Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610d.jpg" width="353">
Labor markets in Australia look prosperous. While this labor force survey shows that the number of people employed fell 41,000 in May, that decline followed sizable rises the two months before. Year-on-year, employment was up 2.0% in May, similar to recent increases and a pick-up from the performance through 2003. Just as notably, the unemployment rate has continued to decline, reaching 5.5% in May, the second lowest in the 26-year history of the survey. The lowest reading was 5.4% in June 1981.
In May, the decline in unemployment in the face of falling employment indicates that overall labor force participation was down, and indeed, the participation rate dipped from 63.9% to 63.5% in the month. This could raise skepticism about the ability of the Australian economy to keep its workforce at work. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610c.jpg" width="353"> It appears, though, that this is more probably a temporary blip in the data.
One way to assess this is to examine the extent of the population actually employed. Haver&#39;s DLXVG3 software allows us to calculate such an &quot;employment rate&quot;. Using the two variables, employment (as the primary or &quot;red&quot; series) and population (as the secondary or &quot;blue&quot; series), we can use the Data Transformation capability (Ctrl-T or directly on the command toolbar) to form this rate, as shown in the adjoining graphs. In the second graph, we see that this rate too fell in May, but April&#39;s value, 60.4%, was the highest ever, and even the May reduction leaves intact a pronounced uptrend. Australian labor markets are in fact providing job opportunities for record numbers of their population.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Australia Labor Force Survey</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Year Ago</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Employment: Change, Thous</td>
<td>-41</td>
<td>+62</td>
<td>+60</td>
<td>+188</td>
<td>+153</td>
<td>+282</td>
<td>+81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>2.0</td>
<td>1.6</td>
<td>3.0</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">&quot;Employment Rate&quot;*, %</td>
<td>60.0</td>
<td>60.4</td>
<td>60.1</td>
<td>59.8</td>
<td>59.8**</td>
<td>59.4**</td>
<td>59.1**</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate, %</td>
<td>5.5</td>
<td>5.6</td>
<td>5.6</td>
<td>6.2</td>
<td>6.0**</td>
<td>6.4**</td>
<td>6.8**</td>
</tr>
<tr>
<td class="firstcol">Labor Force: Change, Thous</td>
<td>-55</td>
<td>+65</td>
<td>+37</td>
<td>-1</td>
<td>+194</td>
<td>+216</td>
<td>+151</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>1.2</td>
<td>1.1</td>
<td>2.5</td>
<td>1.4</td>
</tr>
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Labor markets in Australia look prosperous. While this labor force survey shows that the number of people employed fell 41,000 in May, that decline followed sizable rises the two months before. Year-on-year, employment was up 2.0% in [...]

