Robert Brusca

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Asia manufacturing PMIs continue weak in data reported in the New Year that are up-to-date through December 2018. The rank standing data are very mixed with China logging a very low 2.9 percentile standing and Malaysia on an all-time sample period low. These compare to India at a 90th percentile standing and Indonesia at an 85th percentile standing. Myanmar and Vietnam log standings in their respective 81st percentiles.

But Asia is less mixed than it seems. Asia has been struggling for better growth. The average (unweighted) manufacturing PMI in the table for December is a weak 51.1 with slowing in half of the reporters in December compared to November as a similar splint exists in November compared to October. Three economies log PMI values below 50 indicating manufacturing contraction: China, South Korea, and Malaysia. Out of ten reporters, only two have PMI raw scores above a diffusion reading of 53. The readings for ASEAN and Thailand are on the brink of showing a contraction for December with a level of less than one half of one diffusion point above neutral. The more erratic percentile standing data –that are based on these same weak diffusion data- simply reflect that for some of these nations there has been a long period of weak performance and by those standards the current crop of readings is not anything new.

Only India and Vietnam are showing anything like ongoing firm readings. In fact, both of them show sequential average readings that are getting progressively stronger- setting them quite apart from the rest of Asia, especially China. In contrast, the progressive readings for China and Thailand are getting progressively weaker for the shorter horizons.

As the New Year starts, there is also geopolitical news and for Asia that news is not reassuring. In China, Xi Jinping has given his Happy New Year...or else… greeting to Taiwan warning it that it must eventually acceded to China's rule, a long standing position of China but one he makes more forcefully in early-2019. In North Korea, Kim Jong Un is threatening to walk a new path without specifying where that might lead or how he might do that. North Korea is anxious for the U.S. to show a sign of faith and drop some sanctions while the U.S. is reluctant to take the pressure off that seems to have brought North Korea to heel. In fact, the U.S. has done this before with North Korea, cutting it slack, only to find that without ongoing pressure there is no progress on North Korea's part.

Markets are unsteady. Oil prices are falling. Gold prices are firming. All this is as the New Year begins. In the U.S., the White House has rejected a Democrat plan to end the government shut down calling it a 'nonstarter' as the President has invited party leaders to the White House for a briefing on border security.

All this makes in painfully clear that you can flip a page on the calendar and reveal a new picture, but nothing else really has changed. There is lots of talk about a New Year, and turning over a new leaf and having New Year's resolutions. But one year flows seamlessly into another and the problems of late-2018 are still the problems of early-2019. In so many ways, the transition for December to January is no different from going from June to July. Well-wishers can Happy New Year us until their lips turn blue in the cold of January weather (at least as it typically in the north and eastern United States where I am based). But nothing is different. When Mr. Trump was asked if he thought Elizabeth Warren, who just announced her candidacy for President as a Democrat thought she could win, his response was that you would have to ask her psychiatrist <a href="https://www.politico.com/story/2019/01/01/trump-warren-psychiatrist-1077366">(Source here)</a>. There will be no kinder gentler Trump in 2019. And as Democrats take control in the House, we can look for increasingly less civil exchanges.

Meanwhile, the PMI readings make it clear that growth is slowing. It is slowing globally and it is not clear how fast or deep the slowing will come on in the U.S. But it is in train. I had been warning that the Fed seemed too much on auto pilot with its program of rate hikes and that the December rate hikes did not seem at all consistent with incoming data. Yet, the Fed did hike rates and now the forward-looking expectations of many market watchers are being cut sharply. Clearly, the trade war with China is taking a toll. But just as clearly U.S. rate hikes by the Fed are taking a toll on U.S. growth especially on the housing sector. The government is shut down. Democrats seem to have set opposing and defying Trump as their New Year's resolution. This does not seem like the basis for a 'Happy New Year' for anyone to me. Can the U.S. two-party system find happiness in discord? I doubt it.


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Asia manufacturing PMIs continue weak in data reported in the New Year that are up-to-date through December 2018. The rank standing data are very mixed with China logging a very low 2.9 percentile standing and Malaysia on an all-time [...]

Asian Manufacturing Shows Slowing

Tom Moeller

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The Federal Reserve Bank of Dallas reported in its Texas
Manufacturing Outlook Survey that the General Business Activity Index declined
to -5.1 during December from 17.6 in November. It was the lowest level since
June 2016. The index had been easing for six months.

