Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126a.jpg" width="353">
Could the decline in home sales be stabilizing, perhaps due to lower prices? According to the National Association of Realtors, sales of existing homes rose 6.5% last month to 4.740M. The 9.4% November decline was slightly deeper than reported initially. Consensus expectations had been for sales of 4.40M homes. Total sales include sales of condos and co-ops.
Median home prices fell yet again during December. The 2.7% (NSA) decline followed a 3.3% November drop that was slightly deeper than initially reported. It was the sixth consecutive monthly drop and it lowered prices by 15.3% from December of 2007. Prices have fallen 23.4% since their peak in June 2007.
The number of unsold homes (condos &amp; single-family) on the market dropped a sharp 11.7% (-7.5% y/y). At the current sales rate there was a 9.3 months&#39; supply on the market which was the lowest since early during 2007. For single-family homes the inventory fell m/m to an 8.7 months supply at the current sales rate which also was the lowest since 2007.
Last month, sales of existing single-family homes recovered nearly all of the November decline with a 7.0% increase. Nevertheless, sales of existing homes remained down by nearly one-third from their peak in mid-2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126b.jpg" width="353">
By region, home sales in the West posted the strongest gain in December with a 13.6% rise. This gain recouped all of the declines during the prior two months and returned sales to the upward trend line that has been in place since the low in October of 2007. Sales in the South also gained 7.4% versus November but that level was the series&#39; low for this cycle. Sales in the Midwest also rose by 4.0%. That too was off the series&#39; low. Sales in the Northeast fell 1.4% after a huge 12.0% November drop. Single family home sales here were at their lowest since 1992.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous)</th>
<th scope="col">December</th>
<th scope="col">y/y %</th>
<th scope="col">November</th>
<th scope="col">December &#39;07</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>4,740</td>
<td>-3.5</td>
<td>4,450</td>
<td>4,910</td>
<td>4,897</td>
<td>5,672</td>
<td>6,508</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>720</td>
<td>-14.3</td>
<td>730</td>
<td>840</td>
<td>842</td>
<td>1,008</td>
<td>1,090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>-10.3</td>
<td>1,000</td>
<td>1,160</td>
<td>1,129</td>
<td>1,331</td>
<td>1,491</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>-11.2</td>
<td>1,620</td>
<td>1,960</td>
<td>1,863</td>
<td>2,240</td>
<td>2,576</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>31.6</td>
<td>1,100</td>
<td>950</td>
<td>1,066</td>
<td>1,093</td>
<td>1,353</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,260</td>
<td>-1.4</td>
<td>3,980</td>
<td>4,320</td>
<td>4,345</td>
<td>4,958</td>
<td>5,703</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,400</td>
<td>-15.3</td>
<td>180,300</td>
<td>207,000</td>
<td>197,217</td>
<td>216,617</td>
<td>222,000</td>
</tr>
</tbody>
</table>
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Could the decline in home sales be stabilizing, perhaps due to lower prices? According to the National Association of Realtors, sales of existing homes rose 6.5% last month to 4.740M. The 9.4% November decline was slightly deeper than [...]

