Tom Moeller

A slower rate of inventory replenishment was warranted because products weren't leaving the shelves quickly. As a result, real GDP growth eased last quarter to 3.2% after the 5.6% jump during 4Q '09. The latest roughly matched [...]

U.S. GDP Growth Moderates As LiftFrom Inventories Fades

Robert Brusca

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Money growth rates in Europe are starting to edge higher, but
ever so slowly. At a 2.2% annual rate pace over three months compared
to a 1.5% pace Yr/Yr is not much of an acceleration. Credit growth is
however weaker over three months than over 12-months. In the US money
growth is decelerating. In Japan it&#8217;s decelerating. In the UK, where
inflation has started to flash some less than comfortable numbers,
there is an issue. Money growth is in a major acceleration in the UK
for M4 which is up at nearly a 40% annual rate pace over three months.</p>
<p>While the growth rates are different, the main themes remain
in tact when we look at the growth rates of real money balances - money
growth deflated by inflation.</p>
<p>Basically money is not much of a stimulant anywhere except in
the UK.</p>
<p>Still we have great concerns among some economists that the
fiscal spending and coming monetary excesses (paradoxically, fiscal
issues already are taking what must be regarded as a deflationary toll
in Europe) will result in a bout of inflation. For the most part,
market pricing does not see that risk. Some of the hardest-money
economists still are very worried. Some worry that the economy will
recover and banks will begin to loan and this excess of reserves at the
Fed will be unleashed into something that can become a torrent of
inflation.</p>
<p>Then, others among us worry about getting hit by meteors from
outer space.</p>
<p>While a cyclical pick up in lending is something we do expect
in every business cycle, right now bankers are hunkered down. It is
very hard to see how they are going to turn the lending spigot from a
slow drip to full throttle in some quick fashion. Bank lending
committees are notoriously slow in shifting their policy stance. The US
economy and the European economies have a huge amount of slack.
Conservative hard-money economists also point out that a lot of
capacity was destroyed in the economic downturn. They warn that capital
may appear to be less utilized than it really is. While that is a good
point it is largely academic. The amount of slack in the economy is so
great it&#8217;s like warning that the other rim of the Grand Canyon might be
five feet closer than we thought so be careful about what might want to
&#8216;fit inside of it.&#8217;</p>
<p>There will come a time to worry about these things. But
unemployment in Europe is high. In the US 8.5 million people net were
taken off the job rolls. In addition, many first-time job seekers were
not able to find work. There is a great deal of slack. Money supply
growth is slow. Europe&#8217;s fiscal situation has deteriorated making it a
drag on the outlook despite some recent upbeat reports on growth. The
question of the role of the deterioration in confidence in the e-Zone
will play out over months not over hours. The US has its own fiscal
challenge which will make public policy more contractionary ahead. Why
all the worry about excess stimulus and inflation?</p>
<p>For the time being, despite high oil prices and some pressures
on commodity prices, we have to signal the &#8216;all clear&#8217; on the inflation
front. Not enough growth remains as the near term clear and present
danger. Inflation always lurks but it is, for the moment, unarmed and
not very dangerous. Inflation is more lost in the woods and confused
than it is dangerously lurking in some dark alley-way to mug an
unsuspecting policymaker.</p>
</span>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> <b>Look at Global and Euro Liquidity Trends</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;Saar-all</td>
<td colspan="3">Euro Measures (E13):
Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets:
Money</td>
<td>Memo</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&#8364;-Supply M2</td>
<td>Credit:Resid</td>
<td>Loans</td>
<td>$US M2</td>
<td>&#163;UK M4</td>
<td>&#165;Jpn M2+Cds</td>
<td>OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3-MO</td>
<td>2.2%</td>
<td>-0.6%</td>
<td>0.8%</td>
<td>-1.5%</td>
<td>39.5%</td>
<td>1.8%</td>
<td>38.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 6-MO</td>
<td>0.9%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>19.5%</td>
<td>2.1%</td>
<td>35.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 12-MO</td>
<td>1.6%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>1.5%</td>
<td>10.6%</td>
<td>2.6%</td>
<td>70.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 2Yr</td>
<td>4.5%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>5.3%</td>
<td>13.7%</td>
<td>2.4%</td>
<td>-12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3Yr</td>
<td>6.4%</td>
<td>5.9%</td>
<td>4.6%</td>
<td>5.9%</td>
<td>13.0%</td>
<td>2.4%</td>
<td>10.1%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Real Balances: deflated
by Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3-MO</td>
<td>0.3%</td>
<td>-2.5%</td>
<td>-1.1%</td>
<td>-2.4%</td>
<td>32.8%</td>
<td>0.6%</td>
<td>37.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 6-MO</td>
<td>-1.4%</td>
<td>-2.9%</td>
<td>-2.1%</td>
<td>-0.3%</td>
<td>14.7%</td>
<td>1.9%</td>
<td>33.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 12-MO</td>
<td>0.2%</td>
<td>-1.6%</td>
<td>-1.9%</td>
<td>-0.9%</td>
<td>7.0%</td>
<td>3.7%</td>
<td>66.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 2Yr</td>
<td>3.4%</td>
<td>1.5%</td>
<td>0.5%</td>
<td>4.2%</td>
<td>10.2%</td>
<td>3.1%</td>
<td>-13.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3Yr</td>
<td>4.5%</td>
<td>4.0%</td>
<td>2.6%</td>
<td>3.9%</td>
<td>9.8%</td>
<td>2.4%</td>
<td>8.0%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Japan's March CPI is
estimated to complete this table; The February value is used</td>
</tr>
</tbody>
</table>
</body></html>

Money growth rates in Europe are starting to edge higher, but ever so slowly. At a 2.2% annual rate pace over three months compared to a 1.5% pace Yr/Yr is not much of an acceleration. Credit growth is however weaker over three months [...]

