Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040428b.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) slipped in March to 0.17 from 0.47 in February. The latest was the lowest reading since October.
The three-month moving average of the CFNAI was about unchanged at 0.35.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 75% correlation between the level of the CFNAI and quarterly growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The latest release of the Chicago Fed&#39;s National Activity Index is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_april2004.pdf"> here</a>.
Comments from Michael H. Moskow, President &amp; CEO of the Federal Reserve Bank of Chicago, on the U.S. Economic Outlook can be found <a href="http://www.chicagofed.org/news_and_conferences/speeches/2004-04-23_economic_outlook.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM"> Chicago Fed</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.17</td>
<td>0.47</td>
<td>-0.66</td>
<td>-0.11</td>
<td>-0.40</td>
<td>-1.18</td>
</tr>
</tbody>
</table>
Gasoline Prices at Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040428a.jpg" width="353">
The US average retail gasoline price for all formulations settled last week at $1.81 per gallon versus an average of $1.74 in March and $1.65 February.
Relative to all consumer prices for non-energy goods &amp; services, gasoline prices are back to the highs of a year ago. The current level of relative gasoline prices is up nearly 50% from the low in late 2001 and it is up 60% from the 1999 low.
Despite these gains, relative gasoline prices are down 40% versus the peak in early 1981 and versus disposable personal income (purchasing power) retail gasoline prices are down roughly two-thirds during that period.
Wholesale natural gas prices last week averaged 5.56/mmbtu (+0.9% y/y) and have meandered this year between 5.14 &amp; 6.67/mmbtu.
Crude oil prices have moved higher this year with the price of West Texas Intermediate crude at $37.25 (+47.6% y/y) yesterday.
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>.
Federal Reserve Chairman Alan Greenspan&#39;s testimony yesterday on energy is available <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2004/20040427/default.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W4/@W403/@W40303/@W40303.HTM"> US Retail Gasoline Prices</a></th>
<th scope="col">04/26/04</th>
<th scope="col">12/29/03</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">All Formulations ($/Gal.)</td>
<td>$1.81</td>
<td>$1.48</td>
<td>16.4%</td>
<td>$1.56</td>
<td>$1.34</td>
<td>$1.42</td>
</tr>
</tbody>
</table>
Mortgage Applications Ticked Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040428c.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association ticked 0.5% (-28.8% y/y) higher last week following four weeks of sharp decline.
The increase was fueled by a 6.8% w/w rise in purchase applications (+30.2% y/y). So far in April purchase applications are 1.9% ahead of the March average.
During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance dropped another 5.8% (-52.8% y/y), the fifth consecutive steep weekly decline.
The effective interest rate on a conventional 30-Year mortgage jumped to 6.27% from 6.11% the week prior and from 5.65% averaged in March. The effective rate on a 15-year mortgage rose to 5.63% from 5.49% the week prior and from 5.00% in March.
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>.

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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">04/23/04</th>
<th scope="col">04/16/04</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>748.0</td>
<td>744.5</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>463.5</td>
<td>434.1</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,403.0</td>
<td>2,550.3</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
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The Chicago Fed National Activity Index (CFNAI) slipped in March to 0.17 from 0.47 in February. The latest was the lowest reading since October. The three-month moving average of the CFNAI was about unchanged at 0.35. A zero value of [...]

