Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090814d.jpg" align="left" border="0" height="265" width="353">
The EMU HICP fell by a larger than expected 0.7% Yr/Yr. But
with France and Germany emerging from recession in yesterday&#8217;s GDP
reports, markets are not focused on inflation being under control or
worried about deflation with the Yr/Yr drop, but instead worried that
inflation is going to be a problem sooner rather than later. Isn&#8217;t that
just like markets? Nothing is what is seems.
Forecasts made up to this point have been assuming that Europe
was going to remain weak for some time. Now with the early exit from
recession by Germany and France and the small drop in EMU GDP in
2009-Q2, inflation forecasts are beginning to get a re-think.
Ex food and energy inflation in EMU is at +0.6%. The core
measure of inflation was flat in July, up by 0.1% in June and flat in
May. There isn&#8217;t exactly any news saying inflation is building momentum
here.
Moreover, although Germany and France have &#8216;existed recession&#8217;
they have done so in a most peculiar way. And before calling it the
&#8216;end of recession&#8217; perhaps we should wait and see what has been cooked
into its GDP stew. As we pointed out in the write&#8211;up of European GDP
yesterday, the diffusion indicators that track the various sectors
across European nations and in EMU are still at very depressed levels.
This has to conjure up concerns of what ether GDP rose upon in Q2 and
if those fumes will still have lifting force in 2009-Q3.
In short, it seems a bad time to start to raise inflation
forecasts and fears. The EMU-wide HICP is in a strong drop; it is not
covering for any inflation under the surface and the surprising growth
served up by several European economies is equally surprising after the
fact as we try to understand it. Is that real and is it really a basis
for concerns about STRONG growth? 
The bottom line is that inflation is under control in Europe
and barring something exceptional - that we have not yet seen -- it
should stay that way.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> Trends in HICP </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% Mo/Mo</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="even">
<td class="firstcol">EMU</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td> 0.2%</td>
<td>-0.7%</td>
<td>4.0%</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Core</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.6%</td>
<td> 1.3%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr class="even">
<td class="firstcol">Goods</td>
<td>-1.7%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>-5.5%</td>
<td> -0.1%</td>
<td>-2.4%</td>
<td>5.1%</td>
</tr>
<tr class="even">
<td class="firstcol">Services</td>
<td>0.8%</td>
<td>0.1%</td>
<td>0.1%</td>
<td> 4.1%</td>
<td> 3.7%</td>
<td>1.9%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol" colspan="8">HICP</td>
</tr>
<tr class="even">
<td class="firstcol">Germany</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>-0.7%</td>
<td> -0.2%</td>
<td>-0.7%</td>
<td>3.5%</td>
</tr>
<tr class="even">
<td class="firstcol">France</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>0.0%</td>
<td> 0.3%</td>
<td> 0.3%</td>
<td>-0.8%</td>
<td>4.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Italy</td>
<td>-0.6%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>-1.1%</td>
<td> 0.7%</td>
<td>-0.1%</td>
<td>4.1%</td>
</tr>
<tr class="even">
<td class="firstcol">Spain</td>
<td>0.1%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td> 1.7%</td>
<td> 0.3%</td>
<td>-1.4%</td>
<td>5.3%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">Core:xFE&amp;A</td>
</tr>
<tr class="even">
<td class="firstcol">Germany</td>
<td>0.1%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.8%</td>
<td> 1.7%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr class="even">
<td class="firstcol">Italy</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.7%</td>
<td>1.3%</td>
<td>1.3%</td>
<td>2.8%</td>
</tr>
<tr class="even">
<td class="firstcol">Spain</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.0%</td>
<td> 1.3%</td>
<td>0.5%</td>
<td>0.7%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
</body></html>

The EMU HICP fell by a larger than expected 0.7% Yr/Yr. But with France and Germany emerging from recession in yesterday’s GDP reports, markets are not focused on inflation being under control or worried about deflation with the Yr/Yr [...]

