Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921d.jpg" align="right" border="0" height="265" width="353">
Each
quarter, the Federal Reserve Bank of Philadelphia surveys a group of
professional forecasters to gain perspective on the outlook for the
U.S. economy. In the August survey, the panel expected the recession to
have reached its end, though the recovery is expected to be subpar.
That subpar nature is expected to keep unemployment high but it is not
expected to prevent inflation and interest rates from rising.Just
2.4% growth in real GDP is expected during the current quarter to be
followed by growth at about that rate into next year. That follows the
3.9% y/y drop in real GDP through last quarter, which was the deepest
decline since the Great Depression. Indeed, this recovery is subpar
compared to prior periods of severe recession. Following the 1973-75
recession, when GDP fell at a peak y/y rate of 2.3%, growth shortly
rebounded to 6.2%. Similarly following the 1981-82 recession, when GDP
fell 2.7% y/y, a snapback came quickly at near an 8%
rate. The subpar nature of the coming economic
recovery stems very much from the consumer who remains burdened by
excessive levels of debt. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921e.jpg" reaching only two that compares with excess six percent during recoveries similarly quarterly in residential middle next fraction prior periods past overbuilding weighs activity finally on domestic demand side business investment is expected to recover at a subpar rate after its decline this year as corporate profits remain under pressure and outlook for global economic remains contained federal spending also should rise but rates of growth are constrained by the soaring budget deficit align="right" border="0" height="265" width="353">A swing towards inventory accumulation also should
play a part in the pending economic recovery, yet here again it's not a
huge part. Accumulation at near a $20 billion annual rate is expected
by the end of next year. Certainly that is improved from the peak rate
of decumulation of $141 last quarter, and the dollar swing is
impressive. But as a percentage of the economy's overall real size it
amounts to barely half the swing after prior severe recessions. As for
the foreign trade deficit, recent improvement has helped forestall an
even deeper decline in U.S. GDP during this recession. However, that
improvement is expected to now end with little or no improvement
through next year as foreign economies remain weak. Weak
economic growth is expected to do little reduce unemployment. The
unemployment rate is expected to average 9.9% and then dip just to 9.6%
by next year's third quarter. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921f.jpg" align="right" border="0" height="265" width="353">
These rates are the highest jobless rates
since 1982-83 and reflect little or no growth in expected employment.
Pricing power is thus expected to be severely constrained. The y/y
growth in the overall GDP price deflator is expected to drift up to
1.5% from its low of 1.0% this year. Perhaps not-so-surprisingly,
forecasters expect that lift to stem from a liquidity-driven rise in
core consumer prices to 1.6% from a low of 1.1% being reached now.
Ten-year Treasury yields are expected to rise in tandem to highs near
4% by the middle of next year. The full Third
Quarter 2009 Survey of Professional Forecasters from the
Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/2009/survq309.cfm">here</a>.
The data are available in Haver's SURVEYS database.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">FRB
Philadelphia Survey of Professional Forecasters (AR)</th>
<th scope="col">2Q '09</th>
<th scope="col">3Q '09</th>
<th scope="col">4Q '09</th>
<th scope="col">1Q '10</th>
<th scope="col">2Q '10</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>-1.0%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; PCE</td>
<td>-1.2</td>
<td>1.7</td>
<td>1.1</td>
<td>1.7</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-Residential
Investment</td>
<td>-8.9</td>
<td>-7.3</td>
<td>-6.3</td>
<td>2.1</td>
<td>3.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>-29.3</td>
<td>-7.3</td>
<td>1.8</td>
<td>5.6</td>
<td>13.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Federal
Government&nbsp;</td>
<td>10.9</td>
<td>6.2</td>
<td>4.1</td>
<td>1.5</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Change in Business
Inventories</td>
<td>$-141.1B</td>
<td>$-89.9B</td>
<td>$-32.7B</td>
<td>$-1.7B</td>
<td>$9.5B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports</td>
<td>-339.3</td>
<td>-340.0</td>
<td>-342.1</td>
<td>-353.6</td>
<td>-366.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>9.3</td>
<td>9.6</td>
<td>9.9</td>
<td>9.9</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Price Index (Y/Y, %)</td>
<td>2.4</td>
<td>1.7</td>
<td>1.1</td>
<td>1.5</td>
<td>1.5</td>
</tr>
</tbody>
</table>


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Each quarter, the Federal Reserve Bank of Philadelphia surveys a group of professional forecasters to gain perspective on the outlook for the U.S. economy. In the August survey, the panel expected the recession to have reached its [...]