Lower production, shipments and delivery times indexes
accounted for the decline, all of which were down sharply versus earlier highs.
The employment measure fell to the lowest
level since March and was well below its high during August. Hours-worked have
been fairly steady for two months but were sharply below the May high. The wages &amp; benefits
measure recovered some of its sharp decline during November, and continued the
improvement during the last two years.

The index for finished goods prices received declined to the
lowest level since July 2017 and was well below its high in June of this year.
The raw materials price measure also fell sharply.

The index of expected business conditions in six months also
declined significantly to the lowest level since May 2016. Movement amongst the
sub-series was mixed. Expected orders, production, shipments and capital
spending fell sharply. Expected employment decreased to a two-year low and was
off sharply following strength during November. The future
wages &amp; benefits reading remained below its 2018 high.

Each index is calculated by subtracting the percentage
reporting a decrease from the percentage reporting an increase. When all firms
report rising activity, an index will register 100. An index will register -100
when all firms report a decrease. An index will be zero when the number of firms
reporting an increase or decrease is equal. Items may not add up to 100% because
of rounding. Data for the Texas Manufacturing Outlook can be found in Haver's SURVEYS database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Texas Manufacturing Outlook Survey (SA,
 % Balance)</th>
 <th>Dec</th>
 <th>Nov</th>
 <th>Oct</th>
 <th>Dec'17</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Current General Business Activity Index</td>
 <td >-5.1</td>
 <td >17.6</td>
 <td >29.4</td>
 <td >30.5</td>
 <td >26.1</td>
 <td >20.6</td>
 <td >-8.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Production</td>
 <td >7.3</td>
 <td >8.4</td>
 <td >17.6</td>
 <td >33.8</td>
 <td >21.8</td>
 <td >20.2</td>
 <td >2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Growth Rate of New Orders</td>
 <td >5.8</td>
 <td >4.8</td>
 <td >11.0</td>
 <td >23.2</td>
 <td >14.8</td>
 <td >11.4</td>
 <td >-7.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Employment</td>
 <td >11.0</td>
 <td >15.9</td>
 <td >23.9</td>
 <td >21.1</td>
 <td >19.9</td>
 <td >11.4</td>
 <td >-4.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Wages &amp; Benefits</td>
 <td >29.2</td>
 <td >24.9</td>
 <td >32.9</td>
 <td >26.3</td>
 <td >29.4</td>
 <td >22.2</td>
 <td >17.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Prices Received for
 Finished Goods</td>
 <td >6.6</td>
 <td >7.5</td>
 <td >17.5</td>
 <td >18.7</td>
 <td >17.7</td>
 <td >12.7</td>
 <td >-1.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >General Business Activity Index Expected
 in Six Months</td>
 <td >3.2</td>
 <td >25.7</td>
 <td >35.6</td>
 <td >40.2</td>
 <td >32.2</td>
 <td >34.5</td>
 <td >8.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Production</td>
 <td >32.7</td>
 <td >52.9</td>
 <td >47.9</td>
 <td >47.8</td>
 <td >48.1</td>
 <td >46.8</td>
 <td >35.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Growth Rate of New Orders</td>
 <td >23.1</td>
 <td >32.1</td>
 <td >36.5</td>
 <td >40.1</td>
 <td >35.7</td>
 <td >37.7</td>
 <td >24.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Employment</td>
 <td >28.2</td>
 <td >42.0</td>
 <td >32.8</td>
 <td >36.6</td>
 <td >37.8</td>
 <td >35.2</td>
 <td >16.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Wages &amp; Benefits</td>
 <td >45.0</td>
 <td >44.8</td>
 <td >51.4</td>
 <td >43.7</td>
 <td >50.5</td>
 <td >43.4</td>
 <td >34.8</td>
 </tr>
 </tbody>
 </table>
 
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The Federal Reserve Bank of Dallas reported in its Texas Manufacturing Outlook Survey that the General Business Activity Index declined to -5.1 during December from 17.6 in November. It was the lowest level since June 2016. The index [...]