EMU HICP In Large Yr/Yr Drop

Tom Moeller

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090814a.jpg" align="right" border="0" height="265" width="353">Deflation is
much too strong a word to describe all of the pieces of the current
pricing environment, but it appropriately denotes the CPI total and
some of its components. Last month, the CPI matched Consensus
expectations and was unchanged from June. More to the point, versus
June of last year, the 1.9% decline again was the largest since
early-1950. Stripping out food &amp; energy, prices rose an
expected 0.1% which lessened the y/y gain to 1.6%, its least since
early 2004. The 0.4% decline in energy prices reversed a
small piece of the June jump and left them down by more than
one-quarter from the year-ago level. Gasoline prices slipped 0.8%
(-37.3% y/y) after a 17.3% jump during June. Fuel oil prices also
reversed roughly half of their June rise with a 1.1% (-41.8% y/y) drop.
Finally, prices for natural gas &amp; electricity slipped 0.3%
(-11.7% y/y).Food &amp; beverage prices also provided some price
relief with a 0.2% decline which was the fifth this year. That lowered
the y/y increase to 1.0% which was the lowest since late-2002 and down
from the peak 6.1% rate of increase last fall. Recent weakness has been
led by lower dairy prices (-9.7% y/y) and lower fruit &amp;
vegetable (-3.4% y/y) prices. Prices for meats, poultry &amp; fish
also fell by 1.7% y/y while cereals &amp; bakery product prices
rose just 1.2%. The CPI less food &amp; energy also has been well
behaved. The expected 0.1% July increase slowed the y/y gain to 1.6%
which was its least since early-2004. Of some note, however, is that
prices increased at an accelerated 2.1% rate since December of last
year. That's only slightly below the 2.3% rates of increase during the
last two years.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090814b.jpg" align="right" border="0" height="265" width="353">
This year, core goods prices indeed
have firmed some. They rose 0.2% last month and at a 3.8% annualized
rate so far this year. That compares with little price change during
the prior three years. Again, higher tobacco prices account for much of
that acceleration. As taxes have been raised, prices jumped 2.2% last
month and so far this year at a 49.8% annual rate. There also has been
modest firming of prices elsewhere. Apparel prices posted a 0.6%
increase and are up at a 3.9% rate this year after price declines which
extend back to 1994 (no typo). Prices for new &amp; used motor
vehicles also seemed to strengthen despite an aggressive marketing
campaign. They rose 0.3% last month and at a 4.1% rate this year. That
compares with price deflation during the last two years. Continuing
weak were prices for household furnishings &amp; operation. They
slipped 0.1% during July and the 0.5% YTD rate of increase about
matches the gain during 2008. The U.S. recession continued to lower
the strength of core services prices. They were
unchanged last month and have risen at just a 1.5% annual rate so far
this year, half that in 2008 and nearly the&nbsp; weakest since
1983. Weakness in the housing market accounts for much of that
moderation. Last month, shelter prices fell 0.2% and they've risen at a
just a 0.6% annual rate so far in 2009. Owners equivalent rent of
primary residences, a measure not equivalent to other house price
measures, dipped slightly during July and have risen at a 1.6% rate so
far this year versus a 2.5% 2008 increase.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090814c.jpg" align="right" border="0" height="265" width="353">
Elsewhere, public
transportation prices posted a 1.9% rebound last month after earlier
declines but they're down at an 8.3% rate this year.&nbsp;Also
firming last month were medical care services prices with a 0.3%
increase and 3.6% YTD gain. Education costs have been firm. They are up
at a 5.5% annual rate this year.The chained CPI, which adjusts for
shifts in consumption patterns, fell 0.2% during July while
year-to-year prices fell 1.9%. Chained prices less food and energy were
roughly unchanged last month for the third month in a row but the YTD
change of 2.2% is up sharply from no change as of the end of last year.
The consumer price data is available in Haver's USECON
database while detailed figures can be found in the CPIDATA
database. &nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>0.0</td>
<td>0.7</td>
<td>-1.9</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>1.6</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.2</td>
<td>0.3</td>
<td>1.4</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.0</td>
<td>0.1</td>
<td>1.6</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-0.4</td>
<td>7.4</td>
<td>-28.0</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.2</td>
<td>0.1</td>
<td>1.0</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>&nbsp;</td>
<td>0.9</td>
<td>-1.3 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td></td>
<td>0.0</td>
<td>1.3</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body></html>

Deflation is much too strong a word to describe all of the pieces of the current pricing environment, but it appropriately denotes the CPI total and some of its components. Last month, the CPI matched Consensus expectations and was [...]

CPI Decline Revisits 1950 As Core Price Gain Slows To Smallest Since 2004

CPI Decline Revisits 1950 As CorePrice Gain Slows To Smallest Since 2004

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813j.jpg" width="353">
Business inventories have continued to fall sharply through June, and at all three levels of distribution, manufacturing, wholesale and retail. Total inventories were off 1.1% in June alone, following 1.2% in May and 1.3% in April. The level at end-June was down an amazing 9.8% from a year ago. Factory stocks were off 0.8% in the month and 8.5% from June 2008, wholesale was down 1.7% in June and 10.3% on the year and retail 1.1% in June and 10.8% from June 2008.
No small part of this shrinkage is in the auto industry alone. Wholesale and retail motor vehicle and parts stocks together were down 2.4% in June and 21.9% from June 2008. Apart from auto dealers, retail inventories are down on the year by &quot;only&quot; 5.2% and total business stocks by 7.9%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813i.jpg" width="353">
There is a distinctly encouraging note in this report on business inventories and sales for June. Sales rose. They were up 0.9% from May, the first month-on-month increase since July 2008. All three sectors participated in the gain, and total sales excluding the auto industry rose 0.8%. The sales improvement helped bring the inventory/sales ratio down to 1.38 from 1.41 in May, the lowest since last October. The auto industry has contributed to this swing too, but in June, the I/S ratio for non-auto industries fell to 1.33 from 1.35 and was also the lowest figure since October.
Today&#39;s accompanying data on retail sales for July remind us that the sales picture remains fragile, though [see Tom Moeller&#39;s summary of that], so it&#39;s clearly premature to conclude that anything fundamental has shifted in the total sales and inventory picture. But at least this one month looks better, and getting the I/S ratios down more puts the economy another step closer to recovery.
The business sales and inventory data are available in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Inventories (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total</td>
<td>-1.1</td>
<td>-1.2</td>
<td>-1.3</td>
<td>-9.8</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail</td>
<td>-1.0</td>
<td>-1.7</td>
<td>-1.4</td>
<td>-10.8</td>
<td>-3.1</td>
<td>2.5</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Auto</td>
<td>-0.3</td>
<td>-0.7</td>
<td>-0.7</td>
<td>-5.2</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Wholesale</td>
<td>-1.7</td>
<td>-1.2</td>
<td>-1.3</td>
<td>-10.3</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.8</td>
<td>-0.8</td>
<td>-1.2</td>
<td>-8.5</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Business inventories have continued to fall sharply through June, and at all three levels of distribution, manufacturing, wholesale and retail. Total inventories were off 1.1% in June alone, following 1.2% in May and 1.3% in April. [...]

