Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901f.jpg" align="right" border="0" height="265" width="353">
Preliminary
data show that German retail sales rose 0.7% in volume
terms in July after declining in May and June. (Final data for total
retail sales plus data on the composition of sales for the month of
July will be available in about two weeks.) The value of
retail sales rose only 0.1%, implying a decline in retail
prices.&nbsp; While the rise in retail sales is encouraging, its
magnitude suggests a pretty lack luster consumer.&nbsp;&nbsp;
The first chart shows the volume, value and implied price level of
Germany's retail sales. Perhaps the reason that these data suggest
such a lack luster consumer, is that they do not take into account the
effect of the Government's program, paying people 2,500 Euros if they
scrap their car and buy a new one, which began in January.&nbsp;
German retail sales data exclude sales of motor vehicles.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901g.jpg" align="right" border="0" height="265" width="353">
&nbsp;
Combined wholesale and retail sales of cars and light trucks are
available in the Manufacturing, Trade &amp; Service Section of the
Haver data base for Germany.&nbsp; This series combining wholesale
sales is not strictly comparable with the retail sales data and is
available only through June. The increase in passenger car
registrations is, perhaps, a better proxy for sales of new cars and
this series, which is not seasonally adjusted, is available through
July.&nbsp; It, too, can be&nbsp; found in the&nbsp;
Manufacturing, Trade &amp; Services section in the Haver data base
on Germany.&nbsp; The year to year increases in these two series
are shown in the second chart.&nbsp; The&nbsp; year to year
increases in car registrations since January have been particularly
striking and suggest that consumers have a higher propensity to spend
than the retail sales data would suggest.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun&nbsp; 09</th>
<th scope="col">Jul 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Retail Sales Volume&nbsp;
(2005=100)</td>
<td>94.9</td>
<td>94.2</td>
<td>-5.9</td>
<td>0.74</td>
<td>-1.04</td>
<td>96.5</td>
<td>97.2</td>
<td>1000.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales Value&nbsp;
(2005=100)</td>
<td>99.1</td>
<td>99.0</td>
<td>101.4</td>
<td>0.10</td>
<td>-2.27</td>
<td>101.4</td>
<td>99.4</td>
<td>100.9</td>
</tr>
<tr class="even">
<td class="firstcol">Retail Sales Implied Price
Level&nbsp; (2005=100)</td>
<td>104.4</td>
<td>105.1</td>
<td>105.7</td>
<td>-0.64</td>
<td>-1.24</td>
<td>105.1</td>
<td>102.2</td>
<td>100.9</td>
</tr>
<tr>
<td class="firstcol">Year to Year % Change</td>
<td>Jul 09</td>
<td>Jun&nbsp; 09</td>
<td>May 09</td>
<td>Apr&nbsp;&nbsp;&nbsp; 09</td>
<td>Mar 09</td>
<td>Feb 09&nbsp;</td>
<td>Jan 09 </td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale and Retail Sales of
Cars and Light Motor Vehicles</td>
<td>n.a.</td>
<td>8.59</td>
<td>7.23</td>
<td>0.75</td>
<td>23.70</td>
<td>5.38</td>
<td>-15.89</td>
<td>--</td>
</tr>
<tr class="even">
<td class="firstcol">New Passenger Car Registrations</td>
<td>29.50</td>
<td>40.48</td>
<td>39.71</td>
<td>19.39</td>
<td>39.33</td>
<td>21.48</td>
<td>-14.21</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Preliminary data show that German retail sales rose 0.7% in volume terms in July after declining in May and June. (Final data for total retail sales plus data on the composition of sales for the month of July will be available in [...]

German Retail Sales Up A Bit In July: Where Are The Auto Sales Resulting From Germany's "Cash For Clunkers" Program?

