Carol Stone, CBE

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091001e.jpg" align="right" border="0">Housing
demand continues to improve. The National Association of Realtors (NAR)
reported that during August, pending home sales increased 6.4%, notably
stronger than June's 3.6% and July's 3.2% gains.&nbsp; NAR's index
stood at 103.8, the highest since March 2007; the index base is
2001=100.
 In this report, all four regions of the
country participated in the firming sales pattern.&nbsp; The West
led again, with a whopping 16.0% jump.&nbsp; This is a&nbsp;
monthly rate; you can annualize it, if you like, and see a really
eye-popping figure.&nbsp; The sales index there was 130.5; its
all-time high in the West is 133.0 in February 2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091001f.jpg" align="right" border="0" height="265" width="353">
This
upturn in sales has been helped by weak house prices, but as noted
elsewhere on these pages recently, these prices have started to firm;
while there are no price data with this report, NAR's tally of sales
closed in August showed an outright increase in prices in the West of
1.3%; since an apparent trough in April, these prices have risen a
total of 8.6%.&nbsp; 
Elsewhere, sales advanced 8.2% in the
Northeast, and at 85.3, this index is up 47.6% since the low there in
January.&nbsp; In the Midwest, sales gained 3.1% in August, and
they are 25.1% above their low, also in January.&nbsp; Sales in the
South just barely edged higher, 0.8%, but they have risen more in prior
months, so that they are now 27.3% above their January trough.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091001g.jpg" align="right" border="0">These
home sales figures are analogous to the new home sales data from the
Commerce Department in that they measure existing home sales when the
sales contract is signed, not at the time the sale is closed. The
series dates back to 2001.
The pending home sales data are
available in Haver's PREALTOR database. The number
of homes on the market and prices are in the REALTOR database.&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>103.8</td>
<td>97.6</td>
<td>94.6</td>
<td>&nbsp;&nbsp; 12.3%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>85.3</td>
<td>78.8</td>
<td>81.2</td>
<td>11.9</td>
<td>73.1</td>
<td>85.9</td>
<td>98.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>90.8</td>
<td>88.1</td>
<td>89.9</td>
<td>7.6</td>
<td>80.6</td>
<td>89.5</td>
<td>101.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>104.6</td>
<td>103.8</td>
<td>100.7</td>
<td>8.3</td>
<td>89.6</td>
<td>107.3</td>
<td>127.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>130.5</td>
<td>112.5</td>
<td>100.4</td>
<td>22.3</td>
<td>99.5</td>
<td>92.3</td>
<td>109.6</td>
</tr>
</tbody>
</table>

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Housing demand continues to improve. The National Association of Realtors (NAR) reported that during August, pending home sales increased 6.4%, notably stronger than June's 3.6% and July's 3.2% gains. NAR's index stood at 103.8, the [...]

U.S. Pending Home Sales Climb Another 6.4% in August

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091001d.jpg" align="left" border="0" height="265" width="353">
Yes, Japan&#8217;s Tankan survey has legs and the rise in the
various large company Tankan indices is ongoing. There is somewhat less
vigor in the rise of the future improvement expected but it is still
advancing at a solid pace and the current situation has improved more
rapidly. The fly in the ointment this quarter is that despite &#8216;improved
confidence&#8217; the plans for capital expenditure have been cut back. In
the end that casts some doubt about the rise in confidence itself.
Firms with profits still under pressure are acting to conserve cash
instead of aggressively re-deploying themselves for growth ahead. That
kind of behavior could help to torpedo recovery even as survey
respondents say that things are getting better. 
 
The table above shows that manufacturing, wholesaling and personal
services are best sectors in terms of the percentile standing of their
respective indices. Even so these sectors are in the bottom 30th
percentile of their respective ranges or lower. Non MFG as a whole is
in the bottom 13 percentile of its range. Manufacturing&#8217;s outlook, at a
raw reading of -21, is in the 41st percentile of its range. That is
somewhat better, than the current assessment but still far from good. 
 
Medium sized firms assess their MFG index as in the 23rd percentile of
its ranges for small enterprises it is much worse as they stand in the
bottom 7th percentile of their range. The nonMFG percentiles for the
medium and small enterprises are comparable to the Tankan Large Company
readings for Non MFG &#8211; very weak. 
 
