Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116a.jpg" align="right" border="0" height="265" width="353">According
to the Bureau of Labor Statistics, the consumer price index
(CPI-U) fell for the third straight month in December. The 0.7% decline
followed drops of 1.7% and 1.0% during November and October. Indeed.
that, understates the weakness in pricing since there was a
less-than-0.1% decline in September. The latest reading lowered the
three-month rate of change to -12.7% (AR). That pulled
seasonally adjusted prices lower by 0.1% for the last twelve months,
the first such decline since 1955. The recent figure
compared to Consensus expectations for a 0.9% decline.
Lower energy
prices led the weakness in last month's CPI with an 8.3% decline, the
fifth consecutive monthly drop.&nbsp; It was paced by a 17.2%
decline in gasoline prices to an average of $1.69 per gallon.&nbsp;
Gas prices have backed up a bit this in January to an average $1.78
last week.&nbsp; December fuel oil prices fell 9.2% (-14.4% y/y)
for their fifth consecutive monthly drop and prices for natural gas
&amp; electricity were roughly unchanged m/m (+7.9%
y/y).
 Increases in food &amp; beverage prices tapered
off and posted a slight December decline. That followed moderate
increases of 0.3% and 0.2% during the prior two months. However,
monthly increases between 0.6% and 0.9% were common earlier in the
year. Therefore, the year-to-year growth in food prices
during 2008 was the strongest since 1981.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116b.jpg" align="left" border="0" height="265" width="353">Core pricing power
also weakened further in December with the developing recession. The CPI
less food &amp; energy slipped and it was down at a 0.3%
annual rate during the last three months. It reached a peak three-month
rate of increase of 3.5% just this past July and the latest change was
the weakest since 1982.
Core goods prices fell for
the fourth consecutive month.&nbsp; The 0.3% decline pulled the
three-month rate of change to a negative 3.4% which was the weakest
since late-2003. The latest decline was led by another fall in prices
of new &amp; used motor vehicles which were off 0.4% (-3.5%
y/y).&nbsp; Apparel prices also fell last month by 0.9% and they
dropped 1.0% last year.&nbsp; Prices for household furnishings
&amp; operations ticked up 0.1% after their 0.2% November
drop.&nbsp; However, the 2.0% year-to-year gain was the firmest
since 2005.&nbsp; Tobacco prices rose 0.5% last month and they were
up 6.3% during the full year. 
 Core services prices again
ticked up by 0.1% and they rose at a 1.0% annual rate during the last
three months. That was the lowest rate of increase since
1982.&nbsp; Medical care services prices rose a moderate 0.2% (3.0%
y/y) but education costs remained strong.&nbsp; They posted a 0.5%
increase (5.6% y/y) during December. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116c.jpg" align="right" border="0" height="265" width="353">
Shelter prices were unchanged m/m
and the year-to-year gain of 1.9% was the weakest since 2005. As the
housing market remained deeply depressed owners equivalent rent of
primary residence, a measure not equivalent to other house price
measures, rose just 0.1% (2.1% y/y).&nbsp; Public transportation
prices fell for the fourth consecutive month and were up just 1.8%
year-to-year. Recreation prices fell 0.2% and they rose a modest 1.8%
y/y. 
The chained CPI, which adjusts for shifts in consumption
patterns, fell 1.3%. Less food and energy, chained prices fell 0.3% for
the second month and the year-to-year gain of 1.3% was the lowest since
early 2004. 
Rethinking the Measurement of Household
Inflation Expectations: Preliminary Findings from the
Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr359.pdf">here.</a>
&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>-0.7</td>
<td>-1.7</td>
<td>-0.1</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>-0.0</td>
<td>0.0</td>
<td>1.7</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-0.5</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>0.1</td>
<td>2.6</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-8.3</td>
<td>-17.0</td>
<td>-21.9</td>
<td>13.6</td>
<td>5.6</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.0</td>
<td>0.2</td>
<td>5.8</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>-1.3</td>
<td>-2.0</td>
<td>-0.5 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>-0.3</td>
<td>-0.3</td>
<td>1.3</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>

EMU Trade Deficit Widens: Exports
and Imports Collapse 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 16, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116d.jpg" align="left" border="0" height="265" width="353">
The EMU trade deficit widened in November as exports fell by
4.7%. Imports also dropped but by 2.5% causing the deficit to widen.
The table above is replete with negative numbers denoting declining
export and import flows. The global downturn is hitting trade hard on
both the export and the import side. Among exports raw materials and
manufactured goods are both being hit hard. On the import side weakness
is in oil imports but spreads across all groupings. 
 

Over 12-months exports are lower by 5.1% and imports are off
by 0.1%. In contrast a year before exports had risen over 12-months by
6.8% and imports were up by 7.7%. Even in Yr/Yr terms the slowdown is
rapid and that is why the economic dislocations are so severe. 
 