U.S. Business Inventories Still Being Cut Sharply through June

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813f.jpg" align="right" border="0">
U.S. import prices last month declined a slightly
more-than-expected 0.7%. Prices have fallen sharply since last year due
to lower oil prices, the firmer dollar and the global economic
recession.
The recent gain in petroleum prices took a breather last month
and fell 2.8% after four consecutive months of double-digit increase.
This month, however, crude oil prices have more than reversed the
earlier decline with a rise to an average $71.75 per barrel.
Non-oil import prices reversed course last month with a 0.2%
decline and since March prices have been roughly unchanged. This
stability compares to three-month price declines of 3.5% as recently as
this past January. (During the last ten years, there has been a
negative 81% correlation between the nominal trade-weighted exchange
value of the US dollar vs. major currencies and the y/y change in
non-oil import prices.)
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813g.jpg" align="right" border="0">
Food prices took an about face last month with a 0.8% decline
(-7.3% y/y) that reversed the gains during the prior two months. Prices
for nonauto consumer goods fell 0.4% (-1.2% y/y). Durable consumer
goods prices fell 0.3% (-1.6% y/y) as household goods fell and home
entertainment equipment prices also were down by 1.4% y/y. Apparel
prices reversed earlier stability and continued down with a 0.5% flop
(-0.6% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813h.jpg" align="right" border="0">
Capital goods import prices during July increased a modest
0.2% (-1.5% y/y) after little change during the prior three months.
Excluding computers, capital goods prices rose 0.2% but they're still
down 0.3% y/y. Prices of computers, peripherals &amp; accessories
inched up 0.3% but they're down 4.8% during the last year.
Total export prices reversed some of their earlier
strengthening with a 0.3% decline. The latest overall drop was led by a
4.9% (-22.3% y/y) decline in agricultural prices which reversed all of
the June increase. Nonagricultural export prices firmed again and
posted a 0.2% uptick but they're still down 6.5% y/y.

<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/USECON/@E8/@E807/@E807.HTM">Import/Export
Prices (NSA, %)</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-0.7</td>
<td>2.6</td>
<td>-19.3</td>
<td>11.5</td>
<td>4.2</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-2.8</td>
<td>16.2</td>
<td>-49.9</td>
<td>37.7</td>
<td>11.6</td>
<td>20.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>-0.2</td>
<td>0.2</td>
<td>-7.3</td>
<td>5.3</td>
<td>2.7</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>-0.3</td>
<td>1.0</td>
<td>-8.1</td>
<td>6.0</td>
<td>4.9</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</body></html>

U.S. import prices last month declined a slightly more-than-expected 0.7%. Prices have fallen sharply since last year due to lower oil prices, the firmer dollar and the global economic recession. The recent gain in petroleum prices [...]

U.S. Import Prices Decline With Drop In Oil And Other Prices

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813d.jpg" width="353">
The latest figures from the Labor Department indicate that initial claims for unemployment insurance increased slightly to 558,000 last week after an upwardly revised 554,000 during the prior week. For all of July, claims fell 9.3% from June but since the beginning of the month they moved sideways. The four-week moving average of claims, which smoothes out some of the volatility in the weekly numbers, ticked up to 565,000 but was still near its lowest level since late-January. A decline in weekly claims to 545,000 had been expected.
The Labor Department indicated that the largest increases in initial claims for the week ending Aug. 1 were in Alabama (+721, 58.4% y/y), Washington (+692, 47.6% y/y), Nebraska (+306, 40.4% y/y), Kentucky (+247, 46.9% y/y), and Delaware (+157, 43.0% y/y), while the largest decreases were in California (-7,258, -16.4% y/y), Michigan (-7,031, -20.9% y/y), Tennessee (-4,391, +30.9% y/y), Florida (-3,358, -6.1% y/y), and Georgia (-2,538, +19.8% y/y).
The lower level of initial claims has been accompanied by lower continuing claims for unemployment insurance which probably owes partly to the exhaustion of benefits. For the latest week, they declined 141,000 and since their peak last month they&#39;ve fallen 702,000 or 10.2%. Continuing claims provide an indication of workers&#39; ability to find employment and the level of 6,202,000 claims is up sharply from the year-ago level. The four-week average of continuing claims fell back to 6,259,250 and that was the lowest since late-April. The series dates back to 1966.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813e.jpg" width="353">
The insured rate of unemployment remained at 4.7% which was the lowest level since mid-April. During the last ten years, there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.
The highest insured unemployment rates in the week ending July 25 were in Michigan (6.8 percent), Puerto Rico (6.7), Oregon (6.3), Pennsylvania (6.2), Nevada (6.0), Wisconsin (5.6), Connecticut (5.5), California (5.4), New Jersey (5.4), and Illinois (5.3). The lowest rates were in South Dakota (1.4) and North Dakota (1.6), Virginia (2.5), Wyoming (3.0), Texas (3.0), Maine (3.2), Colorado (3.4), Maryland (3.6), Minnesota (3.7), Florida (4.3), Mississippi (4.3), New York (4.4) and Georgia (4.3).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.

<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">08/07/09</th>
<th scope="col">07/31/09</th>
<th scope="col">07/24/09</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 class="odd">
<td class="firstcol">Initial Claims</td>
<td>558</td>
<td>554</td>
<td>589</td>
<td>26.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,202</td>
<td>6,343</td>
<td>82.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>4.7</td>
<td>4.8</td>
<td>2.5</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The latest figures from the Labor Department indicate that initial claims for unemployment insurance increased slightly to 558,000 last week after an upwardly revised 554,000 during the prior week. For all of July, claims fell 9.3% [...]

U.S. Weekly Claims for Unemployment Insurance Rise Unexpectedly but the Trend Is Still Down

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813c.jpg" align="left" border="0" height="265" width="353">
European growth figures continue to be weak when we log the
indicators month by month but if instead we complete a formal GDP
presentation, Germany and France have exited recession while the EMU
GDP drop is only -0.1% in Q2 of 2009, a drop at an annual rate of
-0.4%. EMU&#8217;s GDP decline in Q2 is less than the drop in the US but
Europe&#8217;s Yr/Yr decline has been worse at -4.7% compared to the US
year-over-year loss of -3.9%. 
 

In the US the Fed is less downbeat - At
its meeting yesterday the Fed implied that the recession in the US was
ending but did not take the step of saying in any clear voice that
recovery was beginning. It issued in a vague voice the statement saying
that activity was leveling off. In Q2 some of Europe, at least, is
doing better than that. 
 