Yes Japan has made progress. But the current state of business is still
poor even though it has improved. While the expected improvement is at
a slightly better level than the assessment of current conditions,
firms continue to react to the recession instead of planning ahead for
recovery. As a result, one of the great forces of recovery has yet to
be unleashed- optimism. Japan&#8217;s recovery remains cautiously guarded and
in the end that will be a drag on its momentum. Until firms see the
need to invest for the future and as long as they cut and hack at
existing spending plans the look will remain touch and go. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Tankan
Results Large Enterprises</th>
</tr>
</thead>
<tbody>
<tr class="grey9">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Readings</td>
<td colspan="2">Averages</td>
<td>PERCENTILES</td>
</tr>
<tr class="grey8">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey7">
<td class="firstcol">MFG</td>
<td>-33.0</td>
<td>-48.0</td>
<td>-58.0</td>
<td>-24.0</td>
<td>-40.5</td>
<td>5.3</td>
<td>29.8%</td>
</tr>
<tr class="grey7">
<td class="firstcol">NonMFG</td>
<td>-24.0</td>
<td>-29.0</td>
<td>-31.0</td>
<td>-9.0</td>
<td>-26.5</td>
<td>7.8</td>
<td>13.2%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Total Industry</td>
<td>-28.0</td>
<td>-39.0</td>
<td>-45.0</td>
<td>-16.0</td>
<td>-33.5</td>
<td>6.5</td>
<td>25.0%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Construction</td>
<td>-23.0</td>
<td>-29.0</td>
<td>-27.0</td>
<td>-10.0</td>
<td>-26.0</td>
<td>-5.9</td>
<td>18.2%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Real Estate</td>
<td>-11.0</td>
<td>-24.0</td>
<td>-21.0</td>
<td>-7.0</td>
<td>-17.5</td>
<td>24.3</td>
<td>16.9%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Wholesale</td>
<td>-29.0</td>
<td>-41.0</td>
<td>-44.0</td>
<td>-7.0</td>
<td>-35.0</td>
<td>8.2</td>
<td>22.1%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Retail</td>
<td>-32.0</td>
<td>-39.0</td>
<td>-42.0</td>
<td>-18.0</td>
<td>-35.5</td>
<td>-0.9</td>
<td>17.2%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Transportation</td>
<td>-35.0</td>
<td>-43.0</td>
<td>-46.0</td>
<td>-7.0</td>
<td>-39.0</td>
<td>5.8</td>
<td>15.7%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Services 4 Biz</td>
<td>-22.0</td>
<td>-30.0</td>
<td>-21.0</td>
<td>-1.0</td>
<td>-26.0</td>
<td>15.2</td>
<td>11.9%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Personal Serv</td>
<td>-4.0</td>
<td>-11.0</td>
<td>-9.0</td>
<td>-11.0</td>
<td>-7.5</td>
<td>7.1</td>
<td>23.3%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Restaurants &amp;
Hotels</td>
<td>-50.0</td>
<td>-46.0</td>
<td>-45.0</td>
<td>-32.0</td>
<td>-48.0</td>
<td>-3.3</td>
<td>0.0%</td>
</tr>
<tr class="grey9">
<td colspan="8" class="firstcol">Forecast</td>
</tr>
<tr class="grey8">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey6">
<td class="firstcol">MFG-OtLk</td>
<td>-21.0</td>
<td>-30.0</td>
<td>-51.0</td>
<td>-36.0</td>
<td>-34.5</td>
<td>5.8</td>
<td>41.1%</td>
</tr>
<tr class="grey6">
<td class="firstcol">NonMFG -Otlk</td>
<td>-17.0</td>
<td>-21.0</td>
<td>-30.0</td>
<td>-14.0</td>
<td>-20.5</td>
<td>8.4</td>
<td>24.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">All Industry-Otlk</td>
<td>-19.0</td>
<td>-26.0</td>
<td>-41.0</td>
<td>-25.0</td>
<td>-27.8</td>
<td>7.0</td>
<td>34.9%</td>
</tr>
<tr class="grey9">
<td colspan="8" class="firstcol">Tankan
Results Medium
Enterprises</td>
</tr>
<tr class="grey8">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>1-Y Avg</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-40.0</td>
<td>-55.0</td>
<td>-57.0</td>
<td>-44.0</td>
<td>-44.0</td>
<td>-7.8</td>
<td>23.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">NonMFG</td>
<td>-30.0</td>
<td>-36.0</td>
<td>-37.0</td>
<td>-31.0</td>
<td>-31.0</td>
<td>-8.9</td>
<td>15.6%</td>
</tr>
<tr class="grey9">
<td colspan="8" class="firstcol">Forecast</td>
</tr>
<tr class="grey8">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG-OtLk</td>
<td>-35.0</td>
<td>-46.0</td>
<td>-61.0</td>
<td>-45.0</td>
<td>-46.8</td>
<td>-9.1</td>
<td>34.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG -Otlk</td>
<td>-28.0</td>
<td>-32.0</td>
<td>-45.0</td>
<td>-32.0</td>
<td>-34.3</td>
<td>-10.5</td>
<td>32.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Industry-Otlk</td>
<td>-31.0</td>
<td>-39.0</td>
<td>-51.0</td>
<td>-38.0</td>
<td>-39.8</td>
<td>-10.1</td>
<td>32.8%</td>
</tr>
<tr class="grey9">
<td colspan="8" class="firstcol">Tankan
Results Small
Enterprises</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>-52.0</td>
<td>-57.0</td>
<td>-57.0</td>
<td>-54.5</td>
<td>-54.5</td>
<td>-15.0</td>
<td>7.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">NonMFG</td>
<td>-39.0</td>
<td>-44.0</td>
<td>-42.0</td>
<td>-41.5</td>
<td>-41.5</td>
<td>-20.2</td>
<td>13.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>-39.0</td>
<td>-44.0</td>
<td>-42.0</td>
<td>-41.5</td>
<td>-41.5</td>
<td>-20.2</td>
<td>12.2%</td>
</tr>
<tr class="grey9">
<td colspan="8" class="firstcol">Forecast</td>
</tr>
<tr class="grey8">
<td class="firstcol">&nbsp;</td>
<td>Q4-09</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG-OtLk</td>
<td>-44.0</td>
<td>-53.0</td>
<td>-63.0</td>
<td>-48.0</td>
<td>-52.0</td>
<td>-16.2</td>
<td>26.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">NonMFG -Otlk</td>
<td>-40.0</td>
<td>-45.0</td>
<td>-52.0</td>
<td>-42.0</td>
<td>-44.8</td>
<td>-23.9</td>
<td>27.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">All Industry-Otlk</td>
<td>-41.0</td>
<td>-48.0</td>
<td>-56.0</td>
<td>-44.0</td>
<td>-47.3</td>
<td>-21.1</td>
<td>27.8%</td>
</tr>
</tbody>
</table>
</body></html>

Yes, Japan’s Tankan survey has legs and the rise in the various large company Tankan indices is ongoing. There is somewhat less vigor in the rise of the future improvement expected but it is still advancing at a solid pace and the [...]