Australia Employment Maintains Uptrend, Despite Decrease in May

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610e.jpg" width="353">
The U.S. Government Budget deficit shrunk to $62.5B in May versus a deficit of $88.9B in May &#39;03. The improvement was slightly greater than expected by the Consensus. For the first eight months of FY04 the deficit of $344.3 was 18.4% larger than last year.
Growth in net receipts for the first eight months of FY04 improved to 2.3% versus the first eight months of FY03. The rise from 1.3% growth last month reflected strong individual tax receipts, up 27.5% versus last May. That pulled fiscal YTD growth in individual tax receipts to -3.1% versus last year and compared to a 7.5% decline n FY03.
Corporate tax receipts continued to surge and for the fiscal year-to-date were up 46.6% ($96.0B) versus last fiscal YTD. Growth in contributions for social insurance contributions (FICA) improved to 2.5% with the rise in employment.
Growth in Federal net expenditures eased to 5.5% versus the first eight months of last fiscal year. Defense expenditures growth slowed to 12.5% from 16.7% in April. Growth in Medicare outlays slumped to 3.9% from 8.9% but interest expense fell only 0.7% versus a 3.8% y/y decline in April.
&quot;Deficit-Financed Tax Cuts and Interest Rates&quot; from the Federal Reserve Bank of Philadelphia is available <a href="http://www.phil.frb.org/files/br/br204sl.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/USECON/@E1/@E106/@E10602/@E10602.HTM"> US Government Finance</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;03</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-62.5B</td>
<td>$17.6B</td>
<td>$-88.9B</td>
<td>$-374.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$115.5B</td>
<td>$220.1B</td>
<td>11.6%</td>
<td>-3.8%</td>
<td>-6.9%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$177.9B</td>
<td>$202.5B</td>
<td>-7.5%</td>
<td>7.2%</td>
<td>7.9%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 10, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610a.jpg" width="353">
Initial claims for jobless insurance rose 12,000 last week to 352,000 following two weeks of decline. Consensus expectations had been for 335,000 claims.
The 4-week moving average of initial claims rose to 346,000 (-18.7% y/y), the highest level since late April.
Continuing claims for unemployment insurance fell 106,000 to the lowest level since May 2001.
The insured rate of unemployment fell back to 2.3%.
&quot;A Jobless Recovery With More People Working?&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://stlouisfed.org/publications/re/2004/b/pages/jobless_recovery.html"> here</a>.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">6/05/04</th>
<th scope="col">5/29/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 352</td>
<td>340</td>
<td>-17.0%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,881</td>
<td>-22.3%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Import Price Jump Led By Oil & Commodities 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 10, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610b.jpg" width="353">
Import prices jumped 1.6% last month led by a 5.6% surge in industrial materials prices. The rise pulled the y/y gain in import prices to 7.0%, the fastest rate of increase since early last year.
The recent rise in import prices has been accompanied by a 20% decline in the trade weighted value of the dollar against major currencies since early 2002. During the last fifteen years there has been a (negative) 60% correlation between this value of the dollar and the y/y change in nonoil import prices.
Higher oil prices accounted for much of the gain in overall import prices. The 10.3% May increase in petroleum prices has been followed this month by a decline in the price of Brent crude to $34.74 yesterday from an average $37.50 last month.
Nonpetroleum import prices also rose a strong 0.4% (3.0% y/y) in May but the rise largely reflected a 2.1% (14.7% y/y) gain in nonoil industrial supplies such as iron &amp; steel, lumber and natural gas.
Capital goods prices ticked up 0.1% (-1.0% y/y) following a 0.5% April decline. Computer &amp; peripheral prices rose 0.1% (-5.0% y/y). Capital goods prices excluding computers also rose 0.1% (+1.2% y/y). Non-auto consumer goods prices fell 0.1% (0.6% y/y) for the second month. Motor vehicle &amp; parts prices were unchanged (+1.3% y/y). Prices for imported foods, feeds &amp; beverages fell 0.3% (+5.5% y/y), the first monthly decline since last August.
Export prices gained 0.3% led by a 0.5% rise in agricultural export prices (20.9% y/y). Nonagricultural export prices rose 0.2% (2.8% 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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.6%</td>
<td>0.2%</td>
<td>7.0%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>10.3%</td>
<td>-0.4%</td>
<td>43.9%</td>
<td>21.0%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.3%</td>
<td>0.7%</td>
<td>4.3%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
</tbody>
</table>
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The U.S. Government Budget deficit shrunk to $62.5B in May versus a deficit of $88.9B in May '03. The improvement was slightly greater than expected by the Consensus. For the first eight months of FY04 the deficit of $344.3 was 18.4% [...]

