Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923a.jpg" align="left" border="0">
Released yesterday was the U.S. House Price Index from the
Federal Housing and Finance Agency (FHFA). The Purchase Only Index for
July rose 0.3% from June and it was the third consecutive monthly
increase. Moreover, the latest gain eased the year-to-year decline in
the nationwide average of home prices to 4.2% from its worst reading of
negative 8.9% last November. Since their peak in early-2007 home prices
nationwide have fallen 10.5%. The FHFA uses data provided by Fannie Mae
and Freddie Mac and it is not value-weighted.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923b.jpg" align="right" border="0">
Most notable during July was the 1.6% gain in home prices in
the Pacific region of the country. It followed similarly strong 0.7%
and 1.6% increases during the prior two months. Nevertheless these
increases follow earlier home price declines that were amongst the
sharpest in the country. Versus last July prices in the region were
still down 9.0% after having fallen 17.3% during all of 2008. Recent
improvement in home prices also was evident in a 1.0% July increase in
the Mid-Atlantic region. That gain, however, only recouped the decline
during June and left prices roughly even with the year-end 2008 level.
More moderate monthly gain in home prices were logged in the West North
Central, South Atlantic and Mountain Regions of the country. In the
latter two regions, however, prices continued notably below the
year-ago level.
Continuing weak were home prices in several of the country's
regions. Despite a 0.3% July increase, prices in the Mountain states
remained off 9.8% from the year ago level and they were off 16.1% from
the 2007 peak. In the South Atlantic region prices also posted a gain
during July but the 0.6% uptick still left them off by 5.6% from one
year ago. Since their early-2007 peak prices here have fallen 12.8%. In
the populous East North Central region prices slipped another 0.3%
during July and they were flat year-to-date.
Cross-Country Causes and Consequences of the 2008
Crisis: Early Warning Signals from the Federal Reserve Bank
of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-17bk.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">FHFA
U.S. House Price Index Purchase Only (%)</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</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3</td>
<td>0.1</td>
<td>-4.2</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-0.1</td>
<td>0.3</td>
<td>-2.5</td>
<td>-4.6</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle Atlantic</td>
<td>1.0</td>
<td>-1.1</td>
<td>-2.9</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North Central</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-3.3</td>
<td>-4.4</td>
<td>-1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West North Central</td>
<td>0.3</td>
<td>-0.3</td>
<td>-1.5</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South Atlantic</td>
<td>0.6</td>
<td>-0.2</td>
<td>-5.6</td>
<td>-7.1</td>
<td>1.4</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South Central</td>
<td>-0.9</td>
<td>2.3</td>
<td>-1.7</td>
<td>-1.4</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South Central</td>
<td>-0.2</td>
<td>1.1</td>
<td>0.1</td>
<td>0.7</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.3</td>
<td>-1.0</td>
<td>-9.8</td>
<td>-6.0</td>
<td>4.0</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>1.6</td>
<td>0.7</td>
<td>-9.0</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
PMIS Show Continued Growth In
Europe 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> September 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923c.jpg" align="left" border="0">
The EMU PMIs are up again &#8211; and, for the second month running,
the overall business index is over 50, showing positive growth. The two
main PMI components improved again in September with MFG index up to
40.04 from 48.24 and the services index up to 50.61 from 49.92. 
 

The MFG PMI is at its highest since June of 2008. The services
index is at its best value since April 2008. 
 
The more detailed results show that Germany is suffering some setbacks
and cross currents. That is in-keeping with other German indicators we
have recently seen. In France the improvement continues to move ahead,
with a national index of business sentiment also up sharply in
September. 
 

&#8216; V-shaped&#8217; recovery -- Europe&#8217;s PMIs
continue to sketch out a recovery that is very &#8220;V-shaped.&#8217; The MFG PMI
fell from 50 to its cycle low in eight months. Now after eight months
it has risen from its low to 49.04 , nearly back to 50. The Services
PMI slipped to its cycle low in nine months. Now, seven months later,
it is above the neutral mark of 50. 
 

Beyond the diffusion world of the PMIs - Of
course the indices are not yet back to their respective cycle peaks.
But that typically does not happen until the cycle itself actually
peaks which is a long way off (we hope). For now the recovery has been
unfolding apace. The more detailed news from Germany suggests that the
pace of recovery may be in store for some slowing, from a diffusion
standpoint. But there is plenty of room for the expansion to spread in
terms of real readings like orders and industrial output and job
growth, even if the PMIs do not advance very fast from now on. PMIs are
economic indicators; formally, they are measures of breadth- the answer
the question, &#8220;what proportion of the industries are doing better, in
terms of jobs, orders, overall performance and so on?&#8221; The PMIs do not
answer the question, &#8220;how strong is the gain?&#8221; That is the next
challenge, to expand the increase in orders and in output that has
begun, and to extend the expansion to include job gains. Then the task
is to continue to show staying power across sectors. Indicators like
the diffusion-based PMIs can be very useful, but they fall short of
giving us the true welfare picture of the economy. 
 