Texas Factory Sector Index Plummets; Outlook Worsens

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Contraction is not what China has been seeking 
China's manufacturing gauge last showed a contraction 2.5 years ago. And apart from one observation in February 2016, the headline PMI was last lower than its current reading in August 2012, about 6.5 years ago.

Changing momentum also tells a story 
The momentum changes confirm that there has been an extended slowdown for manufacturing in China that has culminated in the overall contraction. Orders and output are slowing while inventories are piling up. The headline PMI in manufacturing has showed declining momentum over 12 months and from 12-months to six-months as well as from six-months to three-months. This sort of progressive deterioration is present in all but two of the PMI components. The exceptions are delivery lags and inventories. Meanwhile, the build-up in inventories is not a good sign but tends to reinforce that a slowdown is in effect as 'stuff' is being made that is not being sold or exported.

China's manufacturing is impacted 
Since 2005, China's manufacturing PMI has been this weak or weaker only about 7% of the time. Orders have been this weak or weaker about 8.3% of the time. Output has been this weak or weaker about 5.1% of the time. Is there a pattern here? Delivery speeds are a contrary signal and they are approximately normal at a 58th percentile standing in their queue of historic data. Inventories have been higher only about 23% of the time so stock levels have been built up and appear to be really built up and out of line compared to output and order trends.

Trump tactics have impact in China 
U.S. trade countermeasures against China are having an impact. But China in a new communication has said that it is ready to work with the U.S., a statement that suggests progress is being made. Earlier President Trump had tweeted that 'Big Progress' was being made in the U.S.-China trade talks after he and the Chinese Premier Xi Jinping had spoken on the phone.

U.S.-China Trade...Deal? 
The U.S.-China trade conflict has been front and center in everyone's mind for some time now. The U.S. and China had agreed at the G-20 summit in December in Buenos Aires to put any trade actions on hold for 90 days while they worked to formulate a solution. As 2018 draws to a close, we have some hopeful noises being made by both sides about the progress in these talks. And that is certainly good news.

Happy New Year! But remember that reality bites 
However, as we cheer prospects for a trade deal with China, we must be mindful that any deal we get must be good for us and must preserve the rights of U.S. firms to trade freely and to not have their corporate secrets and technology subject to theft of confiscation by China or its minions. We need a deal that is enforceable and verifiable. We need to remember just who we are dealing with. As China makes nice overtures to the U.S., it is also busy persecuting Canadians in China because Canada is holding a high level Chinese citizen whose company broke U.S. law and who is being sought under a Canada-U.S. extradition treaty. China has managed to arrest two Canadians and apparently is pressing ahead with drug changes against one of the seized persons to put pressure on Canada to not honor its extradition treaty with the U.S. What you deal with China this is what you deal with. So let's keep that in mind.

By the Sea, by the Sea, by the South China Sea... 
China did also grab the South China Sea and flouted a world court ruling that their seizure had no standing in international law. China is now tied up in a new fight with Vietnam over China's claiming of the South China Sea. In dealing with China, we are dealing with a country that persistently flouts international law and bends or sets rules in its own favor. Not only am I wary of cutting any deal with China, I am very suspicious about what it will want in return for what it will claim to give us. And yet I worry about how China's behavior will change in the future. It is easy to agree with someone and to compromise if you never intend to uphold your end of the bargain. And right now the U.S. has China in a place that is hurting it as we can see from its manufacturing PMI. The U.S. needs to press this advantage. China needs trade. It needs to expand and needs more trade expansion than the U.S. can give it or afford. China needs to grow and to spread development. But the world isn't big enough or affluent enough to absorb the goods China would need to make and export to create that development. A real Free Trade deal with China should not make the U.S. market more penetrable by China. But that seems to be what China thinks that it will get. So for me, the hint of progress from trade talks with China is the sound of one-hand clapping.

Happy New Year...I Hope. 


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Contraction is not what China has been seeking China's manufacturing gauge last showed a contraction 2.5 years ago. And apart from one observation in February 2016, the headline PMI was last lower than its current reading in August [...]

China Manufacturing Gauge Reads 'Contraction' for First Time in 2.5 Years

Carol Stone, CBE

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The National Association of Realtors (NAR) reported that pending home sales fell 0.7% in November the second consecutive decline and the seventh in the eleven months so far this year. These sales are thus off 7.7% y/y, and at 101.4 in November (2001=100), the index is 10.3% below the peak in April 2016. It is also the lowest since 101.3 in June 2014.

