Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225b.jpg" width="353">
The Federal Reserve Bank of Chicago reported that its January National Activity Index (CFNAI) remained negative, at -0.58. The three month moving average of the index also remained negative at -0.60 which was near the lowest since 2003.
The Bank indicated that the negative value of the three month moving average suggests low inflationary pressure from economic activity.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225c.jpg" width="353">
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
During January, each of the four broad categories of indicators &#151; employment, production, consumption and housing &#151; continued to make negative contributions to the CFNAI.
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.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_february2008.pdf">here</a>.
The Globalization of U.S. Business Investment from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/staff/2008/staff0801.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.58</td>
<td>-0.69</td>
<td>-1.00</td>
<td>-0.42</td>
<td>0.01</td>
<td>0.28</td>
</tr>
</tbody>
</table>
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The Federal Reserve Bank of Chicago reported that its January National Activity Index (CFNAI) remained negative, at -0.58. The three month moving average of the index also remained negative at -0.60 which was near the lowest since [...]

Chicago Fed National Activity Index Still Negative, Inflationary Pressure Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225a.jpg" width="353">
The National Association of Realtors reported that January sales of existing single family homes slipped 0.4% to 4.890M after a 2.2% decline during December. The decline was slightly less than general expectations and new seasonal factors revised past data just slightly.
Sales of existing single family homes ticked up 0.5% last month, the first m/m increase in nearly one year.
By region, home sales in the Northeast fell 3.6% (-25.7% y/y). In the Midwest January sales rose 3.4% (-20.0% y/y) and sales in the South also rose 0.6% (-20.9% y/y). Single family homes in the West fell 1.2% (-28.0% y/y) after no change during December.
The median price of an existing single family home fell 2.9% (-4.6% y/y) last month. Home prices were off 12.2% in January from their peak last June.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Single Family Home Sales (Thous)</th>
<th scope="col">January</th>
<th scope="col">y/y %</th>
<th scope="col">December</th>
<th scope="col">January &#39;07</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">Total</td>
<td>4,890</td>
<td>-23.4</td>
<td>4,910</td>
<td>6,380</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>810</td>
<td>-25.7</td>
<td>840</td>
<td>1,090</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,200</td>
<td>-20.0</td>
<td>1,160</td>
<td>1,500</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,950</td>
<td>-22.0</td>
<td>1,960</td>
<td>2,500</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>930</td>
<td>-28.5</td>
<td>930</td>
<td>1,300</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,340</td>
<td>-22.4</td>
<td>4,320</td>
<td>5,590</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>201,100</td>
<td>-4.6</td>
<td>207,000</td>
<td>210,900</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
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The National Association of Realtors reported that January sales of existing single family homes slipped 0.4% to 4.890M after a 2.2% decline during December. The decline was slightly less than general expectations and new seasonal [...]