Japan's Tankan Shows Up-Swing... And Less

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091001a.jpg" align="right" border="0" height="265" width="353">Personal
income in August continued to increase at its modest July
rate. The 0.2% rise&nbsp; followed a 0.2% gain which was revised
from 0.1%. Consensus forecasts were for a 0.1% uptick. These weak
increases wholly reflect the current recession. Year-to-year income
growth fell 2.6% during the last twelve months after a 2.9% increase
last year.The dismal job market accounts for this year's negative
income growth. Wages &amp; salaries rose modestly m/m during July
and August. However, these latest gains were not enough to lift wages
yr-to-yr which fell 5.2% after a 2.1% 2008 increase. Wages in the
factory sector fell 11.6% y/y while service sector wages fell 5.4%. To
a limited extent these declines were offset by a 3.6% increase in
government sector earnings.Unemployment insurance payments
picked up just some of the slack in the job market and rose 4.4% during
August. That lifted payments to $136.9B versus $60.4B during August of
last year. Interest income continued to show the effects of lower rates
and fell 6.9% y/y while dividend income fell by one-quarter as
corporate profits dried up.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091001b.jpg" align="right" border="0" height="265" width="353">
Disposable personal
income increased just 0.1% following a slight decline during
July. Adjusted for inflation, real disposable income slipped for the
third straight month, although only by 0.2% during August and by 0.1%
in July. Real disposable income growth of 1.3% y/y was lifted by tax
cuts earlier this year. The saving rate fell again with the weakness in
income growth. The decline to 3.0% contrasted with a May peak of 5.9%.
Nevertheless, the rate remained up slightly from last year and double
the 2007 level. Personal spending showed the full
effect of the "cash-for-clunkers" program for new motor vehicle
purchases. It lifted durables spending by 5.3% (-1.3% y/y) with a 13.3%
gain (6.6% y/y) for autos. Spending on nondurables rose just 2.3%
(-5.3% y/y) as outlays on apparel continued down by 3.8% versus last
year. Spending on furniture continued quite weak and fell 7.7% versus
last year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091001c.jpg" align="right" border="0" height="265" width="353">
Outlays on services increased 0.4% (1.7% y/y) as spending on
health care continued quite strong and posted a 5.2% gain versus last
year. Spending in restaurants and on recreation remained negative.
Prices increased 0.3% during August reflecting an 8.4% rise (-30.5%
y/y) in gasoline costs and another rise is in store for September.
Nevertheless, the PCE chain price index still was
down by 0.5% versus last year. Less food-and-energy, "core" prices were
again quite tame and posted their fourth consecutive 0.1% increase.
Goods prices rose 0.7% (-3.6% y/y while prices for services increased
just 1.0% y/y.The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases. Yesterday's speech titled Central Bank Exit
Policies by Vice Chairman Donald L. Kohn can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20090930a.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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.2</td>
<td>0.2</td>
<td>-1.1</td>
<td>-2.6</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>0.1</td>
<td>-0.0</td>
<td>-1.1</td>
<td>0.8</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>1.3</td>
<td>0.3</td>
<td>0.7</td>
<td>-0.3</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>3.0</td>
<td>4.0</td>
<td>4.2</td>
<td>1.7 (Aug. '08)</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.3</td>
<td>0.0</td>
<td>0.5</td>
<td>-0.5</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>0.1</td>
<td>0.1</td>
<td>1.3</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
</body></html>

Personal income in August continued to increase at its modest July rate. The 0.2% rise followed a 0.2% gain which was revised from 0.1%. Consensus forecasts were for a 0.1% uptick. These weak increases wholly reflect the current [...]

U.S. Personal Income Grows Modestly; PCE Raised By "Cash-for-Clunkers"

U.S. Personal Income GrowsModestly; PCE Raised By "Cash-for-Clunkers"

