Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040422a.jpg" width="353">
Finished producer prices jumped 0.5% higher last month following a 0.1% February uptick. The surge matched consensus expectations. The core PPI also rose a moderate 0.2% following the 0.1% February rise. A 0.1% increase in the core PPI had been the Consensus expectation.
Finished food prices jumped 1.5% (5.3% y/y) in March. Pricing strength during the last year has been broad based. Energy prices rose 0.6% (-0.4% y/y)
Finished consumer goods prices surged 0.7% after the tame 0.1% increase in February. Less food &amp; energy finished consumer goods prices rose 0.3% (0.6% y/y following no change in February. Consumer durable prices rose 0.6% (+0.4% y/y) after a 0.2% February drop. Core non-durable prices fell 0.1% (+0.7% y/y) after 0.2% increases in the prior two months.
Finished capital goods prices rose 0.3% (0.8% y/y) after no change in February. That gain was fueled by a 0.8% (-1.6% y/y) recovery in light truck prices after a 1.9% February drop.
Intermediate goods prices again were strong, rising 0.7%. Core intermediate prices climbed 0.6% (2.9% y/y) led by an 8.6% jump in plywood prices (49.1% y/y) after a 15.2% spike in February.
Crude goods prices were tame as crude energy prices fell 6.1% (-26.5% y/y) after no change in February. Lower natural gas prices (-40.3% y/y) account for recent weakness. Prices for core crude goods jumped 2.7% as metals prices continued to spike higher.
&quot;Decomposing Inflation&quot; from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=825437DF-B173-FAB1-3D72FA96A8E8B7D3&amp;method=display_body#bauer">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/@E802/@E80201/@E80201.HTM"> Producer Price Index</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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>0.5%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.7%</td>
<td>0.9%</td>
<td>1.3%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.6%</td>
<td>0.9%</td>
<td>2.9%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>0.7%</td>
<td>2.5%</td>
<td>-1.6%</td>
<td>25.0%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>2.7%</td>
<td>5.5%</td>
<td>29.8%</td>
<td>12.3%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
Jobless Claims Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 22, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040422b.jpg" width="353">
Initial claims for jobless insurance fell 9,000 last week to 353,000 but fell short of Consensus expectations for a decline to 345,000 claims. Claims during the prior week were revised up slightly.
The 4-week moving average of initial claims rose to 347,000 (-19.5% y/y), the highest level since late February.
Continuing claims for unemployment insurance jumped 52,000 in the latest week but claims so far in April remained 1.5% below the March average.
The insured rate of unemployment was unchanged at 2.4% for the seventh consecutive week. This unemployment rate averaged 2.8% during 2002 and 2003.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col"> 4/17/04</th>
<th scope="col">4/10/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 353</td>
<td>362</td>
<td>-20.5%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>3,019</td>
<td>-15.3%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
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Finished producer prices jumped 0.5% higher last month following a 0.1% February uptick. The surge matched consensus expectations. The core PPI also rose a moderate 0.2% following the 0.1% February rise. A 0.1% increase in the core [...]

PPI Goosed By Food & Light Trucks

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/040421b.jpg" width="353">
Trade flows are increasing. Three large, but otherwise very diverse countries reported trade data today which show markedly rising trends in BOTH exports and imports. This development indicates widespread gains in economic activity, that is, in the demand for goods in many parts of the world.
Japan&#39;s trade surplus is larger in 2004 through March than in recent years, but this is because exports have increased considerably more than imports.
In Italy, imports are growing, while exports are uneven. More detailed data suggest that energy imports are not the source of the rise in imports; as we explained here a week ago in discussing relative inflation rates, the rise in the euro through February may have held down the euro value of dollar-priced oil imports in such places as Italy.
For exports, the uneven pattern in recent months is actually an improvement, following a declining trend from late 2000 through early last year.
In India, where we cite US dollar-denominated figures, both exports and imports have climbed sharply. Commentary from the Indian government relates that March exports were affected by changes in reporting practices that speed up the processing of shipments information. But this is only a partial explanation, as indicted by the steeply rising trend throughout the period shown in the table and chart. The behavior of both kinds of trade flows in India thus corresponds to what we believe intuitively about the Indian economy. It is being strengthened by the role of outsourcing, so imports possibly of both intermediate and consumer goods may be rising even as exports increasingly make inroads into world markets.