U.S. Existing Home Sales Rose Last Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126a.jpg" align="left" border="0" height="265" width="353">
Could the decline in home sales be stabilizing, perhaps due to
lower prices? According to the National Association of Realtors, sales
of existing homes rose 6.5% last month to 4.740M.
The 9.4% November decline was slightly deeper than reported initially.
Consensus expectations had been for sales of 4.40M homes. Total sales
include sales of condos and co-ops.
Median home prices fell yet again during
December. The 2.7% (NSA) decline followed a 3.3% November drop that was
slightly deeper than initially reported. It was the sixth consecutive
monthly drop and it lowered prices by 15.3% from December of 2007.
Prices have fallen 23.4% since their peak in June 2007.
The number of unsold homes (condos &amp; single-family) on
the market dropped a sharp 11.7% (-7.5% y/y). At the current sales rate
there was a 9.3 months' supply on the market which was the lowest since
early during 2007. For single-family homes the inventory fell m/m to an
8.7 months supply at the current sales rate which also was the lowest
since 2007.
Last month, sales of existing single-family homes recovered
nearly all of the November decline with a 7.0% increase. Nevertheless,
sales of existing homes remained down by nearly one-third from their
peak in mid-2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126b.jpg" align="right" border="0" height="265" width="353">
By region, home sales in the West posted the strongest gain in
December with a 13.6% rise. This gain recouped all of the declines
during the prior two months and returned sales to the upward trend line
that has been in place since the low in October of 2007. Sales in the
South also gained 7.4% versus November but that level was the series'
low for this cycle. Sales in the Midwest also rose by 4.0%. That too
was off the series' low. Sales in the Northeast fell 1.4% after a huge
12.0% November drop. Single family home sales here were at their lowest
since 1992.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous)</th>
<th scope="col">December</th>
<th scope="col">y/y %</th>
<th scope="col">November</th>
<th scope="col">December '07</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>4,740</td>
<td>-3.5</td>
<td>4,450</td>
<td>4,910</td>
<td>4,897</td>
<td>5,672</td>
<td>6,508</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>720</td>
<td>-14.3</td>
<td>730</td>
<td>840</td>
<td>842</td>
<td>1,008</td>
<td>1,090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>-10.3</td>
<td>1,000</td>
<td>1,160</td>
<td>1,129</td>
<td>1,331</td>
<td>1,491</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>-11.2</td>
<td>1,620</td>
<td>1,960</td>
<td>1,863</td>
<td>2,240</td>
<td>2,576</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>31.6</td>
<td>1,100</td>
<td>950</td>
<td>1,066</td>
<td>1,093</td>
<td>1,353</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,260</td>
<td>-1.4</td>
<td>3,980</td>
<td>4,320</td>
<td>4,345</td>
<td>4,958</td>
<td>5,703</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,400</td>
<td>-15.3</td>
<td>180,300</td>
<td>207,000</td>
<td>197,217</td>
<td>216,617</td>
<td>222,000</td>
</tr>
</tbody>
</table>
U.S. Leading Indicators Rose
Slightly 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126c.jpg" align="left" border="0" height="265" width="353">
The Conference Board reported that the December composite
index of leading economic indicators rose 0.3% after an unrevised 0.4%
November decline. The peak for the index was in July of last year and
the six-month percent change of -5.0% was near the largest rate of
decline since 1990.
Five of the ten components of the leading index fell last
month with the largest declines coming from lower building permits,
shorter hours worked and easier vendor performance. Higher initial
claims for jobless insurance also subtracted a sharp 0.15 percentage
points from the leaders and consumer expectations were about unchanged.
Faster money supply growth added back one percentage point to the m/m
change in the leading index and a steeper yield curve added another 0.2
points.
The breadth of one-month increase amongst the leaders' 10
components improved to 50% but over a six-month period the breadth of
gain amongst the components remained stuck at a quite low 30%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126d.jpg" align="right" border="0" height="265" width="353">
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.
The coincident indicators fell again. The 0.5% decline
followed an unrevised 0.3% November drop an it was the tenth of the
year. Three quarters of the index components fell m/m but over six
months 25.0% rose. Year-to-year the coincident indicators fell 2.8% and
over the last ten years there has been a 76% correlation between this
y/y change and real GDP.
The lagging index fell 0.4% after no change in November. The
ratio of coincident-to-lagging indicators (a measure of economic
excess) fell slightly to its lowest level since 1975.
Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


<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">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 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>0.3</td>
<td>-0.4</td>
<td>-1.0</td>
<td>-5.0</td>
<td>-2.7</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.5</td>
<td>-0.3</td>
<td>0.3</td>
<td>-2.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>0.0</td>
<td>0.1</td>
<td>2.9</td>
<td>2.8</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Chicago Fed Index Well Into
Recession Territory 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126e.jpg" align="left" border="0" height="265" width="353">
For December, the National Activity Index (CFNAI) from the
Chicago Federal Reserve Bank continued lower into recession territory.
The latest reading of -3.26 was near it's historic low. Since 1970
there has been a 75% correlation between the level of the index and the
q/q change in real GDP.
The three-month moving average of the index of -2.40
was at its lowest level since January of 1982.
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_january2009.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
Each category of the index including employment, production,
income, consumption &amp; housing made a negative contribution to
the November index.
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 a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during November to its lowest level
since early 1997. The steel, machinery and resource sectors all were
weak but the auto sector ticked up very slightly.

<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/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December '07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-3.26</td>
<td>-2.78</td>
<td>-0.96</td>
<td>-1.69</td>
<td>-0.39</td>
<td>0.00</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.40</td>
<td>-2.56</td>
<td>-0.71</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
Canada's Mixed Inflation Picture... 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126f.jpg" align="left" border="0" height="265" width="353">
While headline inflation continues to lose steam in Canada as
it does everywhere else in the world, Canada&#8217;s core rate is not on that
same page. Over three-months core inflation has escalated to a pace of
+2.6% from under 2% over previous key horizons (see table). By
comparison, Canada&#8217;s CPIx, that excludes eight volatile categories
shows inflation remains steady at a pace of 2.2% to 2.4%. This is not a
question about inflation spiking but a question about what sort of
momentum inflation now has in Canada and what pressures the bank of
Canada faces in setting policy. . 
 