Forecasters Expect Return Of Positive GDP Growth This Quarter, Slow Thereafter

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921a.jpg" align="right" border="0" height="265" width="353">
The
Conference Board's Index of Leading Economic Indicators continued to
suggest a pending economic recovery with a 0.6% August increase that
was close to expectations. The rise in the composite index of leaders
was the fifth in a row and the 4.7% increase during those five months
was the strongest since early-1983. The index itself was at the highest
level since January of last year. The leading index is based on actual
reports for eight economic data series. The Conference Board initially
estimates two series, orders for consumer goods and orders for capital
goods. Perhaps tempering the outlook was that the 0.6%
August increase in the leaders was the weakest of the last five months.
Moreover, a slightly diminished 60% of the index components rose.
Higher stock prices and a steeper interest rate yield curve, along with
a slower speed of vendor deliveries, made the largest positive
contributions to the latest overall increase in the leaders. However,
the real money supply fell for the fourth month in the last five and
average weekly factory hours worked were unchanged as were new orders
for consumer goods &amp; materials.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921b.jpg" align="right" border="0" height="265" width="353">
Continuing to
suggest that the rate of decline in the economy is slowing were the
coincident indicators. They were unchanged during August after a slim
0.1% July gain. While hardly indicative of a robust economy, these
declines compare with monthly shortfalls of 0.6%-to-1.1% dating back to
September. Fostering the turnaround have been slight increases in
industrial production and real personal income as well as diminished
monthly declines in payrolls.Wringing out past economic
excesses is needed for real economic recovery. In a further sign that
excesses in the U.S. economy are diminishing, the lagging index fell
for the eight month in the last nine. To that point, C&amp;I loans
outstanding fell sharply for the ninth straight month and consumer
credit versus personal income was off for the fifth month this year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921c.jpg" align="right" border="0" height="265" width="353">
Regardless, the average duration of unemployment shortened and the
change in CPI for services eased. The ratio of coincident-to-lagging
indicators (a measure of economic excess) also continued higher for the
fifth straight month to the highest level since November.
The Conference Board figures are available in Haver's BCI
database. Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.
Beyond Inflation Targeting: Should Central Banks
Target the Price Level? from the Federal Reserve Bank
of Kansas City is available <a href="%A0http:/www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3kahn.pdf">here.</a> 
How Will Unemployment
Fare Following the Recession? also from the Federal
Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3knotek.pdf">here.</a>
<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/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May 6-Month % (AR)</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">Leading</td>
<td>0.6</td>
<td>0.9</td>
<td>0.8</td>
<td>6.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0</td>
<td>0.1</td>
<td>-0.4</td>
<td>-5.4</td>
<td>-0.9</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1</td>
<td>-0.5</td>
<td>-0.9</td>
<td>-8.6</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
</body></html>

The Conference Board's Index of Leading Economic Indicators continued to suggest a pending economic recovery with a 0.6% August increase that was close to expectations. The rise in the composite index of leaders was the fifth in a row [...]

U.S. Leading Indicators Rise For A Fifth Straight Month And Signal Economic Recovery