Globally Money Growth Is Just Not Getting Into Gear. So Where’s The Real Risk?

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The job market is on the mend. The Bureau of Labor Statistics
reported that initial claims for jobless insurance fell 11,000 to
448,000 after the prior week's revised 21,000 drop. The latest level
equaled the March average and roughly matched Consensus expectations
for a decline to 445,000 claims. Last week's figure was down from the
recession peak of 651,000 reached in March of 2009. The four-week
moving average of initial claims nudged up to 462,500.</p>
<p>A 18,000 decline in continuing claims for unemployment
insurance during the latest week added to a revised 23,000 drop during
the prior week. They were down by one-third from the June '09 peak. The
overall decline is a function of the improved job market but also
reflects the exhaustion of 26 weeks of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims also fell to a
cycle low of 4.639 mil. This series dates back to 1966.</p>
<p>Extended benefits for unemployment insurance increased to
202,215. However, they were down by three-quarters from a peak of
597,688 reached in November.</p>
<p>The insured unemployment rate held steady at 3.6%. The rate
reached a high of 4.9% during May. During the last ten years, there has
been a 96% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.</p>
<p>The highest insured unemployment rates in the week ending
April 10 were in Alaska (6.6 percent), Puerto Rico (6.4), Oregon (5.9),
Wisconsin (5.6), Pennsylvania (5.4), Nevada (5.2), California (5.0),
Idaho (5.0), Montana (5.0), Michigan (4.9), and North Carolina (4.9).
The lowest insured unemployment rates were in Virginia (1.8), Texas
(2.2), Georgia (2.9), Florida (3.1), Maryland (3.2), Wyoming (3.2),
Ohio (3.5), New York (3.7) and Maine (3.9). These data are not
seasonally adjusted but the overall insured unemployment rate is.</p>
<p>The unemployment insurance claims data is available in Haver's
<b>WEEKLY</b> database and the state data is in the <b>REGIONW</b>
database.</p>
<p><b>Employment Survey Delivers JOLTS</b> from the
Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/documents/pubs/econsouth/q110econsouth.pdf#page=8">here</a>.</p>
</span><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></b></th>
<th scope="col"><b>04/24/10</b></th>
<th scope="col"><b>04/17/10</b></th>
<th scope="col"><b>04/10/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>448</td>
<td>459</td>
<td>480</td>
<td>-28.1%</td>
<td>572</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,645</td>
<td>4,663</td>
<td>-25.2%</td>
<td>5,809</td>
<td>3,340</td>
<td>2,549</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.6</td>
<td>3.6</td>
<td>4.6(4/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

The job market is on the mend. The Bureau of Labor Statistics reported that initial claims for jobless insurance fell 11,000 to 448,000 after the prior week's revised 21,000 drop. The latest level equaled the March average and roughly [...]

U.S. Unemployment Insurance Claims Fall To Last Month's Low

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322a.jpg" align="left" border="0" height="265" width="363"></p>
<p>Weather constraints on U.S. economic growth abated last month,
according to the Chicago Fed National Activity Index (CFNAI) from the
Federal Reserve Bank of Chicago. Their index rose to -0.07 and
recovered all of its February decline. The increase added to earlier
gains from the series' low of -4.14 reached in January '09. During the
last ten years the has been a 76% correlation between the index level
and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also improved to -0.18.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_april2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that rebounds in the employment and
in the production components contributed to the total index
improvement. Overall, 50 of the 85 individual indicators made positive
contributions to the index while 34 made negative contributions. The
CFNAI is a weighted average of 85 indicators of economic activity. The
indicators reflect activity in the following categories: production
&amp; income, the labor market, personal consumption &amp;
housing, manufacturing &amp; trade sales, and inventories &amp;
orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during February to its highest
level since December 2008. Indicators for the auto, steel, machinery
and resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429c.jpg" style="width: 312px; height: 265px;">
<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/SURVEYS/@S5/@S503/@S503.HTM"><b>Chicago Fed</b></a></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>March '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CFNAI</td>
<td>-0.07</td>
<td>-0.44</td>
<td>-0.05</td>
<td>-3.37</td>
<td>-1.62</td>
<td>-1.79</td>
<td>-0.35</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.18</td>
<td>-0.31</td>
<td>-0.11</td>
<td>-3.33</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.42</td>
<td>-0.41</td>
<td>-0.45</td>
<td>-0.56</td>
<td>-0.49</td>
<td>-0.32</td>
<td>-0.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
<td>0.12</td>
<td>-0.13</td>
<td>0.05</td>
<td>-1.45</td>
<td>-0.76</td>
<td>-0.67</td>
<td>-0.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>0.18</td>
<td>0.04</td>
<td>0.44</td>
<td>-0.99</td>
<td>-0.24</td>
<td>-0.56</td>
<td>-0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>0.06</td>
<td>0.06</td>
<td>-0.06</td>
<td>-0.38</td>
<td>-0.14</td>
<td>-0.25</td>
<td>-0.06</td>
</tr>
</tbody>
</table>
</body></html>

Weather constraints on U.S. economic growth abated last month, according to the Chicago Fed National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago. Their index rose to -0.07 and recovered all of its February decline. [...]