The headline rate points clearly lower, with inflation down by
6.1% over three months (annualized) or up by just 1.2% Yr/Yr. Both of
those are good results. The dropping and negative three-month and
six-month results suggest that there may be more relief in inflation to
be passed on to core and nonvolatile items in the months ahead. But for
now Canada&#8217;s main inflation trends as depicted by the core or CPIx are
best viewed as moderate and steady. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Canada's
CPI and Core Inflation</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% MO/MO</td>
<td colspan="4">% saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol"> All Items</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.8%</td>
<td>-6.1%</td>
<td>-2.1%</td>
<td>1.2%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol"> All Items SA</td>
<td>-0.4%</td>
<td> -0.3%</td>
<td>-0.6%</td>
<td>-5.1%</td>
<td>-1.6%</td>
<td>1.4%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; CPI Core</td>
<td>0.1%</td>
<td> 0.5%</td>
<td>0.0%</td>
<td> 2.6%</td>
<td>1.5%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol"> All items Excl 8
Volatile (CPIx)</td>
<td>-0.1%</td>
<td> 0.6%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.2%</td>
<td> 2.4%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol"> RPIxseas food</td>
<td>-0.3%</td>
<td> 0.6%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>3.9%</td>
<td>4.1%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol"> Food &amp; Non
Alcohol Bev</td>
<td>0.3%</td>
<td> 1.0%</td>
<td>0.6%</td>
<td>7.7%</td>
<td> 8.7%</td>
<td> 7.2%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol"> Shelter</td>
<td>0.0%</td>
<td> 0.2%</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>3.5%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol"> Clothing &amp;
Footwear</td>
<td>-0.3%</td>
<td> 0.4%</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-3.0%</td>
<td>-2.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol"> Education</td>
<td> 0.2%</td>
<td>0.2%</td>
<td>0.7%</td>
<td> 4.6%</td>
<td> 3.8%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol"> Health &amp;
Personal Care</td>
<td>0.2%</td>
<td> 0.5%</td>
<td>0.1%</td>
<td>3.0%</td>
<td> 3.4%</td>
<td> 2.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol"> Transportation</td>
<td> -0.6%</td>
<td> -0.7%</td>
<td>-0.8%</td>
<td>-8.1%</td>
<td>-3.8%</td>
<td>0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> A
RED highlight indicates
inflation accelerating from pace of previous horizon</td>
</tr>
</tbody>
</table>
Deterioration in World Trade
Continues: the News from Sweden 
by <a href="/comment/Curley.html">Louise
Curley</a> January 26, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126g.jpg" align="left" border="0" height="265" width="353">
Last week, Robert Brusca noted how the global slowdown was
affecting international trade by citing Italy's trade data. Further
evidence of the decline in world trade became available today with the
release of December trade data for Sweden.
Sweden reported a 12,930 million kronor decline in imports and
a 15,259 decline in exports, resulting in an improvement in its balance
of trade of 7,479 million kronor for the month of December. But from
the standpoint of world trade the fewer exports and fewer imports meant
a decline in world trade activity of 18,189 million kronor or $2,760
million.
The attached chart shows the sum of the changes in Sweden's
exports and imports over the past five years. The data showed little
trend until April of this year. Since then the down trend has been
dramatic.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SWEDEN&nbsp;</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">M/M chg&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Balance of Trade
(Millions Kroner)</td>
<td>10163.14</td>
<td>2697.76</td>
<td>7470.35</td>
</tr>
<tr class="odd">
<td class="firstcol">Export&nbsp;&nbsp;
(Millions Kroner)</td>
<td>84355.39</td>
<td>89714.62</td>
<td>-5259.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports&nbsp;&nbsp;
(Millions Kroner)</td>
<td>74192.25</td>
<td>87021.86</td>
<td>-12829.61</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions Kroner)</td>
<td>18188.84</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange rate
(Kroner/US$)</td>
<td>8.0038</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions US$)</td>
<td>2272.53</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123a.jpg" align="left" border="0" height="265" width="353">
Hooray! The MFG and Services PMIs for Europe in January have
bounced. It&#8217;s too soon to call it a bottom but since they are bouncing
off historic- or near-historic lows, maybe we have seen the worst of
decay. Even if that is true it is a far cry from saying we are about to
embark on recovery. 
 

What it means - At a reading of 34 for MFG, the sector is
telling us that about 34% of the industries are expanding&#8230; (That is
strictly speaking an improper interpretation since the PMI reading is
all the &#8216;up&#8217; readings plus &#8216;half the unchanged responses&#8217; and there are
myriad ways to get that result. A given PMI reading does not tell you
how many, or which proportion, of industries are expanding. But the
reading of 34 is &#8216;as if&#8217; 34% were rising and the rest falling although
fewer may be rising and twice the residual might be unchanged. I will
use this short hand of treating the PMI as if it were an &#8216;up only&#8217;
index for simplicity but the reader should understand that the truth is
a bit more complex- I think nothing is lost by this expositional
device.). For services the reading of +42 is coming off that (shorter)
series&#8217; all-time low. 
 

Lots of weakness ahead - In any event it is clear that these
two measures can rise for some time and still not get back to neutral
(a reading of 50 is neutral- half the sectors expanding, half
contracting). 
 

&#8216;Neutral&#8217; is not &#8216;normal&#8217; - And of course &#8216;neutral&#8217; is not the
same as &#8216;normal&#8217;. When you put your car in &#8216;neutral&#8217; is neither in
&#8216;drive&#8217; nor &#8216;reverse&#8217;. If we were to average what gear your car were in
most of the time the average would not be close to neutral. Similarly,
since July 1998 when the services measure was launched it has averaged
54.2. Over the same span the MFG index has averaged 52. On balance more
sectors are expanding than contracting in normal times. So the current
readings are a very great distance away from being &#8216;normal&#8217; and it
should take a good deal of time to get back to normal. 
 

Diffusion increases do not necessarily mean that output
increases - When these diffusion indices rise, until they surpass a
reading of 50, they are indicating contraction at a slower pace but
still contraction and not expansion.. For now the PMIs are saying that
the worst &#8211; most severe phase of the contraction - is behind us, not
that recession is ending. And that is the message only if the December
bottoms stay in place and are not replaced by new weaker readings. 
 