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921a.jpg" align="right" border="0" height="265" width="353">The
Conference Board's Index of Leading Economic Indicators continued to
suggest a pending economic recovery with a 0.6% August increase that
was close to expectations. The rise in the composite index of leaders
was the fifth in a row and the 4.7% increase during those five months
was the strongest since early-1983. The index itself was at the highest
level since January of last year. The leading index is based on actual
reports for eight economic data series. The Conference Board initially
estimates two series, orders for consumer goods and orders for capital
goods.
 Perhaps tempering the outlook was that the 0.6%
August increase in the leaders was the weakest of the last five months.
Moreover, a slightly diminished 60% of the index components rose.
Higher stock prices and a steeper interest rate yield curve, along with
a slower speed of vendor deliveries, made the largest positive
contributions to the latest overall increase in the leaders. However,
the real money supply fell for the fourth month in the last five and
average weekly factory hours worked were unchanged as were new orders
for consumer goods &amp; materials.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921b.jpg" align="right" border="0" height="265" width="353">Continuing
to
suggest that the rate of decline in the economy is slowing were the
coincident indicators. They were unchanged during August after a slim
0.1% July gain. While hardly indicative of a robust economy, these
declines compare with monthly shortfalls of 0.6%-to-1.1% dating back to
September. Fostering the turnaround have been slight increases in
industrial production and real personal income as well as diminished
monthly declines in payrolls.
Wringing out past economic
excesses is needed for real economic recovery. In a further sign that
excesses in the U.S. economy are diminishing, the lagging index fell
for the eight month in the last nine. To that point, C&amp;I loans
outstanding fell sharply for the ninth straight month and consumer
credit versus personal income was off for the fifth month this year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921c.jpg" align="right" border="0" height="265" width="353">
Regardless, the average duration of unemployment shortened and the
change in CPI for services eased. The ratio of coincident-to-lagging
indicators (a measure of economic excess) also continued higher for the
fifth straight month to the highest level since November.
The Conference Board figures are available in Haver's BCI
database. Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.
Beyond Inflation Targeting: Should Central Banks
Target the Price Level? from the Federal Reserve Bank
of Kansas City is available <a href="%A0http:/www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3kahn.pdf">here.</a> 

How Will Unemployment
Fare Following the Recession? also from the Federal
Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3knotek.pdf">here.</a>
<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/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May 6-Month % (AR)</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">Leading</td>
<td>0.6</td>
<td>0.9</td>
<td>0.8</td>
<td>6.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0</td>
<td>0.1</td>
<td>-0.4</td>
<td>-5.4</td>
<td>-0.9</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1</td>
<td>-0.5</td>
<td>-0.9</td>
<td>-8.6</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>

Forecasters Expect Return Of
Positive GDP Growth This Quarter, Slow Thereafter 
by <a href="/comment/Moeller.html">Tom
Moeller&nbsp;</a> September 21, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921d.jpg" align="right" border="0" height="265" width="353">Each
quarter, the Federal Reserve Bank of Philadelphia surveys a group of
professional forecasters to gain perspective on the outlook for the
U.S. economy. In the August survey, the panel expected the recession to
have reached its end, though the recovery is expected to be subpar.
That subpar nature is expected to keep unemployment high but it is not
expected to prevent inflation and interest rates from rising.
Just
2.4% growth in real GDP is expected during the current quarter to be
followed by growth at about that rate into next year. That follows the
3.9% y/y drop in real GDP through last quarter, which was the deepest
decline since the Great Depression. Indeed, this recovery is subpar
compared to prior periods of severe recession. Following the 1973-75
recession, when GDP fell at a peak y/y rate of 2.3%, growth shortly
rebounded to 6.2%. Similarly following the 1981-82 recession, when GDP
fell 2.7% y/y, a snapback came quickly at near an 8%
rate.
 The subpar nature of the coming economic
recovery stems very much from the consumer who remains burdened by
excessive levels of debt. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921e.jpg" reaching only two that compares with excess six percent during recoveries similarly quarterly in residential middle next fraction prior periods past overbuilding weighs activity finally on domestic demand side business investment is expected to recover at a subpar rate after its decline this year as corporate profits remain under pressure and outlook for global economic remains contained federal spending also should rise but rates of growth are constrained by the soaring budget deficit align="right" border="0" height="265" width="353">
A swing towards inventory accumulation also should
play a part in the pending economic recovery, yet here again it's not a
huge part. Accumulation at near a $20 billion annual rate is expected
by the end of next year. Certainly that is improved from the peak rate
of decumulation of $141 last quarter, and the dollar swing is
impressive. But as a percentage of the economy's overall real size it
amounts to barely half the swing after prior severe recessions. As for
the foreign trade deficit, recent improvement has helped forestall an
even deeper decline in U.S. GDP during this recession. However, that
improvement is expected to now end with little or no improvement
through next year as foreign economies remain weak.
 Weak
economic growth is expected to do little reduce unemployment. The
unemployment rate is expected to average 9.9% and then dip just to 9.6%
by next year's third quarter. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090921f.jpg" align="right" border="0" height="265" width="353">
These rates are the highest jobless rates
since 1982-83 and reflect little or no growth in expected employment.
Pricing power is thus expected to be severely constrained. The y/y
growth in the overall GDP price deflator is expected to drift up to
1.5% from its low of 1.0% this year. Perhaps not-so-surprisingly,
forecasters expect that lift to stem from a liquidity-driven rise in
core consumer prices to 1.6% from a low of 1.1% being reached now.
Ten-year Treasury yields are expected to rise in tandem to highs near
4% by the middle of next year.
 The full Third
Quarter 2009 Survey of Professional Forecasters from the
Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/2009/survq309.cfm">here</a>
.
The data are available in Haver's SURVEYS database.&nbsp;