The November decline in pending home sales nationwide included a mix by region. Sales in the West recovered 2.8% after their October drop of 8.9% and were off 12.2% from a year ago. Those in the Northeast grew 2.7% in November after a slim 0.3% rise in October; they were down 3.5% from November 2017. The South and the Midwest both had month-on-month declines in November, the South by 2.7% (-7.4% y/y) and the Midwest, 2.3% (-7.0% y/y)

The pending home sales index measures sales at the time the
contract for an existing home is signed, analogous to the Census Bureau's new
home sales data. In contrast, the National Association of Realtors' existing
home sales data are recorded when the sale is closed. In developing the pending
home sales index, the NAR found that the level of monthly sales contract activity
parallels the level of closed existing home sales in the following two months.
The series dates back to 2001, and the data are available in Haver's PREALTOR database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Pending Home Sales (SA,
 2001=100)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
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 <tr>
 <td class="firstcol" >Total</td>
 <td >101.4</td>
 <td >102.1</td>
 <td >104.8</td>
 <td >-7.7</td>
 <td >109.0</td>
 <td >109.8</td>
 <td >108.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Northeast</td>
 <td >95.1</td>
 <td >92.6</td>
 <td >92.3</td>
 <td >-3.5</td>
 <td >97.2</td>
 <td >96.4</td>
 <td >90.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Midwest</td>
 <td >98.1</td>
 <td >100.4</td>
 <td >102.2</td>
 <td >-7.0</td>
 <td >104.8</td>
 <td >107.4</td>
 <td >107.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >South</td>
 <td >115.7</td>
 <td >118.9</td>
 <td >120.2</td>
 <td >-7.4</td>
 <td >123.8</td>
 <td >122.9</td>
 <td >123.1</td>
 </tr>
 <tr>
 <td class="firstcol" >West</td>
 <td >87.2</td>
 <td >84.8</td>
 <td >93.1</td>
 <td >-12.2</td>
 <td >99.6</td>
 <td >102.4</td>
 <td >102.2</td>
 </tr>
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The National Association of Realtors (NAR) reported that pending home sales fell 0.7% in November the second consecutive decline and the seventh in the eleven months so far this year. These sales are thus off 7.7% y/y, and at 101.4 in [...]

U.S. Pending Home Sales Decline Again, Reaching Lowest since Mid-2014

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	 But Rest Assured: There Is More Hullabaloo to Come...Just Not over Inflation
 
 
 
 

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Germany's HICP fell by 0.3% in December. In Spain, the HICP fell by 0.5%. German ex-energy inflation rose by only 0.1% in December after a 0.1% decline in November.

Where's the beef? 
The ECB has been under a steady drumbeat of pressure to dismantle its stimulative programs and has been criticized for letting inflation rise too much. Now in Germany, the strongest economy in the EMU with the most overheated labor market, the price level is falling in December and the year-on-year rate of inflation has dropped back to a very comfortable very stable under target 1.7% - a pace that even the Bundesbank could love. The pace in traditionally more inflation-prone Spain is only 1.1% over 12 months. And German inflation excluding energy is a paltry 1.4%.

Inflation is ending 2018 much better behaved than almost anyone expected. Fancy that!

Much of this owes to OPEC and its ongoing disorientation along with a special mention, of course, to fracking in the U.S. to say nothing of Iran continuing to be able to export oil even with U.S. sanctions (and some exemptions) in place. The oil market is a wily creature. For now the fickle finger of fate points lower for oil, but one can never be sure of when that finger will invert, develop a crook and beckon prices higher. Still, it does seem that the oil market and concerns about global growth are going to keep petrol prices pouting for some time.

Compared to December of one year ago German inflation is 'up to' a 1.7% pace compared to 1.6%. The German ex-energy pace is down to 1.4% from 1.7% a year ago. Inflation in Spain is lower at 1.1% compared to a 1.2% over 12 months ended in December 2017. Deck the halls with inflation-fear folly!

If we assess inflation trends over the intra-year period from 12-months to six-months to three-months, we find the annualized rate of inflation is progressively falling for all the measures in the table. On Dasher on Dancer, on Donder and Draghi, inflation is lower and sill looking soggy!