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930d.jpg" align="right" border="0" height="265" width="353">
The second
revision of GDP growth last quarter showed that activity fell slightly
less than initially estimated. A 0.7% (AR) 2Q decline compared to 1.0%
declines indicated in the two prior reports. During the course of the
numbers' release, the decline in domestic final demand has been
lessened to 0.9% after a 6.4% collapse to open the year. That easing
has offset an increased negative influence from inventory
decumulation.Inventory decumulation
continued as the major drag on GDP growth last quarter with a 1.4
percentage point reduction that was unrevised. Final demand revisions
were modest. Consumer spending is now estimated to have fallen at a
0.9% annual rate (-1.7% y/y) led by a 5.6% (-8.8% y/y) drop in durables
consumption. Residential investment fell at a little-revised 23.2% rate
-25.6% y/y) and business investment dropped at a 9.6% rate (-19.7% y/y)
which was similar to earlier reports. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930e.jpg" align="right" border="0" height="265" width="353">
Government investment rose at a
little revised 6.7% rate (2.5% y/y) and exports declined at a lessened
4.1% rate. Imports dropped 14.7%; therefore, net-foreign trade
improvement added 1.7 percentage points to 2Q GDP growth.
Corporate profits in Q2 rose 3.7% (-12.6% y/y) pre-tax,
including IVA and CCA, from Q1 which was slightly less of a rise than
reported initially. The latest gain followed a 5.3% 1Q increase but
both just dented a 22.8% 4Q decline. Financial industries saw their
quarterly profits gain 12.0% in Q2 (-1.8% y/y) after having nearly
doubled in Q1 versus 4Q. Nonfinancial company profits improved last
quarter by a marginally unrevised 4.7% (-7.5% y/y).&nbsp;Rest of
world profits fell for the fifth quarter in the last six and by 4.6%
(-17.9% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930f.jpg" align="right" border="0" height="265" width="353">
The GDP price deflator was unrevised
and was unchanged from 1Q. A 1.4% gain (-0.2% y/y) in the PCE price
index followed a 1.5% 1Q decline. Overall, the domestic final sales
price index rose at a negligible 0.5% rate (-0.3% y/y). The U.S.
National Income &amp; Product Account data are available in Haver's
USECON and the USNA
databases.Excerpts from Dallas
Fed Chairman Richard W. Fisher's remarks before the Texas
Christian University Business Network of Dallas can be found <a href="http://dallasfed.org/news/speeches/fisher/2009/fs090929.cfm">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2005$, % AR</a></th>
<th scope="col">2Q '09 (3rd Release)</th>
<th scope="col">2Q '09 (2nd Release)</th>
<th scope="col">2Q '09 (Advance)</th>
<th scope="col">1Q '09</th>
<th scope="col">2Q 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">GDP</td>
<td>-0.7</td>
<td>-1.0</td>
<td>-1.0</td>
<td>-6.4</td>
<td>-3.8</td>
<td>0.4</td>
<td>2.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-1.4</td>
<td>-1.4</td>
<td>-0.8</td>
<td>-2.4</td>
<td>-1.0</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>0.7</td>
<td>0.4</td>
<td>-0.2</td>
<td>-4.1</td>
<td>-2.8</td>
<td>0.8</td>
<td>2.5</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.7</td>
<td>1.6</td>
<td>1.4</td>
<td>2.6</td>
<td>0.9</td>
<td>-1.2</td>
<td>0.8</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-0.9</td>
<td>-1.2</td>
<td>-1.5</td>
<td>-6.4</td>
<td>-3.7</td>
<td>-0.4</td>
<td>1.7</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.0</td>
<td>0.0</td>
<td>0.2</td>
<td>1.9</td>
<td>1.5</td>
<td>2.1</td>
<td>2.9</td>
<td>3.3</td>
</tr>
</tbody>
</table>
</body></html>

The second revision of GDP growth last quarter showed that activity fell slightly less than initially estimated. A 0.7% (AR) 2Q decline compared to 1.0% declines indicated in the two prior reports. During the course of the numbers' [...]

Q2 GDP Fell A Lessened 0.7%; Hesitant Profits Recovery Continues

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930c.jpg" align="left" border="0" height="265" width="353">
U.K. consumer confidence jumped in September by the most since
1995 as optimism about the economy&#8217;s prospects rebounded, according to
GfK NOP. The index of confidence jumped by the greatest amount since
1995 and the level reading of -16 is it&#8217;s highest Since January of 2008. 
 

Still the headline reading is only in the 57th percentile of
its 10-Year range. And the headline, at -16, is still negative. 
 

The current and past readings on the index are still sour. The
financial situation over the past 12 months is a bottom 29 percentile
reading while the current financial situation is rated in the 36th
percentile a bare-bones increase. But for the next 12-months the rating
flies up to 71st percentile. Even with that, the environment for making
a major purchase only rises from a 45th percentile response currently
to a 48th percentile response in the future. Improvement? Yes! Much
improvement? No! 
 

The general economic situation is rated in the 27th percentile
over the past 12 months that jumps to the highest reading in at least
10-years over the next 12-months. 
 
Deja-What? 
We have seen this sort of thing before. We got exactly the
same sort of response from Italy&#8217;s consumers within the last week.
There is a great belief on the part of consumers that in the
next12-months things are going to be much better than they were and
than they are. Meanwhile, although global stock markets are rising
sharply, there is a lot of stock market pessimism and the rise itself
has been accomplished on low volume for the most part. Government
projections for growth are moderate-to-downbeat and private sector
economists have been dragged every step of the way to an improved
forecast by ever improving economic data. It is curious that with
pessimism in the wind in the woodwork everywhere that consumers are so
upbeat. Are they right to be confident &#8211;do they know something? Or, are
they just naïve? In Italy we have observed that a day after its
consumers were so upbeat the business sentiment survey there
backtracked. 
 