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<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Year Ago</th>
Monthly Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Japan: Trade Balance (Bil.Yen)</td>
<td>1010</td>
<td>1184</td>
<td>1038</td>
<td>641</td>
<td>850</td>
<td>826</td>
<td>562</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>4864</td>
<td>4802</td>
<td>4892</td>
<td>4359</td>
<td>4546</td>
<td>4345</td>
<td>4091</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>3854</td>
<td>3618</td>
<td>3854</td>
<td>3717</td>
<td>3696</td>
<td>3519</td>
<td>3529</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy: Trade Balance (Mil.Euros)</td>
<td>n.a.</td>
<td>-246</td>
<td>-711</td>
<td>+6</td>
<td>+56</td>
<td>+699</td>
<td>+817</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>n.a.</td>
<td>21799</td>
<td>20651</td>
<td>21088</td>
<td>21292</td>
<td>22144</td>
<td>22515</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>n.a.</td>
<td>22045</td>
<td>21362</td>
<td>21082</td>
<td>21237</td>
<td>21445</td>
<td>21699</td>
</tr>
<tr>
<td class="firstcol">India: Trade&nbsp;&nbsp; Balance (Mil.US$)</td>
<td>-172</td>
<td>-1866</td>
<td>-1560</td>
<td>-1105</td>
<td>-1245</td>
<td>-601</td>
<td>-569</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>6518</td>
<td>5819</td>
<td>5037</td>
<td>4589</td>
<td>4670</td>
<td>4110</td>
<td>3591</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>6690</td>
<td>7685</td>
<td>6597</td>
<td>5694</td>
<td>5916</td>
<td>4711</td>
<td>4159</td>
</tr>
</tbody>
</table>
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Trade flows are increasing. Three large, but otherwise very diverse countries reported trade data today which show markedly rising trends in BOTH exports and imports. This development indicates widespread gains in economic activity, [...]

Trade Expanding in Japan, Italy & India

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040421a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association dropped another 5.6% (-29.5% y/y) last week, for the fourth consecutive steep weekly decline.
Applications to refinance tumbled 10.9% (-50% y/y) on the heels of a 30.7% drop the prior week.
Purchase applications ticked up 0.4% w/w (+20.6% y/y) after a 9.5% decline the prior week. So far in April purchase applications are 1.0% ahead of the March average.
The effective interest rate on a conventional 30-Year mortgage rose to 6.11% from 6.03% the week prior and versus 5.65% averaged in March. The effective rate on a 15-year mortgage rose to 5.49% from 5.45% the week prior and from 5.00% in March.
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.
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>.
Federal Reserve Chairman Alan Greenspan&#39;s testimony before the Joint Economic Committee on the economic outlook is available <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2004/20040421/default.htm"> 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">04/16/04</th>
<th scope="col">04/09/04</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>744.5</td>
<td>788.6</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>434.1</td>
<td>432.2</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,550.3</td>
<td>2,861.6</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
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The index of mortgage applications compiled by the Mortgage Bankers Association dropped another 5.6% (-29.5% y/y) last week, for the fourth consecutive steep weekly decline. Applications to refinance tumbled 10.9% (-50% y/y) on the [...]