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901k.jpg" width="353">
Despite improvement in the residential sector, the total value of construction outlays has continued to trend lower. The overall value of construction spending ticked lower last month by 0.2% to the lowest level since February of 2004.
The declining level of construction has very-much reflected the weakening of corporate profitability which lowered spending in the private nonresidential sector by 1.2% during July and 8.3% from one year ago. That compares to the gain for all of last year of 13.2%. The commercial sector led that weakness with a 34.6% y/y decline followed closely by a 31.3% drop in the multi-retail sector. Office building construction wasn&#39;t far behind with a 26.0% drop in activity. Easier, but still significant, shortfalls versus last year were logged by the health care (-3.6%) and educational (-10.2% y/y) sectors. Spending in the transportation sector was off just 0.6% y/y.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901l.jpg" width="353">
Residential building activity may be finding its bottom to the recent recession in building activity. It rose 2.3% from June. Nevertheless, spending was down by more than one-quarter from the year-ago level paced by a near-halving of single family-home activity and a 36.6% drop in multi-family spending.Sometimes it&#39;s cheaper to fix the old place up than to buy new. Spending on alterations and improvements rose 6.0% from the year-ago level.
Public construction activity has elevated the overall construction market of late. Though in July it edged down 0.5%, there&#39;s been an increase of 5.5% since last year. By sector, health care has led the y/y rise with a 29.2% jump followed by a 17.9% rise in commercial construction. Spending on highways and streets did fall slightly in July but it&#39;s up 3.4% y/y while spending on schools construction rose 4.5 y/y.
The construction put-in-place figures are available in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Construction (%)</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>-0.2</td>
<td>0.1</td>
<td>-10.5</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.1</td>
<td>-1.6</td>
<td>-17.0</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>2.3</td>
<td>-0.5</td>
<td>-27.8</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.2</td>
<td>-2.2</td>
<td>-8.3</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.7</td>
<td>3.6</td>
<td>5.5</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
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Despite improvement in the residential sector, the total value of construction outlays has continued to trend lower. The overall value of construction spending ticked lower last month by 0.2% to the lowest level since February of [...]

U.S. Construction Spending Holds Steady

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901h.jpg" align="right" border="0" height="265" width="353">There's
been no letup in the recovery in housing demand. The National
Association of Realtors reported that during July pending, improved
home affordability boosted sales of existing homes by 3.2% from June to
their highest level since June of 2007. The gain followed a similar
rise in June sales and doubled Consensus expectations for a 1.6%
increase. The gain in July home sales was led by a 12.1% m/m rise in
sales in the West.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901i.jpg" align="right" border="0" height="265" width="353">
That rise&nbsp; was a multiple of the increases
during the last several months and it lifted sales to the highest level
since September of last year. The latest also was near the highest
since early-2006. Sales in the South also rose a firm 3.1% to the
highest level since mid-2007. Sales in the Midwest went the other way
and fell 2.0%. They have been roughly flat since January. Finally,
sales in the Northeast dropped 3.0% from June and were roughly
unchanged since April. These home sales figures are analogous to the
new home sales data from the Commerce Department in that they measure
existing home sales when the sales contract is signed, not at the time
the sale is closed. The series dates back to 2001.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901j.jpg" align="right" border="0" height="265" width="353">
The
pending home sales data are available in Haver's PREALTOR database.
The number of homes on the market and prices are in the REALTOR
database.&nbsp;
<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/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>97.6</td>
<td>94.6</td>
<td>&nbsp;&nbsp; 12.1%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>78.8</td>
<td>81.2</td>
<td>4.6</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>88.1</td>
<td>89.9</td>
<td>8.1</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>103.8</td>
<td>100.7</td>
<td>12.1</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>112.5</td>
<td>100.4</td>
<td>19.9</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
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There's been no letup in the recovery in housing demand. The National Association of Realtors reported that during July pending, improved home affordability boosted sales of existing homes by 3.2% from June to their highest level [...]