Shifting the focus - For this cycle the PMIs have mostly done
their job. They flagged the slow down and the move lower in the economy
ahead of most traditional economic variables and they also showed the
way for the pick up. Now they will give us some indication of how the
various sectors change speed. But the key reports from here on out will
be the traditional reports that reveal true strength instead of just
diffusion or breadth. 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">Markit
PMIs for the E-Zone</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr class="grey4">
<td class="firstcol">Sep-09</td>
<td>49.04</td>
<td>50.61</td>
</tr>
<tr class="grey4">
<td class="firstcol">Aug-09</td>
<td>48.24</td>
<td>49.92</td>
</tr>
<tr class="grey4">
<td class="firstcol">Jul-09</td>
<td>46.25</td>
<td>45.69</td>
</tr>
<tr class="grey4">
<td class="firstcol">Jun-09</td>
<td>42.62</td>
<td>44.65</td>
</tr>
<tr class="grey3">
<td colspan="3" class="firstcol">Seqment
averages</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-Mo</td>
<td>45.70</td>
<td>48.57</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-Mo</td>
<td>41.43</td>
<td>46.34</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-Mo</td>
<td>39.34</td>
<td>44.31</td>
</tr>
<tr class="grey3">
<td colspan="3" class="firstcol">127-Mo
Range</td>
</tr>
<tr class="grey1">
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr class="grey1">
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr class="grey1">
<td class="firstcol">% Range</td>
<td>57.5%</td>
<td>49.2%</td>
</tr>
</tbody>
</table>
U.S. Weekly Mortgage Applications
Strengthen As Interest Rates Near The Lowest Since 2003 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 23, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923d.jpg" align="right" border="0" height="265" width="353">The Mortgage
Bankers Association indicated that mortgage applications overall
increased 12.8% last week as lower interest rates spurred strength in
refinancings. Applications to refinance jumped 17.4% last week and in
September they have risen 29.3% from August. Nevertheless, since their
peak this past January refinance applications have fallen by nearly
two-thirds.
I tandem, there has been lesser strength in
purchase applications. Applications rose 5.6% last week and that made
up roughly half of the prior week's decline. So far this month purchase
applications have risen 4.6% from August after that month's 3.4%
increase. Since the early-February low purchase applications have risen
22% as new and existing home sales have recovered. During the last ten
years there has been a (negative) 79% correlation between the level of
applications for purchase and the effective interest rate on a 30-year
mortgage. Moreover, during the last ten years there has been a 61%
correlation between the y/y change in purchase applications and the
change in new plus existing single family home sales.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923e.jpg" align="right" border="0" height="265" width="353">The
effective
interest rate on a conventional 15-year mortgage fell last week to
4.67%, down from the high of 5.21% averaged during June. These figures
are near the lowest since 2003. For a 30-year mortgage the rate also
fell last week to 5.19% after reaching a high of 5.79% in early-June.
Interest rates on 15-year and 30-year mortgages are closely correlated
(&gt;90%) with the rate on 10-year Treasury securities. Rates on
adjustable 1-Year mortgages averaged 6.66% this month versus the low
near 6.0% during January. Nevertheless, the rate remained down from the
7.07% peak reached last fall.
 Though they have recovered of
late, since the beginning of this year fixed-rate mortgage applications
have fallen by slightly more than one-half while adjustable-rate
mortgages have more than doubled. The number of conventional loans has
fallen nearly two-thirds but gov't backed loans.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923f.jpg" align="right" border="0" height="265" width="353">The
Mortgage
Bankers Association surveys between 20 to 35 of the top lenders in the
U.S. housing industry to derive its refinance, purchase and market
indexes. The weekly survey covers roughly 50% of all U.S. residential
mortgage applications processed each week by mortgage banks, commercial
banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The figures for weekly
mortgage applications are available in Haver's SURVEYW
database.
TALF:
Jump-Starting the Securitization Markets from the Federal
Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0906.html%A0">
here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/18/09</th>
<th scope="col">09/11/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>668.5</td>
<td>592.8</td>
<td>13.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>288.3</td>
<td>272.9</td>
<td>-15.8</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,881.5</td>
<td>2,454.5</td>
<td>41.0</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
<tr>
<td class="firstcol">15-Year Effective Interest Rate
(%)</td>
<td>4.7%</td>
<td>4.7%</td>
<td>6.1% (9/08)</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.3%</td>
</tr>
</tbody>
</table>