Mortgage Applications Fell Further, Rates Continued to Rise

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040420b.jpg" width="353">
Institutional investors and analysts poled by the ZEW Center for European Economic Research are losing confidence in the German recovery. The ZEW indicator of economic sentiment, while still positive, indicating that the optimists outweigh the pessimists, fell to 49.7 in April. This was the fourth month of decline and is now 32% below the peak of December 2002.
Using industrial production, excluding construction, as a proxy for the economy, we find, according to the attached chart, that the Zew indicator tends to lead economic activity. As a result, the recent trend in the Zew indicator suggests that the economic recovery in Germany may be fall far short of previous expectations.
Institutional investors and analysts continue to view the stock market more favorably than the bond market. The stock market indicator in April was 6.7, up 0.6 points from March to April and 0.7 points above April 2003. The bond market indicator in April was -6.8, an increase of 0.1 points from March, but 3.9 points below the year ago figure.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol">Zew Indicators</th>
<th scope="col">Apr 04</th>
<th scope="col">Mar 04</th>
<th scope="col">Apr 03</th>
<th scope="col">M/M&nbsp; &nbsp;chg</th>
<th scope="col">Y/Y&nbsp; &nbsp;chg</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; Economic Sentiment</td>
<td>49.7</td>
<td>57.6</td>
<td>14.0</td>
<td>-7.9</td>
<td>31.3</td>
<td>38.4</td>
<td>45.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Stock Market</td>
<td>6.7</td>
<td>6.1</td>
<td>6.0</td>
<td>0.6</td>
<td>0.7</td>
<td>6.5</td>
<td>2.0</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Bond Market</td>
<td>-6.8</td>
<td>-6.9</td>
<td>-2.9</td>
<td>0.1</td>
<td>-3.9</td>
<td>-4.8</td>
<td>-4.3</td>
<td>0.3</td>
</tr>
</tbody>
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Institutional investors and analysts poled by the ZEW Center for European Economic Research are losing confidence in the German recovery. The ZEW indicator of economic sentiment, while still positive, indicating that the optimists [...]

German Investors and Analysts Losing Confidence in Germany's Recovery

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040420a.jpg" width="353">
Chain store sales jumped 1.0% last week following a 0.8% gain the week earlier, according to the International Council of Shopping Centers (ICSC)-UBS survey.
These two strong increases pulled the level of sales in April about even with 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">04/17/04</th>
<th scope="col">04/10/04</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>440.3</td>
<td>436.1</td>
<td>5.9%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales jumped 1.0% last week following a 0.8% gain the week earlier, according to the International Council of Shopping Centers (ICSC)-UBS survey. These two strong increases pulled the level of sales in April about even [...]

Chain Store Sales Jump

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040419b.jpg" width="353">
France&#39;s Current Account has been deteriorating since early 2002. In 2003 it was 53% below the level of 2002. Much of the decline can be attributed to the rise of the euro, which on average rose from .9452 to 1.1317, or about 20%.
The attached chart compares the Euro on an inverted scale with France&#39;s current account balance. The rise in the euro (a decline on the chart) since early 2002 is reflected in the decline of the current account balance.
The euro has recently declined and as of April 19, was 1.2019, or some 6% below the peak reached in January of this year. A lower euro should help to improve France&#39;s current account and the improvement in the current account in February, moving to a positive 1,397 million euros from a negative 409 million euros in January is encouraging. However, the current account for the first two months of the year is still only half that of the first two months of 2002.

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<th scope="col" class="firstcol">France</th>
<th scope="col">Feb 04</th>
<th scope="col">Jan 04</th>
<th scope="col">Feb&nbsp; 03</th>
<th scope="col">M/M Chg</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Current Account&nbsp; (millions of Euros)</td>
<td>1397</td>
<td>-404</td>
<td>727</td>
<td>1806</td>
<td>670</td>
<td>10828</td>
<td>23209</td>
<td>24627</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">US$ vs Euro</td>
<td>1.261</td>
<td>1.2640</td>
<td>1.0785</td>
<td>0.02</td>
<td>17.20</td>
<td>1.1317</td>
<td>.9453</td>
<td>.8955</td>
</tr>
</tbody>
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France's Current Account has been deteriorating since early 2002. In 2003 it was 53% below the level of 2002. Much of the decline can be attributed to the rise of the euro, which on average rose from .9452 to 1.1317, or about 20%. The [...]