Chicago Fed Nat'l Activity Index Slipped in March

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/040428d.jpg" width="353">
Yesterday, the US Conference Board reported a jump in US consumer confidence in April. The comparable survey in Japan, also issued yesterday, was favorable as well. Today, three smaller economies in Europe all reported that their consumers &quot;feel better&quot; -- or at least, less bad.
In the Czech Republic, April&#39;s consumer survey shows a marked improvement from the very low levels of the prior two months. But at -16, this result remains below readings of a year ago and the averages for all of the past three years. Notably, this survey, which is not quite four years old, has never had a reading above zero. Thus, Czech consumers have shown some degree of uneasiness throughout the last four years.
In neighboring Slovakia, the net consumer sentiment reading is also negative. However, positive movements in both March and April appear to mark a real break-out from much recent experience, as the overall index reached its highest (least negative) since September 2002.
Finally, in Sweden, the readings are in positive territory, although their month-to-month swings made April&#39;s gain from 5.1 to 9.1 look less convincing as a indication of a sustainable uptrend in consumer optimism.
Reasons for these moves are not consistent in all of these countries. Industry sentiment weakened in Slovakia, although recent industrial production data and the Slovak stock market both look better. Industry sentiment in the Czech Republic rose in February and March, but flattened in April. Unemployment remains high there and not improved. However, industrial production and stock prices are maintaining uptrends. In Sweden, the unemployment picture is the same, unimproved, and employment itself is even down somewhat on a year ago. Stock prices are edging higher, however.
Thus, stock prices look to be the common element in the consumer sentiment picture in each country. Better equity markets buoy consumers, and hopefully will translate into more consumer spending.

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<th scope="col" class="firstcol">% Balance</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Year Ago</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
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<tr class="odd">
<td class="firstcol">&nbsp; Czech Republic</td>
<td>-16</td>
<td>-23</td>
<td>-26</td>
<td>-11</td>
<td>-15</td>
<td>-7</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Slovakia</td>
<td>-25.1</td>
<td>-28.3</td>
<td>-35.9</td>
<td>-34.9</td>
<td>-34.8</td>
<td>-30.2</td>
<td>-32.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Sweden</td>
<td>+9.1</td>
<td>+5.1</td>
<td>+9.1</td>
<td>-6.9</td>
<td>+0.9</td>
<td>+7.2</td>
<td>+3.5</td>
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Yesterday, the US Conference Board reported a jump in US consumer confidence in April. The comparable survey in Japan, also issued yesterday, was favorable as well. Today, three smaller economies in Europe all reported that their [...]

Consumer Sentiment Gains in Czech Republic, Slovakia & Sweden

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040427d.jpg" width="353">
Consumer confidence in Japan, as reported by the Economic and Social Research Institute, rose to 42.5% in the first quarter of this year, the highest level since the fourth quarter of 2000.
All of the components of the total index, except for prices, rose sharply in the first quarter and were well above the levels of the first quarter of 2003. The sharpest quarter-to-quarter rise took place in consumers&#39; appraisal of the job outlook over the next six months. This component was up 7.69% in the quarter and 66.67% above the first quarter of 2003.
Even the price index that showed a decline is a positive indicator for Japan. A price diffusion index below 50% and going down means an expectation of a general upward trend in prices at a faster rate. Any sign of rising prices in Japan is a welcome sign in view of the deflation that has plagued the country over the past several years.

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<th scope="col" class="firstcol">Japan:&nbsp; Diffusion Indexes of Consumer Sentiment %</th>
<th scope="col">Q1 O4</th>
<th scope="col">Q4 O3</th>
<th scope="col">Q1 O3</th>
<th scope="col">Q/Q %</th>
<th scope="col">Y/Y %&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">Consumer Sentiment</td>
<td>42.5</td>
<td>40.6</td>
<td>36.2</td>
<td>4.68</td>
<td>17.40</td>
<td>38.4</td>
<td>38.8</td>
<td>38.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Standard of living</td>
<td>42.8</td>
<td>40.2</td>
<td>36.9</td>
<td>6.47</td>
<td>15.99</td>
<td>38.8</td>
<td>39.0</td>
<td>39.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Change in income</td>
<td>&nbsp;39.9</td>
<td>38.0</td>
<td>35.6</td>
<td>5.00</td>
<td>12.08</td>
<td>36.8</td>
<td>37.4</td>
<td>38.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Job prospects</td>
<td>42.0</td>
<td>39.0</td>
<td>25.2</td>
<td>7.69</td>
<td>66.67</td>
<td>31.7</td>
<td>27.7</td>
<td>25.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Prices</td>
<td>41.0</td>
<td>41.2</td>
<td>42.0</td>
<td>-0.49</td>
<td>-2.38</td>
<td>41.4</td>
<td>46.3</td>
<td>47.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Timing and willingness to buy durable goods</td>
<td>47.2</td>
<td>45.7</td>
<td>41.6</td>
<td>3.28</td>
<td>13.46</td>
<td>43.6</td>
<td>43.8</td>
<td>42.6</td>
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Consumer confidence in Japan, as reported by the Economic and Social Research Institute, rose to 42.5% in the first quarter of this year, the highest level since the fourth quarter of 2000. All of the components of the total index, [...]