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Financial markets and prospects 
Financial markets are in a tizzy. The U.S. stock market had a horrific sell off then the DJIA jumped out of the blue by over 1,000 points in a day, a gain of over 5% (remember when a 500-point drop was a 20% decline?). Trump minions are now saying that Powell is safe based on viewing the video-tape replay after Trump had called him 'out' at the plate initially. It's hard to know if we should be reassured by any of this, given the mercurial nature of the CEO in Chief and his penchant for holding a grudge. Maybe he will find a new angle on the video-tape replay at some point in the future and revert to his original call? Maybe Powell really is safe until Trump calls him a 'Democrat?' That was the signal that ended it all for Mattis, anyway.

Clearly, U.S. policy is based on some factors that are hard to pin down and harder still to depend on. Market valuations depend on Fed policy and on the Fed being independent. But the President was hired (Oops, I mean elected) to be a disruptor and in his world that does not mean that disruption faces any boundaries. Except when it does and even then a few histrionics can be used to great effect.

As the year draws to a close, the Fed has managed to raise Fed funds steadily even though that was never its stated policy (nothing up my sleeve!). I wonder why the Fed felt it could not tell us that that was its true agenda.

The U.K. is still mucking around with Brexit scenarios. Italy has been given a new longer leash on life by the EU Commission that has accepted an only slightly pared budget position and a promise of a smaller deficit next year. China seems to be offering all sorts of changes to try and settle the U.S. trade dispute but not really getting to the nub of what the U.S. wants.

What do we want? FAIR TRADE! When do we want it? NOW!

Good luck with that. Instead, China has offered to drop tariffs to zero on all sorts of things that the U.S. could never export to it on its best of days.

While Trump remains a highly controversial and much criticized figure, it is interesting to note how his trade attacks have paved the way for many more criticisms from mainstreamers about China and about China's unfair trade practices. There is no more saying, 'Well, it's close enough to Free trade for me...' And no more 'Well, they get IOUS and we get goods!' Thank God Trump's shaking things up has brought some to their senses.

Here is hope that in 2019 Mr. Trump knows when to stop shaking and when to start compromising and deal-making. Here is hoping he does not have a fit of jealousy over the 'Wall' that Mr. Putin just successfully completed around Crimea.

There is still a U.S.-EU trade deal to be struck. And there are plenty of places for things to go wrong…or to surprise the critics and to go 'right.' Markets are in disarray wondering what will happen, worried one day and ebullient the next. Unfortunately market schizophrenia is unbecoming. Investors like their markets better behaved. Will that happen in 2019?

From this vantage point, it is hard to tell. But at least the inflation scare is off. And in the U.S., the central bank can at least be happy that it has been able to get Fed funds above 2% without creating a recession (so far…). And the dogs have called Trump off the Fed (or vice versa). The ECB has stoppered its stimulus program. The BOJ is still running its stimulus flat out. And the BOE is waiting on a Brexit clarification. But China is on a hot seat and conditions there are deteriorating.

Note that since the U.S. demand for Canada to extradite a Huawei officer, that request has stirred up all sorts of animosities in China that has begun to incarcerate and charge Canadians in China in ways that make no sense. As 2018 draws to a close, China has revealed its true self to the world. Its belt and Road program is a bait and switch program of influence, entrapment and planned domination. Even economists that did not used to say bad things about China are having second thoughts. You know…it's way overdue. It's time for Baby Huey to change its own diaper.
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Germany's HICP fell by 0.3% in December. In Spain, the HICP fell by 0.5%. German ex-energy inflation rose by only 0.1% in December after a 0.1% decline in November. Where's the beef? The ECB has been under a steady drumbeat of [...]

German Inflation Calms After a Year of Hullabaloo

Peter D'Antonio

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The Chicago Purchasing Managers Business Barometer remained at an elevated level of 65.4 in December after surging to 66.4 in November. Chicago Business Survey readings in the mid-60s are unusual and reflect a strong business climate. The Action Economics Forecast Survey expected a reading of 62.2. The Chicago Purchasing Managers figures are diffusion indexes where readings above 50 indicate growth.