U.S. Existing Home Sales Slipped & Prices Off More

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225a.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors reported that January
sales of existing single family homes slipped 0.4% to 4.890M after a
2.2% decline during December. The decline was slightly less than
general expectations and new seasonal factors revised past data just
slightly.
Sales of existing single family homes ticked up 0.5% last
month, the first m/m increase in nearly one year.
By region, home sales in the Northeast fell 3.6% (-25.7% y/y).
In the Midwest January sales rose 3.4% (-20.0% y/y) and sales in the
South also rose 0.6% (-20.9% y/y). Single family homes in the West fell
1.2% (-28.0% y/y) after no change during December.
The median price of an existing single family home fell 2.9%
(-4.6% y/y) last month. Home prices were off 12.2% in January from
their peak last June.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Single Family 
Home Sales (Thous)</th>
<th scope="col">January</th>
<th scope="col">y/y %</th>
<th scope="col">December</th>
<th scope="col">January '07</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">Total</td>
<td>4,890</td>
<td>-23.4</td>
<td>4,910</td>
<td>6,380</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>810</td>
<td>-25.7</td>
<td>840</td>
<td>1,090</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,200</td>
<td>-20.0</td>
<td>1,160</td>
<td>1,500</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,950</td>
<td>-22.0</td>
<td>1,960</td>
<td>2,500</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>930</td>
<td>-28.5</td>
<td>930</td>
<td>1,300</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,340</td>
<td>-22.4</td>
<td>4,320</td>
<td>5,590</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>201,100</td>
<td>-4.6</td>
<td>207,000</td>
<td>210,900</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
Chicago Fed National Activity
Index Still Negative, Inflationary Pressure Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225b.jpg" align="left" border="0" height="265" width="353">
The Federal Reserve Bank of Chicago reported that its January
National Activity Index (CFNAI) remained negative, at -0.58. The three
month moving average of the index also remained negative at -0.60 which
was near the lowest since 2003.
The Bank indicated that the negative value of the three month
moving average suggests low inflationary pressure from economic
activity.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225c.jpg" align="right" border="0" height="265" width="353">
A zero value of the CFNAI indicates that the economy is
expanding at its historical trend rate of growth of roughly 3%. During
the last twenty years there has been a 68% correlation between the
level of the CFNAI and q/q growth in real GDP.
During January, each of the four broad categories of
indicators &#8212; employment, production, consumption and housing &#8212;
continued to make negative contributions to the CFNAI.
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.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_february2008.pdf">here</a>.
The Globalization of
U.S. Business Investment from the Federal Reserve Bank of
Dallas is available <a href="http://dallasfed.org/research/staff/2008/staff0801.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.58</td>
<td>-0.69</td>
<td>-1.00</td>
<td>-0.42</td>
<td>0.01</td>
<td>0.28</td>
</tr>
</tbody>
</table>
Economists Forecast No U.S.
Recession in 2008 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225d.jpg" align="left" border="0" height="265" width="353">
According to the National Association For Business Economists
(NABE), the U.S. economy will skirt an economic downturn in 2008.
During 1Q08 and 2Q08 growth on average is, however, expected to be the
lowest since the end of the last recession in 2001.
Helping the economy to avoid a recession will be further cuts
in the Federal funds rate to a low of 2.5% next quarter. There it is
expected to remain until yearend.
Yields on the 10 Year Treasury note are expected to bottom at
3.70% this quarter.
The late '08 recovery in quarterly economic growth is expected
to be at a moderate, near trend rate of just under 3.0%. For the full
year, growth this year 1.8% is forecast to be the weakest since 2001.
The NABE Outlook is available in Haver's SURVEYS
database.
Improving Risk Management in Light of Recent Market
Events is today's speech by Fed Governor Randall S. Kroszner
and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/D7BB4B12FA20478A9F0504752AE2190F.htm">
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">NABE
Forecast</th>
<th scope="col">1Q 08</th>
<th scope="col">2Q 08</th>
<th scope="col">3Q 08</th>
<th scope="col">4Q 08</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">U.S. Real GDP (%, AR)</td>
<td>0.4%</td>
<td>1.0%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>1.8%</td>
<td>2.5%</td>
</tr>
</tbody>
</table>
Rise in Singapore's Inflation Spotlights Rises in World Grain
Prices&nbsp; 
by <a href="/comment/Curley.html">Louise
Curley</a> February 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225e.jpg" align="left" border="0" height="265" width="353">
Inflation in Singapore rose more than expected to 6.61% in
January of this year, 2.2 percentage points above the 4.41% in
December. A big part of the rise was due to the government's increasing
the valuation of public housing on which imputed rents are partly
based. The housing component rose 11.03% in January after rising only
2.88% in December.
While the jum<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225f.jpg" align="right" border="0" height="265" width="353">p in
housing cost in December was somewhat of an anomaly, the rise in food
prices has become a regular feature in the cost of living ever since
mid 2007. The first chart shows that, except for the spike in the
housing component in January, the food component has been increasing in
importance relative to the housing component since early 2007.
World grain prices rises have been pushing up the cost of
food. The second chart shows the daily world prices of corn, soybeans
and wheat for the past year. The continued rise in these prices in
February suggests that further food inflation is in the works, not only
for Singapore, but for most other countries.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INFLATION&nbsp;
(Y/Y %Chg in CPI)</th>
<th scope="col">Jan 08</th>
<th scope="col">Dec 07&nbsp;</th>
<th scope="col">Nov 07&nbsp;</th>
<th scope="col">Oct 07&nbsp;</th>
<th scope="col">Sep 07</th>
<th scope="col">Jul 07&nbsp;</th>
<th scope="col">Jun 07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Singapore</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>6.61</td>
<td>4.41</td>
<td>422</td>
<td>3.63</td>
<td>2.76</td>
<td>2.96</td>
<td>2.56</td>
<td>2.10</td>
<td>0.96</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food</td>
<td>5.84</td>
<td>5.50</td>
<td>5.22</td>
<td>4.27</td>
<td>2.75</td>
<td>3.30</td>
<td>2081</td>
<td>1.56</td>
<td>1.33</td>
</tr>
<tr>
<td class="firstcol">
&nbsp;&nbsp;Housing</td>
<td>11.03</td>
<td>2.88</td>
<td>2.88</td>
<td>2.30</td>
<td>0.39</td>
<td>1.06</td>
<td>9.67</td>
<td>0.45</td>
<td>2.67</td>
</tr>
</tbody>
</table>
Italy Retail Sales Trends Continueto Erode 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080225g.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s retail sales rose in December by a thin 0.1%. The
three month advance was at annual rate of 0.4% even below the six month
pace of 0.6% and near the Yr/Yr pace of 0.2% - rotten growth rates all.
These nominal sales gains clearly imply persisting declines in volume
terms. Italy&#8217;s nominal retail sales have been in long, slow, declining
growth phase.
The chart on the left plots nominal Italy retail sales Vs the
EMU volume index for retail sales. The EMU Volume index shows volume
plunging at the end of 2007. Italy shows nominal sales steadily eroding
with real sales likely falling at an accelerated pace at the end of
2007 since inflation flared at year end as energy prices rose strongly
throughout the Euro Area. With the Q4 numbers in, nominal Italian
retail sales fell by 0.4% saar in Q4 as food sales advanced by 0.6%.
Obviously the Italian consumer is under stress. And that is a theme for
the whole of the Euro Area as well.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Italy
Retail Sales Growth</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Q-2-Date</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.6%</td>
<td>0.3%</td>
<td>1.0%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Beverages &amp;
Tobacco</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>1.4%</td>
<td>1.5%</td>
<td>1.0%</td>
<td>1.3%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">Clothing &amp; Fur</td>
<td>0.5%</td>
<td>-2.0%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>-0.4%</td>
<td>-0.9%</td>
<td>1.6%</td>
<td>-2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&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>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222f.jpg" align="left" border="0" height="265" width="353">
EMU PMIs show continued weakness. 
 