The figures for EMU are of course figures for EMU member trade
outside of the block. The various national figures also include
intra-EMU state trading. EMU countries are very prone to trade. Since
these flows are slowing down it is hitting a lot of EMU economies very
hard. Germany, the largest exporter in the world, is being clobbered by
export weakness. German exports are down by 9% Yr/Yr in November,
nearly twice the EMU pace. The trade picture is a bleak one for EMU
members. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Ezone
15-Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; (4,891)</td>
<td>&#8364;&#8364; (2,122)</td>
<td>&#8364;&#8364; (4,154)</td>
<td>&#8364;&#8364; (4,800)</td>
<td>&#8364;&#8364; 2,124</td>
<td>&#8364;&#8364; (1,483)</td>
</tr>
<tr class="even">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Exp</td>
<td>-4.7%</td>
<td>-2.8%</td>
<td>-22.6%</td>
<td>-10.8%</td>
<td>-5.3%</td>
<td>6.8%</td>
</tr>
<tr>
<td class="firstcol">Food and Drinks</td>
<td>-3.0%</td>
<td>0.9%</td>
<td>-5.2%</td>
<td>-3.3%</td>
<td>1.6%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">Raw materials</td>
<td>-13.0%</td>
<td>-3.2%</td>
<td>-58.8%</td>
<td>-34.9%</td>
<td>-12.2%</td>
<td>-0.2%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>-4.6%</td>
<td>-3.0%</td>
<td>-22.6%</td>
<td>-10.6%</td>
<td>-5.7%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-4.0%</td>
<td>-1.6%</td>
<td>-22.8%</td>
<td>-10.8%</td>
<td>-6.6%</td>
<td>4.2%</td>
</tr>
<tr class="even">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All IMP</td>
<td>-2.5%</td>
<td>-5.1%</td>
<td>-24.5%</td>
<td>-5.6%</td>
<td>-0.1%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">Food and Drinks</td>
<td>-2.9%</td>
<td>-1.3%</td>
<td>-12.4%</td>
<td>-7.8%</td>
<td>-3.7%</td>
<td>18.0%</td>
</tr>
<tr>
<td class="firstcol">Raw materials</td>
<td>-0.4%</td>
<td>-4.5%</td>
<td>-6.7%</td>
<td>4.8%</td>
<td>8.3%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>-2.6%</td>
<td>-5.3%</td>
<td>-26.0%</td>
<td>-6.1%</td>
<td>-0.3%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.5%</td>
<td>-2.3%</td>
<td>-12.9%</td>
<td>-1.8%</td>
<td>-1.3%</td>
<td>3.6%</td>
</tr>
<tr class="even">
<td colspan="5">*Eur mlns; mo or period average</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
U.S. Factory Output Fell Again in
December; 2008 Decline The Largest Since 1975 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 16, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116g.jpg" align="left" border="0">
Industrial production during December fell for the ninth month
of 2008. The 2.0% drop followed a 1.3% November decline which was
revised deeper from the initial report. Last month's decline was double
Consensus expectations for a 1.0% decline. For the year,
industrial production declined 7.8% which was the sharpest negative
twelve-month change since the deep recession of 1975.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116h.jpg" align="right" border="0">
Factory output took the brunt of the recession's force and
declined 9.9% last year. That was led by a 13.9% twelve-month decline
in output of construction supplies, again the deepest since 1975.
Output of consumer goods fell 5.2% during last year, pulled lower by a
26.7% December-to-December drop in the output of motor vehicles
&amp; parts. That came on top of roughly 3% declines during the
prior two years. Outside of the auto sector output also was hard it and
production of furniture fell 21.9% while apparel output dropped 6.0%.
Production of business equipment was late to the recession's downturn,
but for the year production fell 6.7%.
Industrial production in the high-tech sector fell 6.5% last
year. That was the worst performance since 2001. Outside of high-tech
production declines amounted to 11.0% for the year, the worst decline
since 1975.
Less the weakness in autos and high tech, output fell 6.9%
last year, the steepest since 1982. Machinery production led that fall
with a steep 11.6% drop while output of electrical equipment production
also fell, but by 9.5% y/y. Production of chemicals fell 11.6% y/y,
also the worst since 1975, but apparel output fell a modest 6.0%.
Capacity utilization fell to 73.6%, the lowest level since
2003. Utilization in the factory sector dropped further, however, to
70.2%, its lowest since 1982. Capacity in the factory sector increased
a firm 1.7% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INDUSTRIAL
PRODUCTION (SA, %)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output </td>
<td>-2.0</td>
<td>-1.3</td>
<td>-7.8</td>
<td>-1.8</td>
<td>1.7</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>-2.4</td>
<td>-2.2</td>
<td>-9.9</td>
<td>-2.5</td>
<td>1.7</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>-1.7</td>
<td>-1.0</td>
<td>-5.2</td>
<td>-2.1</td>
<td>1.7</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>1.8</td>
<td>2.9</td>
<td>-6.7</td>
<td>-1.1</td>
<td>3.3</td>
<td>10.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-3.3</td>
<td>-4.6</td>
<td>-13.9</td>
<td>-6.1</td>
<td>-2.5</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>-0.1</td>
<td>0.9</td>
<td>0.5</td>
<td>0.4</td>
<td>3.3</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>73.6</td>
<td>75.2</td>
<td>81.0 (Dec.'07)</td>
<td>78.2</td>
<td>81.0</td>
<td>80.9</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Up
Again In Early January Yet Still Near The Series' Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 16, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116e.jpg" align="left" border="0" height="265" width="353">
For early January, the University of Michigan reported that
consumer sentiment rose slightly for the second month. The 3.0% rise
followed an 8.7% increase off the cycle's low in November.
Nevertheless, at 61.9 the latest level was near the lowest for the
series back to 1980 and earlier. Moreover, the figure remained down by
nearly one quarter from last year after the 25.5% decline during all of
2008. The latest reading beat Consensus expectations for a reading of
59.0.
During the last ten years there has been a 58% correlation
between the level of sentiment and the three-month change in real
consumer spending.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090116f.jpg" align="right" border="0" height="265" width="353">
The expectations component of consumer sentiment rose
moderately to the highest level since October. Still, the series was
near its lowest since 1990 and close to the low of 1980. Expectations
for business conditions during the next year more than recovered the
December drop and expectations for conditions during the next five
years ticked up as well. The expected change in personal finances rose
to the highest level since September.
The current economic conditions index held roughly unchanged
from December. A decline in buying conditions for large household
goods, presumably due to weak income gains, offset a rise in the view
of current personal finances to the highest level since September. The
figure did, however, remain off sharply from last year's average.
The opinion of government policy, which apparently influences
economic expectations, fell to the series' low (-35.9% y/y). Only six
percent of respondents thought that a good job was being done by
government and a record fifty-six percent thought that a poor job was
being done.
Inflation expectations ticked slightly higher to 2.5% during
the next year but that remained near the series' low. It was as high as
7.0% in May. The expected inflation rate during the next five years
rose off the series' low to 3.7%.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">Mid-January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">January y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>61.9</td>
<td>60.1</td>
<td>55.3</td>
<td>-21.0%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.2</td>
<td>69.5</td>
<td>57.5</td>
<td>-26.7</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>57.2</td>
<td>54.0</td>
<td>53.9</td>
<td>-16.0</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body></html>