Expectations&#8230; 
Very clearly this is a recovery with expectations scattered to the
winds. It is hard to tell what a given group will think and why, let
alone how long, that they will think it. We have markets that
outperform expectations but without believers. After the last 12-months
it is not surprising to have confusion, but despite some very active
government intervention it is strange indeed that consumers are the
most impressed and businesses are skeptical and financial experts seem
apoplectic with the good news to the point to disbelief or even
rejection. 
 
Impact on performance 
All of this has to affect how the economy actually performs. We know
that expectations are important but we also know they are not etched in
stone and we can debate how much they affect behavior. For the time
being the consumer seems to be the backbone of whatever optimism we
have. This is clear in the UK and in the Italy; it seems somewhat the
same in the US. Will it be enough to keep the consumer-led expansions
going? Since we depend on the consumers&#8217; spending it may be. But note
the dark side to the UK response on spending; it is different from the
Italian response. In the UK there is skepticism that the buying climate
will improve by much but in Italy a big improvement is expected in that
climate. On balance we can say that consumers appear to be more
optimistic than most but we cannot say that their optimism is for the
same reasons and therefore it might not be well-grounded. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="7">GFK
Consumer Survey</th>
</tr>
</thead>
<tbody>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>% of 2Yr</td>
<td>% of 10Yr</td>
</tr>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Range</td>
<td>Range</td>
</tr>
<tr class="grey5">
<td class="firstcol">Consumer Confidence</td>
<td>-16</td>
<td>-25</td>
<td>-25</td>
<td>-25</td>
<td>65.7%</td>
<td>57.5%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">Current</td>
</tr>
<tr class="grey5">
<td class="firstcol">Household Financial Situation</td>
<td>18</td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>36.4%</td>
<td>36.4%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Major Purchases</td>
<td>-15</td>
<td>-26</td>
<td>-25</td>
<td>-26</td>
<td>59.6%</td>
<td>45.9%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Last 12 Months</td>
</tr>
<tr class="grey5">
<td class="firstcol">Household Financial Situation</td>
<td>-13</td>
<td>-18</td>
<td>-19</td>
<td>-18</td>
<td>29.2%</td>
<td>29.2%</td>
</tr>
<tr class="grey5">
<td class="firstcol">General Economic Situation</td>
<td>-63</td>
<td>-69</td>
<td>-72</td>
<td>-73</td>
<td>33.3%</td>
<td>27.5%</td>
</tr>
<tr class="grey5">
<td class="firstcol">CPI</td>
<td>67</td>
<td>62</td>
<td>65</td>
<td>68</td>
<td>10.4%</td>
<td>37.7%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Savings</td>
<td>-5</td>
<td>-10</td>
<td>-12</td>
<td>-15</td>
<td>29.9%</td>
<td>29.9%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Next 12-Months</td>
</tr>
<tr class="grey5">
<td class="firstcol">Household Financial Situation</td>
<td>5</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>74.2%</td>
<td>71.9%</td>
</tr>
<tr class="grey5">
<td class="firstcol">General Economic Situation</td>
<td>4</td>
<td>-9</td>
<td>-8</td>
<td>-8</td>
<td>100.0%</td>
<td>100.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Unemployment</td>
<td>46</td>
<td>53</td>
<td>56</td>
<td>57</td>
<td>38.8%</td>
<td>50.8%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Major Purchases</td>
<td>-28</td>
<td>-36</td>
<td>-36</td>
<td>-36</td>
<td>54.5%</td>
<td>48.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Savings</td>
<td>0</td>
<td>-1</td>
<td>1</td>
<td>-2</td>
<td>13.0%</td>
<td>11.5%</td>
</tr>
<tr class="grey5">
<td class="firstcol">CPI</td>
<td>58</td>
<td>52</td>
<td>51</td>
<td>49</td>
<td>35.3%</td>
<td>35.3%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">By Income</td>
</tr>
<tr class="grey5">
<td class="firstcol">Lower</td>
<td>-23</td>
<td>-30</td>
<td>-31</td>
<td>-31</td>
<td>59.5%</td>
<td>51.2%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Upper</td>
<td>-12</td>
<td>-15</td>
<td>-16</td>
<td>-15</td>
<td>60.6%</td>
<td>51.3%</td>
</tr>
</tbody>
</table>
</body></html>

U.K. consumer confidence jumped in September by the most since 1995 as optimism about the economy’s prospects rebounded, according to GfK NOP. The index of confidence jumped by the greatest amount since 1995 and the level reading of [...]