Japanese Consumer Confidence Rises Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040427b.jpg" width="353">
Sales of existing single family homes reported by the National Association of Realtors jumped 5.7% last month to a 6.48M annual rate. The previously reported decline in February sales was revised to show a 2.2% increase. Consensus expectations had been for March sales 6.20M.
The figures reflect closings of home sales in earlier months.
Sales rose in most regions of the nation. In the West sales surged 10.2% (18.1% y/y) and sales in the Midwest rose 6.3% (+7.1% y/y). In the South sales rose 3.6% (+12.2% y/y) but in the Northeast sales were flat (10.8% y/y).
The median price of an existing home rose 3.6% m/m to $174,100 (+7.4% y/y) but the prior month&#39;s figure was revised down.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/publicaffairsweb.nsf/Pages/MarchEHS04?OpenDocument">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
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<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,480</td>
<td>&nbsp;6,130</td>
<td>12.7%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
</tbody>
</table>
Consumer Confidence Jumped On Improved Assessment of Job Market 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040427a.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence for April jumped 5.0% from March to 92.9. The latest is the highest Confidence reading since January and the jump passed Consensus expectations for a rise to 88.5.
Jobs were viewed as hard to get by 27.6% of respondents, the lowest level since November 2002.
Expectations for business conditions in six months improved moderately in April and 18.2% of respondents expected there to be more jobs in six months, the highest percentage since January.
The improvement in April Confidence contrasted with the deterioration in Consumer Sentiment reported earlier by the University of Michigan.
During the last ten years there has been a 67% correlation between the level of consumer confidence and the y/y % change in real PCE.
The present situation reading surged 7.3% to 90.6 (+20.5% y/y), the highest level since August of 2002. The index of consumer expectations also advanced 3.5% (+11.4% y/y), the first m/m increase since December.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM"> Conference Board</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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">Consumer Confidence</td>
<td>92.9</td>
<td>88.5</td>
<td>14.7%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
Chain Store Sales Slip 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040427c.jpg" width="353">
Chain store sales slipped 0.5% last week following a 1.0% jump the prior week, according to the International Council of Shopping Centers (ICSC)-UBS survey.
With one week left to tally the level of sales in April is up 0.1% from March.
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.
During the last ten years there has been a 51% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and consumer sentiment.

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<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">04/24/04</th>
<th scope="col">04/17/04</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>438.2</td>
<td>440.3</td>
<td>7.1%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Sales of existing single family homes reported by the National Association of Realtors jumped 5.7% last month to a 6.48M annual rate. The previously reported decline in February sales was revised to show a 2.2% increase. Consensus [...]