According to the Bureau of Labor Statistics, the consumer price index (CPI-U) fell for the third straight month in December. The 0.7% decline followed drops of 1.7% and 1.0% during November and October. Indeed. that, understates the [...]

U.S. CPI Fell A Third Month Due ToLower Energy Prices

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115h.jpg" align="left" border="0" height="265" width="353">
The EMU inflation picture was finalized with headline
inflation dropping by 0.3% in the month and up by 1.6% Yr/Yr as had
been reported in the flash release. With today&#8217;s report we get the
detail behind the headline. 
 

Inflation is falling sharply for goods as the progressive
growth rates show over shorter horizons the pace of declines getting
greater. That is not true of services, however, there inflation is
stuck and has even notched up over three-months. Still, for the overall
and core rates inflation is decelerating and for the key headline
series for which the ECB imposes a ceiling, the pace of inflation is
now below that ceiling for 3mo, 6-mo and 12-mo inflation calculations,
but most importantly for the 12-mo series that the ECB emphasizes. 
 

Still we present a graph above showing the core rate compared
with that same rate in the US. For Core inflation the two rates have
had different cycles for this two economic groups and some considerable
divergence in recent years. But now the core, which is as good a short
hand as we have for TREND inflation, is showing a sharp decline for
inflation in the US and well as in EMU. 
 

The most recent synchronous declines in inflation came in 2002
and 2003 with another minor episode in 2005. 
 

Since 2004 US and EMU inflation trends have been doing
different things. Over this period EMU inflation has accelerated until
the recent peaking and deceleration. In the US inflation has mostly
moved sideways during this period but with some considerable
volatility. US Core inflation rose from early through late 2006 before
oscillating in range- a range from which it is now declining. As a
result the current US core inflation rate is the lowest realm we have
seen since mid 2004. For EMU core inflation is only back to late 2007
levels. Even a casual look at the chart and the table above shows why
some ECB hawks have been reluctant to cut rates. EMU core inflation has
been much more in the mode of accelerating than has core inflation in
the US. Even as the headline rate plummets, EMU service sector
inflation is showing some unexpected - and sometimes unrecognized -
resilience. So despite the EMU rate cut we can only wonder how much
these trends will limit flexibility in the ECB monetary policymaking in
the months ahead.. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Trends in HICP</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-13</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-2.6%</td>
<td>-0.9%</td>
<td>1.6%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>-0.8%</td>
<td>-0.8%</td>
<td>0.0%</td>
<td>-6.1%</td>
<td>-4.1%</td>
<td>0.9%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>2.6%</td>
<td>2.5%</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>
</tr>
<tr class="odd">
<td class="firstcol">HICP</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">Germany</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-3.3%</td>
<td>-0.9%</td>
<td>1.1%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-2.5%</td>
<td>-1.6%</td>
<td>1.2%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-4.2%</td>
<td>-1.5%</td>
<td>1.4%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Core excl Food Energy
Alcohol</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">Germany</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.5%</td>
<td>3.0%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.0%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body></html>

The EMU inflation picture was finalized with headline inflation dropping by 0.3% in the month and up by 1.6% Yr/Yr as had been reported in the flash release. With today’s report we get the detail behind the headline. Inflation is [...]

Core Inflation in the EMU and in the US Falling Together...at Last

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115f.jpg" align="left" border="0" height="265" width="353">
The Philadelphia Federal Reserve Bank indicated that its
January Index of General Business conditions in the manufacturing
sector rose slightly from the recent monthly lows. However, the index
at -24.3 this month was still only slightly better than the lows of the
prior two recessions. A weaker reading of -35 had been expected for
this month.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115g.jpg" align="right" border="0" height="265" width="353">
During the last ten years there has been a 71% correlation
between the level of the Philadelphia Fed Business Conditions Index and
the three-month growth in factory sector industrial production. There
has been a 54% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total
business activity and each of the sub-indexes. The business conditions
index reflects a separate survey question.
The employment index weakened sharply to the lowest level
since the recession of 1975. A record forty eight percent of
respondents expected to reduce employment levels while only nine
percent expected to raise them. During the last ten years there has
been a 79% correlation between the index level and the m/m change in
manufacturing sector payrolls.
The new orders index ticked up slightly to a reading of -22.3
and the shipments index also recovered all of its sharp December
decline.
The prices paid index fell, for the third month, to a record
low. During the last ten years there has been a 69% correlation between
the prices paid index and the three-month growth in the intermediate
goods PPI. There has been an 82% correlation with the change in core
intermediate goods prices. Just eleven percent of respondents increased
prices this month versus thirty eight percent that lowered them.
The separate index of expected business conditions in six
months rose slightly to its highest level since September. The
expectations index for new orders led the improvement but the
expectations index for employment fell to a record low.
The Philadelphia Fed figures can be found in Haver's SURVEYS
database.
The latest Business Outlook Survey from the Federal
Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0109.pdf">here.</a>
The Fed, Liquidity, and Credit Allocation from
the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/09/01/Thornton.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January&nbsp; '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-24.3</td>
<td>-36.1</td>
<td>-12.0</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-27.0</td>
<td>&nbsp;-25.5</td>
<td>&nbsp;49.8</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body></html>