The EMU PMIs were weak in February. The MFG index fell further
while the services barometer, already very weak, edged higher. The MFG
index is in the 12th percentile of its range over 24 months. Services
reside in the bottom 2 percent of their range.The MFG indexes have been
slipping since mid-2006. They fell to a lower plateau in early 2007
then fell sharply again as 2007 drew to a close. MFG has steadied above
its lowest pace around a MFG reading of 52.The service sector has
weakened on roughly the same profile except it did not rebound and
steady above its low as 2008 began. Services have made a small rebound
in February but continue to cling near the lower reaches of its 24
month range. Europe is continuing to look weak despite this small
up-tick in February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">NTC
PMIs for the Euro Area</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Feb-08</td>
<td>52.25</td>
<td>52.25</td>
</tr>
<tr>
<td class="firstcol">Jan-08</td>
<td>52.60</td>
<td>52.01</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>52.44</td>
<td>52.50</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>52.43</td>
<td>53.47</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>53.73</td>
<td>55.51</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">24-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>51.46</td>
<td>52.01</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>12.8%</td>
<td>2.6%</td>
</tr>
</tbody>
</table>
</body></html>

EMU PMIs show continued weakness. The EMU PMIs were weak in February. The MFG index fell further while the services barometer, already very weak, edged higher. The MFG index is in the 12th percentile of its range over 24 months. [...]

EMU Flash PMIs are Weak; Especially for Services

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222c.jpg" width="353">
During 4Q 2007, the Federal Reserve Board Reported that the delinquency rate on all consumer loan &amp; leases jumped to 2.49% from 2.13% during the third quarter. The latest reading was the highest since early 2003, but that performance masks some the real troubles being had in making payments.
The dollar value of these loans totaled a record $170 billion last quarter, more than double the level at the recent low during 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222d.jpg" width="353">
Driving the rise were delinquent payments on residential real estate loans. Delinquent payments on residential real estate loans surged to 3.09% of the loans extended. The current rate is the highest since 1991. Delinquencies on commercial real estate loans, which had been relatively current, jumped. The rate of 2.71% was the highest since late 1996 with a delinquency rate of 2.71%.
The dollar value of those delinquent residential real estate loans jumped to $68.4 billion (+71.2% y/y), more than four times the level ten years ago and 40% of the dollar value of late payments on banks&#39; books.
Delinquent payments on consumer loans also rose sharply to a 3.39% rate versus 3.13% for the full year 2007. Delinquent payments on credit card debt rose to 4.55%, 4.25% for the whole year. The rise for credit card debt was larger from the low of 3.52% late in 2005.End of the Credit Line is a 2006 article from the Federal Reserve Bank of Minneapolis and it can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/06-07/credit.cfm"> here</a>.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222e.jpg" width="353">
The dollar value of those delinquent credit card payments amounted to $17.4 brillion, nearly triple the low in 1993.
Delinquencies on C&amp;I loans rose slightly q/q to 1.35% from 1.23% during 3Q, up slightly from 2006 but down from years prior.The dollar values of these loans amounted to $18.1 trillion during 4Q, up by more than one third from one year prior.
These data series are available in Haver&#39;s USECON database.
Another Widow: The Term Auction Facility from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20080301/cover.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">Loan Delinquency Rate (%)</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q &#39;07</th>
<th scope="col">4Q &#39;06</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">Total Loan &amp; Leases</td>
<td>2.49</td>
<td>2.13</td>
<td>1.68</td>
<td>2.06</td>
<td>1.57</td>
<td>1.56</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Loans</td>
<td>3.39</td>
<td>3.17</td>
<td>2.93</td>
<td>3.13</td>
<td>2.90</td>
<td>2.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Credit Cards</td>
<td>4.55</td>
<td>4.34</td>
<td>3.92</td>
<td>4.25</td>
<td>4.01</td>
<td>3.70</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Real Estate Loans</td>
<td>2.88</td>
<td>2.40</td>
<td>1.67</td>
<td>2.27</td>
<td>1.48</td>
<td>1.37</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Residential</td>
<td>3.09</td>
<td>2.75</td>
<td>1.91</td>
<td>2.55</td>
<td>1.73</td>
<td>1.55</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Commercial</td>
<td>2.71</td>
<td>1.98</td>
<td>1.32</td>
<td>1.94</td>
<td>1.13</td>
<td>1.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Commercial &amp; Industrial Loans</td>
<td>1.35</td>
<td>1.23</td>
<td>1.17</td>
<td>1.23</td>
<td>1.27</td>
<td>1.51</td>
</tr>
</tbody>
</table>
</body>
</html>

During 4Q 2007, the Federal Reserve Board Reported that the delinquency rate on all consumer loan & leases jumped to 2.49% from 2.13% during the third quarter. The latest reading was the highest since early 2003, but that performance [...]

U.S. Loan Delinquencies Up Across the Board

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222b.jpg" align="left" border="0" height="265" width="353">
The INSEE industry climate index fell to 107 from 108. The
index stands in the 68th percentile of its range. The recent trend
rates a -14 and stands below its midpoint in the 43rd percentile of its
range. 
 

In the chart we plot the business indicator as an index and as
a percentage change from a year ago. On a percentage basis the level is
falling. On a level basis the erosion is minor. 
 

France has held up longer than most other EMU economies. Its
indicators currently stand at a still strong level but the newest
information is that some of this weakness is beginning to take a toll
in France. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> INSEE Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="odd">
<td class="firstcol">Climate</td>
<td>107</td>
<td>108</td>
<td>109</td>
<td>110</td>
<td>68.0</td>
<td>64</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Production</td>
</tr>
<tr class="odd">
<td class="firstcol">Recent Trend</td>
<td>-14</td>
<td>-6</td>
<td>4</td>
<td>3</td>
<td>43.1</td>
<td>134</td>
<td>44</td>
<td>-58</td>
<td>102</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely trend</td>
<td>43</td>
<td>47</td>
<td>44</td>
<td>43</td>
<td>79.2</td>
<td>8</td>
<td>63</td>
<td>-33</td>
<td>96</td>
<td>8</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Orders/Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders &amp; Demand</td>
<td>-1</td>
<td>-1</td>
<td>1</td>
<td>4</td>
<td>70.1</td>
<td>46</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-14</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Orders &amp; Demand</td>
<td>1</td>
<td>0</td>
<td>6</td>
<td>4</td>
<td>66.3</td>
<td>67</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-10</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely Sales Prices Trend</td>
<td>17</td>
<td>12</td>
<td>12</td>
<td>10</td>
<td>85.1</td>
<td>12</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>1</td>
</tr>
</tbody>
</table>
</body></html>

The INSEE industry climate index fell to 107 from 108. The index stands in the 68th percentile of its range. The recent trend rates a -14 and stands below its midpoint in the 43rd percentile of its range. In the chart we plot the [...]

Business Climate Edges Lower in France

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222a.jpg" align="left" border="0" height="265" width="353">
Rising order trends mask encroaching weakness.
Despite a sharp 3.6% drop in orders in December EMU orders are
still rising strongly over three months and a strong 8.5% in the
quarter. Order trends are even turning higher despite the sharp drop in
orders in December. But MFG sales already are very weak and are
declining in the quarter. Domestic orders are clearly weaker than
foreign orders. In the quarter domestic orders are up at nearly a 7%
pace and foreign orders are up at a nearly 14% pace. The country detail
shows that Germany is a major counterbalance to the overall results.
Germany&#8217;s orders are up by 20% in the quarter. France, Italy and the UK
are showing orders drop in the fourth quarter. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> E-zone
and UK Industrial Orders &amp; Sales Trends
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">%
m/m</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
06</td>
<td>Dec 
05</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area Detail</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG Sales</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>-0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Consumer goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Capital goods</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>2.1%</td>
<td>4.7%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Intermediate goods</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>8.3%</td>
<td>5.6%</td>
<td>6.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-4.6%</td>
<td>1.9%</td>
<td>4.5%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>7.4%</td>
<td>-0.7%</td>
<td>6.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-5.5%</td>
<td>3.6%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>-14.5%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>11.5%</td>
<td>13.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Countries:</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-2.2%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>22.8%</td>
<td>-3.3%</td>
<td>10.5%</td>
<td>8.7%</td>
<td>5.1%</td>
<td>20.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>-2.0%</td>
<td>-0.3%</td>
<td>2.2%</td>
<td>-0.3%</td>
<td>-7.0%</td>
<td>3.8%</td>
<td>2.7%</td>
<td>0.5%</td>
<td>-3.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>2.9%</td>
<td>-1.1%</td>
<td>-14.1%</td>
<td>-8.8%</td>
<td>1.6%</td>
<td>8.1%</td>
<td>3.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>5.2%</td>
<td>-4.2%</td>
<td>2.6%</td>
<td>14.0%</td>
<td>7.2%</td>
<td>13.9%</td>
<td>-2.8%</td>
<td>-2.6%</td>
<td>-20.6%</td>
</tr>
</tbody>
</table>
</body></html>

Rising order trends mask encroaching weakness. Despite a sharp 3.6% drop in orders in December EMU orders are still rising strongly over three months and a strong 8.5% in the quarter. Order trends are even turning higher despite the [...]

Euro Area Orders Drop Sharply in December

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222c.jpg" align="left" border="0" height="265" width="353">
During 4Q 2007, the Federal Reserve Board Reported that the
delinquency rate on all consumer loan &amp; leases jumped to 2.49%
from 2.13% during the third quarter. The latest reading was the highest
since early 2003, but that performance masks some the real troubles
being had in making payments.
The dollar value of these loans totaled a record $170 trillion
last quarter, more than double the level at the recent low during 2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222d.jpg" align="right" border="0" height="265" width="353">
Driving the rise were delinquent payments on residential real
estate loans. Delinquent payments on residential real estate
loans surged to 3.09% of the loans extended. The current rate
is the highest since 1991. Delinquencies on commercial real
estate loans, which had been relatively current, jumped. The
rate of 2.71% was the highest since late 1996 with a delinquency rate
of 2.71%.
The dollar value of those delinquent residential real estate
loans jumped to $68.4 trillion (+71.2% y/y), more than four times the
level ten years ago and 40% of the dollar value of late payments on
banks' books.
Delinquent payments on consumer loans also
rose sharply to a 3.39% rate versus 3.13% for the full year 2007.
Delinquent payments on credit card debt rose to
4.55%, 4.25% for the whole year. The rise for credit card debt was
larger from the low of 3.52% late in 2005.End of the Credit
Line is a 2006 article from the Federal Reserve Bank of
Minneapolis and it can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/06-07/credit.cfm">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222e.jpg" align="left" border="0" height="265" width="353">
The dollar value of those delinquent credit card payments
amounted to $17.4 trillion, nearly triple the low in 1993.
Delinquencies on C&amp;I loans rose slightly q/q to 1.35%
from 1.23% during 3Q, up slightly from 2006 but down from years
prior.The dollar values of these loans amounted to $18.1 trillion
during 4Q, up by more than one third from one year prior.
These data series are available in Haver's USECON
database.
Another Widow: The Term Auction Facility
from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20080301/cover.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">Loan
Delinquency Rate (%)</th>
<th scope="col">4Q '07</th>
<th scope="col">3Q '07</th>
<th scope="col">4Q '06</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">Total Loan &amp; Leases</td>
<td>2.49</td>
<td>2.13</td>
<td>1.68</td>
<td>2.06</td>
<td>1.57</td>
<td>1.56</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Loans</td>
<td>3.39</td>
<td>3.17</td>
<td>2.93</td>
<td>3.13</td>
<td>2.90</td>
<td>2.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Credit Cards</td>
<td>4.55</td>
<td>4.34</td>
<td>3.92</td>
<td>4.25</td>
<td>4.01</td>
<td>3.70</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Real Estate Loans</td>
<td>2.88</td>
<td>2.40</td>
<td>1.67</td>
<td>2.27</td>
<td>1.48</td>
<td>1.37</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Residential</td>
<td>3.09</td>
<td>2.75</td>
<td>1.91</td>
<td>2.55</td>
<td>1.73</td>
<td>1.55</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Commercial</td>
<td>2.71</td>
<td>1.98</td>
<td>1.32</td>
<td>1.94</td>
<td>1.13</td>
<td>1.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Commercial &amp;
Industrial Loans</td>
<td>1.35</td>
<td>1.23</td>
<td>1.17</td>
<td>1.23</td>
<td>1.27</td>
<td>1.51</td>
</tr>
</tbody>
</table>
Euro Area Orders Drop Sharply
inDecember 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222a.jpg" align="left" border="0" height="265" width="353">
Rising order trends mask encroaching weakness.
Despite a sharp 3.6% drop in orders in December EMU orders are
still rising strongly over three months and a strong 8.5% in the
quarter. Order trends are even turning higher despite the sharp drop in
orders in December. But MFG sales already are very weak and are
declining in the quarter. Domestic orders are clearly weaker than
foreign orders. In the quarter domestic orders are up at nearly a 7%
pace and foreign orders are up at a nearly 14% pace. The country detail
shows that Germany is a major counterbalance to the overall results.
Germany&#8217;s orders are up by 20% in the quarter. France, Italy and the UK
are showing orders drop in the fourth quarter. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> E-zone
and UK Industrial Orders &amp; Sales Trends
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">%
m/m</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
06</td>
<td>Dec 
05</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area Detail</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG Sales</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>-0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Consumer goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Capital goods</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>2.1%</td>
<td>4.7%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Intermediate goods</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>8.3%</td>
<td>5.6%</td>
<td>6.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-4.6%</td>
<td>1.9%</td>
<td>4.5%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>7.4%</td>
<td>-0.7%</td>
<td>6.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-5.5%</td>
<td>3.6%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>-14.5%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>11.5%</td>
<td>13.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Countries:</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-2.2%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>22.8%</td>
<td>-3.3%</td>
<td>10.5%</td>
<td>8.7%</td>
<td>5.1%</td>
<td>20.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>-2.0%</td>
<td>-0.3%</td>
<td>2.2%</td>
<td>-0.3%</td>
<td>-7.0%</td>
<td>3.8%</td>
<td>2.7%</td>
<td>0.5%</td>
<td>-3.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>2.9%</td>
<td>-1.1%</td>
<td>-14.1%</td>
<td>-8.8%</td>
<td>1.6%</td>
<td>8.1%</td>
<td>3.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>5.2%</td>
<td>-4.2%</td>
<td>2.6%</td>
<td>14.0%</td>
<td>7.2%</td>
<td>13.9%</td>
<td>-2.8%</td>
<td>-2.6%</td>
<td>-20.6%</td>
</tr>
</tbody>
</table>
Business Climate Edges Lower in
France&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222b.jpg" align="left" border="0" height="265" width="353">
The INSEE industry climate index fell to 107 from 108. The
index stands in the 68th percentile of its range. The recent trend
rates a -14 and stands below its midpoint in the 43rd percentile of its
range. 
 