Chicago Fed Index Improves Modestly

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322a.jpg" align="left" border="0" height="265" width="363"></p>
<p>Weather constraints on U.S. economic growth abated last month,
according to the Chicago Fed National Activity Index (CFNAI) from the
Federal Reserve Bank of Chicago. Their index rose to -0.07 and
recovered all of its February decline. The increase added to earlier
gains from the series' low of -4.14 reached in January '09. During the
last ten years the has been a 76% correlation between the index level
and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also improved to -0.18.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a 
 href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_april2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that rebounds in the employment and
in the production components contributed to the total index
improvement. Overall, 50 of the 85 individual indicators made positive
contributions to the index while 34 made negative contributions. The
CFNAI is a weighted average of 85 indicators of economic activity. The
indicators reflect activity in the following categories: production
&amp; income, the labor market, personal consumption &amp;
housing, manufacturing &amp; trade sales, and inventories &amp;
orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during February to its highest
level since December 2008. Indicators for the auto, steel, machinery
and resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429c.jpg" style="width: 312px; height: 265px;">
<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/SURVEYS/@S5/@S503/@S503.HTM"><b>Chicago
Fed</b></a></th>
    <th scope="col"><b>March</b></th>
    <th scope="col"><b>February</b></th>
    <th scope="col"><b>January</b></th>
    <th scope="col"><b>March '09</b></th>
    <th scope="col"><b>2009</b></th>
    <th scope="col"><b>2008</b></th>
    <th scope="col"><b>2007</b></th>
  </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol">CFNAI</td>
      <td>-0.07</td>
      <td>-0.44</td>
      <td>-0.05</td>
      <td>-3.37</td>
      <td>-1.62</td>
      <td>-1.79</td>
      <td>-0.35</td>
    </tr>
    <tr>
      <td class="firstcol">&nbsp; 3-Month Moving
Average</td>
      <td>-0.18</td>
      <td>-0.31</td>
      <td>-0.11</td>
      <td>-3.33</td>
      <td>--</td>
      <td>--</td>
      <td>--</td>
    </tr>
    <tr class="odd">
      <td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
      <td>-0.42</td>
      <td>-0.41</td>
      <td>-0.45</td>
      <td>-0.56</td>
      <td>-0.49</td>
      <td>-0.32</td>
      <td>-0.09</td>
    </tr>
    <tr>
      <td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
      <td>0.12</td>
      <td>-0.13</td>
      <td>0.05</td>
      <td>-1.45</td>
      <td>-0.76</td>
      <td>-0.67</td>
      <td>-0.15</td>
    </tr>
    <tr class="odd">
      <td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
      <td>0.18</td>
      <td>0.04</td>
      <td>0.44</td>
      <td>-0.99</td>
      <td>-0.24</td>
      <td>-0.56</td>
      <td>-0.05</td>
    </tr>
    <tr>
      <td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
      <td>0.06</td>
      <td>0.06</td>
      <td>-0.06</td>
      <td>-0.38</td>
      <td>-0.14</td>
      <td>-0.25</td>
      <td>-0.06</td>
    </tr>
  </tbody>
</table>
<span id="articletitle">U.S. Unemployment Insurance Claims
Fall To Last Month's Low</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> April 29, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The job market is on the mend. The Bureau of Labor Statistics
reported that initial claims for jobless insurance fell 11,000 to
448,000 after the prior week's revised 21,000 drop. The latest level
equaled the March average and roughly matched Consensus expectations
for a decline to 445,000 claims. Last week's figure was down from the
recession peak of 651,000 reached in March of 2009. The four-week
moving average of initial claims nudged up to 462,500.</p>
<p>A 18,000 decline in continuing claims for unemployment
insurance during the latest week added to a revised 23,000 drop during
the prior week. They were down by one-third from the June '09 peak. The
overall decline is a function of the improved job market but also
reflects the exhaustion of 26 weeks of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims also fell to a
cycle low of 4.639 mil. This series dates back to 1966.</p>
<p>Extended benefits for unemployment insurance increased to
202,215. However, they were down by three-quarters from a peak of
597,688 reached in November.</p>
<p>The insured unemployment rate held steady at 3.6%. The rate
reached a high of 4.9% during May. During the last ten years, there has
been a 96% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.</p>
<p>The highest insured unemployment rates in the week ending
April 10 were in Alaska (6.6 percent), Puerto Rico (6.4), Oregon (5.9),
Wisconsin (5.6), Pennsylvania (5.4), Nevada (5.2), California (5.0),
Idaho (5.0), Montana (5.0), Michigan (4.9), and North Carolina (4.9).
The lowest insured unemployment rates were in Virginia (1.8), Texas
(2.2), Georgia (2.9), Florida (3.1), Maryland (3.2), Wyoming (3.2),
Ohio (3.5), New York (3.7) and Maine (3.9). These data are not
seasonally adjusted but the overall insured unemployment rate is.</p>
<p>The unemployment insurance claims data is available in Haver's
<b>WEEKLY</b> database and the state data is in the <b>REGIONW</b>
database.</p>
<p><b>Employment Survey Delivers JOLTS</b> from the
Federal Reserve Bank of Atlanta can be found <a 
 href="http://www.frbatlanta.org/documents/pubs/econsouth/q110econsouth.pdf#page=8">here</a>.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
  <colgroup><col><col><col><col><col><col><col></colgroup>
  <thead><tr>
    <th scope="col" class="firstcol"><b><a 
 ;=""
 href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"
 style="color: black;">Unemployment Insurance (000s)</a></b></th>
    <th scope="col"><b>04/24/10</b></th>
    <th scope="col"><b>04/17/10</b></th>
    <th scope="col"><b>04/10/10</b></th>
    <th scope="col"><b>Y/Y</b></th>
    <th scope="col"><b>2009</b></th>
    <th scope="col"><b>2008</b></th>
    <th scope="col"><b>2007</b></th>
  </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol">Initial Claims</td>
      <td>448</td>
      <td>459</td>
      <td>480</td>
      <td>-28.1%</td>
      <td>572</td>
      <td>419</td>
      <td>321</td>
    </tr>
    <tr>
      <td class="firstcol">Continuing Claims</td>
      <td>--</td>
      <td>4,645</td>
      <td>4,663</td>
      <td>-25.2%</td>
      <td>5,809</td>
      <td>3,340</td>
      <td>2,549</td>
    </tr>
    <tr class="odd">
      <td class="firstcol">Insured Unemployment Rate (%)</td>
      <td>--</td>
      <td>3.6</td>
      <td>3.6</td>
      <td>4.6(4/2009)</td>
      <td>4.4</td>
      <td>2.5</td>
      <td>1.9</td>
    </tr>
  </tbody>
</table>
<span id="articletitle">Globally Money Growth Is Just Not
Getting Into Gear. So Where&#8217;s The Real Risk?</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> April 29, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Money growth rates in Europe are starting to edge higher, but
ever so slowly. At a 2.2% annual rate pace over three months compared
to a 1.5% pace Yr/Yr is not much of an acceleration. Credit growth is
however weaker over three months than over 12-months. In the US money
growth is decelerating. In Japan it&#8217;s decelerating. In the UK, where
inflation has started to flash some less than comfortable numbers,
there is an issue. Money growth is in a major acceleration in the UK
for M4 which is up at nearly a 40% annual rate pace over three months.</p>
<p>While the growth rates are different, the main themes remain
in tact when we look at the growth rates of real money balances - money
growth deflated by inflation.</p>
<p>Basically money is not much of a stimulant anywhere except in
the UK.</p>
<p>Still we have great concerns among some economists that the
fiscal spending and coming monetary excesses (paradoxically, fiscal
issues already are taking what must be regarded as a deflationary toll
in Europe) will result in a bout of inflation. For the most part,
market pricing does not see that risk. Some of the hardest-money
economists still are very worried. Some worry that the economy will
recover and banks will begin to loan and this excess of reserves at the
Fed will be unleashed into something that can become a torrent of
inflation.</p>
<p>Then, others among us worry about getting hit by meteors from
outer space.</p>
<p>While a cyclical pick up in lending is something we do expect
in every business cycle, right now bankers are hunkered down. It is
very hard to see how they are going to turn the lending spigot from a
slow drip to full throttle in some quick fashion. Bank lending
committees are notoriously slow in shifting their policy stance. The US
economy and the European economies have a huge amount of slack.
Conservative hard-money economists also point out that a lot of
capacity was destroyed in the economic downturn. They warn that capital
may appear to be less utilized than it really is. While that is a good
point it is largely academic. The amount of slack in the economy is so
great it&#8217;s like warning that the other rim of the Grand Canyon might be
five feet closer than we thought so be careful about what might want to
&#8216;fit inside of it.&#8217;</p>
<p>There will come a time to worry about these things. But
unemployment in Europe is high. In the US 8.5 million people net were
taken off the job rolls. In addition, many first-time job seekers were
not able to find work. There is a great deal of slack. Money supply
growth is slow. Europe&#8217;s fiscal situation has deteriorated making it a
drag on the outlook despite some recent upbeat reports on growth. The
question of the role of the deterioration in confidence in the e-Zone
will play out over months not over hours. The US has its own fiscal
challenge which will make public policy more contractionary ahead. Why
all the worry about excess stimulus and inflation?</p>
<p>For the time being, despite high oil prices and some pressures
on commodity prices, we have to signal the &#8216;all clear&#8217; on the inflation
front. Not enough growth remains as the near term clear and present
danger. Inflation always lurks but it is, for the moment, unarmed and
not very dangerous. Inflation is more lost in the woods and confused
than it is dangerously lurking in some dark alley-way to mug an
unsuspecting policymaker.</p>
</span>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> <b>Look at Global and Euro Liquidity Trends</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;Saar-all</td>
<td colspan="3">Euro Measures (E13):
Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets:
Money</td>
<td>Memo</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&#8364;-Supply M2</td>
<td>Credit:Resid</td>
<td>Loans</td>
<td>$US M2</td>
<td>&#163;UK M4</td>
<td>&#165;Jpn M2+Cds</td>
<td>OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3-MO</td>
<td>2.2%</td>
<td>-0.6%</td>
<td>0.8%</td>
<td>-1.5%</td>
<td>39.5%</td>
<td>1.8%</td>
<td>38.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 6-MO</td>
<td>0.9%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>19.5%</td>
<td>2.1%</td>
<td>35.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 12-MO</td>
<td>1.6%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>1.5%</td>
<td>10.6%</td>
<td>2.6%</td>
<td>70.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 2Yr</td>
<td>4.5%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>5.3%</td>
<td>13.7%</td>
<td>2.4%</td>
<td>-12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3Yr</td>
<td>6.4%</td>
<td>5.9%</td>
<td>4.6%</td>
<td>5.9%</td>
<td>13.0%</td>
<td>2.4%</td>
<td>10.1%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Real Balances: deflated
by Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3-MO</td>
<td>0.3%</td>
<td>-2.5%</td>
<td>-1.1%</td>
<td>-2.4%</td>
<td>32.8%</td>
<td>0.6%</td>
<td>37.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 6-MO</td>
<td>-1.4%</td>
<td>-2.9%</td>
<td>-2.1%</td>
<td>-0.3%</td>
<td>14.7%</td>
<td>1.9%</td>
<td>33.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 12-MO</td>
<td>0.2%</td>
<td>-1.6%</td>
<td>-1.9%</td>
<td>-0.9%</td>
<td>7.0%</td>
<td>3.7%</td>
<td>66.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 2Yr</td>
<td>3.4%</td>
<td>1.5%</td>
<td>0.5%</td>
<td>4.2%</td>
<td>10.2%</td>
<td>3.1%</td>
<td>-13.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3Yr</td>
<td>4.5%</td>
<td>4.0%</td>
<td>2.6%</td>
<td>3.9%</td>
<td>9.8%</td>
<td>2.4%</td>
<td>8.0%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Japan's March CPI is
estimated to complete this table; The February value is used</td>
</tr>
</tbody>
</table>
</body>
</html>