Haver Analytics constructs an ISM-Adjusted Chicago Business Barometer with similar methodology as the ISM Composite Index. This index slipped to 61.3, but remained at a healthy level. The Chicago index has a 75% correlation with the national ISM Manufacturing Index, which is scheduled for release Thursday, January 3.

A surge in the production component of the Chicago index offset lost ground (from high levels) in delivery times. Last month, the supplier deliveries index had surged, suggesting the slowest delivery times in over a decade. Today's reading erased that positive signal. In addition, the order backlog and inventory readings rose, while new orders declined.

The employment index declined in December to 52.1. While the employment diffusion index can be volatile and often bears no correlation with the employment report, the details of the report were worrisome. The proportion of survey respondents that indicated employment was higher in the month fell by 15 percentage points to 13 percent. That was the lowest figure in two years and the largest month-to-month decline since 2014.

The index of prices paid weakened for the fifth consecutive month. The NSA reading of 63.5 was the lowest since August 2017 and down from July's 81.0. A greatly reduced 33% of respondents reported higher prices, while a slightly increased 6% reported lower prices. The percentage figures are NSA.

The MNI Chicago Report is produced by MNI in partnership with ISM-Chicago.
The survey covers a sample of over 200 purchasing professionals in the Chicago area with a monthly
response rate of about 50%. Summary data are contained in Haver's USECON database, with
detail including the ISM-style index in the SURVEYS database. The Action Economics Forecast Survey
is available in AS1REPNA.

<a href="/comment/181228f.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181228f.png"></a>
 <a href="/comment/181228y.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181228y.png"></a>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Chicago Purchasing Managers Index (%,
 SA)</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Dec '17</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Business Barometer</td>
 <td >65.4</td>
 <td >66.4</td>
 <td >58.4</td>
 <td >67.8</td>
 <td >60.8</td>
 <td >53.1</td>
 <td >50.3</td>
 </tr>
 <tr>
 <td class="firstcol" >ISM-Adjusted General Business Barometer</td>
 <td >61.3</td>
 <td >63.1</td>
 <td >59.7</td>
 <td >65.6</td>
 <td >59.0</td>
 <td >52.0</td>
 <td >51.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Production</td>
 <td >71.0</td>
 <td >65.2</td>
 <td >59.8</td>
 <td >76.9</td>
 <td >64.3</td>
 <td >54.7</td>
 <td >52.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;New Orders</td>
 <td >67.9</td>
 <td >72.5</td>
 <td >57.9</td>
 <td >72.2</td>
 <td >63.5</td>
 <td >55.7</td>
 <td >50.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Order Backlogs</td>
 <td >64.6</td>
 <td >62.9</td>
 <td >51.2</td>
 <td >59.6</td>
 <td >55.2</td>
 <td >47.2</td>
 <td >44.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Inventories</td>
 <td >55.4</td>
 <td >53.7</td>
 <td >60.2</td>
 <td >63.9</td>
 <td >54.9</td>
 <td >47.2</td>
 <td >52.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Employment</td>
 <td >52.1</td>
 <td >55.4</td>
 <td >52.5</td>
 <td >55.3</td>
 <td >52.9</td>
 <td >49.4</td>
 <td >50.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Supplier Deliveries</td>
 <td >59.9</td>
 <td >68.7</td>
 <td >68.3</td>
 <td >59.6</td>
 <td >59.4</td>
 <td >52.8</td>
 <td >52.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Prices Paid</td>
 <td >65.6</td>
 <td >73.2</td>
 <td >75.1</td>
 <td >67.2</td>
 <td >64.0</td>
 <td >53.2</td>
 <td >46.8</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The Chicago Purchasing Managers Business Barometer remained at an elevated level of 65.4 in December after surging to 66.4 in November. Chicago Business Survey readings in the mid-60s are unusual and reflect a strong business climate. [...]

U.S. Chicago Business Barometer Remains Robust

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</head>
<body>
	 
 
 
 

<a href="/comment/181228a.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181228a.png"></a>
 <a href="/comment/181228b.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181228b.png"></a>

The National Association of Realtors (NAR) reported that pending home sales fell 0.7% in November, the second consecutive decline and the seventh in the eleven months so far this year. These sales are thus off 7.7% y/y, and at 101.4 in November (2001=100), the index is 10.3% below the peak in April 2016. It is also the lowest since 101.3 in June 2014.

