Pandemic Unemployment Assistance program and Pandemic Emergency Unemployment Compensation are no longer included in the main Labor Department press release, as both programs have expired.

The insured rates of unemployment in regular programs vary across states. The highest insured unemployment rates in the week ending December 10 were in Alaska (2.28%), California (2.06%), New Jersey (2.11%), Puerto Rico (1.99%), Minnesota (1.83%), Montana (1.78%), Rhode Island (1.67%), Massachusetts (1.62%), New York (1.61%), and Washington (1.57%). The lowest rates were in Alabama (0.24%), Virginia (0.25%), Kansas (0.30%), and New Hampshire (0.35%). Other state insured rates of unemployment in regular programs include Illinois (1.54%), Pennsylvania (1.39%), Texas (0.93%) and Florida (0.47%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are contained in Haver's **WEEKLY** database, and they are summarized monthly in **USECON**. Data for individual states are in **REGIONW**. The expectations figure is from the Action Economics Forecast Survey, carried in the **AS1REPNA** database.

- Claims rose 9,000 in the week ended December 24.

- Continued weeks claimed were up modestly.

- Insured unemployment rate holds steady.

U.S. Initial Claims for Unemployment Insurance Edged Up in Latest Week

Winnie Tapasanun

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The Pending Home Sales Index fell 4.0% m/m (-37.8% y/y) to 73.9 in November after drops of 4.7% in October (-4.6% initially) and 8.7% in September, according to the National Association of Realtors (NAR). The November reading was the sixth consecutive m/m fall to the lowest index level since April 2020’s 71.6. Pending home sales have fallen 42.3% since their August 2020 high of 128.0.

Pending home sales decreased in all the major regions in the country in November. Sales in the Northeast worsened 7.9% (-34.9% y/y), the sixth straight m/m drop, on top of a 4.3% October decline. Sales in the Midwest fell 6.6% (-31.6% y/y), the sixth m/m fall in seven months, following a 3.1% October rebound. Sales in the South slid 2.3% (-38.5% y/y), the sixth successive m/m slide, after a 6.4% October drop. Sales in the West were down 0.9% (-45.7% y/y), the third consecutive m/m decline, after a 11.3% October decrease.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **SURVEYW** database.

- -4.0% m/m (-37.8% y/y) in Nov. vs. -4.7% m/m (-37.1% y/y) in Oct.
- November PHSI at 73.9, lowest since April 2020.
- Widespread m/m drops in all the major regions, w/ double-digit y/y falling rates.
- With mortgage rates declining, home-buying activity will likely rebound and help GDP growth in the near term.

U.S. Pending Home Sales Fall for the Sixth Straight Month in November

Sandy Batten

U.S. house prices were unchanged in October following an unrevised 0.1% m/m increase in September. Prices appear to have stabilized after falling in both July and August. Compared to a year ago, prices were up 9.8%, well off their peak of 19.3% reached in February. The aggressive rate hikes by the Federal Reserve have been reflected in markedly higher mortgage interest rates, which have taken their toll on the housing market.

For the nine census divisions, seasonally adjusted monthly house price changes from September to October ranged from -0.9% m/m in the Pacific division, the fifth monthly decline in the past six months, to +1.4% in the New England division following a 1.0% monthly drop in September. The 12-month changes were all positive, ranging from +4.5% in the Pacific division to +14.1% in the South Atlantic division. Annual rates of increase in every region are well off their highs that were generally reached early this year. However, for most regions, the annual gains are still considerably faster than they were in the seven years preceding the short 2020 recession induced by the COVID-related lockdown of the economy.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancings on the same kinds of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The **FHFA** data are available in Haver’s **USECON** database.

• FHFA HPI was unchanged in October following an unrevised slight +0.1% m/m increase in September after monthly declines in the preceding two months.

• House prices fell in five of the nine census divisions and rose in the other four.

• Largest decline in the Pacific region; largest increase in New England.

U.S. FHFA House Prices Unchanged in October

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

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

260205Z6.jpg

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

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

Robert Brusca

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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.

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

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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

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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.