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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100428d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Japan&#8217;s retail sales have made another strong monthly gain. In
the just-completed quarter, nominal retail sales are rising at an 11.3%
annual rate over the previous quarter&#8217;s level. Gains are strong across
the major retail categories we follow in the table above.</p>
<p>We are looking at the strongest Yr/Yr gains in Japan&#8217;s retail
sales in well over a decade. The results are a breath of fresh air amid
the sorts of news we are dealing with in markets today. News of Japan&#8217;s
strengthening economy is being submerged by the Goldman Sachs inquiry
and testimonies, the Greek relapse, the downgrading of Portugal and by
Germany&#8217;s reluctance to approve the disbursement of funds for Greece.</p>
<p>As the European circus goes on, few eyes are cast to Asia.
Japan&#8217;s improvement is a welcome sign, however. This not just a better
economic report from Japan, but it is also evidence that the Japanese
consumer has finally emerged to spend. We are still waiting for the
same sort of thing to happen in Europe where the recovery remains
largely an industrial and export-led recovery without much consumer
participation.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"><b>Japan
Retail Sales Trends</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr>
<td class="firstcol">Total SA</td>
<td>0.8%</td>
<td>0.9%</td>
<td>2.0%</td>
<td>15.9%</td>
<td>5.7%</td>
<td>4.9%</td>
<td>-12.5%</td>
<td>11.3%</td>
</tr>
<tr style="font-weight: bold;" class="grey2">
<td colspan="9" class="firstcol">Not
seasonally adjusted</td>
</tr>
<tr>
<td class="firstcol">Total: Nominal</td>
<td>-0.1%</td>
<td>1.8%</td>
<td>2.4%</td>
<td>17.4%</td>
<td>7.9%</td>
<td>4.6%</td>
<td>-13.0%</td>
<td>14.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Motor
Vehicles</td>
<td>2.0%</td>
<td>-1.2%</td>
<td>2.5%</td>
<td>14.0%</td>
<td>22.0%</td>
<td>18.2%</td>
<td>-16.3%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Food&amp; Beverage</td>
<td>0.5%</td>
<td>-2.0%</td>
<td>5.1%</td>
<td>15.1%</td>
<td>2.6%</td>
<td>0.6%</td>
<td>2.2%</td>
<td>12.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fabric
apparel&amp; access</td>
<td>-0.7%</td>
<td>2.3%</td>
<td>3.1%</td>
<td>20.7%</td>
<td>10.3%</td>
<td>8.0%</td>
<td>-15.3%</td>
<td>24.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rest of
Retail</td>
<td>-0.9%</td>
<td>5.0%</td>
<td>0.5%</td>
<td>19.2%</td>
<td>7.6%</td>
<td>3.5%</td>
<td>-20.2%</td>
<td>15.5%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s retail sales have made another strong monthly gain. In the just-completed quarter, nominal retail sales are rising at an 11.3% annual rate over the previous quarter’s level. Gains are strong across the major retail categories [...]