Consumer Confidence Spurts in UK

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930a.jpg" width="353">
The sharp decline in payroll employment continued this month, but the rate of decline recently has stabilized. The latest report from the payroll processor ADP, in their National Employment Report, indicated that private nonfarm payrolls fell 254,000 during September. That followed a revised 277,000 August decline which was slightly shallower than reported initially. The latest reading was the twentieth consecutive monthly decline. The monthly change was, however, the smallest since July of last year and two-thirds the size of the worst reading last March. The three-month annualized rate of decline in payrolls also eased to 3.2% from its March record of 7.1%.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The U.S. Bureau of Labor Statistics will report September payroll employment this Friday. For comparison, the August decline of 277,000 in ADP&#39;s measure of private nonfarm payrolls was accompanied by a loss of 198,000 jobs in the BLS measure of private sector payrolls. According to ADP and Macro-Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930b.jpg" width="353">
ADP reported that small-sized payrolls again fell the most this month and posted a 100,000 decline (-4.4%). That was similar to the 93,000 (-5.7% y/y) decline in medium-sized payrolls. Large payrolls fell by 61,000 (-5.7% y/y). The steady decline in service-producing industry employment continued. The September drop, which measured 103,000 (-3.2% y/y), was the eighteenth consecutive monthly decline but in percentage terms the three-month rate of change moderated to -1.8%. The recent declines are less than two-thirds the worst from December through March. Medium-sized service payrolls fell 38,000 (-3.6% y/y) and small-sized payrolls declined 38,000 (-2.9% y/y). Large service producing payrolls dropped by 27,000 (-3.5% y/y).
In the goods producing sector there were 151,000 fewer jobs in September (-13.4% y/y). Here, the three-month rate of change eased again but only to -9.6% versus -17.3% at its worst. Small-sized payrolls fell 62,000 (-13.1% y/y) followed by a 55,000 (-13.7% y/y) drop in medium-sized payrolls. Large payrolls fell 34,000 (-13.4% y/y). In the manufacturing sector alone, payrolls fell a steady 74,000 (-12.8% y/y).
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical figures date back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months. 
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/FINAL_Report_September_09.pdf">here</a> and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</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">Total Nonfarm Private Payroll Employment (m/m Chg., 000s)</td>
<td>-254</td>
<td>-277</td>
<td>-5.1%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Small Payroll (1-49)</td>
<td>-100</td>
<td>-114</td>
<td>-4.4</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Medium Payroll (50-499)</td>
<td>-93</td>
<td>-106</td>
<td>-5.7</td>
<td>-0.5</td>
<td>1.2</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Large Payroll (&gt;500)</td>
<td>-61</td>
<td>-57</td>
<td>-5.7</td>
<td>-1.6</td>
<td>-0.1</td>
<td>0.4</td>
</tr>
</tbody>
</table>


</html>

The sharp decline in payroll employment continued this month, but the rate of decline recently has stabilized. The latest report from the payroll processor ADP, in their National Employment Report, indicated that private nonfarm [...]

ADP Report: Sharp Decline In Nonfarm Payroll Employment Continues

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930a.jpg" align="left" border="0" height="265" width="353">
The sharp decline in payroll employment continued this month,
but the rate of decline recently has stabilized. The latest report from
the payroll processor ADP, in their National Employment Report,
indicated that private nonfarm payrolls fell 254,000 during September.
That followed a revised 277,000 August decline which was slightly
shallower than reported initially. The latest reading was the twentieth
consecutive monthly decline. The monthly change was, however, the
smallest since July of last year and two-thirds the size of the worst
reading last March. The three-month annualized rate of decline in
payrolls also eased to 3.2% from its March record of 7.1%.
ADP compiled the estimate from its database of individual
companies' payroll information. Macroeconomic Advisers, LLC, the St.
Louis economic consulting firm, developed the methodology for
transforming the raw data into an economic indicator.



The U.S. Bureau of Labor Statistics will report September
payroll employment this Friday. For
comparison, the August decline of 277,000 in ADP's measure of private
nonfarm payrolls was accompanied by a loss of 198,000 jobs in the BLS
measure of private sector payrolls.
According to ADP and Macro-Advisers, the correlation between the
monthly percentage change in the ADP estimate and that in the BLS data
is 0.90.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930b.jpg" align="right" border="0" height="265" width="353">

ADP reported that small-sized payrolls again fell the most
this month and posted a 100,000 decline (-4.4%). That was similar to
the 93,000 (-5.7% y/y) decline in medium-sized payrolls. Large payrolls
fell by 61,000 (-5.7% y/y). The steady decline in service-producing
industry employment continued. The September drop, which measured
103,000 (-3.2% y/y), was the eighteenth consecutive monthly decline but
in percentage terms the three-month rate of change moderated to -1.8%.
The recent declines are less than two-thirds the worst from December
through March. Medium-sized service payrolls fell 38,000 (-3.6% y/y)
and small-sized payrolls declined 38,000 (-2.9% y/y). Large service
producing payrolls dropped by 27,000 (-3.5% y/y).


In the goods producing sector there were 151,000 fewer jobs in
September (-13.4% y/y). Here, the three-month rate of change eased
again but only to -9.6% versus -17.3% at its worst. Small-sized
payrolls fell 62,000 (-13.1% y/y) followed by a 55,000 (-13.7% y/y)
drop in medium-sized payrolls. Large payrolls fell 34,000 (-13.4% y/y).
In the manufacturing sector alone, payrolls fell a steady 74,000
(-12.8% y/y).


The ADP National Employment Report data is maintained in
Haver's 
USECON database;
historical figures date back to December 2000. The figures in this
report cover only private sector jobs and exclude employment in the
public sector, which rose an average 11,083 during the last twelve
months. 
 