More weakness ahead - Rest &#8216;assured&#8217; that more declines lies
ahead for conventional economic variables even if the diffusion indices
continue to rise from their lows. 
 

Diffusing as Mr Sensitivity - Diffusion readings are very
valuable because they are so timely and because they are sensitive.
Formally the PMI indices are measures are gauges of the BREADTH not of
its strength. But everyone treats theses measure of breadth as if they
are of strength. Financial experts are well aware that is not so. For
stock markets analysts (for example) always looked at big &#8216;up&#8217; or
&#8216;down&#8217; days in the stock indices to see if the breadth reinforced the
trend or not. Breadth in fact is not the same as strength &#8211; but they
are highly correlated. So again be careful how use diffusion data. They
often are the first whiff of slowdown or of bottoming. But they are
indicators and are not real economic variables so be careful how you
interpret them. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit PMIs for the Euro
Area </th>

</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the Euro
Area 15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.53</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Dec-08</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">Nov-08</td>
<td>35.58</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>36.85</td>
<td>42.62</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>41.74</td>
<td>45.19</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>46.51</td>
<td>47.93</td>
</tr>
<tr class="odd">
<td colspan="3">126-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body></html>

Hooray! The MFG and Services PMIs for Europe in January have bounced. It’s too soon to call it a bottom but since they are bouncing off historic- or near-historic lows, maybe we have seen the worst of decay. Even if that is true it is [...]

PMI Indices for EMU Bounce – Dead Cat or Live One?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123b.jpg" width="353">
The 4Q 08 figures for Gross National Product will be available next Friday at 8:30 A.M. As always, the data will be a key gauge for measuring the current shape of the economy. And the news is not likely to be pleasant reading. It&#39;s easy to now generate an estimate that economic activity fell at a 5.1% annual rate last quarter, which indeed is the current Consensus forecast. The range of forecasts extends, however, from -2.0% to -7.5%.
By itself, the magnitude of the drop expected by Consensus would be the fastest since the middle of the 1981-82 recession. Peak-to-trough activity declined during that recession by 2.9% reflecting a pattern of sharp decline early, then nine months of stagnation. This time no such pattern is foreseen by Consensus estimates. Another sharp drop in GDP is expected for this quarter, 1Q09, then a slight decline in 2Q. A downturn following that pattern would make it severe and the harshest since the end of WWII.The Recession in Perspective from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123c.jpg" width="353">
The table below contains a set of estimates for the 4Q GDP components, generated mostly from the monthly data that already is available. As might be expected, consumer spending and housing lead the downturn. Developing estimates for the worst case outcome of a 7.5% decline in activity is relatively easy by just changing the expectation for consumer spending to -8.0%, perhaps due to weaker vehicle sales, and eliminating the addition from an improved trade deficit.
General expectations are for a subpar, 2H recovery with quarterly gains of 1.0% to 2.0%. Persistent declines in consumer spending coupled with further weakness in housing would easily unravel those expectations. Moreover, lagged declines in business investment and weaker exports due to recessions abroad could add to any lack of forward economic momentum. However, there is the potential for some upside. Pent-up demand for consumer durables could be unleashed with the huge amount of monetary stimulus already in place and an easing of tight credit conditions.
In this era of recession and weak growth, price inflation seems not to be an issue. Growth in the GDP chain prices is expected to drop to 1.0% by 2010 where it is expected to remain in 2011.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">U.S. GDP Components (%, AR)</th>
<th scope="col">4Q (Estimate)</th>
<th scope="col">GDP Weight</th>
<th scope="col">3Q</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption Expenditures</td>
<td>-6.0</td>
<td>.70</td>
<td>-3.8</td>
<td>2.8</td>
<td>3.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential Investment</td>
<td>-20.0</td>
<td>.03</td>
<td>-16.1</td>
<td>-17.9</td>
<td>-7.1</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Investment</td>
<td>-15.0</td>
<td>.12</td>
<td>-1.7</td>
<td>4.9</td>
<td>7.5</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Spending</td>
<td>3.0</td>
<td>.17</td>
<td>5.8</td>
<td>2.1</td>
<td>1.7</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventories (Contribution to GDP Growth)</td>
<td>0.0</td>
<td>--</td>
<td>0.8</td>
<td>-0.4</td>
<td>-0.0</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports (Contribution to GDP Growth)</td>
<td>1.0</td>
<td>--</td>
<td>1.1</td>
<td>0.6</td>
<td>-0.0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The 4Q 08 figures for Gross National Product will be available next Friday at 8:30 A.M. As always, the data will be a key gauge for measuring the current shape of the economy. And the news is not likely to be pleasant reading. It's [...]