GDP as the standard - The contrast
between what GDP sees and what monthly indicators show is an important
one to keep in mind. GDP accounting has its peculiar elements. Fewer
imports boost GDP even though there is no direct impact on domestic
output (there is less bought from abroad and so fewer payments made to
foreigners- all things equal fewer imports mean higher sales by
domestic agents for the same GDP). And inventories cut at slower pace,
add to GDP growth even though they are still being cut. 
 

Indicators can lag - Jobs tend to trail
activity shifts so the economy will be in recovery before job growth is
even positive. In the case of Europe its purchaser induces and the EU
Economic indicators from the EU Commission are woefully weak and seem
inconsistent with the notion that the recession is ending even if just
in Germany and France. But that is the way recessions sometimes end. 
 

Indicators really do lag in this cycle - 
To put it differently early recovery periods often do not look very
different from end recession periods. That is not surprising because
they are chronological neighbors. What makes recovery so different is
where it is headed compared to the recession period. Even so, the
indicators of economic performance in Europe are uncharacteristically
weak for the recession to be ending. Even those in Germany and in
France are lacking. The GDP rebounds hardly seems like they can be from
the same countries as the ones that have produced the indicators they
have up to mid-year. 
 

What indicators have been telling us- To
begin with we have no detail on GDP in Europe just the few things that
might be said at press conferences where the data are released.
Industrial data in EMU as well as in Germany and France, in particular,
continue to be very weak. The German and French economic sentiment
readings which are a weighted average of the EU Commission&#8217;s underlying
sector indices rank in the bottom 20th percentile of their respective
rage of values. The German and French readings are up about 10% or so
from their weakest readings in the recession on this score. The EU
Commission indices are from underlying diffusion data. All continue to
show deep contractions across are all sectors. Germany and France show
GDP that is rising, nonetheless. Apparently the change in the EMU index
is more important that the level of the index even though it is a
diffusion index that has to turn positive to signal sector growth and
all sectors industrial, retail, services, construction and consumer are
weak. 
 

German&#8217;s IFO - Germany has its own IFO
survey with a diffusion component and for July its services reading
just barely turned positive. 
 

More indicators - The NTC/Markit readings
are ISM type readings where a level above 50 denotes expansion. For EMU
in June the NTC reading stood at 42.4 for MFG and 44.5 for Services.
Both of these indices register declines as they are below 50. For
Germany, an economy that is showing positive GDP growth in Q2, its
NTC/Market diffusion index stood at 40.8 and was ins the bottom 40
percentile of its range of readings. France at 45.9 also signaled a
declining MFG sector but its index was closer to neutral standing in
the 49th percentile of its range, despite its low raw diffusion level.
The service sectors in France and Germany were weak in June as well,
with raw diffusion readings 45 and 47 respectively. Those readings
ranked in the lower third of each country&#8217;s respective historic
experience. 
 

GDP does not seem to have widespread support -
In short the industrial data and service sector data we have do not
confirm the message from GDP in EMU. We could go through a litany of
consumer confidence data as well, as they are weak too. If Europe is
recovering (France and Germany, any way) it must be the government
spending that is boosting the economy coupled with lower imports and
inventories that are being cut by less than before &#8211;all these are what
I would terms passive augmentations of GDP. The active augmentation
from more consumer spending and more business investment has not begun.
Inventories are likely adding to GDP growth but not by actively being
built. 
 

Exports and government are probably the main drivers -
We have seen episodic country reports that have revealed exports have
begun to rise. So the economies that are in recovery may now be firing
on two cylinders exports and the government sector. It&#8217;s not a very
wide base for growth yet. But it is also the support within EMU that is
helping to cut the drop in the formal measure of GDP. Progress is being
made but it does look like the sort of progress that usually marks the
ends of recessions. Too many European, German and French sectors are
just too weak. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">E-Area and main G-10 country GDP Results </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Quarter over quarter-Saar</td>
<td colspan="4">Year/Year</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q3-08</td>
</tr>
<tr>
<td class="firstcol">&nbsp; EMU-15</td>
<td>-0.4%</td>
<td>-9.7%</td>
<td>-6.9%</td>
<td>-4.7%</td>
<td>-4.9%</td>
<td>-1.7%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Austria</td>
<td>#N/A</td>
<td>-3.3%</td>
<td>-3.9%</td>
<td>#N/A</td>
<td>-3.4%</td>
<td>0.2%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France</td>
<td>1.4%</td>
<td>-5.3%</td>
<td>-5.5%</td>
<td>-2.6%</td>
<td>-3.4%</td>
<td>-1.6%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany</td>
<td>1.3%</td>
<td>-13.4%</td>
<td>-9.4%</td>
<td>-5.9%</td>
<td>-6.7%</td>
<td>-1.8%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Greece</td>
<td>1.3%</td>
<td>-4.7%</td>
<td>1.2%</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy</td>
<td>-1.9%</td>
<td>-10.3%</td>
<td>-8.3%</td>
<td>-6.0%</td>
<td>-6.0%</td>
<td>-3.0%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; The
Netherlands</td>
<td>-3.4%</td>
<td>-10.3%</td>
<td>-4.1%</td>
<td>-4.9%</td>
<td>-4.2%</td>
<td>-0.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Portugal</td>
<td>#N/A</td>
<td>-6.2%</td>
<td>-7.1%</td>
<td>#N/A</td>
<td>-3.7%</td>
<td>-2.0%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Spain</td>
<td>#N/A</td>
<td>-7.4%</td>
<td>-3.8%</td>
<td>#N/A</td>
<td>-3.0%</td>
<td>-0.7%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; UK</td>
<td>-3.1%</td>
<td>-9.2%</td>
<td>-7.0%</td>
<td>-5.6%</td>
<td>-4.9%</td>
<td>-1.8%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; US</td>
<td>-1.0%</td>
<td>-6.4%</td>
<td>-5.4%</td>
<td>-3.9%</td>
<td>-3.3%</td>
<td>-1.9%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Japan</td>
<td>#N/A</td>
<td>-14.2%</td>
<td>-13.5%</td>
<td>#N/A</td>
<td>-8.4%</td>
<td>-4.4%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Switzerland</td>
<td>#N/A</td>
<td>-3.2%</td>
<td>-2.2%</td>
<td>#N/A</td>
<td>-1.6%</td>
<td>-0.4%</td>
<td>1.2%</td>
</tr>
</tbody>
</table>
</body></html>

European growth figures continue to be weak when we log the indicators month by month but if instead we complete a formal GDP presentation, Germany and France have exited recession while the EMU GDP drop is only -0.1% in Q2 of 2009, a [...]