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">FRB
Philadelphia Survey of Professional Forecasters (AR)</th>
<th scope="col">2Q '09</th>
<th scope="col">3Q '09</th>
<th scope="col">4Q '09</th>
<th scope="col">1Q '10</th>
<th scope="col">2Q '10</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>-1.0%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; PCE</td>
<td>-1.2</td>
<td>1.7</td>
<td>1.1</td>
<td>1.7</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-Residential
Investment</td>
<td>-8.9</td>
<td>-7.3</td>
<td>-6.3</td>
<td>2.1</td>
<td>3.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>-29.3</td>
<td>-7.3</td>
<td>1.8</td>
<td>5.6</td>
<td>13.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Federal
Government&nbsp;</td>
<td>10.9</td>
<td>6.2</td>
<td>4.1</td>
<td>1.5</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Change in Business
Inventories</td>
<td>$-141.1B</td>
<td>$-89.9B</td>
<td>$-32.7B</td>
<td>$-1.7B</td>
<td>$9.5B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports</td>
<td>-339.3</td>
<td>-340.0</td>
<td>-342.1</td>
<td>-353.6</td>
<td>-366.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>9.3</td>
<td>9.6</td>
<td>9.9</td>
<td>9.9</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Price Index (Y/Y, %)</td>
<td>2.4</td>
<td>1.7</td>
<td>1.1</td>
<td>1.5</td>
<td>1.5</td>
</tr>
</tbody>
</table>
Industrial Orders Keep Rising In
France And In Italy Pessimism Continues To Haunt The Outlook, However 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 21, 2009


<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>
 
Recent Data For The Russian Economy 
by <a href="/comment/Curley.html">
Louise Curley</a> September 21, 2009


<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>

U.S. Leading Indicators Rise For AFifth Straight Month And Signal Economic Recovery