The Philadelphia Federal Reserve Bank indicated that its January Index of General Business conditions in the manufacturing sector rose slightly from the recent monthly lows. However, the index at -24.3 this month was still only [...]

Philadelphia Fed Index Improved Slightly But Still Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115d.jpg" width="353">
Initial claims for unemployment insurance rose last week and recovered a piece of the decline in earlier weeks. The 54,000 week-to-week increase to 524,000 followed declines of 21,000 (slightly revised) and 98,000 during the prior two weeks. These latter declines were widely attributed to aberrant seasonal factors, although a problem near this magnitude has not been observed since 2001. The latest increase exceeded Consensus expectations for a rise to 501,000.
The Labor Department indicated that the largest increases in initial claims for the week ending January 3 were in New York (+24,465), North Carolina (+19,749), Georgia (+18,308), South Carolina (+14,905), and Virginia (+7,362), while the largest decreases were in California (-14,796), Kansas (-13,313), Michigan (-11,956), Illinois (-9,727), and Ohio (-7,499).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115e.jpg" width="353">
Continuing claims for unemployment insurance during the week of January 3 fell 115,000 and that reversed roughly half of the prior week&#39;s increase. The four-week average of continuing claims rose 27,500 to 4,500,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment remained stable for the third week at this cycle&#39;s high of 3.4%. The highest insured unemployment rates in the week ending December 27 were in Oregon (7.4 percent), Michigan (6.6), Idaho (6.3), Wisconsin (6.0), South Carolina (5.4), Arkansas (5.3), Nevada (5.2), Pennsylvania (5.2), Indiana (5.1), and Montana (5.1).
Three Funerals and a Wedding from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/09/01/Bullard.pdf">here</a>.
The Current Recession: How Bad Is It? also from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/es/09/ES0904.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">01/10/09</th>
<th scope="col">01/03/09</th>
<th scope="col">12/27/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>524</td>
<td>470</td>
<td>491</td>
<td>66.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,497</td>
<td>4,612</td>
<td>64.5%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance rose last week and recovered a piece of the decline in earlier weeks. The 54,000 week-to-week increase to 524,000 followed declines of 21,000 (slightly revised) and 98,000 during the prior two [...]

U.S. Weekly Claims For Jobless Insurance Back Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115a.jpg" align="right" border="0" height="265" width="353">U.S.
producer prices for finished goods fell 1.9% last month versus
expectations for a 2.0% drop. The decline was the fifth in as many
months. Nevertheless, 2008 was a year when price increases as a whole
were stronger than during 2007. The 6.3% increase in the overall
Producer Price Index compared to a 3.9% rise one year earlier and it
was the firmest since 1991.&nbsp; Several month-to-month increases,
which exceeded 1.0% early in 2008, were responsible for that lift.
Gains in energy prices were responsible for much of the acceleration in
the PPI last year. Though they fell 9.3% last month, down for the fifth
consecutive month, for all of 2008 they rose 14.0% and that was double
the 2007 increase. December-to-December energy prices fell 21.2%. That
decline was enough to lower the level of finished energy prices in
December to that of mid-2005.&nbsp; Therefore, much more sanguine
news on pricing is in the cards for this year. Finished consumer food
prices also eased during the last three months and in December they
fell 1.5%. That lowered the December-to-December increase to a moderate
3.8%. Nevertheless, for all of last year food prices rose a strong 6.9%
which was about the gain they posted in 2007.&nbsp; Large monthly
increases early in the year were responsible for that lift and they
were led by a 6.5% rise in meat prices, which was double the 2007 rise,
and a 34.5% rise in pasta product prices.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115b.jpg" align="right" border="0" height="265" width="353">
Less food &amp; energy,
prices also firmed in 2008. First, the December increase of 0.2% was
double Consensus expectations. That gain followed a slim 0.1% increase
one month earlier but these followed four consecutive monthly increases
between 0.4% and 0.6%. The y/y rise in the core PPI of 4.3% was nearly
the strongest since late-1989. Prices of core finished consumer goods
rose 0.3% last month and that ended a year when they increased 4.5%
from December-to-December. The gain was the strongest since 1989.
Durable consumer goods prices jumped 0.5% last month and were up 3.2%
y/y. Appliance prices jumped 3.8% y/y, their strongest since 1989,
while core nondurable goods prices strengthened to a 5.6% y/y increase,
also the fastest rise since early 1999.&nbsp; In addition, prices
for capital equipment firmed and rose 4.0%, again the strongest since
1989. Lower prices for intermediate goods may portend easier price
gains in finished goods prices this year.&nbsp;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115c.jpg" align="right" border="0" height="265" width="353">
They fell 4.2% last
month and repeating their decline in November.&nbsp; Energy prices
dropped 9.5% (-20.4% y/y).&nbsp; Excluding food &amp; energy,
prices fell for the third consecutive month. The crude
materials PPI was down sharply for the fifth straight month. Energy
prices led the fall with a 6.0% (-33.4% y/y) drop and crude food prices
fell 5.3% (-13.9% y/y). Less food &amp; energy, crude prices fell
2.2% with the recent drop in commodity prices. The latest Beige
Book from the Federal Reserve which covers regional economic
conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090114/default.htm">here</a>.&nbsp;&nbsp;
<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">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-1.9</td>
<td>-2.2</td>
<td>-1.2</td>
<td>6.3</td>
<td>3.9</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2</td>
<td>0.1</td>
<td>4.3</td>
<td>3.4</td>
<td>1.9</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-4.2</td>
<td>-4.3</td>
<td>-2.0</td>
<td>10.5</td>
<td>4.1</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-3.0</td>
<td>-2.3</td>
<td>3.2</td>
<td>7.6</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-5.3</td>
<td>-12.5</td>
<td>-24.8</td>
<td>21.5</td>
<td>12.1</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-2.2</td>
<td>-20.4</td>
<td>&nbsp;-24.5</td>
<td>15.2</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>
</body></html>