Japan’s Retail Sales Are On The Road To Recovery

Louise Curley

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<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100427l.jpg" style="width: 353px; height: 265px;" align="right">France,
Germany, Italy and Switzerland released indicators of consumer
confidence today.&nbsp; The latest data for the Swiss indicator,
the UBS Consumption Indicator, are for March.&nbsp; Those for
Italy, ISAE's consumer survey, and France, INSEE's household survey,
are for April and those for Germany, GfK's consumer climate survey,
May.</p>
<p>After some loss of confidence at the end of last year and
early
this year, due largely to the rise in energy prices, consumer
confidence in Switzerland, Italy and Germany has recovered as can be
seen in the first chart.&nbsp; French consumers, however, have on
balance become more negative, as shown in the second chart.&nbsp;
It should be noted that since its inception in April, 1986, that the
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100427m.jpg" style="width: 353px; height: 265px;" align="right">only
time the non seasonally adjusted French measure of consumer
confidence has reported a positive balance of opinion was during the
period from July 1999 to May 2001, as seen in the second
chart.&nbsp; The average balance of opinion over the whole span is
-18.&nbsp;&nbsp;</p>
<p> The measures of consumer confidence vary from
country to country.&nbsp; Balances of opinion in German and France,
an index with a base year of 1980 for Italy and a so-called index for
Switzerland.&nbsp; The Swiss indicator has no base year and is an
index in the sense that "it points to, identifies or highlights a
particular trend or condition" (Definition of index, no.3 in Chambers
21st Century Dictionary).&nbsp; One way to judge current values is
to relate them to the average of the data over its history, which is
shown in the last column of the following table.&nbsp; Consumer
confident in Germany at 3.8 in May is above its long term average of
3.3, as is Swiss consumer confidence, which in March was 1.708 compared
with its long term average of 1.501.&nbsp; In April, French
consumer confidence at -37 was well below its long term average of -18
while Italian consumer confidence of 107.7 was&nbsp; moderately
below its long term average of 112.7
(1980=100).&nbsp;&nbsp;&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col"><b>May 10&nbsp;</b></th>
<th scope="col"><b>Apr 10&nbsp;</b></th>
<th scope="col"><b>Mar 10</b></th>
<th scope="col"><b>Feb 10</b></th>
<th scope="col"><b>Jan 10</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Average*</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany: GFK
Consumer Climate % Bal</td>
<td>3.8</td>
<td>3.4</td>
<td>3.2</td>
<td>3.3</td>
<td>3.4</td>
<td>3.6</td>
<td>3.9</td>
<td>3.3</td>
</tr>
<tr class="odd">
<td class="firstcol">France: INSEE
Household Survey</td>
<td>&nbsp;--</td>
<td>-37</td>
<td>-35</td>
<td>-34</td>
<td>-29</td>
<td>-33</td>
<td>-32</td>
<td>-18</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy: ISAE
Consumer Survey1980=100</td>
<td>&nbsp;--</td>
<td>107.7</td>
<td>105.3</td>
<td>107.2</td>
<td>112.1</td>
<td>111.2</td>
<td>111.2</td>
<td>112.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Switzerland: UBS
Consumption Indicator</td>
<td>&nbsp;--</td>
<td>&nbsp;--</td>
<td>1.708</td>
<td>1.201</td>
<td>1.322</td>
<td>1.201</td>
<td>1.279</td>
<td>1.501</td>
</tr>
<tr>
<td class="firstcol" colspan="9">*Average
over the span
of available
data</td>
</tr>
</tbody>
</table>
</span>
</body></html>

France, Germany, Italy and Switzerland released indicators of consumer confidence today. The latest data for the Swiss indicator, the UBS Consumption Indicator, are for March. Those for Italy, ISAE's consumer survey, and France, [...]