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917c.jpg" align="right" border="0" height="265" width="353">
Extraordinary
developments continued to characterize the US financial system through
Q2, as indicated in the Federal Reserve's flow-of-funds accounts,
published today at noon.&nbsp; Two sectors in particular caught our
attention, households and the federal government, each for opposing
reasons.First, after six consecutive quarters of
deterioration, household net worth finally experienced an
improvement.&nbsp; It increased $2.0 trillion to $53.1
trillion.&nbsp; The biggest gains came from the upturn in the stock
market, which added $1.1 trillion to people's assets.&nbsp;
Additionally, mutual fund holdings gained $486 billion, and pension
fund reserves -- largely invested in equities, of course -- added $742
billion.&nbsp; Among tangible assets, household real estate values
rose by $323 billion following nine consecutive quarters of
erosion.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917e.jpg" align="right" border="0" height="265" width="353">
&nbsp;Household financial positions also improved because
they continued to pay down liabilities.&nbsp; These changes were
small compared to the asset moves, but clearly still in a favorable
direction; total liabilities fell $35 billion in Q2, the fourth
reduction in the last five quarters.&nbsp; Mortgage debt and
consumer credit had the largest declines, while conventional bank loans
increased.In these comparisons, the concept of "mortgage equity
withdrawal" plays a role.&nbsp; Homeowners' equity in real estate
increased in Q2 by $353 billion.&nbsp; It had contracted in 12 of
the last 13 quarters, a span extending back to the beginning of 2006
and interrupted by just a token increase in Q4 2006.&nbsp; For the
first year of this period, the reductions were evidently deliberate on
the part of consumers, who borrowed heavily against their
properties.&nbsp; Such "mortgage equity withdrawal" became a
popular addition to economists' tools for forecasting consumer
spending, which could be larger still when income was augmented by
liquidations of home values.&nbsp; This practice dwindled rapidly
however as real estate prices began to decline in 2007 and according to
the Haver measure, "MEW" turned negative last year.&nbsp; So people
began borrowing a smaller portion of the value of the real estate they
were purchasing or remodeling to try to hold a larger equity
stake.&nbsp; In the aggregate this effort was subverted by the the
continuing decline in real estate prices in general.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917m.jpg" align="right" border="0" height="265" width="353">
&nbsp; Finally,
though, this last quarter saw homeowners' equity go up.&nbsp; As
noted above, the value of real estate increased some $323
billion.&nbsp; Our measure of MEW declined by about $90 billion,
and mortgage debt itself was paid down by some $29 billion.&nbsp;
As a media headline writer noted recently, once again, the main
function of a home is returning to that of residence, not a resource to
pay for something else.Separately in this flow-of-funds report, we
were also struck by the magnitude of the federal government's
borrowing, and just one small comparison will suffice to
illustrate.&nbsp; In these data, it's the historical comparison
available through the time series that helps put these things in
perspective.&nbsp; It's easy to joke about "a trillion here and
trillion there", but here's a new way to look at these
numbers.&nbsp; In Q2, net new issues of Treasury securities were
just under $339 billion.&nbsp; In this one three-month period, at a
time of year when tax inflows usually mean the Treasury borrows little
or even pays down on the debt, the Treasury borrowed more than it had
in any whole year before 2003.&nbsp; And this latest quarter's new
debt was in fact seasonally small: the prior three quarters had
averaged $518 billion, easily larger than any whole year ever -- until
2008.&nbsp;
End of Year
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Flow
of Funds (Y/Y % Chg.)</th>
<th scope="col">% of Total
Outstanding</th>
<th scope="col">2Q '09</th>
<th scope="col">1Q '09</th>
<th scope="col" colspan="3">End of Year</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td class="firstcol">2008</td>
<td>2007</td>
<td>2006</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt
Outstanding</td>
<td>--</td>
<td>3.0</td>
<td>4.2</td>
<td>5.0</td>
<td>10.4</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Federal Government</td>
<td>13.6%</td>
<td>35.9</td>
<td>28.3</td>
<td>24.2</td>
<td>4.9</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Households</td>
<td>25.9%</td>
<td>-1.2</td>
<td>-0.7</td>
<td>0.3</td>
<td>6.6</td>
<td>10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfinancial Corporate Business</td>
<td>13.8%</td>
<td>2.9</td>
<td>4.4</td>
<td>5.3</td>
<td>14.2</td>
<td>8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfarm, Noncorporate Business</td>
<td>6.9%</td>
<td>-1.7</td>
<td>1.4</td>
<td>4.9</td>
<td>12.6</td>
<td>14.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>31.3%</td>
<td>-0.9</td>
<td>3.7</td>
<td>5.5</td>
<td>13.4</td>
<td>9.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Trillions of
$</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Net Worth: Households &amp;
Nonprofit Organizations</td>
<td>--</td>
<td>$53.140</td>
<td>$51.141</td>
<td>$52.917</td>
<td>$62.911</td>
<td>$63.335</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tangible Assets:
Households</td>
<td>--</td>
<td>$24.847</td>
<td>$24.660</td>
<td>$25.177</td>
<td>$27.526</td>
<td>$28.724</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Financial Assets:
Households</td>
<td>--</td>
<td>$42.361</td>
<td>$40.584</td>
<td>$41.957</td>
<td>$50.703</td>
<td>$48.025</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total Liabilities:
Households</td>
<td>--</td>
<td>$14.068</td>
<td>$14.103</td>
<td>$14.217</td>
<td>$14.318</td>
<td>$13.414</td>
</tr>
</tbody>
</table>
</body></html>

Extraordinary developments continued to characterize the US financial system through Q2, as indicated in the Federal Reserve's flow-of-funds accounts, published today at noon. Two sectors in particular caught our attention, households [...]