Consensus Forecast for 4Q GDP: Activity Down 5%

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123b.jpg" align="left" border="0" height="265" width="353">
The 4Q 08 figures for Gross National Product will be available
next Friday at 8:30 A.M. As always, the data will be a key gauge for
measuring the current shape of the economy. And the news is not likely
to be pleasant reading. It's easy to now generate an estimate that
economic activity fell at a 5.1% annual rate last quarter, which indeed
is the current Consensus forecast. The range of forecasts extends,
however, from -2.0% to -7.5%.
By itself, the magnitude of the drop expected by Consensus
would be the fastest since the middle of the 1981-82 recession.
Peak-to-trough activity declined during that recession by 2.9%
reflecting a pattern of sharp decline early, then nine months of
stagnation. This time no such pattern is foreseen by Consensus
estimates. Another sharp drop in GDP is expected for this quarter,
1Q09, then a slight decline in 2Q. A downturn following that pattern
would make it severe and the harshest since the end of WWII.The
Recession in Perspective from the Federal Reserve Bank of
Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123c.jpg" align="right" border="0" height="265" width="353">
The table below contains a set of estimates for the 4Q GDP
components, generated mostly from the monthly data that already is
available. As might be expected, consumer spending and housing lead the
downturn. Developing estimates for the worst case outcome of a 7.5%
decline in activity is relatively easy by just changing the expectation
for consumer spending to -8.0%, perhaps due to weaker vehicle sales,
and eliminating the addition from an improved trade deficit.
General expectations are for a subpar, 2H recovery with
quarterly gains of 1.0% to 2.0%. Persistent declines in consumer
spending coupled with further weakness in housing would easily unravel
those expectations. Moreover, lagged declines in business investment
and weaker exports due to recessions abroad could add to any lack of
forward economic momentum. However, there is the potential for some
upside. Pent-up demand for consumer durables could be unleashed with
the huge amount of monetary stimulus already in place and an easing of
tight credit conditions.
In this era of recession and weak growth, price inflation
seems not to be an issue. Growth in the GDP chain prices is expected to
drop to 1.0% by 2010 where it is expected to remain in 2011.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">U.S.
GDP Components (%, AR)</th>
<th scope="col">4Q (Estimate)</th>
<th scope="col">GDP Weight</th>
<th scope="col">3Q</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption
Expenditures</td>
<td>-6.0</td>
<td>.70</td>
<td>-3.8</td>
<td>2.8</td>
<td>3.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>-20.0</td>
<td>.03</td>
<td>-16.1</td>
<td>-17.9</td>
<td>-7.1</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Investment</td>
<td>-15.0</td>
<td>.12</td>
<td>-1.7</td>
<td>4.9</td>
<td>7.5</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Spending</td>
<td>3.0</td>
<td>.17</td>
<td>5.8</td>
<td>2.1</td>
<td>1.7</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventories
(Contribution to GDP Growth)</td>
<td>0.0</td>
<td>--</td>
<td>0.8</td>
<td>-0.4</td>
<td>-0.0</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports
(Contribution to GDP Growth)</td>
<td>1.0</td>
<td>--</td>
<td>1.1</td>
<td>0.6</td>
<td>-0.0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
 PMI Indices for EMU Bounce &#8211; Dead
Cat or Live
One?
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123a.jpg" align="left" border="0" height="265" width="353">
Hooray! The MFG and Services PMIs for Europe in January have
bounced. It&#8217;s too soon to call it a bottom but since they are bouncing
off historic- or near-historic lows, maybe we have seen the worst of
decay. Even if that is true it is a far cry from saying we are about to
embark on recovery. 
 

What it means - At a reading of 34 for MFG, the sector is
telling us that about 34% of the industries are expanding&#8230; (That is
strictly speaking an improper interpretation since the PMI reading is
all the &#8216;up&#8217; readings plus &#8216;half the unchanged responses&#8217; and there are
myriad ways to get that result. A given PMI reading does not tell you
how many, or which proportion, of industries are expanding. But the
reading of 34 is &#8216;as if&#8217; 34% were rising and the rest falling although
fewer may be rising and twice the residual might be unchanged. I will
use this short hand of treating the PMI as if it were an &#8216;up only&#8217;
index for simplicity but the reader should understand that the truth is
a bit more complex- I think nothing is lost by this expositional
device.). For services the reading of +42 is coming off that (shorter)
series&#8217; all-time low. 
 

Lots of weakness ahead - In any event it is clear that these
two measures can rise for some time and still not get back to neutral
(a reading of 50 is neutral- half the sectors expanding, half
contracting). 
 

&#8216;Neutral&#8217; is not &#8216;normal&#8217; - And of course &#8216;neutral&#8217; is not the
same as &#8216;normal&#8217;. When you put your car in &#8216;neutral&#8217; is neither in
&#8216;drive&#8217; nor &#8216;reverse&#8217;. If we were to average what gear your car were in
most of the time the average would not be close to neutral. Similarly,
since July 1998 when the services measure was launched it has averaged
54.2. Over the same span the MFG index has averaged 52. On balance more
sectors are expanding than contracting in normal times. So the current
readings are a very great distance away from being &#8216;normal&#8217; and it
should take a good deal of time to get back to normal. 
 

Diffusion increases do not necessarily mean that output
increases - When these diffusion indices rise, until they surpass a
reading of 50, they are indicating contraction at a slower pace but
still contraction and not expansion.. For now the PMIs are saying that
the worst &#8211; most severe phase of the contraction - is behind us, not
that recession is ending. And that is the message only if the December
bottoms stay in place and are not replaced by new weaker readings. 
 