U.S. Pending Home Sales Remain Firm And Rise To The Highest Level In Two Years

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901d.jpg" width="353">
Earlier strength in gasoline prices took a breather during July and August. Nevertheless, prices remained up sharply since the year began. The pump price for regular gasoline dipped slightly last week to an average $2.61 per gallon, roughly where it&#39;s been since early June. Compared to the December low, however, prices remained up by one dollar (62%). Yesterday, that slight decline in pump prices was accompanied by a dip in the wholesale gasoline price to $1.84 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&#39;s WEEKLY &amp; DAILY databases.
In contrast to the stability of gasoline prices, crude oil prices have strengthened. Light sweet crude oil prices (WTI) increased to $72.41 per barrel last week versus a June high of $70.61. Prices have more-than-doubled since the December low of $32.37. Most recently, the price strength eased. Yesterday the spot market price for light sweet crude oil fell to $69.96 per barrel. Prices had reached a daily high of $73.82 just last week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901e.jpg" width="353">
Earlier strength in gasoline prices stood against the backdrop of a firming demand picture, which now has eased. Since early-June the demand for gasoline has dropped moderately and year-to year demand slipped by 3.5%. Demand for distillate also is off sharply (-19.8% y/y) and residual fuel oil demand has given back its earlier strength (-14.8% y/y). Finally, oil remains plentiful as evidenced by an 11.3% y/y rise in inventories of crude oil &amp; petroleum products. Inventories of gasoline recently have dropped somewhat but they have strengthened by 6.5% versus last year, the strongest gain since early last year. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Natural gas prices make up the weakest part of the energy sector&#39;s pricing environment. Falling last week to an average of $2.72 per mmbtu (-66.5% y/y), prices were down by over three-quarters from the high reached in early-July of last year of $13.19/mmbtu.
Has Greater Globalization Made Forecasting Inflation More Difficult? from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2009/el0905.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">08/31/09</th>
<th scope="col">08/24/09</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>2.61</td>
<td>2.63</td>
<td>-29.0%</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>72.41</td>
<td>70.82</td>
<td>-37.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
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Earlier strength in gasoline prices took a breather during July and August. Nevertheless, prices remained up sharply since the year began. The pump price for regular gasoline dipped slightly last week to an average $2.61 per gallon, [...]

Gasoline Prices Remain Roughly Stable As Crude Oil Prices Tick Higher

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901a.jpg">
According to The National Association of Purchasing Management data, the recession in U.S. factory sector activity is over. Its August composite index jumped to 52.9 from an unrevised July reading of 48.9 and reached it&#39;s highest level since June of 2007. (Any reading above the break-even point of 50 suggests rising activity.) The latest figure was up from the low of 32.9 hit last December and it greatly exceeded Consensus expectations for a reading of 50.5. The ISM data is available in Haver&#39;s USECON database.
Last month, improvement in the ISM index again was broad-based led by a 9.6 point surge in the new orders component. So great was the strengthening in orders that the latest index level of 64.9 was the highest since December of 2004. That compared to a low of 23.1 reached this past December and reflected increases in orders reported by 43% (NSA) of firms. Only 5% reported higher orders this past December. Adding to that strength in domestic orders, it appeared that recessions abroad also wound down. The export order index jumped to 55.5 versus the December low of 35.5. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901b.jpg">
Factory sector improvement also was indicated by a rise in the employment index. Though still reflecting a drop in payrolls, the rate of decline has eased. The index rose to 46.4 which was its highest level since last August and that was up from the February low of 26.1. During the last ten years there has been a 90% correlation between the index level and the three-month change in manufacturing payrolls.
The production component also strengthened. The rise to 61.9 was to its highest level since October 2005, up from the low of 26.3 in December. During the last ten years there has been an 84% correlation between the level of the production component of the composite index and the three-month growth in factory sector industrial production. It is appropriate to correlate the ISM index level with factory sector output growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090901c.jpg">
All this improvement in activity has brought with it a slowing in the speed of vendor deliveries. That&#39;s indicated by the gain in the delivery index to the highest level since 2006. The rate of inventory destocking also appears to have slowed. The inventory index increased modestly to 34.4 but it still was near the lowest level since 1982.
The separate index of prices paid again rose with improved factory sector activity. At 65.0 the reading above the break-even level of 50 was its highest level since last August and it&#39;s up from the December low of 18.0. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>52.9</td>
<td>48.9</td>
<td>49.3</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>64.9</td>
<td>55.3</td>
<td>48.2</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment Index</td>
<td>46.2</td>
<td>45.6</td>
<td>48.0</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>65.0</td>
<td>55.0</td>
<td>77.0</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
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</html>

According to The National Association of Purchasing Management data, the recession in U.S. factory sector activity is over. Its August composite index jumped to 52.9 from an unrevised July reading of 48.9 and reached it's highest [...]