U.S. Leading Indicators Rise ForAFifth Straight Month And Signal Economic Recovery

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917a.jpg" align="left" border="0" height="265" width="353">
August following and outsized drop of 1.6% in July. Even so
the drop in German PPI prices is becoming progressively smaller. Over
three-months the pace of decline for PPI-ex-construction prices is 4.4%
compared to a larger 6.9% pace of decline Yr./Yr. Ex energy PI prices
are starting to creep up. Over thee-months the ex-energy price trend is
flat; over six months it&#8217;s a rate of decline of 1.9% and over 12-months
the pace of decline is 3.3%. PPI prices ex-energy are stabilizing and
paving the way to rise on a more consistent basis. 
 

Sectors and quarterly trend: Still in the quarter, PPI prices
are still falling with two of three-months&#8217; data in hand. Yr/Yr trends
for sector prices are still falling although for intermediate goods
there has started to be some cutting of the pace of the decline in the
year-over-year price trend. 
 

German prospects: The strong euro will help to keep a lid on
German PPI prices. And much of the rise in oil prices is already under
our belt in Germany although there may be some subtle transmission
effects that are still at work. The recent back off in the IFO index
suggests that the German recovery will not be the sort of blockbuster
that introduces demand-pull inflation to the recovery process. But just
as clearly the period of falling prices is coming to an end. There will
groups that experienced set-backs in the recession and will be looking
to make up for those with gains as the economy gets healthier. In
Germany especially there is a concern among policymakers about how this
transition plays out. 
 

Perspective: A new dawn of a tentative dawn - The ECB remains
wary in this circumstance. But the Bundesbank and ECB have not been as
over-the-top with stimulus as was the US Federal Reserve. There is not
as much to pull back or to offset. Even now credit growth in Europe
remains weak and stilted. The UK is on the same page with this result.
Without rapid credit growth, it seems unlikely that any sort of
overheating would have legs. But as we transition away from the &#8216;era of
falling prices&#8217; expect the central bankers to begin to sound a new note
even as they are wary not to overdo any tightening of policy too soon
or to do it too rapidly once they start. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> Germany PPI</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> %m/m</td>
<td colspan="4"> %-SAAR</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
<td>IN Q3</td>
</tr>
<tr class="odd">
<td class="firstcol">PPIxConst</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-0.2%</td>
<td>-4.4%</td>
<td>-6.8%</td>
<td>-6.9%</td>
<td>0.3%</td>
<td>-6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ex Energy</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-1.9%</td>
<td>-3.3%</td>
<td>3.2%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
</body></html>

August following and outsized drop of 1.6% in July. Even so the drop in German PPI prices is becoming progressively smaller. Over three-months the pace of decline for PPI-ex-construction prices is 4.4% compared to a larger 6.9% pace [...]

German PPI Rises And Sets Sites On A New Horizon

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917a.jpg" align="left" border="0" height="265" width="353">
August following and outsized drop of 1.6% in July. Even so
the drop in German PPI prices is becoming progressively smaller. Over
three-months the pace of decline for PPI-ex-construction prices is 4.4%
compared to a larger 6.9% pace of decline Yr./Yr. Ex energy PI prices
are starting to creep up. Over thee-months the ex-energy price trend is
flat; over six months it&#8217;s a rate of decline of 1.9% and over 12-months
the pace of decline is 3.3%. PPI prices ex-energy are stabilizing and
paving the way to rise on a more consistent basis. 
 

Sectors and quarterly trend: Still in the quarter, PPI prices
are still falling with two of three-months&#8217; data in hand. Yr/Yr trends
for sector prices are still falling although for intermediate goods
there has started to be some cutting of the pace of the decline in the
year-over-year price trend. 
 