An Assortment Of Consumer Confidence Indicators

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100427i.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Improvement in consumers' mood continued this month according
to the Conference Board. Their consumer confidence index rose 10.7% m/m
to 57.9, its highest level since September 2008. The gain handily
outpaced the Consensus expectation for a rise to 53.5. During the last
ten years there has been an 86% correlation between the level of
consumer confidence and the y/y change in real consumer spending. The
Conference Board data can be found in Haver's <b>CBDB</b>
database.</p>
<p>Consumers' assessment of the present situation jumped 13.5%
m/m after a similar March rise, off a near-record low. Jobs were seen
as hard to get by a reduced 45.0% of respondents but jobs were seen as
plentiful by only 4.8%. That was up just slightly from the series'
historic low reached in November. Also improved was the percentage of
respondents who saw business conditions as good. The percentage of
consumers who thought business conditions were bad fell to 40.2%, off
ten points from its peak during the recession.</p>
<p>The expectations component of confidence also improved m/m to
its highest level just before the recession. Improved expectations for
employment led the gain but expectations for business conditions and
income rose just slightly. Expectations for the inflation rate in
twelve months slipped to 5.3% and that remained down from last year's
high of 7.7%. Interest rates in twelve months were expected to be
higher by an increased 56.3%, the highest since 2007. A much-reduced
12.2% expected rates to fall. An increased 35.0% of respondents
expected stock prices to rise. That was near the recent high.</p>
<p>A reduced 2.0% of those surveyed plan to buy a home during the
next six months. An improved 27.4% plan to buy a major appliance,
though 30.9% planned to buy one back in 2007. An improved 5.1% plan to
buy an automobile versus 6.0% in 2007 and a greater 2.3% plan to buy a
new one, just off the series' historic low.</p>
</span>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100427j.jpg" style="width: 312px; height: 265px;"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100427k.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><strong>Conference
Board&nbsp;(SA, 1985=100)</strong></th>
<th scope="col"><strong>April</strong></th>
<th scope="col"><strong>March</strong></th>
<th scope="col"><strong>February</strong></th>
<th scope="col"><strong>Y/Y %</strong></th>
<th scope="col"><strong>2009</strong></th>
<th scope="col"><strong>2008</strong></th>
<th scope="col"><strong>2007</strong></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><strong>Consumer
Confidence Index</strong></td>
<td>57.9</td>
<td>52.3</td>
<td>46.4</td>
<td>41.9</td>
<td>45.2</td>
<td>57.9</td>
<td>103.4</td>
</tr>
<tr>
<td class="firstcol"><strong>&nbsp;
Present Situation</strong></td>
<td>28.6</td>
<td>25.2</td>
<td>21.7</td>
<td>12.2</td>
<td>24.0</td>
<td>69.9</td>
<td>128.8</td>
</tr>
<tr class="odd">
<td class="firstcol"><strong>&nbsp;
Expectations</strong></td>
<td>77.4</td>
<td>70.4</td>
<td>62.9</td>
<td>51.8</td>
<td>59.3</td>
<td>50.0</td>
<td>86.4</td>
</tr>
</tbody>
</table>
</body></html>

Improvement in consumers' mood continued this month according to the Conference Board. Their consumer confidence index rose 10.7% m/m to 57.9, its highest level since September 2008. The gain handily outpaced the Consensus expectation [...]

U.S. Consumer Confidence Improves Further

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

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

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Andrew Cates

**Energy shock lifts inflation, trims growth**
The IMF’s latest WEO revisions for 2026 broadly reflect the classic stagflationary impact of the recent Middle East energy shock, with growth downgraded and inflation revised higher across most major economies. Higher energy prices act as a tax on real incomes while simultaneously pushing up costs. That said, the picture is not uniform: a number of economies—notably the US, China and India—have seen growth upgrades, reflecting stronger-than-expected momentum so far in 2026. By contrast, the UK stands out at the stagflationary extreme, combining one of the largest growth downgrades with a relatively strong inflation uplift—consistent with its weaker underlying momentum, greater energy sensitivity and more persistent domestic inflation dynamics. More broadly, while the global revisions remain modest—pointing to resilience in activity—the message is that disinflation is no longer a smooth glide back to target but increasingly contingent on energy prices and geopolitical developments.

260423Z1.jpg

**Markets largely shrug off rising economic pessimism**
Notwithstanding a more downbeat assessment from economists—including the IMF’s stagflationary tilt to the outlook—there has been remarkably little follow-through into financial markets. Measures of systemic stress in both the US and UK remain low by historical standards, suggesting that investors are, for now, largely looking through the Middle East conflict. There are several possible explanations: corporate profits remain resilient, the AI-driven investment narrative continues to dominate market thinking, and markets may be assuming that any energy shock will be temporary and contained. In effect, investors appear to be pricing a benign baseline in which geopolitical risks do not materially disrupt growth, inflation expectations or policy. The UK is a partial exception, with a somewhat more visible uptick in stress, which aligns more closely with the IMF’s more challenging growth-inflation trade-off and the economy’s greater sensitivity to energy prices.