More weakness ahead - Rest &#8216;assured&#8217; that more declines lies
ahead for conventional economic variables even if the diffusion indices
continue to rise from their lows. 
 

Diffusing as Mr Sensitivity - Diffusion readings are very
valuable because they are so timely and because they are sensitive.
Formally the PMI indices are measures are gauges of the BREADTH not of
its strength. But everyone treats theses measure of breadth as if they
are of strength. Financial experts are well aware that is not so. For
stock markets analysts (for example) always looked at big &#8216;up&#8217; or
&#8216;down&#8217; days in the stock indices to see if the breadth reinforced the
trend or not. Breadth in fact is not the same as strength &#8211; but they
are highly correlated. So again be careful how use diffusion data. They
often are the first whiff of slowdown or of bottoming. But they are
indicators and are not real economic variables so be careful how you
interpret them. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit
PMIs for the Euro
Area </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the Euro
Area 15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.53</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Dec-08</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">Nov-08</td>
<td>35.58</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>36.85</td>
<td>42.62</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>41.74</td>
<td>45.19</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>46.51</td>
<td>47.93</td>
</tr>
<tr class="odd">
<td colspan="3">126-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body></html>

Consensus Forecast for 4Q GDP:Activity Down 5%

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122i.jpg" align="left" border="0" height="265" width="353">
E-Zone orders are dropping sharply in November. Based on some
more topical country level reports, it is not surprising that the EMU
orders series made another sharp fall &#8211; and more those lie ahead.
Today, in fact, the UK CBI survey of industry posted another sharply
weaker result with its up minus down diffusion index falling to -48 in
January compared to -35 in December. That&#8217;s right, in January.
Diffusion data are generally out a month or more ahead of the actual
underlying series that they describe and, as such, they provide a road
map of where we are headed. Still, the variables themselves tell the
actual story of industry. 
 

In November the EMU series is telling us of increased pain in
the zone. The carnage is widespread. For Germany, France, Italy and the
UK Yr/Yr orders are dropping in November by 20% or more from November
of one year ago. In the quarter to date (Q4) the country level growth
rates for orders are more like a negative 50% at an annual rate
compared to Q3 2008. 
 

The weakness is spread more or less equally across domestic
and foreign orders in the EMU series. Foreign orders are down by more
over 12-months but the drop in November is worse for domestic orders. 
 

For the moment we are in the worst of the grip of the
downturn. As we admit this, the international banking crisis is not
getting any better. The &#8216;Dutch boys&#8217; with their fingers in the dikes
are calling out for more recruits --for more stop-gap plans. Others are
crying out for a more permanent solution and for mindful attention to
what all this interventionism will mean for the future. The US has just
completed its transition to new leadership. Japan is eroding faster
after showing some resilience. The strength in the yen is finally
creating more distress there. The data from the industrial sector in
EMU are telling. The pressure on the financial sector is bad and it is
going to get worse. We were already in a financial mess before this
recession began. Now the recession is global in nature and it is going
to spawn and spread the usual credit mess that comes hand in hand with
recession- and this recession is severe. So be prepared, because things
will get worse... That is the main message from the day&#8217;s weak
industrial data in Europe. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">E-zone-13 and UK Industrial Orders And Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
</tr>
<tr>
<td class="firstcol">Ezone Detail</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-4.5%</td>
<td>-5.7%</td>
<td>-5.4%</td>
<td>-47.3%</td>
<td>-40.3%</td>
<td>-27.6%</td>
<td>-28.3%</td>
<td>-21.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>-0.9%</td>
<td>-1.9%</td>
<td>-1.9%</td>
<td>-17.0%</td>
<td>-17.0%</td>
<td>-10.5%</td>
<td>-8.6%</td>
<td>-2.6%</td>
<td>-1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-1.4%</td>
<td>-0.7%</td>
<td>-1.2%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>-5.8%</td>
<td>-6.7%</td>
<td>-5.3%</td>
<td>-5.2%</td>
<td>-1.5%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate</td>
<td>-7.0%</td>
<td>-5.5%</td>
<td>-6.0%</td>
<td>-53.6%</td>
<td>-38.7%</td>
<td>-28.6%</td>
<td>-26.9%</td>
<td>-20.5%</td>
<td>-12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo:MFG</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-4.5%</td>
<td>-5.7%</td>
<td>-5.4%</td>
<td>-47.3%</td>
<td>-40.3%</td>
<td>-27.6%</td>
<td>-28.3%</td>
<td>-21.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-7.0%</td>
<td>-5.5%</td>
<td>-6.0%</td>
<td>-53.6%</td>
<td>-38.7%</td>
<td>-28.6%</td>
<td>-26.9%</td>
<td>-20.5%</td>
<td>-12.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-3.5%</td>
<td>-6.9%</td>
<td>-5.9%</td>
<td>-48.9%</td>
<td>-46.5%</td>
<td>-30.3%</td>
<td>-32.3%</td>
<td>-24.8%</td>
<td>-18.9%</td>
</tr>
<tr>
<td class="firstcol">Countries:</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany (MFG):</td>
<td>-7.2%</td>
<td>-7.1%</td>
<td>-8.0%</td>
<td>-60.3%</td>
<td>-39.7%</td>
<td>-37.5%</td>
<td>-29.6%</td>
<td>-24.4%</td>
<td>-16.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France(Ind):</td>
<td>-5.7%</td>
<td>-11.8%</td>
<td>0.6%</td>
<td>-50.8%</td>
<td>-55.2%</td>
<td>-33.7%</td>
<td>-38.5%</td>
<td>-25.5%</td>
<td>-18.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy (Ind):</td>
<td>-6.3%</td>
<td>-6.6%</td>
<td>-3.8%</td>
<td>-49.7%</td>
<td>-39.0%</td>
<td>-27.2%</td>
<td>-23.2%</td>
<td>-21.1%</td>
<td>-12.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; UK (Engineering Ind):</td>
<td>-8.4%</td>
<td>-24.0%</td>
<td>28.8%</td>
<td>-35.6%</td>
<td>-35.3%</td>
<td>-38.9%</td>
<td>-35.2%</td>
<td>-21.7%</td>
<td>-8.9%</td>
</tr>
</tbody>
</table>
</body></html>

E-Zone orders are dropping sharply in November. Based on some more topical country level reports, it is not surprising that the EMU orders series made another sharp fall – and more those lie ahead. Today, in fact, the UK CBI survey of [...]

E-Zone Orders Drop Sharply...Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122g.jpg" width="353">
At 589,000 last week, initial claims for unemployment insurance rose another 62,000 to their highest level since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough. The latest increase in initial claims followed a 57,000 increase during the prior period and it exceeded Consensus expectations for a rise to 548,000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122h.jpg" width="353">
The latest initial claims figure is for the January survey period for nonfarm payrolls and claims were up 5.9% from the December period. During the last ten years there has been a negative 84% correlation between the level of claims and the month-to-month change in nonfarm payrolls.
The Labor Department indicated that the largest increases in initial claims for the week ending January 10 were in Michigan (+34,639), California (+22,573), Florida (+20,658), North Carolina (+15,637), and Pennsylvania (+13,848), while the largest decreases were in South Carolina (-2,682), Massachusetts (-1,882), New York (-1,852), Iowa (-1,593), and Oregon (-856).
Continuing claims for unemployment insurance during the week of January 10 recovered nearly all of the prior week&#39;s decline with a 97,000 increase. That also lifted continuing claims to their highest since late 1982. The four-week average of continuing claims rose 58,800 to 4,559,750. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment remained stable for the fourth week at this cycle&#39;s high of 3.4%, the highest since 1983. The highest insured unemployment rates in the week ending January 3 were in Michigan (7.5 percent), Oregon (7.5), Idaho (6.7), Wisconsin (6.7), Pennsylvania (6.6), Indiana (5.7), Kentucky (5.7), North Carolina (5.7), South Carolina (5.6), and Rhode Island (5.5).
The Tech Pulse Index: Recent Trends in Tech-Sector Activity from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-03.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">01/17/09</th>
<th scope="col">01/10/09</th>
<th scope="col">01/03/09</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>
<td class="firstcol">Initial Claims</td>
<td>589</td>
<td>527</td>
<td>470</td>
<td>81.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,607</td>
<td>4,510</td>
<td>71.8%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

At 589,000 last week, initial claims for unemployment insurance rose another 62,000 to their highest level since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough. The latest [...]

U.S. Weekly Claims For Jobless Insurance Highest Since 1982

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122e.jpg" width="353">
Regular gasoline prices moved higher last week for the third consecutive period. They rose six cents to an average $1.85 per gallon after the prior week&#39;s ten cent gain, according to the U.S. Department of Energy survey. The latest level was the highest price since late November. Yesterday, the spot market price for regular gasoline was up again to $1.20 per gallon which was its highest level since late-November.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122f.jpg" width="353">
Demand continued quite weak for gasoline in reaction to the economy&#39;s weakness. The U.S. Department of Energy reported that the demand for gasoline fell by 3.9% during the latest four weeks, nearly the fastest rate of decline since late-1995 (the latest four weeks versus the same four weeks in 2008). The demand for all petroleum products also fell sharply, by 4.0%. These numbers are available in Haver&#39;s OILWKLY database.
The source for that reduced demand for gasoline is the cutback in vehicle miles driven which have fallen 3.5% during the twelve months ended October. The decline of roughly this magnitude, sustained as it has been for most of last year, is unprecedented. These Department of Transportation figures are available in Haver&#39;s OGJ database.
The price for a barrel of West Texas Intermediate crude oil retraced most of the gains during the prior two weeks and fell to $36.91 per barrel. Prices reached their high of $145.66 last July. In futures trading yesterday, the one-month price for crude oil moved back up to $43.55.
Last week, prices for natural gas slipped to $5.40 per mmbtu (-35.0% y/y). The latest average price was almost 50% below natural gas prices in early-July of $13.19/mmbtu.
Understanding Monetary Policy Implementation from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2008/summer/pdf/ennis.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">01/19/09</th>
<th scope="col">01/12/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>1.85</td>
<td>1.78</td>
<td>-38.8%</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>36.91</td>
<td>44.51</td>
<td>-59.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Regular gasoline prices moved higher last week for the third consecutive period. They rose six cents to an average $1.85 per gallon after the prior week's ten cent gain, according to the U.S. Department of Energy survey. The latest [...]

U.S. Gasoline Prices Up Again

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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250509A1.jpg

250509C1.jpg

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 0.6% (-3.6% y/y) during the four weeks ended May 9, 2025. The improvement followed sharp declines in April.

Miscellaneous group prices increased 2.4% (5.9% y/y) over the last four weeks. Natural rubber price soared 13.9% (11.7% y/y). The price of tallow (used in the soap industry) rose 10.6% (41.3% y/y) in four weeks but the cost of framing lumber declined 5.6%, but rose 7.3% y/y.

Prices in the Metals group edged 0.2% higher (-7.3% y/y) over the most recent four weeks. Variation in pricing was wide. Copper scrap prices rose 7.4% (-3.3% y/y) while lead costs rose 4.0% in four weeks (-11.1% y/y). The cost of aluminum increased 2.3% in four weeks, off 4.4% y/y. Working lower, the cost of steel scrap declined 8.1% (-11.6% y/) in four weeks while tin prices followed with a 4.9% decline (-2.9% y/y). Zinc prices eased 0.7% in four weeks and declined 10.3% y/y.

Crude Oil & Benzene group prices edged 0.1% higher (-19.4% y/y) in four weeks. The cost of West Texas Intermediate crude oil weakened 4.0% to $58.50 per barrel and was 25.6% lower y/y. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 8.5% (-41.8% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.9% (-2.1% y/y) during the last four weeks.

Textile group prices edged 0.9% lower (-0.5% y/y) during the last four weeks. Burlap costs declined 14.3% (+7.4% y/y) but the cost of cotton rose 4.5% (-7.7% y/y) over four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

250509D1.jpg

250509B1.jpg

- Metals prices are mixed.
- Crude oil prices fall sharply.
- Textile prices ease.

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

250509L1.jpg

250509M1.jpg

Wholesale trade inventories increased 0.4% (2.2% y/y) during March after rising 0.5% in February, revised from 0.3% after a 0.8% January rise. The increase compared to expectations for a 0.5% rise in the Informa Global Markets Survey and compared to a 0.6% gain in the advance report issued two weeks ago.

Durable goods inventories rose 0.6% in March (1.5% y/y) after rising 0.5% in February. Machinery inventories, the largest sector, increased 0.6% (1.7% y/y) while inventories of motor vehicles & parts, the second largest grouping, rose 1.2% (0.8% y/y). Furniture inventories strengthened 2.7% (6.8% y/y) while electrical equipment inventories declined 1.0% (-3.1% y/y). Inventories of nondurable goods edged 0.1% higher (3.4% y/y). Drug inventories, which make up one-quarter of nondurable inventories, advanced 1.0% (4.6% y/y). Grocery inventories, the second largest category, rose 0.4% (8.3% y/y). Apparel inventories fell 0.8% (-6.5% y/y) and chemical inventories rose 2.1% both m/m and y/y. Petroleum inventories increased 0.7% (0.3% y/y).

Sales at the wholesale level rose 0.6% (6.1% y/y) in March after rising 2.0% in February and falling 0.9% in January. A 0.9% March rise had been expected in the Action Economics Forecast Survey.

Durable goods sales rose 1.0% (8.5% y/y) in March after strengthening 3.2% in February. Sales of electrical equipment & electronic goods, the largest sector, rose 2.5% (20.9% y/y), after a 2.3% rise. Professional and commercial equipment sales, which includes computers, rose 1.2% (11.9% y/y), while vehicle sales declined 1.0% (1.1% y/y). Sales of machinery improved 0.7% (4.2% y/y). Nondurable product sales rose 0.3% (3.9% y/y) in March after gaining 0.9% in February. Drug store sales, the largest category, increased 2.8% (13.4% y/y), while grocery store sales eased 0.2% (+4.3% y/y). Sales of apparel weakened 0.8% (+3.5% y/y) while paper sales declined 1.7% (0.5% y/y). Petroleum product sales fell 4.6% both m/m and y/y.

The inventory-to-sales (I/S) ratio at the wholesale level remained at 1.30 in March and has been moving lower for the last two years.

The wholesale I/S ratio for durable goods eased to 1.69 in March and also has been trending lower. The machinery ratio fell to 2.92 while motor vehicles rose to 1.78. The I/S ratio for nondurable goods slipped to 0.93 and remained down from 1.02 early in 2023. The drug industry ratio eased to 0.94. Apparel's I/S ratio held at 2.06, but remained below its 2.28 level one year earlier, and has been declining since early 2023. The petroleum industry I/S ratio rose to 0.33.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

**Assessing Maximum Employment** from Federal Reserve Governor Adriana D. Kugler is available [here](https://www.federalreserve.gov/newsevents/speech/kugler20250509a.htm).

250509N1.jpg

250509O1.jpg

- Inventories trend higher y/y.
- Sales increase broadly.
- Inventory-to-sales ratio steadies.

U.S. Wholesale Inventories & Sales Increase in March

250508N2.jpg

250508O2.jpg

Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

250508P2.jpg

250508Q2.jpg

- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

250508F0.jpg

250508G0.jpg

The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

Carol Stone, CBE

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

Economy in Brief: January 2009

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