The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/FINAL_Report_September_09.pdf">here</a>
 and the ADP
methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</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">Total Nonfarm Private Payroll
Employment (m/m Chg., 000s)</td>
<td>-254</td>
<td>-277</td>
<td>-5.1%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Small
Payroll (1-49)</td>
<td>-100</td>
<td>-114</td>
<td>-4.4</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Medium
Payroll (50-499)</td>
<td>-93</td>
<td>-106</td>
<td>-5.7</td>
<td>-0.5</td>
<td>1.2</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Large
Payroll (&gt;500)</td>
<td>-61</td>
<td>-57</td>
<td>-5.7</td>
<td>-1.6</td>
<td>-0.1</td>
<td>0.4</td>
</tr>
</tbody>
</table>
 Consumer Confidence Spurts in
UK&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 30, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930c.jpg" align="left" border="0" height="265" width="353">
U.K. consumer confidence jumped in September by the most since
1995 as optimism about the economy&#8217;s prospects rebounded, according to
GfK NOP. The index of confidence jumped by the greatest amount since
1995 and the level reading of -16 is it&#8217;s highest Since January of 2008. 
 

Still the headline reading is only in the 57th percentile of
its 10-Year range. And the headline, at -16, is still negative. 
 

The current and past readings on the index are still sour. The
financial situation over the past 12 months is a bottom 29 percentile
reading while the current financial situation is rated in the 36th
percentile a bare-bones increase. But for the next 12-months the rating
flies up to 71st percentile. Even with that, the environment for making
a major purchase only rises from a 45th percentile response currently
to a 48th percentile response in the future. Improvement? Yes! Much
improvement? No! 
 

The general economic situation is rated in the 27th percentile
over the past 12 months that jumps to the highest reading in at least
10-years over the next 12-months. 
 
Deja-What? 
We have seen this sort of thing before. We got exactly the
same sort of response from Italy&#8217;s consumers within the last week.
There is a great belief on the part of consumers that in the
next12-months things are going to be much better than they were and
than they are. Meanwhile, although global stock markets are rising
sharply, there is a lot of stock market pessimism and the rise itself
has been accomplished on low volume for the most part. Government
projections for growth are moderate-to-downbeat and private sector
economists have been dragged every step of the way to an improved
forecast by ever improving economic data. It is curious that with
pessimism in the wind in the woodwork everywhere that consumers are so
upbeat. Are they right to be confident &#8211;do they know something? Or, are
they just naïve? In Italy we have observed that a day after its
consumers were so upbeat the business sentiment survey there
backtracked. 
 
Expectations&#8230; 
Very clearly this is a recovery with expectations scattered to the
winds. It is hard to tell what a given group will think and why, let
alone how long, that they will think it. We have markets that
outperform expectations but without believers. After the last 12-months
it is not surprising to have confusion, but despite some very active
government intervention it is strange indeed that consumers are the
most impressed and businesses are skeptical and financial experts seem
apoplectic with the good news to the point to disbelief or even
rejection. 
 