260423Z2.jpg

**Volatility falls despite deteriorating growth surprises**
Market optimism is also increasingly at odds with the incoming data flow. Typically, equity volatility declines when growth surprises are positive and inflation surprises are benign. However, the recent pattern has broken that relationship. Growth surprises across the G10 have turned increasingly negative (our series is inverted in the chart below), yet volatility has continued to fall. In other words, markets are becoming less sensitive to weakening macro data, continuing to price a benign outlook even as the data deteriorate. This divergence reinforces the broader theme: investors are, for now, looking through both geopolitical risks and softer economic momentum, placing greater weight on resilience in earnings, the AI-driven narrative and the assumption that policy will remain supportive.

260423Z3.jpg

**Inflation Nowcasts Have Jumped**
Incoming data suggest that headline inflation has moved higher in recent weeks, broadly in line with expectations given the rise in energy prices following the Middle East shock. Nowcasts for CPI across the major economies show a clear rebound in March and April from the lows seen at the start of 2026, with the move occurring in a relatively synchronised fashion. This reinforces the view that the recent pickup in inflation is being driven primarily by a common external factor—energy.

260423Z4.jpg

**Energy shock not yet feeding into underlying inflation**
However, the detailed breakdown of March inflation outcomes suggests that this remains, for now, a largely headline-driven phenomenon. While headline CPI prints were firm across most economies, core inflation—stripping out energy and food—was more subdued and in some cases weaker. This indicates that there has been very limited pass-through from higher energy prices into broader goods and services inflation at this early stage. In other words, the shock is still being absorbed rather than propagated. That distinction is critical for policy and markets alike: as long as second-round effects remain contained, central banks may be able to look through the near-term rise in inflation, even as headline rates move higher.

260423Z5.jpg

**Inflation Expectations Rising as Growth Sentiment Falters**
It remains early days, and much will hinge on how inflation expectations evolve from here. The latest ZEW survey for Germany already conveys the hallmarks of a classic stagflationary shock, with macroeconomic expectations weakening even as inflation expectations have ratcheted sharply higher. This shift is important: while the recent rise in headline inflation has so far shown limited pass-through into core, a sustained increase in expectations would raise the risk of second-round effects and make the inflation process more persistent. In that sense, the ZEW data highlight the key fault line in the current environment—whether the energy-driven shock remains contained, or begins to embed itself more broadly through expectations and pricing behaviour.

260423Z6.jpg

Financial markets have remained notably calm in recent weeks despite rising geopolitical tensions in the Middle East, a more downbeat macroeconomic narrative and elevated uncertainty. Measures of financial stress and volatility remain low, and equity markets continue to look through both the conflict and softer data. That resilience sits alongside a more nuanced macro backdrop. The IMF’s latest WEO revisions point to a classic stagflationary energy shock—growth downgraded and inflation revised higher—although the global impact remains modest and uneven, with some economies still benefiting from stronger momentum (chart 1). At the same time, market pricing appears increasingly detached from the data flow, with volatility declining even as growth surprises have turned more negative relative to inflation (charts 2 and 3). Incoming inflation data reinforce the idea of a largely headline-driven shock, with nowcasts rising in line with higher energy prices but only limited pass-through into core inflation so far (charts 4 and 5). However, it remains early days. Survey evidence, such as the latest ZEW release, suggests that inflation expectations may already be responding in a more concerning way, with a marked rise alongside weakening growth sentiment (chart 6). Taken together, the key question for markets is whether this remains a contained, energy-driven shock that can be looked through—or whether it begins to embed more persistently via expectations, forcing a reassessment of the currently benign outlook.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/44A12ktUaoJGHZG7pEVcul?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Risks Build, Markets Shrug

260424E.jpg

The onset of the war in Iran appears to have hit the German economy extremely hard as the Ifo survey shows very substantial and broad-based decline across its survey in April. The Ifo survey features readings for five sectors as well as an aggregate reading, and it surveys them for climate, current conditions, and expectations. The decline in the Ifo survey is present for all three concepts and across all five sectors, marking the weakening in April as a highly significant and extremely disturbing development. Only manufacturing in the current conditions survey escapes a month-to-month decline.

**The Ifo sequences**: The **climate** reading fell both overall and across each of the five sectors. **Current conditions** declined for the overall and for four of the five sectors, with manufacturing the sole exception. **Expectations** declined for the overall and for all sectors. Several of the sector declines were for a very substantial magnitude, especially when compared to historic changes in these indexes.

**Monthly changes in readings—severe broad deterioration**
The month-to-month change in the climate reading has weakened more month-to-month 19% of the time. That overall result, however, is boosted by manufacturing where the monthly change has been weaker 35% of the time (on data back to 2011). However, all other sectors have seen climate weaker m/m only 2.3% to 6.3% of the time! The current situation readings weakened, with the headline weakening more m/m 11% of the time. This was boosted by manufacturing, the only sector that improved on the month; its ranking on change was in its 85th percentile—quite good and truly stand-alone good news. The other current changes by sector ranged from construction being weaker 1.7% of the time, to retailing that has been weaker about 30% of the time in terms of m/m changes. Expectation changes were uniformly terrible, with the headline drop weaker only 6.3% of the time and sector change month-to-month weaker between 9% and 1.7% of the time. The monthly weakening was uniform and substantial. I document it with these calculations, but you can also see it on the chart above.

**Climate**: The bottom line is that the all-sector index for climate fell to -20.3 in April from -18 in March, placing it at a 10.5 percentile standing on data since 1993. The sector ranking is the highest for construction with a 42.2 percentile standing and the weakness for services at a 1.1 percentile standing—weaker than the table reading nearly 99% of the time. In terms of percentile standing levels or monthly changes, conditions are closing in on grim.