EMU GDP Falls But French And German GDP Rise

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813a.jpg" width="353">
Price discounting apparently wasn&#39;t enough last month to entice consumers to open their wallets and spend. July retail sales slipped 0.1% after an upwardly revised 0.8% June increase that was fueled by higher gasoline prices. The July decline in total sales fell well short of expectations for a 0.6% increase. The retail sales data are available in Haver&#39;s USECON database.
The &quot;Cash-For-Clunkers&quot; auto sales program was successful in lifting sales of motor vehicles by 2.4% (-7.3% y/y) in dollar terms as unit vehicle sales jumped 15.8% m/m. Without the auto sector, retail sales fell 0.6%.
Elsewhere, gas prices reversed just a piece of earlier increases with a 4.0% (NSA) decline to $2.53 per gallon. As a result, sales of gasoline service stations fell 2.1% after a 6.3% jump during June.
Distortion of the underlying retail spending picture is an obvious result of auto &amp; gasoline sales, but the basic trend is not vibrant. Retail sales excluding both autos and gasoline fell 0.4% (-4.6% y/y) last month for the fifth consecutive monthly decline. Including a strong January, these sales have risen at just a 0.2% annual rate since December following last year&#39;s 2.8% 12-month decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090813b.jpg" width="353">
Discretionary spending continued under pressure as the job market remained depressed. Sales at furniture, electronics &amp; appliance stores fell 1.2% (-13.8% y/y) for the fifth consecutive monthly drop. Earlier small monthly gains were revised away. Furniture store sales alone fell 0.9% (-12.9% y/y) while sales of electronics &amp; appliances dropped 1.4% (-14.6% y/y). So far this year, these hard good sales have fallen at a 7.8% annual rate after last year&#39;s 4.4% decline. In the soft goods area, apparel store sales increased a slight 0.6% (-7.6% y/y) while sales at general merchandise stores fell 0.8% for the fifth consecutive monthly decline (-4.7% y/y).
Internet and catalogue purchases inched up after a firm June. July sales of non-store retailers rose 0.1% (-5.2% y/y) following an upwardly revised 1.5% jump during June. So far this year sales have risen at a 3.2% rate after rising 2.8% in 2008. Finally, restaurant sales made up their June decline with a 0.4% increase. So far this year they&#39;ve risen a a 4.0% annual rate.
Building materials sales continued their slump, falling 2.1% last month for the sixth monthly decline this year and they were down at a 9.1% annual rate since December.
Bank Credit Standards from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_bank-credit-standards.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">&nbsp;</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a> (%)</td>
<td>-0.1</td>
<td>0.8</td>
<td>0.5</td>
<td>-8.3</td>
<td>-0.7</td>
<td>3.3</td>
<td>5.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.6</td>
<td>0.5</td>
<td>0.2</td>
<td>-8.5</td>
<td>2.5</td>
<td>3.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Less Gasoline</td>
<td>-0.4</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-4.6</td>
<td>1.6</td>
<td>3.6</td>
<td>5.7</td>
</tr>
</tbody>
</table>
</body>
</html>

Price discounting apparently wasn't enough last month to entice consumers to open their wallets and spend. July retail sales slipped 0.1% after an upwardly revised 0.8% June increase that was fueled by higher gasoline prices. The July [...]

U.S. Retail Sales Post Surprising, Across-the-Board Declines

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Tian Yong Woon

This week, we dive into several key developments across Asia. China’s Q4 GDP marked a further extension of its recent growth slowdown, yet full-year growth still came in exactly at the government’s 5% target for 2025 (chart 1). That said, the road ahead remains challenging, as December’s data delivered a mixed set of outcomes. Encouragingly, new external inroads, starting with Canada’s opening up of EV trade with China, could pave the way for additional opportunities (chart 2). In semiconductors, the latest US tariff measures proved far more limited in scope than initially feared, helping to explain the muted market reaction to the announcement (chart 3). Relatedly, commitments by major Taiwanese chipmakers to expand investment in the US have brought Washington and its largest chip supplier closer together, culminating in a US–Taiwan trade deal (chart 4).

In Japan, attention has turned to the possibility of a snap Lower House election in February. The interim political uncertainty, alongside expectations around future policy, has weighed on the yen and pushed Japanese yields higher (chart 5), with some observers increasingly concerned about the narrowing window to pass the FY2026 budget by April, given the likely dissolution of the Lower House. In South Korea, President Lee’s recent visits to China and Japan point to improving bilateral ties, although he continues to navigate a delicate balancing act amid still-elevated China–Japan tensions. Domestically, elevated house prices and high household debt continue to limit the scope for further monetary policy easing (chart 6).

**China**
Alongside its regular slate of monthly economic releases, China unveiled its Q4 GDP figures earlier today, with the economy expanding by 4.5% y/y during the quarter. While Q4 growth continues the recent trend of deceleration seen over the past few quarters, the outcome brings China’s full-year growth for 2025 right in line with the government’s 5% target (chart 1). This defied expectations among some investors that the economy would fall short. This outcome aligns with earlier discussions that China remained within reach of its growth target despite slowing momentum. That said, the outlook ahead remains challenging. December’s monthly data painted a mixed picture, with declines in fixed asset investment accelerating and retail sales growth cooling further, even as industrial production growth remained relatively resilient.