The November decline in pending home sales nationwide included a mix by region. Sales in the West recovered 2.8% after their October drop of 8.9% and were off 12.2% from a year ago. Those in the Northeast grew 2.7% in November after a slim 0.3% rise in October; they were down 3.5% from November 2017. The South and the Midwest both had month-on-month declines in November, the South by 2.7% (-7.4% y/y) and the Midwest, 2.3% (-7.0% y/y)

The pending home sales index measures sales at the time the
contract for an existing home is signed, analogous to the Census Bureau's new
home sales data. In contrast, the National Association of Realtors' existing
home sales data are recorded when the sale is closed. In developing the pending
home sales index, the NAR found that the level of monthly sales contract activity
parallels the level of closed existing home sales in the following two months.
The series dates back to 2001, and the data are available in Haver's PREALTOR database.

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Pending Home Sales (SA,
 2001=100)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >101.4</td>
 <td >102.1</td>
 <td >104.8</td>
 <td >-7.7</td>
 <td >109.0</td>
 <td >109.8</td>
 <td >108.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Northeast</td>
 <td >95.1</td>
 <td >92.6</td>
 <td >92.3</td>
 <td >-3.5</td>
 <td >97.2</td>
 <td >96.4</td>
 <td >90.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Midwest</td>
 <td >98.1</td>
 <td >100.4</td>
 <td >102.2</td>
 <td >-7.0</td>
 <td >104.8</td>
 <td >107.4</td>
 <td >107.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >South</td>
 <td >115.7</td>
 <td >118.9</td>
 <td >120.2</td>
 <td >-7.4</td>
 <td >123.8</td>
 <td >122.9</td>
 <td >123.1</td>
 </tr>
 <tr>
 <td class="firstcol" >West</td>
 <td >87.2</td>
 <td >84.8</td>
 <td >93.1</td>
 <td >-12.2</td>
 <td >99.6</td>
 <td >102.4</td>
 <td >102.2</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The National Association of Realtors (NAR) reported that pending home sales fell 0.7% in November, the second consecutive decline and the seventh in the eleven months so far this year. These sales are thus off 7.7% y/y, and at 101.4 [...]

Sandy Batten

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
</head>
<body>
	 
 
 
 

<a href="/comment/181227n.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181227n.png"></a>
 <a href="/comment/181227o.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181227o.png"></a>


New single-family home sales fell 8.9% (-12.0% y/y) in October to 544,000 (SAAR).



The data in this report are available in Haver's USECON database.
The consensus expectation figure from Action Economics is available in the AS1REPNA database.

<a href="/comment/181227p.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181227p.png"></a>
 <a href="/comment/181227q.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181227q.png"></a>

 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >U.S. New Single-Family
 Home Sales (SAAR, 000s)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >???</td>
 <td >544</td>
 <td >597</td>
 <td >-12.0</td>
 <td >616</td>
 <td >560</td>
 <td >502</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Northeast</td>
 <td >???</td>
 <td >22</td>
 <td >27</td>
 <td >-46.3</td>
 <td >40</td>
 <td >32</td>
 <td >25</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Midwest</td>
 <td >???</td>
 <td >60</td>
 <td >77</td>
 <td >-16.7</td>
 <td >72</td>
 <td >69</td>
 <td >61</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; South</td>
 <td >???</td>
 <td >313</td>
 <td >339</td>
 <td >-11.6</td>
 <td >341</td>
 <td >317</td>
 <td >286</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West&nbsp;</td>
 <td >???</td>
 <td >149</td>
 <td >154</td>
 <td >-1.3</td>
 <td >164</td>
 <td >142</td>
 <td >130</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Median Price (NSA, $) </td>
 <td >???</td>
 <td >309,700</td>
 <td >321,300</td>
 <td >-3.1</td>
 <td >321,633</td>
 <td >306,500</td>
 <td >293,733</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

New single-family home sales fell 8.9% (-12.0% y/y) in October to 544,000 (SAAR). The data in this report are available in Haver's USECON database. The consensus expectation figure from Action Economics is available in the AS1REPNA [...]

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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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

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

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

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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

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Asian Manufacturing Shows Slowing

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TT