German prospects: The strong euro will help to keep a lid on
German PPI prices. And much of the rise in oil prices is already under
our belt in Germany although there may be some subtle transmission
effects that are still at work. The recent back off in the IFO index
suggests that the German recovery will not be the sort of blockbuster
that introduces demand-pull inflation to the recovery process. But just
as clearly the period of falling prices is coming to an end. There will
groups that experienced set-backs in the recession and will be looking
to make up for those with gains as the economy gets healthier. In
Germany especially there is a concern among policymakers about how this
transition plays out. 
 

Perspective: A new dawn of a tentative dawn - The ECB remains
wary in this circumstance. But the Bundesbank and ECB have not been as
over-the-top with stimulus as was the US Federal Reserve. There is not
as much to pull back or to offset. Even now credit growth in Europe
remains weak and stilted. The UK is on the same page with this result.
Without rapid credit growth, it seems unlikely that any sort of
overheating would have legs. But as we transition away from the &#8216;era of
falling prices&#8217; expect the central bankers to begin to sound a new note
even as they are wary not to overdo any tightening of policy too soon
or to do it too rapidly once they start. 


Germany PPI
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="9" scope="col"> Germany
PPI</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
<td>IN Q3</td>
</tr>
<tr class="odd">
<td class="firstcol">PPIxConst</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-0.2%</td>
<td>-4.4%</td>
<td>-6.8%</td>
<td>-6.9%</td>
<td>0.3%</td>
<td>-6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ex Energy</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-1.9%</td>
<td>-3.3%</td>
<td>3.2%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
</body></html>

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917b.jpg" align="left" border="0" height="265" width="353">
Exports rose sharply in the e-Zone in July posting a gain of
4.1% in the month as imports edged lower by 0.3%. The widening surplus
will boost EMU GDP and surpluses have emerged and steadily widened over
the last four months. The chart shows a considerable trend in place
with exports rising and imports still extending their losses in
percentage terms. 
 

Among export components raw material are having the largest
export boom over the previous three months (detailed trade data lag one
month). But even over that period MFG exports are falling at an 8.6%
pace. On the import side imports continue to post negative growth rates
even over three-months. Raw material imports are falling sharply on
that period. And manufacturing imports are falling at nearly
three-times the pace of MFG exports. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="6" scope="col">Ezone
13-Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; 6,777</td>
<td>&#8364;&#8364; 2,288</td>
<td>&#8364;&#8364; 3,514</td>
<td>&#8364;&#8364; 1,181</td>
<td>&#8364;&#8364; (1,230)</td>
</tr>
<tr class="grey3">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Exp</td>
<td>4.1%</td>
<td>0.9%</td>
<td>14.2%</td>
<td>8.6%</td>
<td>-20.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Food and Drinks</td>
<td>--</td>
<td>0.6%</td>
<td>5.7%</td>
<td>-15.0%</td>
<td>-9.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Raw materials</td>
<td>--</td>
<td>-0.2%</td>
<td>84.5%</td>
<td>8.4%</td>
<td>-21.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>--</td>
<td>-1.6%</td>
<td>-8.6%</td>
<td>-27.9%</td>
<td>-24.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">All IMP</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>-10.7%</td>
<td>-14.5%</td>
<td>-28.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Food and Drinks</td>
<td>--</td>
<td>-0.9%</td>
<td>-8.2%</td>
<td>-13.8%</td>
<td>-7.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Raw materials</td>
<td>--</td>
<td>0.3%</td>
<td>-49.4%</td>
<td>-58.0%</td>
<td>-41.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>--</td>
<td>-2.0%</td>
<td>-31.2%</td>
<td>-28.9%</td>
<td>-22.8%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">*Eur mlns; mo or period average;
Gray shaded areas lag one month</td>
</tr>
</tbody>
</table>
</body></html>

Exports rose sharply in the e-Zone in July posting a gain of 4.1% in the month as imports edged lower by 0.3%. The widening surplus will boost EMU GDP and surpluses have emerged and steadily widened over the last four months. The [...]