The Factory Sector Recession Is Over; ISM Index Jumps To Highest Level Since Early-2007

The Factory Sector Recession IsOver; ISM Index Jumps To Highest Level Since Early-2007

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831d.jpg" align="left" border="0" height="265" width="353">India's real gross domestic
product rose 6.1% in the second
quarter from the second quarter of 2008, up from the 5.8% year over
year growth in the first quarter. It was the first acceleration in
growth since the fourth quarter of 2007 when the global recession began
to affect the Indian economy. Among the industries contributing to the
acceleration in growth were manufacturing, mining and quarrying,
electricity gas and water and the service industries covering trade,
hotels, transport and communications. The year to year growth in these
industries is shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831e.jpg" align="right" border="0" height="265" width="353">
Earlier this year, the Reserve Bank of India forecasted that
the economy would increase 6% in the fiscal year ending March 2010
while the Federal Government was estimating growth between 6.25% and
7.75%. Since then, the weak summer monsoon, reducing prospects for
agriculture output, has cast doubts on these projections, Although
agriculture has been declining in importance in the Indian economy for
years (as can be seen in the second chart), it still accounts for a
slightly larger portion of the economy than manufacturing. In fiscal
2008, agriculture accounted for 17% of total GDP and manufacturing for
15%. Agriculture output increased 2.4% in the second quarter over the
corresponding period of 2008, down from the 2.7% increase in the first
quarter. The recent announcement by the Farm ministry that 44% of the
625 administered districts reported drought or drought like conditions
suggests a grim outlook for agriculture in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Year/year
Percent Change</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</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">Gross Domestic Product by
Industry</td>
<td>6.13</td>
<td>5.76</td>
<td>4.8</td>
<td>7.75</td>
<td>7.80</td>
<td>8.63</td>
<td>9.25</td>
<td>9.01</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>3.45</td>
<td>-1.36</td>
<td>0.90</td>
<td>5.08</td>
<td>5.50</td>
<td>6.29</td>
<td>8.62</td>
<td>8.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining and Quarrying</td>
<td>7.88</td>
<td>1.60</td>
<td>4.90</td>
<td>3.70</td>
<td>4.61</td>
<td>4.67</td>
<td>4.16</td>
<td>3.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Electric, Gas, Water</td>
<td>6.19</td>
<td>3.58</td>
<td>3.51</td>
<td>3.78</td>
<td>2.75</td>
<td>4.58</td>
<td>3.80</td>
<td>5.86</td>
</tr>
<tr class="odd">
<td class="firstcol">Agriculture</td>
<td>2.37</td>
<td>2.68</td>
<td>-0.84</td>
<td>2.65</td>
<td>3.04</td>
<td>2.23</td>
<td>8.06</td>
<td>3.86</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>7.70</td>
<td>8.41</td>
<td>9.53</td>
<td>9.77</td>
<td>9.99</td>
<td>11.28</td>
<td>10.21</td>
<td>10.68</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>7.10</td>
<td>6.79</td>
<td>4.16</td>
<td>9.56</td>
<td>8.44</td>
<td>6.90</td>
<td>9.70</td>
<td>13.4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade, Hotels,
Transport, Communications</td>
<td>8.08</td>
<td>6.32</td>
<td>5.88</td>
<td>12.09</td>
<td>12.97</td>
<td>13.76</td>
<td>11.66</td>
<td>10.90</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Finance, Insurance,
Real Estate &amp; Business Services</td>
<td>8.06</td>
<td>9.51</td>
<td>8.30</td>
<td>6.37</td>
<td>6.92</td>
<td>10.31</td>
<td>11.89</td>
<td>12.37</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Community, Social
and Personal Services</td>
<td>6.78</td>
<td>12.55</td>
<td>22.49</td>
<td>8.96</td>
<td>8.17</td>
<td>9.73</td>
<td>5.51</td>
<td>7.08</td>
</tr>
</tbody>
</table>

</body></html>

India's real gross domestic product rose 6.1% in the second quarter from the second quarter of 2008, up from the 5.8% year over year growth in the first quarter. It was the first acceleration in growth since the fourth quarter of 2007 [...]