260119T1.jpg

On China’s external developments, another high-profile outcome followed Canadian Prime Minister Carney’s visit to Beijing. Canada and China unveiled a trade deal lowering tariffs on Canada’s imports of 49,000 Chinese EVs to 6.1% from 100%, in exchange for China easing tariffs on Canadian agricultural products. Carney remarked that China is now a “more predictable” trading partner than the US and that “a new world order” is taking hold. These comments likely reflect longstanding trade frictions between the US and Canada, as US President Trump has sought to renegotiate what he views as unfair trade arrangements. The new Canada–China agreement is also expected to catalyse significant Chinese joint-venture investment in Canada over the coming years. The move marks a notable shift for Canada, which has traditionally been an exceptionally close partner of the US, not only economically (chart 2). That Ottawa has inked a trade deal with Beijing while US–China tensions remain elevated represents a clear break from its previous stance and has, unsurprisingly, drawn criticism from Washington.

260119T2.jpg

**US semiconductor tariffs**
Turning to US-originated developments, President Trump signed a proclamation last week imposing a 25% tariff on certain advanced computing chips, including Nvidia’s H200 and AMD’s MI325X. The tariff will not apply to chips imported to support the buildout of the US tech supply chain or to strengthen domestic manufacturing capacity for semiconductor derivatives. The move stops short of a blanket tariff on all AI chips and semiconductor imports, easing—at least for now—initial investor concerns and likely explaining the market’s relatively muted reaction to the announcement (chart 3). A broader tariff would have had far more severe implications, given the  US economy’s substantial imports of semiconductor goods. In the case of Nvidia’s H200—designed to comply with US export restrictions and primarily targeted at the Chinese market—the tariff appears intended to capture a 25% levy before the chips are shipped onward to China. That said, China’s demand response remains uncertain, particularly as the H200 is reportedly banned in China.

260119T3.jpg

Not long after the tariff announcement, the US and Taiwan — the largest source of US semiconductor imports, as shown in chart 4 — were reported to have reached a trade deal. Under the agreement, Taiwanese chipmakers such as TSMC that expand production in the US will face lower tariffs on semiconductors and related manufacturing equipment, with duty-free treatment applying to some imports. In addition, tariffs on most other Taiwanese exports to the US will be reduced to 15% from 20%. In return, Taiwanese companies will invest $250 billion in the US, including an expanded manufacturing footprint by TSMC in Arizona, aimed at boosting domestic production of semiconductors, energy, and AI. As illustrated in chart 4, Taiwan already dominates US semiconductor imports, with its share having risen sharply in recent years and far outstripping contributions from other major suppliers such as Southeast Asian economies and South Korea.

260119T4.gif

**Japan snap elections**
Turning to Japan, the country is drumming up for an anticipated February Lower House snap election as Prime Minister Takaichi looks poised to capitalize on her strong approval ratings to secure a firmer parliamentary footing. In reaction, opposition parties have already started galvanizing for the expected upcoming electoral fight, with the opposition Constitutional Democratic Party (CDP) and the ruling party’s former coalition partner, Komeito, having announced a plan to form a new Centrist Reform Alliance (CRA) to fight the current ruling bloc. Given this interim bout of uncertainty, there is now some doubt cast on whether Japan’s budget this year can be debated robustly and passed in time by April 2026 (when the new fiscal year starts), especially if the Lower House gets dissolved soon, meaning less parliamentary time will be available for the purpose. Tracking such developments, the yen had extended its recent slide, whilst Japanese yields have firmed further (chart 5).

260119T5.jpg

**South Korea**
Lastly, we turn to South Korea, where President Lee has embarked on visits to China and Japan that point to a warming of regional ties. In China, Lee’s meeting with President Xi yielded agreements to restore strategic dialogue channels and deepen cooperation in areas such as critical minerals, with Lee calling for a “full restoration” of bilateral relations. In Japan, his visit similarly signalled a thaw in ties following previous periods of tension. Overall, South Korea appears to be seeking closer relations with its two major Asian neighbours even as China–Japan tensions remain elevated. Domestically, however, while the semiconductor sector has benefited from the AI-driven upswing, South Korea continues to face challenges such as elevated house prices and high household debt. These factors have constrained the scope for further monetary policy easing (chart 6).

260119T6.jpg

Asia

Economic Letter from Asia: Shifting Gears

Winnie Tapasanun

260116R23.jpg

260116S23.jpg

Industrial production (IP) rose a more-than-expected 0.4% m/m in December following a 0.4% rise in November (+0.2% initially) and a 0.3% decline in October (-0.1% previously), data from the Federal Reserve Board showed. December marked the third m/m gain in four months. A 0.1% m/m December increase had been expected in the Action Economics Forecast Survey. The year-on-year growth rate slowed to 2.0% in December, the lowest since September, from 2.5% in November; this compared with a 0.3% y/y decline in December 2024. The December IP index at 102.3 was 3.1% above a low of 99.2 in January 2024. IP rose 0.2% q/q in Q4 2025 after a 0.6% q/q gain in Q3 2025, increasing at a 0.7% annualized rate following a 2.3% Q3 annualized pace. In 2025, IP rose 1.3% after declines of 0.7% in 2024 and 0.2% in 2023.