U.S. Budget Deficit Shrunk

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040609c.jpg" width="353">
Germany&#39;s CPI picked up in May, driving mainly by higher energy prices, particularly gasoline. The year-on-year rate was 2.0%, up from 1.6% in April and the strongest advance since March 2002. The impact of energy is seen in the Bundesbank&#39;s seasonally adjusted series that excludes energy, which did not accelerate in May and, in fact, was virtually flat on a month-to-month basis.
Another influential aspect of Germany&#39;s consumer pricing structure is government- regulated prices, and these too have boosted the CPI this year. These prices as a group were hiked 3.2% in January, the largest boost since 1993. Health care costs were apparently the prime mover, along with elementary education expenses. Tobacco prices were raised in March.
Otherwise, private market prices remain soft. Household furnishings, apparel and transportation costs (excluding fuel) have all remained steady or even weak.
This mixed pattern suggests that true inflationary pressure has not yet developed in Germany. Factors largely external to domestic market forces are pushing up some prices, but those that are flexible seem to be staying down, offsetting at least some of the impact of the managed price hikes.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
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<th scope="col" class="firstcol">% Changes</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Total (SA)</td>
<td>0.2</td>
<td>0.3</td>
<td>0.4</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr (NSA)</td>
<td>2.0</td>
<td>1.6</td>
<td>1.1</td>
<td>1.1</td>
<td>1.2</td>
<td>1.6</td>
</tr>
<tr>
<td class="firstcol">Total Ex Energy (SA)</td>
<td>0.0</td>
<td>0.2</td>
<td>0.4</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr (SA)</td>
<td>1.6</td>
<td>1.6</td>
<td>1.3</td>
<td>1.2</td>
<td>0.7</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Total Ex Energy &amp; Gov&#39;t Regulated Prices, Yr/Yr (NSA)</td>
<td>0.8</td>
<td>0.8</td>
<td>0.8</td>
<td>0.8</td>
<td>0.8</td>
<td>1.7</td>
</tr>
</tbody>
</table>
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Germany's CPI picked up in May, driving mainly by higher energy prices, particularly gasoline. The year-on-year rate was 2.0%, up from 1.6% in April and the strongest advance since March 2002. The impact of energy is seen in the [...]

German CPI has largest 12-Month rise in 2 years, due to energy, government-regulated sectors

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040609a.jpg" width="353">
&quot;Economic developments going forward will determine the level and term structure of interest rates. Federal funds futures prices already reflect expectations of a substantial firming of policy by the Federal Open Market Committee (FOMC). Unlike 1994, there has been an appreciable increase of market rates in anticipation of policy tightening, though history cautions that investors&#39; anticipations of the cumulative magnitude of policy actions and their timing under such circumstances are far from perfect.&quot; - Alan Greenspan
The complete text of Chairman Greenspan&#39;s June 8th comments on economic developments can be found <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2004/20040608/default.htm"> here</a>.
&quot;Great Expectations: The Role of Beliefs in Economics and Monetary Policy&quot; from Federal Reserve Bank of Philadelphia President Santomero are available <a href="http://www.phil.frb.org/files/br/br204as.pdf"> here</a>.

Mortgage Applications At Two Year Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 9, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040609b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association dropped 8.9% (-66.2% y/y) last week to the lowest level since June &#39;02. Applications began the month of June 14.2% below the May average which fell 18.9% from April.
Applications to refinance mortgages fell 13.9% last week and started June 25.1% below the May average. Purchase applications fell 6.0% (+3.2% y/y), down 7.0% from May.
During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-Year mortgage was little changed at 6.53%, the average for May. The effective rate on a 15-year mortgage also was little changed at 5.97%, the May average.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
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<colgroup><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">06/04/04</th>
<th scope="col">05/28/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>568.8</td>
<td>624.6</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>432.2</td>
<td>459.8</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,363.2</td>
<td>1,583.6</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
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"Economic developments going forward will determine the level and term structure of interest rates. Federal funds futures prices already reflect expectations of a substantial firming of policy by the Federal Open Market Committee [...]

The Future Course of Interest Rates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040608a.jpg" width="353">
The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 0.9% last month following a 2.8% jump in April.
The decline reflected fewer firms expecting the economy to improve as well as a slight decline in the percent of firms planning to raise employment and capital expenditures.
Nevertheless, the percentage of firms raising average selling prices rose and the percent reporting higher earnings this quarter improved.
During the last ten years there has been a 50% correlation between the level of the NFIB index and the y/y change in real GDP.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>104.5</td>
<td>105.4</td>
<td>4.4%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
</table>
Chain Store Sales Inched Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 8, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040608b.jpg" width="353">
Chain store sales inched 0.2% higher last week following three successive down periods, according to the International Council of Shopping Centers (ICSC)-UBS.
Sales in early June started 0.7% below the May average.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/05/04</th>
<th scope="col">05/29/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.5</td>
<td>437.7</td>
<td>5.5%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
The Future Course of Interest Rates 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 9, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040608c.jpg" width="353">
&quot;Economic developments going forward will determine the level and term structure of interest rates. Federal funds futures prices already reflect expectations of a substantial firming of policy by the Federal Open Market Committee (FOMC). Unlike 1994, there has been an appreciable increase of market rates in anticipation of policy tightening, though history cautions that investors&#39; anticipations of the cumulative magnitude of policy actions and their timing under such circumstances are far from perfect.&quot; - Alan Greenspan
The complete text of Chairman Greenspan&#39;s June 8th comments on economic developments can be found <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2004/20040608/default.htm">here</a>.
&quot;Great Expectations: The Role of Beliefs in Economics and Monetary Policy&quot; from Federal Reserve Bank of Philadelphia President Santomero is available <a href="http://www.phil.frb.org/files/br/br204as.pdf">here</a>.

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The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 0.9% last month following a 2.8% jump in April. The decline reflected fewer firms expecting the economy to improve as well [...]

Small Business Optimism Slipped

Louise Curley

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Industrial production in emerging economies continues to out pace that of the countries of developed Europe. April industrial production data for two emerging countries--Malaysia and Slovakia--and two developed countries of Europe-- Denmark and Norway were released today. In the emerging countries, Slovakia showed a decline of 2.79% from March and Malaysia an increase of 1.74%. Similarly, in the developed countries, there was one up and one down. Denmark showed an increase of 2.88% and Norway a decrease of 4.85%
Since the month to month changes tend to be volatile, a clearer picture of the trends emerges when a three month moving average is used.
In the attached chart, industrial production for Denmark and Malaysia on a three month moving average is shown. Slovakia typifies the trend in the emerging economies, while Denmark typifies the trend in developed Europe. The contrast between the relatively flat trend of industrial production in Denmark and the rising trend in Slovakia is evident.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production</th>
<th scope="col">Apr 04</th>
<th scope="col">Mar 04</th>
<th scope="col">Apr&nbsp; 03</th>
<th scope="col">M/M&nbsp;&nbsp;&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %&nbsp;</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
<th scope="col">2001 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Malaysia (1993=100)</td>
<td>228.5</td>
<td>224.6</td>
<td>200.4</td>
<td>1.74</td>
<td>14.02</td>
<td>9.31</td>
<td>4.59</td>
<td>-4.14</td>
</tr>
<tr>
<td class="firstcol">Denmark (2000=100)</td>
<td>107</td>
<td>104</td>
<td>103</td>
<td>2.88</td>
<td>3.88</td>
<td>-0.65</td>
<td>1.06</td>
<td>2.08</td>
</tr>
<tr class="odd">
<td class="firstcol">Norway (1995=100)</td>
<td>105.9</td>
<td>111.3</td>
<td>106.1</td>
<td>-4.85</td>
<td>-0.19</td>
<td>-4.11</td>
<td>1.04</td>
<td>-1.25</td>
</tr>
<tr>
<td class="firstcol">Slovakia (2000=100)</td>
<td>125.6</td>
<td>129.2</td>
<td>119.5</td>
<td>-2.79</td>
<td>5.10</td>
<td>6.18</td>
<td>6.49</td>
<td>6.95</td>
</tr>
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Industrial production in emerging economies continues to out pace that of the countries of developed Europe. April industrial production data for two emerging countries--Malaysia and Slovakia--and two developed countries of Europe-- [...]