Existing Home Sales Jumped to Second Highest on Record

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040426b.jpg" width="353">
The IFO survey of the German business climate rose unexpectedly in April to 96.3 (2000=100) from 95.4 in March. However, the expectations component, appraising conditions six months ahead, continued to decline and was at 97.8 in April compared with 98.8 in March. The rise in the overall index was due entirely to the business confidence component, which is an appraisal of current conditions. It rose from 92.2 in March to 94.9 In April.
The recent decline in the euro, which has fallen by nearly 8% since the peak reached on February 17 of this year, has been a welcome turnaround from the persistent rise of about 55% in the euro from October 25, 2000 to February 17, 2004. That rise had had a dampening effect on world demand for German exports. Germany&#39;s main source of growth. Now with a somewhat lower euro and the improvement in growth in the United States and Asia, particularly China, since late last year the outlook for German exports has brightened.
In spite of the improved outlook for export growth, businessmen have become more cautious about the outlook for the next six months as there are few, if any, indications that domestic demand is improving.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol">IFO&nbsp; Business Climate Survey&nbsp; (2000=100)</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 %</th>
<th scope="col">Y/Y %&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">&nbsp;Business Climate</td>
<td>96.3</td>
<td>95.4</td>
<td>88.4</td>
<td>0.94</td>
<td>8.94</td>
<td>91.7</td>
<td>89.4</td>
<td>92.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Confidence</td>
<td>94.9</td>
<td>92.2</td>
<td>86.6</td>
<td>2.93</td>
<td>9.58</td>
<td>88.4</td>
<td>85.3</td>
<td>93.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>&nbsp;&nbsp;&nbsp; 97.8</td>
<td>98.8</td>
<td>90.3</td>
<td>-1.01</td>
<td>8.38</td>
<td>95.1</td>
<td>93.8</td>
<td>91.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro/US$</td>
<td>&nbsp;</td>
<td>% Chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">October 25, 2000</td>
<td>1.2068</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">February 17, 2004</td>
<td>0.7791</td>
<td>54.9</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">April 26, 2004</td>
<td>0.8448</td>
<td>-7.8</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

The IFO survey of the German business climate rose unexpectedly in April to 96.3 (2000=100) from 95.4 in March. However, the expectations component, appraising conditions six months ahead, continued to decline and was at 97.8 in April [...]

German IFO Business Climate Survey Surprises on the Up Side but Expectations Component Continues to Decline

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040423b.jpg" width="353">
 Growth in the UK economy moderated a bit in Q1 2004, according to the &quot;Preliminary&quot; release of GDP today. Total GDP at market prices gained 0.6%, somewhat slower than the 0.9% advance in Q4 2003.
For the industrial sector, this meant a steeper decline. That portion of the economy, which includes manufacturing, mining and energy output, has shown an increase in only one quarter since the end of 2000.
Services, by contrast, continue to grow vigorously, although not quite as fast in the first quarter as the fourth quarter&#39;s full 1.0%. However, within that broad segment, the subcategory of distribution, food and hotel services and repair services, expanded by 1.2%, its largest advance since the summer of 2002.
In this preliminary release, there is little further detail. But overall, the UK economy, driven by service sector expansion, is extending its healthy growth track, not as strongly as the late 1990s, but firmer, surely, than the recession plagued period two-to-three years ago.Note: the UK Office of National Statistics cautions that early data responses were unusually low in March, so these figures may be subject to more revision than normal.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q1 2004</th>
<th scope="col">Q4 2003</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">GDP Chained Volume Index, 2000=100</td>
<td>108.1</td>
<td>107.4</td>
<td>104.9*</td>
<td>106.1</td>
<td>103.8</td>
<td>102.1</td>
</tr>
<tr>
<td class="firstcol">% Change&nbsp;</td>
<td>0.6</td>
<td>0.9</td>
<td>3.0</td>
<td>2.2</td>
<td>1.6</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production % Change</td>
<td>-0.5</td>
<td>-0.1</td>
<td>-0.3</td>
<td>-0.5</td>
<td>-2.7</td>
<td>-1.6</td>
</tr>
<tr>
<td class="firstcol">Service Industries&nbsp;&nbsp;&nbsp; % Change</td>
<td>0.8</td>
<td>1.0</td>
<td>2.9</td>
<td>2.2</td>
<td>2.2</td>
<td>2.6</td>
</tr>
</tbody>
</table>
</body>
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Growth in the UK economy moderated a bit in Q1 2004, according to the "Preliminary" release of GDP today. Total GDP at market prices gained 0.6%, somewhat slower than the 0.9% advance in Q4 2003. For the industrial sector, this meant [...]