U.S. producer prices for finished goods fell 1.9% last month versus expectations for a 2.0% drop. The decline was the fifth in as many months. Nevertheless, 2008 was a year when price increases as a whole were stronger than during [...]

U.S. December PPI Fell Again; 2008 Strength in Pricing Abruptly Ends

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115a.jpg" align="right" border="0" height="265" width="353">U.S.
producer prices for finished goods fell 1.9% last month versus
expectations for a 2.0% drop. The decline was the fifth in as many
months. Nevertheless, 2008 was a year when price increases as a whole
were stronger than during 2007. The 6.3% increase in the overall
Producer Price Index compared to a 3.9% rise one year earlier and it
was the firmest since 1991.&nbsp; Several month-to-month increases,
which exceeded 1.0% early in 2008, were responsible for that lift.
Gains in energy prices were responsible for much of the
acceleration in
the PPI last year. Though they fell 9.3% last month, down for the fifth
consecutive month, for all of 2008 they rose 14.0% and that was double
the 2007 increase. December-to-December energy prices fell 21.2%. That
decline was enough to lower the level of finished energy prices in
December to that of mid-2005.&nbsp; Therefore, much more sanguine
news on pricing is in the cards for this year.
 Finished consumer food
prices also eased during the last three months and in December they
fell 1.5%. That lowered the December-to-December increase to a moderate
3.8%. Nevertheless, for all of last year food prices rose a strong 6.9%
which was about the gain they posted in 2007.&nbsp; Large monthly
increases early in the year were responsible for that lift and they
were led by a 6.5% rise in meat prices, which was double the 2007 rise,
and a 34.5% rise in pasta product prices.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115b.jpg" align="right" border="0" height="265" width="353">Less food
&amp; energy,
prices also firmed in 2008. First, the December increase of 0.2% was
double Consensus expectations. That gain followed a slim 0.1% increase
one month earlier but these followed four consecutive monthly increases
between 0.4% and 0.6%. The y/y rise in the core PPI of 4.3% was nearly
the strongest since late-1989. Prices of core finished consumer goods
rose 0.3% last month and that ended a year when they increased 4.5%
from December-to-December. The gain was the strongest since 1989.
Durable consumer goods prices jumped 0.5% last month and were up 3.2%
y/y. Appliance prices jumped 3.8% y/y, their strongest since 1989,
while core nondurable goods prices strengthened to a 5.6% y/y increase,
also the fastest rise since early 1999.&nbsp; In addition, prices
for capital equipment firmed and rose 4.0%, again the strongest since
1989.
 Lower prices for intermediate goods may portend easier price
gains in finished goods prices this year.&nbsp;<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115c.jpg" align="right" border="0" height="265" width="353">
They fell 4.2% last
month and repeating their decline in November.&nbsp; Energy prices
dropped 9.5% (-20.4% y/y).&nbsp; Excluding food &amp; energy,
prices fell for the third consecutive month.
 The crude
materials PPI was down sharply for the fifth straight month. Energy
prices led the fall with a 6.0% (-33.4% y/y) drop and crude food prices
fell 5.3% (-13.9% y/y). Less food &amp; energy, crude prices fell
2.2% with the recent drop in commodity prices.
 The latest Beige
Book from the Federal Reserve which covers regional economic
conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090114/default.htm">here</a>.&nbsp;&nbsp;
<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">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-1.9</td>
<td>-2.2</td>
<td>-1.2</td>
<td>6.3</td>
<td>3.9</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2</td>
<td>0.1</td>
<td>4.3</td>
<td>3.4</td>
<td>1.9</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-4.2</td>
<td>-4.3</td>
<td>-2.0</td>
<td>10.5</td>
<td>4.1</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-3.0</td>
<td>-2.3</td>
<td>3.2</td>
<td>7.6</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-5.3</td>
<td>-12.5</td>
<td>-24.8</td>
<td>21.5</td>
<td>12.1</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-2.2</td>
<td>-20.4</td>
<td>&nbsp;-24.5</td>
<td>15.2</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>

 U.S. Weekly Claims For Jobless
Insurance Back Up 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 15, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115d.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance rose last week and
recovered a piece of the decline in earlier weeks. The 54,000
week-to-week increase to 524,000 followed declines of 21,000 (slightly
revised) and 98,000 during the prior two weeks. These latter declines
were widely attributed to aberrant seasonal factors, although a problem
near this magnitude has not been observed since 2001. The latest
increase exceeded Consensus expectations for a rise to 501,000.
The Labor Department indicated that the largest increases in
initial claims for the week ending January 3 were in New York
(+24,465), North Carolina (+19,749), Georgia (+18,308), South Carolina
(+14,905), and Virginia (+7,362), while the largest decreases were in
California (-14,796), Kansas (-13,313), Michigan (-11,956), Illinois
(-9,727), and Ohio (-7,499).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115e.jpg" align="right" border="0" height="265" width="353">
Continuing claims for unemployment insurance during the week
of January 3 fell 115,000 and that reversed roughly half of the prior
week's increase. The four-week average of continuing claims rose 27,500
to 4,500,000. Continuing claims provide some indication of workers'
ability to find employment and they lag the initial claims figures by
one week.
The insured rate of unemployment remained stable for the third
week at this cycle's high of 3.4%. The highest insured unemployment
rates in the week ending December 27 were in Oregon (7.4 percent),
Michigan (6.6), Idaho (6.3), Wisconsin (6.0), South Carolina (5.4),
Arkansas (5.3), Nevada (5.2), Pennsylvania (5.2), Indiana (5.1), and
Montana (5.1).
Three Funerals and a Wedding from the
Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/09/01/Bullard.pdf">here</a>.
The Current Recession: How Bad Is It? also
from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/es/09/ES0904.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">01/10/09</th>
<th scope="col">01/03/09</th>
<th scope="col">12/27/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>524</td>
<td>470</td>
<td>491</td>
<td>66.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,497</td>
<td>4,612</td>
<td>64.5%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
 Philadelphia Fed Index Improved
Slightly But Still Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 15, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115f.jpg" align="left" border="0" height="265" width="353">
The Philadelphia Federal Reserve Bank indicated that its
January Index of General Business conditions in the manufacturing
sector rose slightly from the recent monthly lows. However, the index
at -24.3 this month was still only slightly better than the lows of the
prior two recessions. A weaker reading of -35 had been expected for
this month.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115g.jpg" align="right" border="0" height="265" width="353">
During the last ten years there has been a 71% correlation
between the level of the Philadelphia Fed Business Conditions Index and
the three-month growth in factory sector industrial production. There
has been a 54% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total
business activity and each of the sub-indexes. The business conditions
index reflects a separate survey question.
The employment index weakened sharply to the lowest level
since the recession of 1975. A record forty eight percent of
respondents expected to reduce employment levels while only nine
percent expected to raise them. During the last ten years there has
been a 79% correlation between the index level and the m/m change in
manufacturing sector payrolls.
The new orders index ticked up slightly to a reading of -22.3
and the shipments index also recovered all of its sharp December
decline.
The prices paid index fell, for the third month, to a record
low. During the last ten years there has been a 69% correlation between
the prices paid index and the three-month growth in the intermediate
goods PPI. There has been an 82% correlation with the change in core
intermediate goods prices. Just eleven percent of respondents increased
prices this month versus thirty eight percent that lowered them.
The separate index of expected business conditions in six
months rose slightly to its highest level since September. The
expectations index for new orders led the improvement but the
expectations index for employment fell to a record low.
The Philadelphia Fed figures can be found in Haver's SURVEYS
database.
The latest Business Outlook Survey from the Federal
Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0109.pdf">here.</a>
The Fed, Liquidity, and Credit Allocation from
the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/09/01/Thornton.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Philadelphia
Fed (%)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January&nbsp; '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-24.3</td>
<td>-36.1</td>
<td>-12.0</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-27.0</td>
<td>&nbsp;-25.5</td>
<td>&nbsp;49.8</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
 Core Inflation in the EMU and in
the US Falling Together...at Last 
by <a href="/comment/Brusca.html">Brusca
Robert</a> January 15, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090115h.jpg" align="left" border="0" height="265" width="353">
The EMU inflation picture was finalized with headline
inflation dropping by 0.3% in the month and up by 1.6% Yr/Yr as had
been reported in the flash release. With today&#8217;s report we get the
detail behind the headline. 
 

Inflation is falling sharply for goods as the progressive
growth rates show over shorter horizons the pace of declines getting
greater. That is not true of services, however, there inflation is
stuck and has even notched up over three-months. Still, for the overall
and core rates inflation is decelerating and for the key headline
series for which the ECB imposes a ceiling, the pace of inflation is
now below that ceiling for 3mo, 6-mo and 12-mo inflation calculations,
but most importantly for the 12-mo series that the ECB emphasizes. 
 

Still we present a graph above showing the core rate compared
with that same rate in the US. For Core inflation the two rates have
had different cycles for this two economic groups and some considerable
divergence in recent years. But now the core, which is as good a short
hand as we have for TREND inflation, is showing a sharp decline for
inflation in the US and well as in EMU. 
 

The most recent synchronous declines in inflation came in 2002
and 2003 with another minor episode in 2005. 
 

Since 2004 US and EMU inflation trends have been doing
different things. Over this period EMU inflation has accelerated until
the recent peaking and deceleration. In the US inflation has mostly
moved sideways during this period but with some considerable
volatility. US Core inflation rose from early through late 2006 before
oscillating in range- a range from which it is now declining. As a
result the current US core inflation rate is the lowest realm we have
seen since mid 2004. For EMU core inflation is only back to late 2007
levels. Even a casual look at the chart and the table above shows why
some ECB hawks have been reluctant to cut rates. EMU core inflation has
been much more in the mode of accelerating than has core inflation in
the US. Even as the headline rate plummets, EMU service sector
inflation is showing some unexpected - and sometimes unrecognized -
resilience. So despite the EMU rate cut we can only wonder how much
these trends will limit flexibility in the ECB monetary policymaking in
the months ahead.. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Trends in
HICP</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-13</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-2.6%</td>
<td>-0.9%</td>
<td>1.6%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>-0.8%</td>
<td>-0.8%</td>
<td>0.0%</td>
<td>-6.1%</td>
<td>-4.1%</td>
<td>0.9%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>2.6%</td>
<td>2.5%</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>
</tr>
<tr class="odd">
<td class="firstcol">HICP</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">Germany</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-3.3%</td>
<td>-0.9%</td>
<td>1.1%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-2.5%</td>
<td>-1.6%</td>
<td>1.2%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-4.2%</td>
<td>-1.5%</td>
<td>1.4%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Core excl Food Energy
Alcohol</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">Germany</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.5%</td>
<td>3.0%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.0%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. December PPI Fell Again; 2008Strength in Pricing Abruptly Ends

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090114e.jpg" align="right" border="0" height="265" width="353">
Total business inventories fell 0.7% during November and it was the
third consecutive monthly decline. Inventories just aren't needed as
sales drop. The 6.6% annual rate of decline in inventories during the
last three months is the swiftest since early 2002. The sales decline
during that period, including the 5.1% November shortfall, was 37.4% at
an annual rate. That mismatch left the inventory/sales ratio surging
upward to 1.41. The November level was the highest since during the
recession of 2001 and the increase in the ratio during the last year is
the swiftest since 1982. The reversal ended a twenty eight year
downtrend.Tighter inventory management enabled retailers to buck the
uptrend so inventories fell 1.3% during November. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090114f.jpg" align="right" border="0" height="265" width="353">
That left the
three-month change at a negative 5.2%.&nbsp; Motor vehicle
inventories have led the decumulation. Down 1.7% during November, they
have fallen at a 9.7% annual rate during the last three months. But
they've got further to fall. The inventory-to-sales ratio for
automobiles has jumped to 2.57 which is by far a historic high. So
unless sales recover soon, expect further production cuts to reduce the
ratio.Outside of autos, retailers have been busy cutting inventory as
well. Furniture, home furnishings &amp; electronics inventories
fell all of 5.7% in November.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090114g.jpg" align="right" border="0" height="265" width="353">
Apparel retailers were busy as
well, but less aggressive. Inventories here fell just 0.3% and they've
been flat for nearly two years. Unfortunately, given the weak
performance of sales the I/S ratio has risen sharply, to its highest
level since 2003.&nbsp; General merchandise inventories fell 0.6%
(-0.6% y/y) and that was been very much enough to keep the inventory
position in good shape.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Business
Inventories</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.7%</td>
<td>-0.6%</td>
<td>-0.4%</td>
<td>3.3%</td>
<td>3.8%</td>
<td>5.9%</td>
<td>6.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-1.3%</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-1.2%</td>
<td>2.6%</td>
<td>3.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Auto</td>
<td>-1.0%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>0.6%</td>
<td>2.7%</td>
<td>4.9%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.6%</td>
<td>-1.2%</td>
<td>-0.4%</td>
<td>6.3%</td>
<td>5.5%</td>
<td>8.3%</td>
<td>7.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-0.8%</td>
<td>5.1%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>8.9%</td>
</tr>
</tbody>
</table>
</body></html>

Total business inventories fell 0.7% during November and it was the third consecutive monthly decline. Inventories just aren't needed as sales drop. The 6.6% annual rate of decline in inventories during the last three months is the [...]

U.S. Business Inventories Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090114h.jpg" width="353">
During December, total U.S. import prices declined another 4.2% after the revised 7.0% November drop. The decline fell short of Consensus expectations for a 5.3% decline.
Petroleum prices continued down sharply last month by 21.4%. However, a recent turnaround has lifted imported oil prices by 9.0% versus the December average.
December import prices less petroleum were down for the fifth straight month. The 1.1% decline lowered them by 13.6% (AR) during the last three months versus the 12%-to-13% rates of positive growth this past spring.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090114i.jpg" width="353">
 December-to-December, the foreign exchange value of the dollar rose 9.3% and thus reduced the change in U.S. import prices. During the last ten years there has been an 83% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices.
Capital goods import prices fell another 0.3% and on a three-month basis prices fell at a 3.4% annual rate after a 5%-to-6% rate of increase earlier this year. Less the lower prices of computers, capital goods prices fell 0.2% and the three-month growth rate fell to 1.8% rate over the last three months after 9.0% growth earlier this year. Prices of computers, peripherals &amp; accessories were down at an 8.1% rate during the last three months.
Prices for nonauto consumer goods ticked up 0.1% last month but the three-month rate of change remained a negative 0.8% versus the 5.9% peak earlier this year. Durable goods prices overall fell at a 0.8% rate during the last three months versus a 6.2% rate of increase earlier this year.
Total export prices fell 2.3% due to another sharp decline in agricultural prices. Their 6.5% drop left them down at a 60.2% annual rate during the last three months. Nonagricultural export prices by 1.9% for the fifth consecutive monthly decline.
Troubled Asset Relief Program is yesterday&#39;s testimony by Fed Vice-Chairman Donald L. Kohn and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/kohn20090113a.htm">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/@E807/@E807.HTM">Import/Export Prices (NSA, %)</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-4.2</td>
<td>-7.0</td>
<td>-9.3</td>
<td>11.6</td>
<td>4.2</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-21.4</td>
<td>-28.5</td>
<td>-47.0</td>
<td>38.3</td>
<td>11.6</td>
<td>20.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>-1.1</td>
<td>-1.8</td>
<td>0.9</td>
<td>5.3</td>
<td>2.7</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>-2.3</td>
<td>-3.4</td>
<td>-3.2</td>
<td>6.0</td>
<td>4.9</td>
<td>3.6</td>
</tr>
</tbody>
</table>


</html>

During December, total U.S. import prices declined another 4.2% after the revised 7.0% November drop. The decline fell short of Consensus expectations for a 5.3% decline. Petroleum prices continued down sharply last month by 21.4%. [...]

U.S. Import Prices Down Sharply Again: Both Oil & Nonoil

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USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 0.6% (-3.6% y/y) during the four weeks ended May 9, 2025. The improvement followed sharp declines in April.

Miscellaneous group prices increased 2.4% (5.9% y/y) over the last four weeks. Natural rubber price soared 13.9% (11.7% y/y). The price of tallow (used in the soap industry) rose 10.6% (41.3% y/y) in four weeks but the cost of framing lumber declined 5.6%, but rose 7.3% y/y.

Prices in the Metals group edged 0.2% higher (-7.3% y/y) over the most recent four weeks. Variation in pricing was wide. Copper scrap prices rose 7.4% (-3.3% y/y) while lead costs rose 4.0% in four weeks (-11.1% y/y). The cost of aluminum increased 2.3% in four weeks, off 4.4% y/y. Working lower, the cost of steel scrap declined 8.1% (-11.6% y/) in four weeks while tin prices followed with a 4.9% decline (-2.9% y/y). Zinc prices eased 0.7% in four weeks and declined 10.3% y/y.

Crude Oil & Benzene group prices edged 0.1% higher (-19.4% y/y) in four weeks. The cost of West Texas Intermediate crude oil weakened 4.0% to $58.50 per barrel and was 25.6% lower y/y. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 8.5% (-41.8% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.9% (-2.1% y/y) during the last four weeks.

Textile group prices edged 0.9% lower (-0.5% y/y) during the last four weeks. Burlap costs declined 14.3% (+7.4% y/y) but the cost of cotton rose 4.5% (-7.7% y/y) over four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Metals prices are mixed.
- Crude oil prices fall sharply.
- Textile prices ease.

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

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Wholesale trade inventories increased 0.4% (2.2% y/y) during March after rising 0.5% in February, revised from 0.3% after a 0.8% January rise. The increase compared to expectations for a 0.5% rise in the Informa Global Markets Survey and compared to a 0.6% gain in the advance report issued two weeks ago.

Durable goods inventories rose 0.6% in March (1.5% y/y) after rising 0.5% in February. Machinery inventories, the largest sector, increased 0.6% (1.7% y/y) while inventories of motor vehicles & parts, the second largest grouping, rose 1.2% (0.8% y/y). Furniture inventories strengthened 2.7% (6.8% y/y) while electrical equipment inventories declined 1.0% (-3.1% y/y). Inventories of nondurable goods edged 0.1% higher (3.4% y/y). Drug inventories, which make up one-quarter of nondurable inventories, advanced 1.0% (4.6% y/y). Grocery inventories, the second largest category, rose 0.4% (8.3% y/y). Apparel inventories fell 0.8% (-6.5% y/y) and chemical inventories rose 2.1% both m/m and y/y. Petroleum inventories increased 0.7% (0.3% y/y).

Sales at the wholesale level rose 0.6% (6.1% y/y) in March after rising 2.0% in February and falling 0.9% in January. A 0.9% March rise had been expected in the Action Economics Forecast Survey.

Durable goods sales rose 1.0% (8.5% y/y) in March after strengthening 3.2% in February. Sales of electrical equipment & electronic goods, the largest sector, rose 2.5% (20.9% y/y), after a 2.3% rise. Professional and commercial equipment sales, which includes computers, rose 1.2% (11.9% y/y), while vehicle sales declined 1.0% (1.1% y/y). Sales of machinery improved 0.7% (4.2% y/y). Nondurable product sales rose 0.3% (3.9% y/y) in March after gaining 0.9% in February. Drug store sales, the largest category, increased 2.8% (13.4% y/y), while grocery store sales eased 0.2% (+4.3% y/y). Sales of apparel weakened 0.8% (+3.5% y/y) while paper sales declined 1.7% (0.5% y/y). Petroleum product sales fell 4.6% both m/m and y/y.

The inventory-to-sales (I/S) ratio at the wholesale level remained at 1.30 in March and has been moving lower for the last two years.

The wholesale I/S ratio for durable goods eased to 1.69 in March and also has been trending lower. The machinery ratio fell to 2.92 while motor vehicles rose to 1.78. The I/S ratio for nondurable goods slipped to 0.93 and remained down from 1.02 early in 2023. The drug industry ratio eased to 0.94. Apparel's I/S ratio held at 2.06, but remained below its 2.28 level one year earlier, and has been declining since early 2023. The petroleum industry I/S ratio rose to 0.33.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

**Assessing Maximum Employment** from Federal Reserve Governor Adriana D. Kugler is available [here](https://www.federalreserve.gov/newsevents/speech/kugler20250509a.htm).

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- Inventories trend higher y/y.
- Sales increase broadly.
- Inventory-to-sales ratio steadies.

U.S. Wholesale Inventories & Sales Increase in March

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Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

Carol Stone, CBE

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

Economy in Brief: January 2009

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