Impact on performance 
All of this has to affect how the economy actually performs. We know
that expectations are important but we also know they are not etched in
stone and we can debate how much they affect behavior. For the time
being the consumer seems to be the backbone of whatever optimism we
have. This is clear in the UK and in the Italy; it seems somewhat the
same in the US. Will it be enough to keep the consumer-led expansions
going? Since we depend on the consumers&#8217; spending it may be. But note
the dark side to the UK response on spending; it is different from the
Italian response. In the UK there is skepticism that the buying climate
will improve by much but in Italy a big improvement is expected in that
climate. On balance we can say that consumers appear to be more
optimistic than most but we cannot say that their optimism is for the
same reasons and therefore it might not be well-grounded. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="7">GFK
Consumer Survey</th>
</tr>
</thead>
<tbody>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>% of 2Yr</td>
<td>% of 10Yr</td>
</tr>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Range</td>
<td>Range</td>
</tr>
<tr class="grey5">
<td class="firstcol">Consumer Confidence</td>
<td>-16</td>
<td>-25</td>
<td>-25</td>
<td>-25</td>
<td>65.7%</td>
<td>57.5%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">Current</td>
</tr>
<tr class="grey5">
<td class="firstcol">Household Financial Situation</td>
<td>18</td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>36.4%</td>
<td>36.4%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Major Purchases</td>
<td>-15</td>
<td>-26</td>
<td>-25</td>
<td>-26</td>
<td>59.6%</td>
<td>45.9%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Last
12 Months</td>
</tr>
<tr class="grey5">
<td class="firstcol">Household Financial Situation</td>
<td>-13</td>
<td>-18</td>
<td>-19</td>
<td>-18</td>
<td>29.2%</td>
<td>29.2%</td>
</tr>
<tr class="grey5">
<td class="firstcol">General Economic Situation</td>
<td>-63</td>
<td>-69</td>
<td>-72</td>
<td>-73</td>
<td>33.3%</td>
<td>27.5%</td>
</tr>
<tr class="grey5">
<td class="firstcol">CPI</td>
<td>67</td>
<td>62</td>
<td>65</td>
<td>68</td>
<td>10.4%</td>
<td>37.7%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Savings</td>
<td>-5</td>
<td>-10</td>
<td>-12</td>
<td>-15</td>
<td>29.9%</td>
<td>29.9%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Next
12-Months</td>
</tr>
<tr class="grey5">
<td class="firstcol">Household Financial Situation</td>
<td>5</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>74.2%</td>
<td>71.9%</td>
</tr>
<tr class="grey5">
<td class="firstcol">General Economic Situation</td>
<td>4</td>
<td>-9</td>
<td>-8</td>
<td>-8</td>
<td>100.0%</td>
<td>100.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Unemployment</td>
<td>46</td>
<td>53</td>
<td>56</td>
<td>57</td>
<td>38.8%</td>
<td>50.8%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Major Purchases</td>
<td>-28</td>
<td>-36</td>
<td>-36</td>
<td>-36</td>
<td>54.5%</td>
<td>48.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Savings</td>
<td>0</td>
<td>-1</td>
<td>1</td>
<td>-2</td>
<td>13.0%</td>
<td>11.5%</td>
</tr>
<tr class="grey5">
<td class="firstcol">CPI</td>
<td>58</td>
<td>52</td>
<td>51</td>
<td>49</td>
<td>35.3%</td>
<td>35.3%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">By
Income</td>
</tr>
<tr class="grey5">
<td class="firstcol">Lower</td>
<td>-23</td>
<td>-30</td>
<td>-31</td>
<td>-31</td>
<td>59.5%</td>
<td>51.2%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Upper</td>
<td>-12</td>
<td>-15</td>
<td>-16</td>
<td>-15</td>
<td>60.6%</td>
<td>51.3%</td>
</tr>
</tbody>
</table>
 Q2 GDP Fell A Lessened 0.7%;
Hesitant Profits Recovery Continues 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 30, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930d.jpg" align="right" border="0" height="265" width="353">The second
revision of GDP growth last quarter showed that activity fell slightly
less than initially estimated. A 0.7% (AR) 2Q decline compared to 1.0%
declines indicated in the two prior reports. During the course of the
numbers' release, the decline in domestic final demand has been
lessened to 0.9% after a 6.4% collapse to open the year. That easing
has offset an increased negative influence from inventory
decumulation.
Inventory decumulation
continued as the major drag on GDP growth last quarter with a 1.4
percentage point reduction that was unrevised. Final demand revisions
were modest. Consumer spending is now estimated to have fallen at a
0.9% annual rate (-1.7% y/y) led by a 5.6% (-8.8% y/y) drop in durables
consumption. Residential investment fell at a little-revised 23.2% rate
-25.6% y/y) and business investment dropped at a 9.6% rate (-19.7% y/y)
which was similar to earlier reports. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930e.jpg" align="right" border="0" height="265" width="353">
Government investment rose at a
little revised 6.7% rate (2.5% y/y) and exports declined at a lessened
4.1% rate. Imports dropped 14.7%; therefore, net-foreign trade
improvement added 1.7 percentage points to 2Q GDP growth.
Corporate profits in Q2 rose 3.7% (-12.6% y/y) pre-tax,
including IVA and CCA, from Q1 which was slightly less of a rise than
reported initially. The latest gain followed a 5.3% 1Q increase but
both just dented a 22.8% 4Q decline. Financial industries saw their
quarterly profits gain 12.0% in Q2 (-1.8% y/y) after having nearly
doubled in Q1 versus 4Q. Nonfinancial company profits improved last
quarter by a marginally unrevised 4.7% (-7.5% y/y).&nbsp;Rest of
world profits fell for the fifth quarter in the last six and by 4.6%
(-17.9% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090930f.jpg" align="right" border="0" height="265" width="353">
The GDP price deflator was unrevised
and was unchanged from 1Q. A 1.4% gain (-0.2% y/y) in the PCE price
index followed a 1.5% 1Q decline. Overall, the domestic final sales
price index rose at a negligible 0.5% rate (-0.3% y/y).
 The U.S.
National Income &amp; Product Account data are available in Haver's
USECON and the USNA
databases.
Excerpts from Dallas
Fed Chairman Richard W. Fisher's remarks before the Texas
Christian University Business Network of Dallas can be found <a href="http://dallasfed.org/news/speeches/fisher/2009/fs090929.cfm">
here</a>.
&nbsp;

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2005$, % AR</a></th>
<th scope="col">2Q '09 (3rd Release)</th>
<th scope="col">2Q '09 (2nd Release)</th>
<th scope="col">2Q '09 (Advance)</th>
<th scope="col">1Q '09</th>
<th scope="col">2Q 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">GDP</td>
<td>-0.7</td>
<td>-1.0</td>
<td>-1.0</td>
<td>-6.4</td>
<td>-3.8</td>
<td>0.4</td>
<td>2.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-1.4</td>
<td>-1.4</td>
<td>-0.8</td>
<td>-2.4</td>
<td>-1.0</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>0.7</td>
<td>0.4</td>
<td>-0.2</td>
<td>-4.1</td>
<td>-2.8</td>
<td>0.8</td>
<td>2.5</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.7</td>
<td>1.6</td>
<td>1.4</td>
<td>2.6</td>
<td>0.9</td>
<td>-1.2</td>
<td>0.8</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-0.9</td>
<td>-1.2</td>
<td>-1.5</td>
<td>-6.4</td>
<td>-3.7</td>
<td>-0.4</td>
<td>1.7</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.0</td>
<td>0.0</td>
<td>0.2</td>
<td>1.9</td>
<td>1.5</td>
<td>2.1</td>
<td>2.9</td>
<td>3.3</td>
</tr>
</tbody>
</table>
</body></html>

ADP Report: Sharp Decline InNonfarm Payroll Employment Continues

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

260116R23.jpg

260116S23.jpg

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.

260116T23.jpg

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.

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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

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

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

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

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

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

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

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

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

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

Import & Export Prices: Generally Modest Changes

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

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

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

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

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

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

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

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

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

Economy in Brief: 2009

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