By **industry groups**, manufacturing production grew 0.2% (2.0% y/y) in December, up for the third time in four months, following a 0.3% increase in November (0.0% initially) and a 0.6% drop in October (-0.4% previously). Durable goods production edged up 0.1% (3.1% y/y) in December, the first m/m increase since September, after a 0.1% downtick in November. Within durables, the following categories rose m/m in December, including output rises of 2.4% (3.5% y/y) in primary metals, 1.7% (1.3% y/y) in electrical equipment, appliances & components, 1.5% (17.2% y/y) in aerospace & miscellaneous transportation equipment, 0.8% (-2.2% y/y) in furniture & related products, 0.2% (4.8% y/y) in machinery, and 0.1% (7.4% y/y) in computer & electronic products. Notably, aircraft & parts production climbed 2.1% (30.0% y/y), the third m/m increase in four months, reversing a 2.1% November drop. To the downside, the following durable goods categories fell m/m in December, including drops of 2.3% (-5.5% y/y) in wood products, 1.1% (-2.8% y/y) in motor vehicles & parts, 1.1% (-1.0% y/y) in nonmetallic mineral products, 0.1% (+2.6% y/y) in fabricated metal products, and 0.1% (-3.7% y/y) in miscellaneous durables goods.

Nondurable goods production increased 0.3% (1.0% y/y) in December, the third m/m gain in four months, after a 0.8% rebound in November. The December increase reflected m/m output rises of 1.8% (2.1% y/y) in petroleum & coal products, 0.5% (1.9% y/y) in food, beverages & tobacco, and 0.3% (-0.2% y/y) in plastics & rubber products. In contrast, the following nondurable goods categories declined m/m in December, including output drops of 1.3% (-0.8% y/y) in textiles & product mills, 1.1% (-0.5% y/y) in apparel & leather goods, 0.3% (-3.1% y/y) in paper, 0.3% (-3.4% y/y) in printing & related support activities, and 0.1% (+1.6% y/y) in chemicals.

Utilities output recovered 2.6% (2.3% y/y) in December, the third m/m rise in four months, following a 0.3% decline in November (-0.4% initially), reflecting a 1.2% rebound (1.3% y/y) in electric utilities output and a 12.0% jump (8.7% y/y) in natural gas utilities output. Mining activity, however, fell 0.7% (+1.7% y/y), the third m/m slide in four months, after an unrevised 1.7% November gain.

By **market groups**, business equipment output advanced 0.8% (10.1% y/y) in December, up for the third time in four months, after a 0.3% increase in November. Consumer goods output rose 0.7% (0.7% y/y) after a 0.7% November rebound, reflecting a 0.7% decline (-3.5% y/y) in durable consumer goods and a 1.1% gain (1.8% y/y) in nondurable consumer goods. Materials production grew 0.2% (1.7% y/y), the third m/m increase in four months, after a 0.5% November rise. In contrast, construction supplies production fell 0.3% (+1.3% y/y) in December, the second m/m fall in three months, reversing a 0.3% increase in November.

In **special classifications**, factory output of selected high-tech industries increased 0.7% (10.9% y/y) in December, the third successive m/m gain, following a downwardly revised 0.5% rise in November (+1.1% initially). Manufacturing production excluding selected high-tech industries rose 0.2% (1.7% y/y) in December after a 0.3% gain in November, and manufacturing production excluding selected high-tech and motor vehicles & parts rose 0.3% (2.1% y/y) after a 0.4% increase; both measures posted their third m/m gain in four months.

Capacity utilization rose to 76.3% in December, the highest since July, from 76.1% in November (76.0% initially). The Action Economics Forecast Survey forecasted 76.0%. The December reading was 3.2 percentage points below its long-run (1972–2024) average. Manufacturing capacity utilization held at 75.6% in December and November (75.4% previously); the December rate was 2.6 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

260116T23.jpg

260116U23.jpg

- December IP +0.4% (+2.0% y/y), third m/m rise in four months, led by a 2.6% gain in utilities.
- Manufacturing +0.2% (+2.0% y/y), w/ durables +0.1% and nondurables +0.3%.
- Selected high-tech +0.7%, third consecutive m/m rise; motor vehicles -1.1%, fourth straight m/m fall.
- Mining -0.7%, third m/m decline in four months.
- Key categories in market groups mostly increase.
- Capacity utilization at a five-month-high 76.3%; mfg. capacity utilization steady at 75.6%.

U.S. Industrial Production Increases in December on Utilities Rebound

260116E.jpg

The European Monetary Union has concluded a year of weak-to-moderate growth with inflation largely toeing the line. As always, the inflation picture is more complicated than a simple statement. When we look at inflation, we look at the headline, we look at the core, to make sure that the volatile food & energy elements aren't dominating the index, and then we look across some of the main participants to see if the trend for inflation is shared broadly across the largest countries in the Monetary Union. When we apply those kinds of standards, the grading for the year is reduced. However, based on the headline alone, it was an excellent year for the ECB.

**Headline Inflation in 2025**
Headline inflation in 2025 rose by 2%, exactly on the target of the European Central Bank. It rose over six months at a 2% annual rate and then concluded the year over the last three months, rising at a 1.6% annual rate with some margin below the target set by the central bank itself.

**Country Headline Inflation Trends**
On a country basis, the performance is not nearly as good. While year-on-year results look pretty good, with Germany at 2%, France at 0.7% and Italy at 1.3%, Spain comes in at 3.1%. So the three largest monetary union economies come in at or below 2% with Spain as a rogue observation. When we look further at the sequence of inflation within the year, we see Germany at 2% over 12 months, rising to 3.1% over 6 months, rising further to 4% over 3 months. Inflation is accelerating at the end of the year even as Germany hits the target! This is something to keep an eye on. For France, the inflation rate also accelerates slightly but stays below the bar of 2% over three months, six months, and 12 months. For Italy, inflation is decelerating from 1.3% over 12 months to -0.3% over six months, and then inflation in Italy is contracting at a 1.9% annual rate over three months. Spanish inflation shows clear trouble with a 3.1% 12-month pace, rising to 4.6% at an annual rate over six months, and rising further to 5.9% at an annual rate over three months.