FOMC Cites Economic Improvement
But Leaves Rates Unchanged 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923g.jpg" align="left" border="0" height="265" width="353">
In an anticipated and unanimous vote, the Federal Open Market
Committee today left the Federal funds rate in a "range from 0 to 1/4
percent." The discount rate also was left unchanged at 0.5%. The action
was as expected and left the Fed funds rate at its lowest level ever.
The Fed indicated that "economic activity has picked up
following its severe downturn." In addition, as at earlier meetings, it
noted "Although economic activity is likely to remain weak for a time,
the Committee anticipates that policy actions to stabilize financial
markets and institutions, fiscal and monetary stimulus, and market
forces will support a strengthening of economic growth and a gradual
return to higher levels of resource utilization in a context of price
stability."
Regarding inflation the FOMC statement indicated that "With
substantial resource slack likely to continue to dampen cost pressures
and with longer-term inflation expectations stable, the Committee
expects that inflation will remain subdued for some time."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923h.jpg" align="right" border="0" height="265" width="353">
In its effort to promote economic liquidity, the Fed used
similar language as in June that "... to provide support to mortgage
lending and housing markets and to improve overall conditions in
private credit markets, the Federal Reserve will purchase a total of up
to $1.25 trillion of agency mortgage-backed securities and up to $200
billion of agency debt by the end of the year. As previously indicated,
the Committee indicated that the Federal Reserve&#8217;s purchases
of $300billion of Treasury securities will be completed by the end of
October 2009. Moreover, "The Committee will continue to evaluate the
timing and overall amounts of its purchases of securities in light of
the evolving economic outlook and conditions in financial markets. The
Federal Reserve is monitoring the size and composition of its balance
sheet and will make adjustments to its credit and liquidity programs as
warranted.
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090923a.htm">link</a>.
The Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.
Against the backdrop of monetary ease, forward indicators are
signaling the possibility of future inflationary risk. The CRB
Commodity Price Index has risen roughly 25% since yearend while the
trade-weighted value of the dollar has fallen 13% since March.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
</body></html>

Released yesterday was the U.S. House Price Index from the Federal Housing and Finance Agency (FHFA). The Purchase Only Index for July rose 0.3% from June and it was the third consecutive monthly increase. Moreover, the latest gain [...]

FHFA Home Price Index StrengthensDue To Notable Gains In The Pacific & Mid-Atlantic Regions

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922f.jpg" align="right" border="0" height="265" width="353">
Quarterly unemployment data for the second quarter for Ireland
and Italy, and monthly data for August for Finland and Taiwan were
released today. The attached two charts show the year over year changes
in the unemployment rates for the four countries: monthly data for
Finland and Taiwan and quarterly data for Ireland and Italy. Ireland
has the highest rate of unemployment, 12%, of the four countries and
the largest increase, 6.3 percentage points, over the same period of a
year ago. The other three countries show year over year increases of
2.6 percentage points or less. The big rise in unemployment in Ireland
is another indicator of the severity of the recession hitting that
country.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922g.jpg" align="right" border="0" height="265" width="353">
The rise in unemployment in Ireland has undoubtedly played a
part in the dramatic change in its net migration. The Irish Central
Statistics Office reported today that in the year ending April, 2009,
emigrants exceeded immigrants by 7,800, compared with an excess of
immigrants of 38,500 in the previous year. This was the first excess of
emigrants since 1995. Ireland's long history of net emigration, was
reversed beginning in 1996 and continued through 2008 as the economy
prospered. Net migration reached a high of 71,800 in 2006 at the height
of the economic boom.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Unemployment Rates (NAS %)</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4 09</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4 07</th>
<th scope="col">Q3 07</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>12.0</td>
<td>10.2</td>
<td>7.6</td>
<td>7.0</td>
<td>5.7</td>
<td>4.9</td>
<td>4.5</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>7.4</td>
<td>7.9</td>
<td>7.1</td>
<td>6.1</td>
<td>6.7</td>
<td>7.1</td>
<td>6.6</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Aug 09</td>
<td>Jul&nbsp; 09</td>
<td>Jun 09</td>
<td>May 09&nbsp;</td>
<td>Apr 09&nbsp;</td>
<td>Mar 09&nbsp;</td>
<td>Feb 09 </td>
<td> Jan 09 </td>
</tr>
<tr class="odd">
<td class="firstcol">Finland</td>
<td>7.6</td>
<td>7.7</td>
<td>9.1</td>
<td>10.9</td>
<td>8.8</td>
<td>8.3</td>
<td>7.6</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Taiwan</td>
<td>6.1</td>
<td>6.1</td>
<td>5.9</td>
<td>5.8</td>
<td>5.8</td>
<td>5.8</td>
<td>5.8</td>
<td>5.3</td>
</tr>
</tbody>
</table>
</body></html>

Quarterly unemployment data for the second quarter for Ireland and Italy, and monthly data for August for Finland and Taiwan were released today. The attached two charts show the year over year changes in the unemployment rates for [...]

Unemployment In Ireland, Italy, Finland, And Taiwan

Robert Brusca

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922e.jpg" align="left" border="0" height="265" width="353">
Retail sales in Canada fell by 0.6% in July following a surge
in growth of 1% in June and of 1.1% in May. In the new quarter retail
sales are expanding at a 3% pace in nominal terms. For the quarter
supermarket sales are dropping. Sales of new car dealers are surging in
double digits. Clothing sales are up at a 3.4% nominal pace. Excluding
autos the annual rate gain early in Q3 are 0.9%. 
 

More broadly, sales trends show gains that are gathering pace
over three-months and mixed to the positive side over six months.
Overall sales are expanding at a rate of 6.4% over three months at a
pace of 3.6% excluding autos and at a 6.4% pace for overall sales. 
 

The chart shows how Canada&#8217;s retail sales simply fell off a
cliff at the end of 2008 when the US economy&#8217;s financial crisis took
hold. Since then ex-auto sales are showing a more consistent rebound.
Overall sales have only really reduced their rate of decline and the
trend drop still seems to be operative for year-over year calculations.
However over that short spans memorialized in the table both overall
and ex-auto sales are hosing that progress is in train. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Canada Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td colspan="4">Saar</td>
<td>New QTR</td>
</tr>
<tr>
<td class="firstcol">Nominal %</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-MO</td>
<td>Yr-Ago</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Total RTL</td>
<td>-0.6%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>2.5%</td>
<td>-4.9%</td>
<td>5.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">New Car Dealerss</td>
<td>0.2%</td>
<td>0.5%</td>
<td>3.5%</td>
<td>18.0%</td>
<td>15.1%</td>
<td>-6.6%</td>
<td>-5.8%</td>
<td>10.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Supermarkets</td>
<td>-1.6%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>-3.9%</td>
<td>-2.5%</td>
<td>4.3%</td>
<td>3.1%</td>
<td>-6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing Stores</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>-2.1%</td>
<td>-4.1%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail less MVs</td>
<td>-0.8%</td>
<td>1.1%</td>
<td>0.6%</td>
<td>3.6%</td>
<td>0.2%</td>
<td>-4.7%</td>
<td>7.9%</td>
<td>0.9%</td>
</tr>
</tbody>
</table>
</body></html>

Retail sales in Canada fell by 0.6% in July following a surge in growth of 1% in June and of 1.1% in May. In the new quarter retail sales are expanding at a 3% pace in nominal terms. For the quarter supermarket sales are dropping. [...]

Canadian Retail Sales Are Digging Out Slowly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922c.jpg" width="353">
Encouraging indications that consumer spending was improving faded further during September. During the latest week, chain store sales fell 2.0% and that was enough to pull sales for the month so far to their lowest level since June.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Prospects for improvement in sales seem limited. The leading indicator of sales slipped 0.5% (-2.0% y/y) during the latest week though it had risen somewhat earlier this summer.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922d.jpg" width="353">
The Johnson Redbook also reported soft sales of late. General merchandise store sales so far this month increased a seasonally adjusted 0.4% from August (-2.1% y/y) following three months of sometimes sharp decline. Department store sales were down 4.8% y/y on a same-store basis while discount store sales slipped just 0.2% as shoppers searched for bargains.
The Dynamics of Automobile Expenditures from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr394.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/19/09</th>
<th scope="col">09/12/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>484.6</td>
<td>494.5</td>
<td>0.6%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

Encouraging indications that consumer spending was improving faded further during September. During the latest week, chain store sales fell 2.0% and that was enough to pull sales for the month so far to their lowest level since June. [...]