India Reports Acceleration in 2nd Q Growth, but Weak Monsoon Challenges Its Continuance

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831a.jpg" align="right" border="0" height="265" width="353">Middle
America finally appears to be emerging from its sharp recession.
Reporting this morning, the Chicago Purchasing Managers Association
indicated that its August Business Barometer Index rose to 50, at the
break-even level for the first month since last September. The increase
was led by a rise in the orders and production components that breached
50 for the first month since June of last year. In addition, the order
backlogs index surged to its highest level since last September. The
employment series also gained but only back to its December level. The
Chicago PMI figures are diffusion indexes and are available in Haver's SURVEYS
database. In a separate report issued last week, the Chicago
Federal Reserve Bank reported that the National Activity Index (CFNAI)
rose in July to the highest level since January of last year. The
reading of -0.74 was up from June and both figures were higher than the
series' low of -3.99 reached this past January. Since 1970 there has
been a 74% correlation between the level of the index and the q/q
change in real GDP. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831b.jpg" align="right" border="0" height="265" width="353">
The three-month moving average
of the index also improved to its highest level since August. An index
level at or below -0.70 typically has indicated negative U.S. economic
growth. A zero value of the CFNAI indicates that the economy is
expanding at its historical trend rate of growth of roughly 3%. The
complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_august2009.pdf">here.</a>·
The production and income components made the largest positive
contributions to the July CFNAI. Thirty-five of the index components
had a positive influence on the overall index while 50 had a negative
influence. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090831c.jpg" align="right" border="0" height="265" width="353">
These figures contrast to last month's report on June
activity when 22 of the index components had a positive influence while
63 made a negative contribution. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders. In yet a third survey, the
Chicago Fed indicated that its Midwest manufacturing index improved
slightly during July and recovered declines during the prior two
months. Nevertheless, the figure remained near the lowest since 2003.
Indicators for the auto and steel sectors rose while machinery fell.
The Chicago Federal Reserve figures also are available in Haver's SURVEYS
database. Clearing and settlement of exchange
traded derivatives from the Federal Reserve Bank of Chicago
can be found <a href="http://www.chicagofed.org/publications/fedletter/cfloctober2009_267.pdf">
here</a>.&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Aug. '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Chicago
Purchasing Managers Index</td>
<td>50.0</td>
<td>43.4</td>
<td>39.9</td>
<td>56.4</td>
<td>46.8</td>
<td>54.4</td>
<td>56.8</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>52.5</td>
<td>48.0</td>
<td>41.6</td>
<td>58.0</td>
<td>46.7</td>
<td>57.7</td>
<td>59.9</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; Production</td>
<td>52.9</td>
<td>43.3</td>
<td>39.3</td>
<td>61.2</td>
<td>48.1</td>
<td>58.3</td>
<td>60.3</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>38.7</td>
<td>35.3</td>
<td>28.9</td>
<td>39.2</td>
<td>41.4</td>
<td>51.5</td>
<td>51.6</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey2">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed Nat'l Activity Index</a></td>
<td>--</td>
<td>-0.74</td>
<td>-1.82</td>
<td>-1.29 (July '08)</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td></td>
<td>-1.69</td>
<td>-2.18</td>
<td>-1.17</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey1">
<td class="firstcol">Chicago Fed
Midwest Factory Index</td>
<td>--</td>
<td>79.7</td>
<td>78.1</td>
<td>103.5</td>
<td>101.6</td>
<td>107.4</td>
<td>107.1</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;&nbsp; Auto Sector</td>
<td>--</td>
<td>51.7</td>
<td>45.1</td>
<td>76.8</td>
<td>73.2</td>
<td>86.5</td>
<td>87.8</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;&nbsp; Machinery
Sector</td>
<td>--</td>
<td>91.6</td>
<td>93.6</td>
<td>126.4</td>
<td>125.3</td>
<td>127.7</td>
<td>129.1</td>
</tr>
</tbody>
</table>
</body></html>

Middle America finally appears to be emerging from its sharp recession. Reporting this morning, the Chicago Purchasing Managers Association indicated that its August Business Barometer Index rose to 50, at the break-even level for the [...]

Several Indices of Midwest Economic Activity Improve; August PMI Moves To Break-Even

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

Robert Brusca

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.

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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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