**Core Inflation**
For core inflation, the Monetary Union’s consolidated numbers are not yet compiled. However, for the four largest economies, we do have core or ex-energy inflation. For Germany, it's inflation excluding energy. On that basis, German inflation is 2.2% over 12 months, it rises to 2.7% over six months, then falls back to a 2% annual pace over three months All-in-all not a bad performance. For France, core inflation is below 2% over 12 months, six months, and three months. In Italy, once again, we see inflation decelerating: Italian inflation is 2% over 12 months - right on the ECB target. It falls to a 1.3% annual rate over six months and then falls further to a 0.3% annual rate over three months. For Spain, the core has another very difficult story for the Monetary Union. Inflation is 2.7% over 12 months, it rises to 3.1% over six months and stays at an annual rate of about 3% over three months. This is too high and it looks stubborn, particularly because it is the core.

260116.jpg

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

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

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

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

260115Z1.jpg

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

260115Z2.jpg

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

260115Z3.jpg

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

260115Z4.jpg

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

260115Z5.jpg

**China’s export growth**
This week’s China trade data revealed that its export growth has continued to rotate away from the US and toward Europe and ASEAN, a pattern that has become more pronounced over the past year. While exports to the US have fallen sharply on a year-on-year basis, shipments to both Europe and ASEAN have held up markedly better, and in recent months have returned to positive growth. This divergence is consistent with the tightening of US trade policy toward China, including higher tariffs, expanded export controls and broader efforts to “de-risk” supply chains. By contrast, trade with Europe and ASEAN appears to be benefiting from trade diversion and re-routing, as Chinese firms redirect exports toward markets where barriers remain lower and supply-chain integration is deeper.

260115Z6.jpg

The global backdrop remains unsettled, reflected in rising gold prices amid geopolitical tensions—most recently around Venezuela—and renewed political noise, including questions over Federal Reserve independence. At the same time, however, many major equity indices remain at or close to all-time highs, buoyed by optimism around AI and reinforced by a run of relatively benign US inflation readings. Against this mixed backdrop, the charts this week point to a global outlook that is becoming more differentiated rather than uniformly weaker. Blue Chip forecasts for 2026 growth have edged higher over the past six months, with upgrades concentrated in economies most exposed to the AI investment cycle, notably the US and parts of Asia (chart 1). Central bank expectations remain fluid: while panelists broadly anticipate easing by the Fed and Bank of England, conviction around timing is limited, and the Bank of Japan remains an outlier with further tightening still expected (chart 2). In the UK, that uncertainty sits alongside a deteriorating data flow, with negative economic surprises increasingly tilting market expectations toward an earlier BoE rate cut (chart 3). Turning to the US, special questions highlight a divide over whether AI is already having a noticeable macro impact or whether its effects will emerge more gradually, a tension that mirrors concerns about over-optimism in financial markets (chart4). That debate is echoed in the recent pick-up in US productivity growth and the step-change in business formation—developments that may reflect AI-related dynamics but which also warrant caution given the historically cyclical nature of productivity (chart 5). Finally, China’s trade data point to a continued re-orientation of export growth away from the US and toward Europe and ASEAN, consistent with evolving US trade policy and broader supply-chain realignment (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2mhM227WWeJJ6kRv7sJMiE?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: Between Optimism and Uncertainty

Michael J. Moran

260115J.jpg

260115K.jpg

The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October to include with the November report. The charts above have a gap in October, and the November figures are represented by a small dot.

Import prices have been remarkably stable in the past three years, as shown by the sideways movement in the level of the import price index (left chart). Focusing on percent changes (i.e. inflation rates) rather than the level of the index shows deflation in 2023 and early 2024 followed by higher prices more recently (right chart). Still, the net change in the past 12 months has totaled only 0.1% and the cumulative change in the past three years amounted to a decline of 0.4%.

A calm environment in the energy sector has helped to restrain import prices, as the price of crude oil showed little change in 2023 and 2024 and declined in 2025. Import prices excluding petroleum products have increased in recent years, but the changes have been modest: 0.9 in the past 12 months and 1.3% in the past three years.

The non-oil components of import prices have traced various patterns in recent years, but shifts have been largely offsetting. Prices of food and autos increased noticeably in 2023 and 2024, but they gave back much of those increases in 2025. Prices of capital goods were stable in 2023 and 2024, but they started to increase in 2025. Prices of consumer goods have been volatile, showing bursts of higher prices followed by discounting, leaving a modest net increase in the past three years.

The calm energy environment also seemed to play a role on the export side, as the industrial supply category showed little net change in prices over 2023 and 2024 before jumping in early 2025. Food prices followed a similar pattern, showing two years of restraint before moving higher in 2025. These two categories account for much of the upward movement in overall export prices in 2025. Prices of consumer goods also started to move higher in 2025 after little net change in the prior two years. Prices of capital goods and automobiles have traced reasonably steady upward paths.

Many observers might try to use the import component of this report to gain insight into the effect of tariffs on prices. That will be difficult because the figures from this report are pre-tariff; there will be no independent upward pressure on prices in this report because of tariffs. In fact, one should look for lower import prices in searching for a tariff effect. That is, if a foreign exporter were to absorb the tariff burden, that would be accomplished by reducing the pre-tariff price in order to keep the after-tariff price steady.

260115L.jpg

Some exporters to the US may have made such efforts. The nearby chart shows the month-to-month change in import prices in 2025, and May and June both showed lower prices. These months were especially important because they followed the announcement by President Trump of marked increases in tariffs in April. Also, some of the downward pressure occurred in components that would be sensitive to price (autos and consumer goods). Of course, May and June might be too soon after the announcement of draconian tariffs for foreign exporters to assess and change their pricing strategy.

The chart on monthly changes ends in September because the absence of an October reading prevents the calculation of the month-to-month changes for October and November. However, the two-month change from September to November is easily calculated, and the increase of 0.4% suggests little or no effort to absorb the burden of tariffs.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

- Import prices have changed little in the past three years.
- Export prices were stable in 2023-24, but moved higher in 2025.

Economy in Brief: 2009

Jump to: