Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618c.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the manufacturing sector came in at -2.2 versus Consensus expectations for a reading of -17.0. The This index reflects a question separate from the components which are surveyed separately.
During the last ten years there has been a 77% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 70% correlation with q/q growth in real GDP.
Amongst the sub-indexes shipments turned positive for the first time since May of last year. The new orders, inventory and employment indexes each rose sharply but were still negative. A reduced thirty-one percent of respondents expected to lower employment levels and an improved ten percent expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618d.jpg" width="353">
The prices paid index rose to a less-negative 13.0. Only five percent of respondents planned to raise prices while eighteen percent expected to lower them. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months improved to its highest level since 2003. The expectations index for new orders, shipments and employment each were up sharply from their winter lows. Expectations for prices also are sharply improved during the last six months
The figures from the Philadelphia Federal Reserve can be found in Haver&#39;s SURVEYS database.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0609.pdf">here</a>.
Residential Housing and Personal Bankruptcy from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_housing-and-bankruptcy.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Philadelphia Fed (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-2.2</td>
<td>-22.6</td>
<td>-17.7</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-13.0</td>
<td>&nbsp;-22.8</td>
<td>&nbsp;63.4</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body>
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The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the [...]

Philadelphia Fed Index Improves Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618a.jpg" width="353">
The Conference Board&#39;s leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases recovered the declines during the prior several months and left the index at its highest level since last September. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
Nearly three quarters of the ten components of the leading index increased last month with the largest positive contributions coming from higher stock prices, a higher money supply, a more positively sloped interest rate yield curve and vendor performance (slower delivery speeds). Initial unemployment insurance claims, weekly hours worked and factory orders made negative contributions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618b.jpg" width="353">
Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2% for the second month and that compared with 0.6% to 1.1% monthly declines since last September. The negative contributions from lower employment and production eased. Half of the four component series rose during May led by gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the fifth month in the last six. The ratio of coincident-to-lagging indicators (a measure of economic excess) was unchanged m/m at the highest level this year.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
IMF Asked to Aid G-8 With Exit Strategies For Crisis Policies can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW061309A.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Feb. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>1.2</td>
<td>1.1</td>
<td>-0.3</td>
<td>2.4</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.3</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.8</td>
<td>-0.6</td>
<td>-4.0</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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The Conference Board's leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases [...]

U.S. Leading Indicators Rise Sharply For A Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618a.jpg" width="353">
The Conference Board&#39;s leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases recovered the declines during the prior several months and left the index at its highest level since last September. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
Nearly three quarters of the ten components of the leading index increased last month with the largest positive contributions coming from higher stock prices, a higher money supply, a more positively sloped interest rate yield curve and vendor performance (slower delivery speeds). Initial unemployment insurance claims, weekly hours worked and factory orders made negative contributions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618b.jpg" width="353">
Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2% for the second month and that compared with 0.6% to 1.1% monthly declines since last September. The negative contributions from lower employment and production eased. Half of the four component series rose during May led by gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the fifth month in the last six. The ratio of coincident-to-lagging indicators (a measure of economic excess) was unchanged m/m at the highest level this year.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
IMF Asked to Aid G-8 With Exit Strategies For Crisis Policies can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW061309A.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Feb. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>1.2</td>
<td>1.1</td>
<td>-0.3</td>
<td>2.4</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.3</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.8</td>
<td>-0.6</td>
<td>-4.0</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Improves Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 18, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618c.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the manufacturing sector came in at -2.2 versus Consensus expectations for a reading of -17.0. The This index reflects a question separate from the components which are surveyed separately.
During the last ten years there has been a 77% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 70% correlation with q/q growth in real GDP.
Amongst the sub-indexes shipments turned positive for the first time since May of last year. The new orders, inventory and employment indexes each rose sharply but were still negative. A reduced thirty-one percent of respondents expected to lower employment levels and an improved ten percent expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618d.jpg" width="353">
The prices paid index rose to a less-negative 13.0. Only five percent of respondents planned to raise prices while eighteen percent expected to lower them. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months improved to its highest level since 2003. The expectations index for new orders, shipments and employment each were up sharply from their winter lows. Expectations for prices also are sharply improved during the last six months
The figures from the Philadelphia Federal Reserve can be found in Haver&#39;s SURVEYS database.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0609.pdf">here</a>.
Residential Housing and Personal Bankruptcy from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_housing-and-bankruptcy.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Philadelphia Fed (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-2.2</td>
<td>-22.6</td>
<td>-17.7</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-13.0</td>
<td>&nbsp;-22.8</td>
<td>&nbsp;63.4</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
U.S. Initial Jobless Insurance Claims Trend Lower But Edge Up In Latest Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 18, 2009


<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618e.jpg" width="353">
The decline in initial claims from their high is leading evidence of labor market improvement. Though initial claims for unemployment insurance edged up last week, they remained near the lowest level since late-January. Claims inched up by 3,000 to 608,000 after a revised 20,000 decline during the prior week which was revised a bit shallower. Initial claims were down from their March peak of 674,000. In addition, the four-week average of claims, which smoothes out some of the volatility in the weekly numbers, fell to 615,750 which was its lowest level since since mid-February. Still, the level remained up by two-thirds from the year ago level. The latest level about matched the Consensus expectation which was for 605,000 claims.
The latest claims figure is for the survey week for June nonfarm payrolls. Claims fell 28,000 (4.4%) from the May survey period. During the last ten years there has been an 86% correlation between the level of claims and the change in nonfarm payrolls.
The Labor Department indicated that the largest increases in initial claims for the week ending June 6 were in Pennsylvania (+6,861), Florida (+6,469), Ohio (+5,104), California (+4,894), and New York (+4,795), while the largest decreases were in Arkansas (-1,206), Puerto Rico (-1,131), Wisconsin (-707), Arizona (-693), and Nebraska (-450).
Modest improvement in the job market finally evidenced itself in a lower level of continuing claims for unemployment insurance. They fell for the first time since early January and the decline was a large 148,000 (2.2%). Continuing claims provide an indication of workers&#39; ability to find employment. At 6,687,000, however, claims remained more than twice the year ago level. Further suggesting that the job market&#39;s improvement is just modest was that the four-week average of continuing claims rose to another record of 6,757,500. The series dates back to 1966.<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618f.jpg" width="353">
Also indicating marginal labor market improvement was that the insured unemployment rate slipped to 5.0% from 5.1%. The level remained more than double June of 2008 and the highest since 1983. 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.
Clearly, the latest weekly figure understates labor market distress in some states.The highest insured unemployment rates in the week ending May 30 were in Michigan (7.5 percent), Oregon (7.0), Nevada (6.3), Puerto Rico (6.3), Pennsylvania (6.2), Wisconsin (6.0), Arkansas (5.6), South Carolina (5.5), California (5.4), and North Carolina (5.4).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Community Development Financial Institutions: Challenges and Opportunities is the title of yesterday&#39;s speech by Fed Chairman Ben S, Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090617a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">06/13/09</th>
<th scope="col">06/06/09</th>
<th scope="col">05/30/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>608</td>
<td>605</td>
<td>625</td>
<td>55.9%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,687</td>
<td>6,835</td>
<td>115.9%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617d.jpg" width="353">
The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 billion was deeper than the Consensus expectation for a reading of $85.0 billion. 
As a percentage of GDP, the shrinkage of the U.S. deficit was dramatic. The 2.9% 1Q figure was the smallest since early-1999. This percentage is sharply reduced from the 6.6% peak reached late in 2005.
Recession in the U.S. worked with the decline in oil prices to drop the 1Q deficit on traded goods to $124.0 billion, its lowest since 2004. Though growth in goods exports was a negative 21.0% y/y, imports fell by a greater 30.1% spurred by the drop in oil prices. 
Fewer U.S. citizens went abroad this year and more came here. As a result, the balance on services trade narrowed as exports fell more then imports. The 1Q surplus of $32.8 billion compared to a peak surplus of $40.0 billion late during 2007. That decline came as exports fell 7.2% y/y against a 6.4% decline in imports.
From the capital account side of the ledger, the U.S. balance on private direct investment remained stable and slightly positive q/q. That compares with deficits during the last three years. U.S. investment abroad rose while foreign investment here fell sharply.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617e.jpg" width="353"> 
Ties that bind: bilateral trade&#39;s role in synchronizing business cycles from the Federal Reserve Bank of Dallas can be found here.

<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/@EE/@EE01/@EE01.HTM">US Balance of Payments</a> SA</th>
<th scope="col">1Q &#39;09</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">Year Ago</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">Current Account Balance ($ Bil.)</td>
<td>-101.5</td>
<td>-154.9</td>
<td>-179.3</td>
<td>-706.1</td>
<td>-726.6</td>
<td>-803.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Deficit % of GDP</td>
<td>2.9</td>
<td>4.4</td>
<td>5.1</td>
<td>5.0</td>
<td>5.3</td>
<td>6.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Goods ($ Bil.)</td>
<td>-124.0</td>
<td>-178.8</td>
<td>-218.8</td>
<td>-840.3</td>
<td>-831.0</td>
<td>-847.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports&nbsp;</td>
<td>-14.2%</td>
<td>-14.0%</td>
<td>-21.0%</td>
<td>12.2%</td>
<td>12.1%</td>
<td>13.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports&nbsp;</td>
<td>-20.4%</td>
<td>-16.0%</td>
<td>-30.1%</td>
<td>7.5%</td>
<td>5.7%</td>
<td>10.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Private Services ($ Bil.)</td>
<td>32.8</td>
<td>34.3</td>
<td>36.2</td>
<td>144.3</td>
<td>129.6</td>
<td>86.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>-5.7</td>
<td>-4.7%</td>
<td>-7.2%</td>
<td>8.9%</td>
<td>15.8%</td>
<td>12.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>-6.2</td>
<td>-5.4%</td>
<td>-6.4%</td>
<td>8.0%</td>
<td>7.5%</td>
<td>11.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Income ($ Bil.)</td>
<td>19.3</td>
<td>21.1</td>
<td>36.7</td>
<td>118.2</td>
<td>90.8</td>
<td>48.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers ($ Bil.)</td>
<td>-29.6</td>
<td>-31.5</td>
<td>-33.3</td>
<td>-128.4</td>
<td>-116.0</td>
<td>-91.3</td>
</tr>
</tbody>
</table>
</body>
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The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 [...]

U.S. 1Q'09 Current Account Deficit Shrinks To Smallest Since 2001

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617a.jpg" width="353">
The recession continued to weigh on pricing power last month according to the Bureau of Labor Statistics. The May report on consumer prices indicated a less-than-expected rise of 0.1% which followed the unchanged reading for April. The eye-catching news, however, was that the y/y change of -1.3% was the weakest since early-1950.
Though energy prices have ticked up recently, the decline of 26.3% versus last year is responsible for much of the overall weakness in pricing power. Gasoline prices during May reversed their earlier decline and rose 3.1%, yet they still were down 39.4% y/y. Conversely, fuel oil prices continued downward with a 3.1% drop (-38.1% y/y). The latest was the tenth consecutive monthly drop. Finally, prices for natural gas &amp; electricity have fallen in all but one of the last ten months and year-to-year they are down 5.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617b.jpg" width="353">
Lower food &amp; beverage prices also continue to restrain overall pricing pressure. Prices slipped for the fourth straight month during May and the y/y gain of 2.7% was the weakest since January 2007. It&#39;s down from a peak of 6.1% last fall. Recent weakness has been led by lower dairy product prices (-5.6% y/y). Moreover, price gains for meats, poultry &amp; fish (1.4% y/y), cereals &amp; bakery products (3.5% y/y) as well as fruits &amp; vegetables (-0.8% y/y) have eased sharply.
Finally, &quot;core&quot; pricing remains tame. The CPI less food &amp; energy ticked up just 0.1% last month, the weakest increase this year. So far in 2009, core prices have risen at a 2.3% annual rate. That is up from their recent low; but the annual gain of 1.8% is nearly the smallest since 2004.
So far this year gains in core goods prices actually have firmed versus last year. The 0.2% gain in May capped a five-month stint during which prices rose at a 3.9% annual rate versus a 0.1% uptick during all of last year. While tobacco prices slipped 0.3% last month, higher sales taxes have lifted prices by one-quarter from 2008. There also has been modest firming of prices elsewhere. Prices of new &amp; used motor vehicles have risen at a 4.1% rate during the last five months and the y/y change of -1.1% compares to a rate of decline of 3.5% as of yearend 2008. Prices for household furnishings &amp; operations have risen 1.6% y/y following price deflation early last year. Apparel prices are up 0.8% y/y but that owes almost entirely to a price jump this past February.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617c.jpg" width="353">
Working the other way, gains in core services prices continue to moderate. The 0.1% uptick last month left the y/y change of 2.3% at its weakest since 1983. So far this year, prices have risen at a 1.6% rate. Weakness in the housing market accounts for much of that moderation. Last month shelter prices ticked up just 0.1% and the annual gain of 1.5% was the weakest since 1983. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, ticked up just 0.1% (2.1% y/y). Conversely, the increase in medical care services prices of 3.2% y/y is off the low and so far this year prices have risen at a 4.0% rate. Education costs also have been firm and were up 0.5% last month (5.5% y/y). Conversely, public transportation prices have been falling since last summer -9.0% y/y.
The chained CPI, which adjusts for shifts in consumption patterns, gained 0.3% in May while year-to-year prices fell 1.4%. The increase in chained prices less food and energy eased to 0.2% last month.
The consumer price data is available in Haver&#39;s USECON database while detailed figures can be found in the CPIDATA database.
Health Care Reform and the Federal Budget from the Congressional Budget Office can be found <a href="http://www.cbo.gov/ftpdocs/103xx/doc10311/06-16-HealthReformAndFederalBudget.pdf"> here</a>.
Why Did FDR&#39;s Bank Holiday Succeed? from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/epr/forthcoming/0906silb.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</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>0.1</td>
<td>0.0</td>
<td>-1.3</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>0.3</td>
<td>1.8</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>0.5</td>
<td>1.2</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>0.1</td>
<td>0.2</td>
<td>2.1</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>0.2</td>
<td>-2.4</td>
<td>-26.3</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>-0.2</td>
<td>2.7</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&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>0.3</td>
<td>0.3</td>
<td>-1.4 </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>-0.0</td>
<td>0.2</td>
<td>1.4</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
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The recession continued to weigh on pricing power last month according to the Bureau of Labor Statistics. The May report on consumer prices indicated a less-than-expected rise of 0.1% which followed the unchanged reading for April. [...]

U.S. May CPI Ticks Up, But 1.2% Drop Y/Y Is Largest Since April 1950

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617a.jpg" width="353">
The recession continued to weigh on pricing power last month according to the Bureau of Labor Statistics. The May report on consumer prices indicated a less-than-expected rise of 0.1% which followed the unchanged reading for April. The eye-catching news, however, was that the y/y change of -1.3% was the weakest since early-1950.
Though energy prices have ticked up recently, the decline of 26.3% versus last year is responsible for much of the overall weakness in pricing power. Gasoline prices during May reversed their earlier decline and rose 3.1%, yet they still were down 39.4% y/y. Conversely, fuel oil prices continued downward with a 3.1% drop (-38.1% y/y). The latest was the tenth consecutive monthly drop. Finally, prices for natural gas &amp; electricity have fallen in all but one of the last ten months and year-to-year they are down 5.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617b.jpg" width="353">
Lower food &amp; beverage prices also continue to restrain overall pricing pressure. Prices slipped for the fourth straight month during May and the y/y gain of 2.7% was the weakest since January 2007. It&#39;s down from a peak of 6.1% last fall. Recent weakness has been led by lower dairy product prices (-5.6% y/y). Moreover, price gains for meats, poultry &amp; fish (1.4% y/y), cereals &amp; bakery products (3.5% y/y) as well as fruits &amp; vegetables (-0.8% y/y) have eased sharply.
Finally, &quot;core&quot; pricing remains tame. The CPI less food &amp; energy ticked up just 0.1% last month, the weakest increase this year. So far in 2009, core prices have risen at a 2.3% annual rate. That is up from their recent low; but the annual gain of 1.8% is nearly the smallest since 2004.
So far this year gains in core goods prices actually have firmed versus last year. The 0.2% gain in May capped a five-month stint during which prices rose at a 3.9% annual rate versus a 0.1% uptick during all of last year. While tobacco prices slipped 0.3% last month, higher sales taxes have lifted prices by one-quarter from 2008. There also has been modest firming of prices elsewhere. Prices of new &amp; used motor vehicles have risen at a 4.1% rate during the last five months and the y/y change of -1.1% compares to a rate of decline of 3.5% as of yearend 2008. Prices for household furnishings &amp; operations have risen 1.6% y/y following price deflation early last year. Apparel prices are up 0.8% y/y but that owes almost entirely to a price jump this past February.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617c.jpg" width="353">
Working the other way, gains in core services prices continue to moderate. The 0.1% uptick last month left the y/y change of 2.3% at its weakest since 1983. So far this year, prices have risen at a 1.6% rate. Weakness in the housing market accounts for much of that moderation. Last month shelter prices ticked up just 0.1% and the annual gain of 1.5% was the weakest since 1983. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, ticked up just 0.1% (2.1% y/y). Conversely, the increase in medical care services prices of 3.2% y/y is off the low and so far this year prices have risen at a 4.0% rate. Education costs also have been firm and were up 0.5% last month (5.5% y/y). Conversely, public transportation prices have been falling since last summer -9.0% y/y.
The chained CPI, which adjusts for shifts in consumption patterns, gained 0.3% in May while year-to-year prices fell 1.4%. The increase in chained prices less food and energy eased to 0.2% last month.
The consumer price data is available in Haver&#39;s USECON database while detailed figures can be found in the CPIDATA database.
Health Care Reform and the Federal Budget from the Congressional Budget Office can be found <a href="http://www.cbo.gov/ftpdocs/103xx/doc10311/06-16-HealthReformAndFederalBudget.pdf"> here</a>.
Why Did FDR&#39;s Bank Holiday Succeed? from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/epr/forthcoming/0906silb.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</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>0.1</td>
<td>0.0</td>
<td>-1.3</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>0.3</td>
<td>1.8</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>0.5</td>
<td>1.2</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>0.1</td>
<td>0.2</td>
<td>2.1</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>0.2</td>
<td>-2.4</td>
<td>-26.3</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>-0.2</td>
<td>2.7</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&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>0.3</td>
<td>0.3</td>
<td>-1.4 </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>-0.0</td>
<td>0.2</td>
<td>1.4</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
U.S. 1Q'09 Current Account Deficit Shrinks To Smallest Since 2001 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 17, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617d.jpg" width="353">
The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 billion was deeper than the Consensus expectation for a reading of $85.0 billion. 
As a percentage of GDP, the shrinkage of the U.S. deficit was dramatic. The 2.9% 1Q figure was the smallest since early-1999. This percentage is sharply reduced from the 6.6% peak reached late in 2005.
Recession in the U.S. worked with the decline in oil prices to drop the 1Q deficit on traded goods to $124.0 billion, its lowest since 2004. Though growth in goods exports was a negative 21.0% y/y, imports fell by a greater 30.1% spurred by the drop in oil prices. 
Fewer U.S. citizens went abroad this year and more came here. As a result, the balance on services trade narrowed as exports fell more then imports. The 1Q surplus of $32.8 billion compared to a peak surplus of $40.0 billion late during 2007. That decline came as exports fell 7.2% y/y against a 6.4% decline in imports.
From the capital account side of the ledger, the U.S. balance on private direct investment remained stable and slightly positive q/q. That compares with deficits during the last three years. U.S. investment abroad rose while foreign investment here fell sharply.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617e.jpg" width="353"> 
Ties that bind: bilateral trade&#39;s role in synchronizing business cycles from the Federal Reserve Bank of Dallas can be found here.

<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/@EE/@EE01/@EE01.HTM">US Balance of Payments</a> SA</th>
<th scope="col">1Q &#39;09</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">Year Ago</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">Current Account Balance ($ Bil.)</td>
<td>-101.5</td>
<td>-154.9</td>
<td>-179.3</td>
<td>-706.1</td>
<td>-726.6</td>
<td>-803.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Deficit % of GDP</td>
<td>2.9</td>
<td>4.4</td>
<td>5.1</td>
<td>5.0</td>
<td>5.3</td>
<td>6.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Goods ($ Bil.)</td>
<td>-124.0</td>
<td>-178.8</td>
<td>-218.8</td>
<td>-840.3</td>
<td>-831.0</td>
<td>-847.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports&nbsp;</td>
<td>-14.2%</td>
<td>-14.0%</td>
<td>-21.0%</td>
<td>12.2%</td>
<td>12.1%</td>
<td>13.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports&nbsp;</td>
<td>-20.4%</td>
<td>-16.0%</td>
<td>-30.1%</td>
<td>7.5%</td>
<td>5.7%</td>
<td>10.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Private Services ($ Bil.)</td>
<td>32.8</td>
<td>34.3</td>
<td>36.2</td>
<td>144.3</td>
<td>129.6</td>
<td>86.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>-5.7</td>
<td>-4.7%</td>
<td>-7.2%</td>
<td>8.9%</td>
<td>15.8%</td>
<td>12.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>-6.2</td>
<td>-5.4%</td>
<td>-6.4%</td>
<td>8.0%</td>
<td>7.5%</td>
<td>11.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Income ($ Bil.)</td>
<td>19.3</td>
<td>21.1</td>
<td>36.7</td>
<td>118.2</td>
<td>90.8</td>
<td>48.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers ($ Bil.)</td>
<td>-29.6</td>
<td>-31.5</td>
<td>-33.3</td>
<td>-128.4</td>
<td>-116.0</td>
<td>-91.3</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090616j.jpg" width="353">
Speculation that the U.S. economic recovery is taking hold drove regular gasoline prices even higher last week to an average $2.67 per gallon of regular. Gasoline prices now have risen more than $1.00 per gallon, or by more than one-half, from the December low to the highest level since late-October. Yesterday, the cash market price for a gallon of regular gas rose further to $2.02 per gallon versus $1.96 averaged last week. These also were the highest prices since last October. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Evidence that the economic rebound is finally taking hold may be evidenced in the figures for vehicle-miles driven. The year-to-year change in miles driven still is negative, but the y/y change of -0.7% is the least since March and is well improved from the -5% comparisons of this past fall. The change in demand is measured using the latest four weeks versus the same four weeks in 2008. Demand for all petroleum products was down 6.9% y/y in the latest week led by a 19.7% drop in demand for residual fuel oil and a 12.8% drop in distillate demand. These numbers are available in Haver&#39;s OILWKLY database.
Higher crude oil prices are behind the rise in gasoline costs. Crude prices averaged $70.83 last week for a barrel of West Texas Intermediate, up from the December low of $32.37 per barrel. Yesterday, crude oil prices held steady at $70.62 and prices reached a high of $145.66 last July. The latest price increases occurred despite a 3.9% year-to-year rise in crude oil production during the latest four weeks. Further more, they have occurred despite a 13.7% y/y rise in inventories of crude oil &amp; petroleum products. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Finally, the gains in the price of natural gas paused again last week and it fell back to $3.56 per mmbtu (-71.8% y/y). The latest price was nearly the lowest since 2002 and is down by two-thirds from the high reached in early-July of $13.19/mmbtu.
Economic and Environmental Impacts of U.S. Corn Ethanol Production and Use from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/red/2009/01/Tiffany.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">06/15/09</th>
<th scope="col">06/08/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.67</td>
<td>2.62</td>
<td>-34.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>70.83</td>
<td>68.10</td>
<td>-47.4%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
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Speculation that the U.S. economic recovery is taking hold drove regular gasoline prices even higher last week to an average $2.67 per gallon of regular. Gasoline prices now have risen more than $1.00 per gallon, or by more than one- [...]

Gasoline Prices Reach The Highest Level Since Last October

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090616h.jpg" align="left" border="0" height="265" width="353">
Optimists regarding the outlook for the next six months among
German financial market professionals outweighed pessimists by 44.8% in
June according to the latest ZEW Survey (The Mannheim based Center for
European Economic Research). This represented an increase of 13.7
percentage points from May and was the largest margin of optimists
since June 2006. It was also well above the long term average of 26.3%.
The financial professionals also saw some slight improvement in current
conditions. The percent balance between pessimists and optimists
declined from 92.9%in May to 89.7% in June. The first chart shows the
ZEW appraisals of current conditions and expectation for the next six
months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090616i.jpg" align="right" border="0" height="265" width="353">
A part of the group's more optimistic appraisal of the outlook
can be attributed to their expectations of profit increases in both the
banking and insurance industries, as shown in the second chart.
Expectations of profits in the banking industry have risen from 2.0% in
April to 30.8% in June, and in the insurance industry from 5.1% in May
to 9.7% in June. Except for a 5.4% increase in Utilities' profits and
virtually no change in Information Technology profits, expectations for
all the other industry are still negative, although less so.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>

<th scope="col" class="firstcol"> ZEW SURVEY</th>
<th scope="col">Jun 09</th>
<th scope="col">May&nbsp;&nbsp;
09</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar&nbsp; 09</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09&nbsp;</th>
<th scope="col">Jun 06&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Expectation Next 6 Months (%
bal)</td>
<td>44.8</td>
<td>31.1</td>
<td>13.0</td>
<td>-3.5</td>
<td>-5.8</td>
<td>-31.0</td>
<td>37.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions&nbsp;(%
bal)</td>
<td>-89.7</td>
<td>-92.8</td>
<td>-91.6</td>
<td>-89.4</td>
<td>-86.2</td>
<td>-77.1</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol" colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol" colspan="8">Profit
Expectations
Next 6 Months&nbsp; (%)</td>
</tr>
<tr class="odd">
<td class="firstcol">Banking</td>
<td>30.8</td>
<td>15.1</td>
<td>2.0</td>
<td>-31.6</td>
<td>-55.7</td>
<td>-65.7</td>
<td>46.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Insurance</td>
<td>9.7</td>
<td>5.1</td>
<td>-15.1</td>
<td>-34.2</td>
<td>-49.0</td>
<td>-56.5</td>
<td>46.3</td>
</tr>
</tbody>
</table>
</body></html>

Optimists regarding the outlook for the next six months among German financial market professionals outweighed pessimists by 44.8% in June according to the latest ZEW Survey (The Mannheim based Center for European Economic Research). [...]

Optimism Increases Among German Investors and Analysts

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Robert Brusca

260120E.jpg

The ZEW survey for January showed improvement all around with both economic expectations and macroeconomic conditions showing improvements in the United States, Germany, and the euro area.

The economic situation in January in the euro area improved to a reading of -18.1 from -28.5 in December. In Germany, the reading improved to -72.7 from -81 in December, while in the United States the reading improved to +17.7 from -0.6 in December. The message here clearly is the month-to-month improvement. Still, the January readings leave the assessments of conditions in these three areas as quite different. The percentile-queue standings place each one of these topical readings in their queue of data back to December 1992, expressing the standing in percentile terms. Viewed in this way, the euro area has a 57.2 percentile standing, the U.S. has nearly a 45-percentile standing, while Germany has a 22.6 percentile standing, leaving each of these areas in their own distinctive positions relative to their historic norms. The euro area has a firm and above-median ranking since the reading is above the 50th percentile (where the median is located). The U.S. is slightly weaker than that, with a reading that's marginally below its median. Germany has a reading between the lower quartile and the one-fifth mark of its historic data, branding it as weak.

Macroeconomic expectations find that Germany in January moved up to a positive reading of 59.6 from 45.8 in December. The U.S. also improved, moving up to -3 from -12 in December. The macro-expectations find Germany and the U.S. in very different places with German expectations in an 80.4 percentile of their queue, placing them in the top 20% while the U.S. has a 45-percentile standing, below its historic median and essentially the same relative position as its current situation ranking. In contrast, Germany has a weak current economic assessment versus a stronger expectations assessment.

Inflation expectations weaken across the board in January, with the euro area falling to -7.6 from -4.6 in December, Germany falling to -6.0 from -1.7 and the U.S. falling to 44.2 from 54.9. The ZEW experts see a disinflationary environment, and they see that despite the pickup in current conditions and improved macroeconomic expectations. Expectations in the U.S. have a 61.1 percentile standing; the German and the euro area readings are much weaker and closer together, with the German standing at its 31.2 percentile and the euro area at its 25.8 percentile.

On the back of these expectations, short-term interest rates in the euro area are less weak, with the January reading at -7.7, up from -10.8 in December. The U.S. has a -65.6 reading, stronger than Decembers -73.9. On a ranking basis, the euro area’s short-term rates have a 37.4 percentile standing The U.S. has a 9.3 percentile standing. The interest rate assessment is that short-term rates are going to be modest to lower over the outlook.

Long-term interest rates in Germany and the U.S. weaken slightly in January from December to 44.5 in January for Germany, compared to 49.2 in December, and in the U.S., there is a very modest ‘decimal point’ change to 44.1 in January from 44.9 in December. German long-term rates have a 58.8 percentile standing while the U.S. has rates at about a 50-percentile standing, placing them just about on top of their historic median. Neither one of these expectations has long-term expectations different from historic norms.

Stock market expectations from December to January, however, are little changed and mostly weaker, with the euro area gauge falling to 35.2 from 41.3 in December. The German gauge slips to 35.9 from 36.3 in December. The January gauge for the U.S. is ticking slightly higher to 31.5 January from 30.2 in December. The rankings for the January gauges show the U.S. above its median at a 59.3 percentile mark, the euro area slightly below its median with a 44.9 percentile reading; the German stock market still scores as the weakest at a 39.7 percentile standing.

260120.jpg

On balance, there are improvements expected in the macroeconomic realm as well as improvements detected in the current economic situation. Inflation is expected to remain tame; short-term interest rates are expected to continue declining, while long-term interest rates are going to be showing some pressure or in the case of the U.S. will continue to oscillate around current levels or firm slightly. Stock market conditions in the U.S. are modestly higher than their historic norms; however, the euro area stocks are in for modest weakness; German stocks weakened and are historically weak. Looking ahead, the thing to do is to watch the market metrics in particular to see how the recent U.S.-European rift over Greenland is going to play out in markets and how much it's going to affect expectations. That's the newest trend in play. How quickly they forget drug running boat sinkings, Maduro’s capture, threats on Iran, and cage rattling the Fed Chair. It’s all about Greenland now- at least for now, don’t blink!

ZEW Survey Shows Advancement All Around

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.

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

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

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

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Economy in Brief: 2009

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Philadelphia Fed Index Improves Sharply

U.S. Leading Indicators Rise Sharply For A Second Month

U.S. Leading Indicators Rise Sharply For A Second Month

U.S. 1Q'09 Current Account Deficit Shrinks To Smallest Since 2001

U.S. May CPI Ticks Up, But 1.2% Drop Y/Y Is Largest Since April 1950

U.S. May CPI Ticks Up, But 1.2% Drop Y/Y Is Largest Since April 1950

Gasoline Prices Reach The Highest Level Since Last October

Optimism Increases Among German Investors and Analysts