IP in Emerging Countries Outpaces that of Western Europe

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040607a.jpg">
The average price for unleaded regular gasoline in NY has fallen sharply the last three weeks to $1.15 on Friday from a peak of $1.40. Retail gasoline prices have yet to show much downward movement from the peak of $2.06 in the third week of May.
Lower spot crude oil prices have led the decline with the price of West Texas Intermediate crude at $38.60 on Friday versus its peak of $41.88 on May 24th.
Wholesale natural gas prices moved higher last week to $6.39/mmbtu (+2.1% y/y), up 26% versus the daily low in February of $5.08/mmbtu.
For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">06/04/04</th>
<th scope="col">12/31/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Unleaded Regular Gasoline, NY ($/Gal.)</td>
<td>$1.15</td>
<td>$0.96</td>
<td>39.2%</td>
<td>$0.88</td>
<td>$0.72</td>
<td>$0.74</td>
</tr>
<tr>
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$38.60</td>
<td>$32.55</td>
<td>35.1%</td>
<td>$31.10</td>
<td>$26.17</td>
<td>$25.97</td>
</tr>
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The average price for unleaded regular gasoline in NY has fallen sharply the last three weeks to $1.15 on Friday from a peak of $1.40. Retail gasoline prices have yet to show much downward movement from the peak of $2.06 in the third [...]

Gasoline & Crude Oil Prices Down

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The labor market in Canada extended its improvement in May, with yet another good rise in employment and a further retreat in unemployment. Employment went up 56,100, taking the employment rate up to 62.6% of the population aged 15 and over. Unemployment fell 14,100, with the unemployment rate at 7.2%, lowest since September 2001.
The industrial pattern of employment changes was notable in May for a continuing advance in construction, and also a rise of 12,000 in manufacturing. This pushed the year-on-year change in factory work to +0.1%, the first positive figure since February 2003. Other industries shared the gains, especially education services, which had fallen in April. Professional and technical services and &quot;other&quot; services also contributed. On the downside was a reversal in business support services from their April gain, along with declines in agriculture, information services and accommodation and food services.
As we noted here last month, the Canadian labor market has performed better than that in the US over the last couple of years. Evidence of this is seen in the chart, which illustrates monthly percent changes in employment in each of the two countries. The bars for the Canadian data show the sustained growth of jobs there in most months, an impressive development in light of the sluggish and irregular pattern of jobs in the US.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Canada: Selected Labor Market Indicators</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Year/ Year</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment Change </td>
<td>+56K</td>
<td>+50K</td>
<td>-13K</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Employment Rate </td>
<td>62.6%</td>
<td>62.5%</td>
<td>62.4%</td>
<td>62.2%</td>
<td>62.4%</td>
<td>61.8%</td>
<td>61.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing Employment Change</td>
<td>+12K</td>
<td>+4K</td>
<td>+7K</td>
<td>+0.1%</td>
<td>-1.4%</td>
<td>+2.3%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>7.2%</td>
<td>7.3%</td>
<td>7.5%</td>
<td>7.9%</td>
<td>7.6%</td>
<td>7.6%</td>
<td>7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Labor Force Change</td>
<td>+42K</td>
<td>+17K</td>
<td>+8K</td>
<td>1.3%</td>
<td>2.2%</td>
<td>2.7%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Participation Rate</td>
<td>67.5%</td>
<td>67.4%</td>
<td>67.4%</td>
<td>67.5%</td>
<td>67.5%</td>
<td>66.9%</td>
<td>66.0%</td>
</tr>
</tbody>
</table>
</body>
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The labor market in Canada extended its improvement in May, with yet another good rise in employment and a further retreat in unemployment. Employment went up 56,100, taking the employment rate up to 62.6% of the population aged 15 [...]

Canada Labor Market Improves Further

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Robert Brusca

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

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

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief: 2004

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