Weekly Chain Store Sales Trend Lower During September

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922a.jpg" align="left" border="0" height="265" width="353">
Since June, improvement in the U.S. economy and aggressive
measures by the Federal Reserve to stimulate growth have supported
gasoline prices from their lows of last December. However, any
incremental strength in prices has topped out. The pump price
for regular gasoline dipped slightly last week to an average
$2.55 per gallon, roughly where it's been since early June. These
prices compare to the December low of $1.61. Yesterday, prices
backpedaled even further as speculation mounted that the Fed may soon
rein in its simulative policies. The wholesale gasoline price fell to
$1.76 per gallon. Prices had reached a high in early-August of $2.03.
The figures are reported by the U.S. Department of Energy and can be
found in Haver's WEEKLY &amp; DAILY databases.
During August, the consumer price index for gasoline recouped
the July decline with a not seasonally adjusted 3.3% increase.
Seasonally adjusted gas prices were quite firm and rose 9.1% m/m, up
40.3% YTD.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922b.jpg" align="right" border="0" height="265" width="353">
Crude oil prices have followed a similar
pattern. Light sweet crude oil prices (WTI) held last week near the
high at $71.36 per barrel, up from the December low of $32.37.
Yesterday, however, the spot market price for light sweet crude oil
fell to $69.71 per barrel versus a daily high of $72.51 last week.
Earlier strength in gasoline prices reflected incremental
improvement in the demand for gasoline. Seasonal factors accounted for
much of demand's incremental improvement, but in September demand has
remained firm. The y/y uptick of 0.1% is the first positive comparison
since early-2008. Demand for residual fuel oil also has improved. It
shows a positive 8.6% y/y comparison but distillate demand is off 14.9%
y/y). Finally, oil remains plentiful as evidenced by a 13.5% y/y rise
in inventories of crude oil &amp; petroleum products. Inventories
of gasoline recently have dropped somewhat but they have strengthened
by 12.5% versus last year, the strongest gain in ten years. The figures
on crude oil production and inventories are available in Haver's OILWKLY
database.
Natural gas prices continued to be the weakest part of the
energy sector's pricing environment. Though they increased last week to
an average of $3.22 per mmbtu (-59.3% y/y), they remained down by
three-quarters from the high reached in early-July of last year of
$13.19/mmbtu. Yesterday prices held at the $3.38 level.
Predicting Crises, Part I: Do Coming Crises Cast
Their Shadows Before? from the Federal Reserve Bank of San
Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-29.html">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">09/21/09</th>
<th scope="col">09/14/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.55</td>
<td>2.58</td>
<td>-31.4%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>71.36</td>
<td>70.91</td>
<td>-26.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body></html>

Since June, improvement in the U.S. economy and aggressive measures by the Federal Reserve to stimulate growth have supported gasoline prices from their lows of last December. However, any incremental strength in prices has topped [...]

Weekly Gasoline Prices Slip Just Modestly As Trend Remains Firm

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923a.jpg" align="left" border="0">
Released yesterday was the U.S. House Price Index from the
Federal Housing and Finance Agency (FHFA). The Purchase Only Index for
July rose 0.3% from June and it was the third consecutive monthly
increase. Moreover, the latest gain eased the year-to-year decline in
the nationwide average of home prices to 4.2% from its worst reading of
negative 8.9% last November. Since their peak in early-2007 home prices
nationwide have fallen 10.5%. The FHFA uses data provided by Fannie Mae
and Freddie Mac and it is not value-weighted.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923b.jpg" align="right" border="0">
Most notable during July was the 1.6% gain in home prices in
the Pacific region of the country. It followed similarly strong 0.7%
and 1.6% increases during the prior two months. Nevertheless these
increases follow earlier home price declines that were amongst the
sharpest in the country. Versus last July prices in the region were
still down 9.0% after having fallen 17.3% during all of 2008. Recent
improvement in home prices also was evident in a 1.0% July increase in
the Mid-Atlantic region. That gain, however, only recouped the decline
during June and left prices roughly even with the year-end 2008 level.
More moderate monthly gain in home prices were logged in the West North
Central, South Atlantic and Mountain Regions of the country. In the
latter two regions, however, prices continued notably below the
year-ago level.
Continuing weak were home prices in several of the country's
regions. Despite a 0.3% July increase, prices in the Mountain states
remained off 9.8% from the year ago level and they were off 16.1% from
the 2007 peak. In the South Atlantic region prices also posted a gain
during July but the 0.6% uptick still left them off by 5.6% from one
year ago. Since their early-2007 peak prices here have fallen 12.8%. In
the populous East North Central region prices slipped another 0.3%
during July and they were flat year-to-date.
Cross-Country Causes and Consequences of the 2008
Crisis: Early Warning Signals from the Federal Reserve Bank
of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-17bk.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">FHFA
U.S. House Price Index Purchase Only (%)</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</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3</td>
<td>0.1</td>
<td>-4.2</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-0.1</td>
<td>0.3</td>
<td>-2.5</td>
<td>-4.6</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle Atlantic</td>
<td>1.0</td>
<td>-1.1</td>
<td>-2.9</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North Central</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-3.3</td>
<td>-4.4</td>
<td>-1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West North Central</td>
<td>0.3</td>
<td>-0.3</td>
<td>-1.5</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South Atlantic</td>
<td>0.6</td>
<td>-0.2</td>
<td>-5.6</td>
<td>-7.1</td>
<td>1.4</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South Central</td>
<td>-0.9</td>
<td>2.3</td>
<td>-1.7</td>
<td>-1.4</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South Central</td>
<td>-0.2</td>
<td>1.1</td>
<td>0.1</td>
<td>0.7</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.3</td>
<td>-1.0</td>
<td>-9.8</td>
<td>-6.0</td>
<td>4.0</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>1.6</td>
<td>0.7</td>
<td>-9.0</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
 Weekly Chain Store Sales Trend
Lower During September 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 22, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922c.jpg" align="left" border="0" height="265" width="353">
Encouraging indications that consumer spending was improving
faded further during September. During the latest week, chain store
sales fell 2.0% and that was enough to pull sales for the month so far
to their lowest level since June.
During the last ten years there has been a 69% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. The weekly figures are available
in Haver's SURVEYW database.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Prospects for improvement in sales seem limited. The leading
indicator of sales slipped 0.5% (-2.0% y/y) during the latest week
though it had risen somewhat earlier this summer.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922d.jpg" align="right" border="0" height="265" width="353">
The Johnson Redbook also reported soft sales of late. General
merchandise store sales so far this month increased a seasonally
adjusted 0.4% from August (-2.1% y/y) following three months of
sometimes sharp decline. Department store sales were down 4.8% y/y on a
same-store basis while discount store sales slipped just 0.2% as
shoppers searched for bargains.
The Dynamics of Automobile Expenditures from
the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr394.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/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">09/19/09</th>
<th scope="col">09/12/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>484.6</td>
<td>494.5</td>
<td>0.6%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
 Canadian Retail Sales Are Digging
Out Slowly 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 22, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922e.jpg" align="left" border="0" height="265" width="353">
Retail sales in Canada fell by 0.6% in July following a surge
in growth of 1% in June and of 1.1% in May. In the new quarter retail
sales are expanding at a 3% pace in nominal terms. For the quarter
supermarket sales are dropping. Sales of new car dealers are surging in
double digits. Clothing sales are up at a 3.4% nominal pace. Excluding
autos the annual rate gain early in Q3 are 0.9%. 
 

More broadly, sales trends show gains that are gathering pace
over three-months and mixed to the positive side over six months.
Overall sales are expanding at a rate of 6.4% over three months at a
pace of 3.6% excluding autos and at a 6.4% pace for overall sales. 
 

The chart shows how Canada&#8217;s retail sales simply fell off a
cliff at the end of 2008 when the US economy&#8217;s financial crisis took
hold. Since then ex-auto sales are showing a more consistent rebound.
Overall sales have only really reduced their rate of decline and the
trend drop still seems to be operative for year-over year calculations.
However over that short spans memorialized in the table both overall
and ex-auto sales are hosing that progress is in train. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Canada
Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td colspan="4">Saar</td>
<td>New QTR</td>
</tr>
<tr>
<td class="firstcol">Nominal %</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-MO</td>
<td>Yr-Ago</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Total RTL</td>
<td>-0.6%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>2.5%</td>
<td>-4.9%</td>
<td>5.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">New Car Dealerss</td>
<td>0.2%</td>
<td>0.5%</td>
<td>3.5%</td>
<td>18.0%</td>
<td>15.1%</td>
<td>-6.6%</td>
<td>-5.8%</td>
<td>10.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Supermarkets</td>
<td>-1.6%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>-3.9%</td>
<td>-2.5%</td>
<td>4.3%</td>
<td>3.1%</td>
<td>-6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing Stores</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>-2.1%</td>
<td>-4.1%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail less MVs</td>
<td>-0.8%</td>
<td>1.1%</td>
<td>0.6%</td>
<td>3.6%</td>
<td>0.2%</td>
<td>-4.7%</td>
<td>7.9%</td>
<td>0.9%</td>
</tr>
</tbody>
</table>
 Unemployment In Ireland, Italy,
Finland, And Taiwan 
by <a href="/comment/Curley.html">
Louise Curley</a> September 22, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922f.jpg" align="right" border="0" height="265" width="353">
Quarterly unemployment data for the second quarter for Ireland
and Italy, and monthly data for August for Finland and Taiwan were
released today. The attached two charts show the year over year changes
in the unemployment rates for the four countries: monthly data for
Finland and Taiwan and quarterly data for Ireland and Italy. Ireland
has the highest rate of unemployment, 12%, of the four countries and
the largest increase, 6.3 percentage points, over the same period of a
year ago. The other three countries show year over year increases of
2.6 percentage points or less. The big rise in unemployment in Ireland
is another indicator of the severity of the recession hitting that
country.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922g.jpg" align="right" border="0" height="265" width="353">
The rise in unemployment in Ireland has undoubtedly played a
part in the dramatic change in its net migration. The Irish Central
Statistics Office reported today that in the year ending April, 2009,
emigrants exceeded immigrants by 7,800, compared with an excess of
immigrants of 38,500 in the previous year. This was the first excess of
emigrants since 1995. Ireland's long history of net emigration, was
reversed beginning in 1996 and continued through 2008 as the economy
prospered. Net migration reached a high of 71,800 in 2006 at the height
of the economic boom.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Unemployment Rates (NAS %)</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4 09</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4 07</th>
<th scope="col">Q3 07</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>12.0</td>
<td>10.2</td>
<td>7.6</td>
<td>7.0</td>
<td>5.7</td>
<td>4.9</td>
<td>4.5</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>7.4</td>
<td>7.9</td>
<td>7.1</td>
<td>6.1</td>
<td>6.7</td>
<td>7.1</td>
<td>6.6</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Aug 09</td>
<td>Jul&nbsp; 09</td>
<td>Jun 09</td>
<td>May 09&nbsp;</td>
<td>Apr 09&nbsp;</td>
<td>Mar 09&nbsp;</td>
<td>Feb 09 </td>
<td> Jan 09 </td>
</tr>
<tr class="odd">
<td class="firstcol">Finland</td>
<td>7.6</td>
<td>7.7</td>
<td>9.1</td>
<td>10.9</td>
<td>8.8</td>
<td>8.3</td>
<td>7.6</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Taiwan</td>
<td>6.1</td>
<td>6.1</td>
<td>5.9</td>
<td>5.8</td>
<td>5.8</td>
<td>5.8</td>
<td>5.8</td>
<td>5.3</td>
</tr>
</tbody>
</table>
</body></html>

FHFA Home Price Index Strengthens Due To Notable Gains In The Pacific & Mid-Atlantic Regions

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921h.jpg" align="left" border="0">
Preliminary data suggest that the Russian Gross Domestic
Product, fell 0.5% in the second quarter, a marked improvement over the
9.0% decline in the first quarter. (These figures are based on the
series that have been seasonally adjusted by Haver Analytics.) August
data on production, construction, and retail sales have been
disappointing. Production and construction declined in contrast to
increases in July and retail sales showed a smaller increase in August
than in July. The unemployment rate, however, was 8.6% in August 2
basis points below July.
In spite of the July hiccup particularly in industrial
production, the prospects for increased activity in Russia have
brightened. Oil prices are up, the Reserve Bank has steadily lowered
the refinancing rate from 13% in March to 10.5% in September.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921i.jpg" align="right" border="0" height="265" width="353">
Inflation, though still high, was 11.6% in August, down from 13.15% in
April. Recent data for these aspects of the Russian economy are shown
in the table below.
The Purchasing Mangers Survey published by Markit Economics in
London reported earlier this month that the GDP indicator for Russia
reached the expansion stage in August (above 50) for the first time
since September, 2008 as shown in the first chart. Finally, the Stock
Market has increased 44% from the recent low point reached on July10
and 1208 today is 139% above the low reached on February 2, 2009. The
decline and rise in the stock market is shown in the second chart.


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">RUSSIA&nbsp;</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp; 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun
09&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</th>
<th scope="col">May 09&nbsp;</th>
<th scope="col">Apr 09&nbsp;</th>
<th scope="col">Mar 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production (M/M %
Chg)</td>
<td>--</td>
<td>-3.0</td>
<td>4.7</td>
<td>4.5</td>
<td>-2.1</td>
<td>-8.1</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Retail Sales&nbsp; (M/M %
Chg)</td>
<td>--</td>
<td>1.68</td>
<td>2.36</td>
<td>0.88</td>
<td>1.70</td>
<td>0.71</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Value of Construction Work
Performed&nbsp; (M/M % Chg)</td>
<td>--</td>
<td>-2.66</td>
<td>2.61</td>
<td>210.55</td>
<td>0.74</td>
<td>11.54</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>--</td>
<td>8.6</td>
<td>8.8</td>
<td>8.7</td>
<td>8.9</td>
<td>8.7</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Inflation (%)</td>
<td>--</td>
<td>11.6</td>
<td>12.0</td>
<td>11.9</td>
<td>12.3</td>
<td>13.2</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Refinancing Rate&nbsp; (%)</td>
<td>10.50</td>
<td>10.75</td>
<td>11.00</td>
<td>11.50</td>
<td>12.00</td>
<td>12.50</td>
<td>13.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Oil Price Brent Crude (Ave of
Daily Prices $ per barrel)</td>
<td>--</td>
<td>72.86</td>
<td>65.62</td>
<td>69.24</td>
<td>58.25</td>
<td>51.18</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Preliminary data suggest that the Russian Gross Domestic Product, fell 0.5% in the second quarter, a marked improvement over the 9.0% decline in the first quarter. (These figures are based on the series that have been seasonally [...]

Recent Data For The Russian Economy

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921g.jpg" align="left" border="0" height="265" width="353">
French orders were up by a solid 2% in July as foreign orders
surged by 14%. In Italy orders jumped by 3.2% on foreign order strength
of 15.6%. Both Italy and France as seeing strong orders in the new
quarter (Q3, one month in) led by huge gains in orders from abroad. 
 

Both Italy and France show recovery patterns of order growth
but order levels that remain just a bit less than 25% below year-ago
levels. 
 

Europe- Europe continues to show economic recovery. But with
the G-20 set to meet in the re-made but old US industrial city of
Pittsburgh, the OECD, the IMF and a German think-tank have taken this
opportunity to highlight the risks to the future of this recovery. The
OECD is very concerned about the health of banks and that there could
be some backsliding and troubles with capitalization. The IMF is
concerned that German employment could rise sharply over the next year,
pushing unemployment to over 10.5% and creating weak growth under 0.5%
in 2010. This would clearly become a problem for growth in the rest of
the e-Zone. Not to be outdone by this sort of sour outlook, the German
think-tank IWH Institute warns of a credit crunch highlighting the
potential for a double dip as government stimulus programs come off the
books. 
 

Pessimism shuns trends: Despite some very strong current
indicators that spread across the major EMU economies there remains in
Europe, much like in the US, a core of pessimism about the risks.
Unlike after other recessions apparently this recovery cannot be
trusted to bottom and begin to rise and for that upswing to be
self-sustaining. The abnormal degree of and scope of early government
help that will eventually be rescinded is one of the common culprits in
both US and European pessimism. If that is so what ever do it in the
first place? 
 

Professional pessimists: While we expect the main
international regulators and oversight agencies to be less than
cheerleaders and to be wary of risks, the extent to which private
sector naysayers have piggy-backed on that tact is surprising. For now
we are left with the reality of an upswing and one that is looking
quite nice and consistent across EMU nations. Meanwhile, the outlook
sours as we speak. While the future may still hold risks, one must
wonder if they are as great as is being said or if lowering
expectations has been taken to a new extreme by politicians who in the
end are chastened by their own role in this crisis by seeing it develop
and watching powerlessly, aware that it is a disaster that occurred on
their watch. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> Italy Orders</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td colspan="3">Saar exept m/m</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-mo6-mo12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total</td>
<td>3.2%</td>
<td>2.6%</td>
<td>0.8%</td>
<td>29.5%</td>
<td>-1.9%</td>
<td>-24.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Foreign</td>
<td>15.6%</td>
<td>2.6%</td>
<td>0.9%</td>
<td>105.4%</td>
<td>17.6%</td>
<td>-19.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Domestic</td>
<td>-2.9%</td>
<td>2.5%</td>
<td>0.7%</td>
<td>0.9%</td>
<td>-11.3%</td>
<td>-26.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Sales</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-1.0%</td>
<td>-7.4%</td>
<td>-11.0%</td>
<td>-22.1%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol"> French Orders</td>
</tr>
<tr class="grey4">
<td colspan="3">Saar exept m/m</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-mo6-mo12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total</td>
<td>2.0%</td>
<td>1.2%</td>
<td>0.0%</td>
<td>13.7%</td>
<td>5.6%</td>
<td>-22.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Foreign</td>
<td>14.0%</td>
<td>-3.0%</td>
<td>7.0%</td>
<td>96.1%</td>
<td>19.1%</td>
<td>-16.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">IP xConstruct</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>16.3%</td>
<td>2.8%</td>
<td>-13.8%</td>
</tr>
</tbody>
</table>
</body></html>

French orders were up by a solid 2% in July as foreign orders surged by 14%. In Italy orders jumped by 3.2% on foreign order strength of 15.6%. Both Italy and France as seeing strong orders in the new quarter (Q3, one month in) led by [...]

Industrial Orders Keep Rising In France And In Italy Pessimism Continues To Haunt The Outlook, However

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.

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

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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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