In the chart we plot the business indicator as an index and as
a percentage change from a year ago. On a percentage basis the level is
falling. On a level basis the erosion is minor. 
 

France has held up longer than most other EMU economies. Its
indicators currently stand at a still strong level but the newest
information is that some of this weakness is beginning to take a toll
in France. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> INSEE
Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="odd">
<td class="firstcol">Climate</td>
<td>107</td>
<td>108</td>
<td>109</td>
<td>110</td>
<td>68.0</td>
<td>64</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Production</td>
</tr>
<tr class="odd">
<td class="firstcol">Recent Trend</td>
<td>-14</td>
<td>-6</td>
<td>4</td>
<td>3</td>
<td>43.1</td>
<td>134</td>
<td>44</td>
<td>-58</td>
<td>102</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely trend</td>
<td>43</td>
<td>47</td>
<td>44</td>
<td>43</td>
<td>79.2</td>
<td>8</td>
<td>63</td>
<td>-33</td>
<td>96</td>
<td>8</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Orders/Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders &amp; Demand</td>
<td>-1</td>
<td>-1</td>
<td>1</td>
<td>4</td>
<td>70.1</td>
<td>46</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-14</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Orders &amp; Demand</td>
<td>1</td>
<td>0</td>
<td>6</td>
<td>4</td>
<td>66.3</td>
<td>67</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-10</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely Sales Prices Trend</td>
<td>17</td>
<td>12</td>
<td>12</td>
<td>10</td>
<td>85.1</td>
<td>12</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>1</td>
</tr>
</tbody>
</table>
EMU Flash PMIs are Weak;
Especially for Services 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222f.jpg" align="left" border="0" height="265" width="353">
EMU PMIs show continued weakness. 
 

The EMU PMIs were weak in February. The MFG index fell further
while the services barometer, already very weak, edged higher. The MFG
index is in the 12th percentile of its range over 24 months. Services
reside in the bottom 2 percent of their range.The MFG indexes have been
slipping since mid-2006. They fell to a lower plateau in early 2007
then fell sharply again as 2007 drew to a close. MFG has steadied above
its lowest pace around a MFG reading of 52.The service sector has
weakened on roughly the same profile except it did not rebound and
steady above its low as 2008 began. Services have made a small rebound
in February but continue to cling near the lower reaches of its 24
month range. Europe is continuing to look weak despite this small
up-tick in February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">NTC
PMIs for the Euro Area</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Feb-08</td>
<td>52.25</td>
<td>52.25</td>
</tr>
<tr>
<td class="firstcol">Jan-08</td>
<td>52.60</td>
<td>52.01</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>52.44</td>
<td>52.50</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>52.43</td>
<td>53.47</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>53.73</td>
<td>55.51</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">24-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>51.46</td>
<td>52.01</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>12.8%</td>
<td>2.6%</td>
</tr>
</tbody>
</table>
</body></html>

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

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

250501J5.jpg

250501K5.jpg

The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

250501L5.jpg

250501M5.jpg

- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

250430N1.jpg

250430O1.jpg

Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

Economy in Brief: February 2008

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Chicago Fed National Activity Index Still Negative, Inflationary Pressure Low

U.S. Existing Home Sales Slipped & Prices Off More

U.S. Existing Home Sales Slipped & Prices Off More

EMU Flash PMIs are Weak; Especially for Services

U.S. Loan Delinquencies Up Across the Board

Business Climate Edges Lower in France

Euro Area Orders Drop Sharply in December

U.S. Loan Delinquencies Up Across the Board