France's Current Account Balance Improves in February, but It Has a Long Way to Go to Reach Previous Highs

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040419a.jpg" width="353">
The Composite Index of Leading Economic Indicators reported by the Conference Board rose an expected 0.3% in March. The gain followed no change in February.
The gain reflected increases in 60% of the component series but shorter delivery lead times, as measured by stronger vendor performance, had the largest positive contribution of 0.26%. Over a six-month span 70% of the leading series rose.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators rose 0.2% and 75% of the component series were higher.
The ratio of coincident-to-lagging indicators rose 0.3% to another record level. The ratio is an indicator of excess relative to actual economic performance.
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.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM"> Business Cycle Indicators</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 class="odd">
<td class="firstcol">Leading</td>
<td>0.3%</td>
<td>0.0%</td>
<td>4.4%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-3.1%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
</body>
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The Composite Index of Leading Economic Indicators reported by the Conference Board rose an expected 0.3% in March. The gain followed no change in February. The gain reflected increases in 60% of the component series but shorter [...]

Leading Indicators Continued Uptrend

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040416e.jpg" width="353">
 Labor market conditions in the UK have improved markedly in the most recent months. The number of people employed (&quot;labor force employment&quot; in the table below) jumped 120,000 in the December reporting period and another 58,000 in the January period, which was published today. All these data except the Claimant Count are reported as 3-month centered moving averages; that is, the new January data are the average of December, January and February. The series begin in April 1992.
As jobs have increased, unemployment has decreased, with the unemployment rate reaching 4.8% in December and January, an all-time low. Labor force participation has increased, with the so-called &quot;economic activity rate&quot; climbing to an all-time high of 63.2% of the population over age 16. Unemployment is thus down because of the gain in jobs, not, as sometimes happens, because people are backing away from the labor force. Note that claims for the &quot;Jobseeker&#39;s Allowance&quot; have also declined.
At the same time, earnings have increased markedly. The &quot;headline rate&quot; for 12-month gains in average earnings jumped by 1.5 percentage points over the last two months. It is seen that the surge is entirely due to higher bonuses; this is a stark shift from earlier periods in 2001 and 2002, when decreasing bonuses meant workers with bonuses actually saw weaker compensation gains than workers with straight earnings alone.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK: Selected Labor&nbsp; Market Indicators</th>
<th scope="col">&quot;Feb&quot;&nbsp; (3&nbsp; months ended Mar)</th>
<th scope="col">&quot;Jan&quot;&nbsp; (3&nbsp; months ended Feb)</th>
<th scope="col">&quot;Dec&quot; (3&nbsp; months ended Jan)</th>
<th scope="col">Year Ago (&quot;Jan&quot;)</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">Unemployment Rate (%)</td>
<td>N.A.</td>
<td>4.8</td>
<td>4.8</td>
<td>5.1</td>
<td>5.0</td>
<td>5.2</td>
<td>5.1</td>
</tr>
<tr>
<td class="firstcol">Claimant Count (thous.)</td>
<td>882.2*</td>
<td>886.4*</td>
<td>891.7*</td>
<td>942.3*</td>
<td>933.2</td>
<td>946.7</td>
<td>969.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Labor Force Employment (thous.)</td>
<td>N.A.</td>
<td>28,330</td>
<td>28,272</td>
<td>28,012</td>
<td>28,111</td>
<td>27,865</td>
<td>27,668</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Change (thous.)</td>
<td>N.A.</td>
<td>58</td>
<td>120</td>
<td>2</td>
<td>246</td>
<td>197</td>
<td>218</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Earnings Index: &quot;Headline Rate&quot; Including Bonuses (Yr/Yr %Chg)</td>
<td>N.A.</td>
<td>4.9</td>
<td>4.7</td>
<td>3.6</td>
<td>3.4</td>
<td>3.5</td>
<td>4.6</td>
</tr>
<tr>
<td class="firstcol">Average Earnings Index Excluding Bonuses (Yr/Yr %Chg)</td>
<td>N.A.</td>
<td>3.9*</td>
<td>3.9*</td>
<td>4.0*</td>
<td>3.6</td>
<td>4.0</td>
<td>4.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Labor market conditions in the UK have improved markedly in the most recent months. The number of people employed ("labor force employment" in the table below) jumped 120,000 in the December reporting period and another 58,000 in the [...]

UK Employment Up, Unemployment Down in Latest 2 Monthly Reports

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

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

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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

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**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.

260205C15.jpg

260205D15.jpg

- 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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260205B2.jpg

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.

260205C2.jpg

260205D2.jpg

- 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

260205E.jpg

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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