UK GDP Growth Eases as Industrial Production Falls; Services Remain Vigorous

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040423a.jpg" width="353">
Durable goods orders soared 3.4% last month and the February gain was revised to 3.8% from 2.5%. Consensus expectations had been for a 0.7% rise in March orders.
Non-defense capital goods orders added 2.1% to a 4.5% February rise that was initially reported at 2.9%. Excluding aircraft and parts, orders rose 2.4% and February was revised to 2.8% from 1.1%.
Machinery orders surged 3.1% (17.1% y/y) and February now shows a 3.8% increase versus the advance 1.3% gain. Orders for electrical equipment, appliances &amp; components rose 0.8% (3.8% y/y) following a 3.0% February gain, revised from -0.4%.
Orders for computers &amp; electronic products rose 0.2% (14.9% y/y) and February is now pegged at 2.7% versus the advance report of a 1.2% gain.
Excluding the transportation sector durable goods orders jumped 3.3% (+14.2% y/y).
Shipments of durable goods surged 3.2% (11.3% y/y) following an upwardly revised 1.7% February gain. Excluding transportation shipments jumped 4.1% (12.1% y/y).
Durable inventories edged up 0.1% (-1.8% 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/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Durable Goods Orders</td>
<td>3.4%</td>
<td>3.8%</td>
<td>13.1%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>2.1%</td>
<td>4.5%</td>
<td>14.0%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
</body>
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Durable goods orders soared 3.4% last month and the February gain was revised to 3.8% from 2.5%. Consensus expectations had been for a 0.7% rise in March orders. Non-defense capital goods orders added 2.1% to a 4.5% February rise that [...]

U.S. Durable Goods Orders Soar, Revisions Up

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040422c.jpg">
Labor market conditions are mixed in three countries reporting data today. Unemployment rates are high and/or rising in Israel and Poland, but easing in Russia. At the same time, employment patterns don&#39;t necessarily match the behavior of the unemployment rate.
In Israel, unemployment is climbing gradually, with March&#39;s 11.0% rate the highest in the eight-year history of these data. This is accompanied by divergent trends in measures of employment. The number of employed persons, a quarterly series, has been rising, as indicated in the accompanying chart. But the number of jobs, both including and excluding those offered to Palestinian Authority workers, has been basically flat for the last couple of years.
In Poland, where unemployment is also rising, employment data are the mirror image, falling markedly, as might be expected and <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040422d.jpg" width="353"> generating the higher trend in unemployment. Notably, though, Poland&#39;s neighbors appear to be doing better, as employment in the Czech Republic is largely flat and mostly rising in Hungary and Slovakia.
Employment in Russia is also moving ahead, albeit somewhat erratically, while its unemployment rate is declining. Indeed, the progress in Russia looks favorable by other gauges as well, including production growth and GDP, with a distinct recovery evident beginning in 1999 after the country&#39;s plunge to debt default in 1998.
Yesterday, in this space, we cited evidence of the emergence of a broadening recovery in world trade. That should help jobs and unemployment conditions in many countries. Perhaps it&#39;s too early to expect this everywhere, but the mixed pattern in these countries today suggests that country-specific circumstances can get in the way, slowing desired improvements, even as neighboring nations do better.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Percent</th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Year Ago</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">Israel (NSA)</td>
<td>n.a.</td>
<td>11.0</td>
<td>10.9</td>
<td>10.5</td>
<td>10.7</td>
<td>10.4</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">Poland (SA)</td>
<td>19.6</td>
<td>19.6</td>
<td>19.8</td>
<td>19.7</td>
<td>19.9</td>
<td>17.8</td>
<td>16.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Russia (SA)</td>
<td>7.7</td>
<td>7.6</td>
<td>7.6</td>
<td>8.6</td>
<td>8.5</td>
<td>8.0</td>
<td>9.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Labor market conditions are mixed in three countries reporting data today. Unemployment rates are high and/or rising in Israel and Poland, but easing in Russia. At the same time, employment patterns don't necessarily match the [...]

Unemployment Rates on Varying Paths in Israel, Poland & Russia

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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