Euro Trade Surplus Surges

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090917a.jpg" align="left" border="0" height="265" width="353">
Yr/Yr regional housing markets all are still declining, of
course, but the pace of the drop is diminishing across each of the main
regions. The turn is clear but to keep it in gear will require more
growth. With the first time home buyer incentives coming off, home
purchases will find a greater challenge to hold the uptrend. It is a
good time to hold our breath and to wait and see how much of this turn
remains in place. Hopefully with the incentives off, a stronger economy
will provide the incentive for a lasting rebound in housing starts. 
 

The table shows that the strength of the housing rebound is in
the single family sector where these purchase incentives play strongly.
For single family units, current strength is building momentum and
permits are steadily strengthening as well, despite the date with the
expiration for incentives. 
 

The 2-4 unit sector is falling at an accelerated pace. Permits
are showing some lift nonetheless. Multifamily starts are still very
weak and despite that permits are improving. 
 

Still the story of housing this month is that it was buoyed by
gains in the multifamily sector even though that sector has weak
trends. Single family starts fell sharply in the month. The small 2-4
unit sector also fell. This month growth was propped up by the sector
that has showed the least promise. The homebuilder survey released on
Sept 16th showed a one &#8211;point rise in that index. For the time being
housing retains its upward momentum, however slight. 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Housing
Starts/Permits By Unit Size</th>
</tr>
<tr class="grey7">
<th colspan="9">Analytical Comparisons (Pct.
Changes-Not Compounded)</th>
</tr>
<tr class="grey6">
<th colspan="9">Aug.2009</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">Total</td>
<td colspan="2">One Unit</td>
<td colspan="2">2-4 Units</td>
<td colspan="2">5 or more</td>
</tr>
<tr class="grey4">
<td class="firstcol">In 000's of Units</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
<td>Starts</td>
<td>Permits</td>
</tr>
<tr class="grey3">
<td class="firstcol">This Month:Saar</td>
<td>598</td>
<td>579</td>
<td>479</td>
<td>462</td>
<td>4</td>
<td>19</td>
<td>115</td>
<td>98</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jul.2009</td>
<td>589</td>
<td>564</td>
<td>494</td>
<td>463</td>
<td>10</td>
<td>18</td>
<td>85</td>
<td>83</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jun.2009</td>
<td>590</td>
<td>570</td>
<td>478</td>
<td>433</td>
<td>11</td>
<td>23</td>
<td>101</td>
<td>114</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-month avg.</td>
<td>592</td>
<td>571</td>
<td>484</td>
<td>453</td>
<td>8</td>
<td>20</td>
<td>100</td>
<td>98</td>
</tr>
<tr class="grey3">
<td class="firstcol">1-month % chg.</td>
<td>1.5%</td>
<td>2.7%</td>
<td>-3.0%</td>
<td>-0.2%</td>
<td>-60.0%</td>
<td>5.6%</td>
<td>35.3%</td>
<td>18.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">3-month % chg</td>
<td>8.5%</td>
<td>11.8%</td>
<td>17.1%</td>
<td>13.8%</td>
<td>-55.6%</td>
<td>5.6%</td>
<td>-13.5%</td>
<td>4.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">6-month % chg</td>
<td>4.2%</td>
<td>5.3%</td>
<td>34.2%</td>
<td>21.3%</td>
<td>-69.2%</td>
<td>11.8%</td>
<td>-43.6%</td>
<td>-35.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">yr/yr % chg.</td>
<td>-29.6%</td>
<td>-32.4%</td>
<td>-21.7%</td>
<td>-15.7%</td>
<td>-73.3%</td>
<td>-44.1%</td>
<td>-48.2%</td>
<td>-64.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Drop from Max</td>
<td>-73.7%</td>
<td>-74.4%</td>
<td>-73.7%</td>
<td>-74.3%</td>
<td>-95.2%</td>
<td>-82.1%</td>
<td>-73.6%</td>
<td>-81.6%</td>
</tr>
</tbody>
</table>
</body></html>

Yr/Yr regional housing markets all are still declining, of course, but the pace of the drop is diminishing across each of the main regions. The turn is clear but to keep it in gear will require more growth. With the first time home [...]

Housing Starts Show Turns Across Regions

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.

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

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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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