**Current conditions**: Current conditions saw the all-sector index slip to -5.3 in April from -2.4 in March. The headline ranking stands at a 9.8 percentile mark, making it—like the climate reading—weaker than its current reading only about 10% of the time. The strongest reading under current conditions is for construction which has a 60.6 percentile standing; it is the only ranking in the table above its historic median. Manufacturing, the only sector in the survey that improved month-to-month, has a 22.5 percentile standing, while services record the weakest percentile standing under current conditions, at an 8.4 percentile standing.

**Expectations:** The all-sector index for expectations fell to -25.3 in April from -19.9 in March, placing it at a 6.3 percentile standing. The percentile standings across sectors range from a high of 9.5% for manufacturing to a low of 1.5% for retailing. Up until earlier this year, the Ifo was showing signs of improvement; however, all of that has simply collapsed in the last month. Weakness is across economic concepts and sectors, as documented above. For reference, the table also gives a separate set of rankings on where the various indexes stand since the invasion of Ukraine, since that was another marked event that drove the index, that had been improving after Covid, down to lower levels.  Ranked even on this reduced scale looking at conditions only since the invasion of Ukraine, when conditions have generally been weaker, the current rankings across the Ifo survey remained extremely weak. This is a very disturbing survey for the German economy.

260424.jpg

Germany

German Ifo Plunges Everywhere

Sandy Batten

260423F8.jpg

260423G8.jpg

The National Activity Index published by the Federal Reserve Bank of Chicago (CFNAI) slipped to -0.20 in March from an upwardly revised +0.03 in February (previously (-0.11). This is the lowest monthly reading since last November. Smoothing out the monthly volatility, the index's three-month moving average (CFNAI-MA3) declined to -0.03 in March from an upwardly revised +0.03 in February (previously -0.01).

This index is expressed in standard deviation units from zero (with a value of zero defined as trend real GDP growth). Research at the FRB Chicago indicates that readings on the 3-month average of -0.70 or below are consistent with the economy being in a recession. Therefore, even though the March reading on the 3-month average was negative, it indicates that the US economy is still growing, just slightly slower than trend, and is well away from recessionary conditions. The 3-month average would be much deeper in negative territory if the economy was at risk of contracting.

The National Activity Index is a composite of 85 economic indicators, grouped into four major categories: production and income; employment, unemployment, and hours worked; personal consumption and housing; sales, orders, and inventories. Three of the four broad categories of indicators used to construct the index decreased from February, and three categories made negative contributions in March. Production-related indicators contributed –0.20 to the CFNAI in March, down from +0.13 in February. The sales, orders, and inventories category's contribution to the CFNAI was –0.01 in March, down from +0.05 in February. Employment-related indicators contributed +0.02 to the CFNAI in March, up from –0.15 in February. The personal consumption and housing category's contribution to the CFNAI was –0.01 in March, down from a neutral value in February.

The CFNAI Diffusion Index, which measures the breadth of the change in the component series and is also a three-month moving average, increased to –0.04 in March from –0.08 in February. This is the highest reading since February 2025. A reading of zero indicates that all of the indicators are growing at their long-term average. If all of the underlying indicators in a given month are below their long-run averages, the diffusion index will equal -1. If all of the indicators are above their long-run averages, it will equal +1. Thirty-four of the 85 individual indicators made positive contributions to the CFNAI in March, while 51 made negative contributions. Forty-three indicators improved from February to March, while 40 indicators deteriorated and two were unchanged. Of the indicators that improved, 16 made negative contributions.

These figures are available in Haver's **SURVEYS** database.

- The monthly reading fell to -0.20 in March from an upwardly revised +0.03 in February.
- The three-month average slipped from +0.03 to -0.03.
- Despite the slip in March, the index points to near-trend economic growth and is well above recession territory.

Chicago Fed National Activity Index Slipped in March

Kathleen Stephansen, CBE

260423A1.jpg

260423B1.jpg

Initial claims for unemployment insurance rose by 6,000 to 214,000 in the week ending April 18, from 208,000 in the week ending April 11, revised from 207,000. The four-week average rose 750 to 210,750 in the week ending April 18, from 210,000 the April 11 week, revised from 209,750. The Action Economics/Haver Analytics Survey looked for 210,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 12,000 to 1.821 million in the week ending April 11, from 1.809 million in the week ending April 4. The four-week moving average rose to 1.812 million in the latest week from 1.811 million in the March 28 week. The insured unemployment rate remained at 1.2% in the week of April 11. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 4, the highest unemployment rates were in New Jersey (2.51%), Massachusetts (2.37%), Rhode Island (2.31%), Washington (2.25%), Minnesota (2.11%), and California (2.02%). The lowest rates were in Florida (0.30%), Louisiana (0.31%), Arkansas (0.35%), Alabama (0.36%), North Carolina (0.39%), Tennessee (0.46%), South Dakota (0.47%), Kansas and Virginia (both 0.49%). Rates in other notable states include New York (1.92%), Illinois (1.82%), Pennsylvania (1.52%), and Texas (1.04%). 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.

260423C1.jpg

260423D1.jpg

- New claims rose by 6,000 to 214,000.
- Continuing claims rose by 12,000 to 1.821 million.
- The insured unemployment rate remained at 1.2%.


U.S. Initial Unemployment Claims Rose in the Week of April 18

260423E.jpg

**Manufacturing looks strong while service sectors weaken**
S&P's April flash PMI readings show some very mixed results. For the United States, India, Australia, and the United Kingdom, there is a strengthening in the readings month-to-month for services, manufacturing, and the composite.

For Japan, France, and the European Monetary Union as a whole, there is improvement in the manufacturing sector on the month but a weaker services reading and a weaker composite overall.

Germany is the only responding area in the table showing weakness all around—in all three sectors—a weaker composite, a weaker manufacturing sector, and a weaker services sector in April. For Germany, this follows a weaker composite and service sector in March as well.

Most reporters—France, the United Kingdom, Japan, Australia, and India—had weaker readings for all three metrics in March: the composite, services, and manufacturing. The March exceptions were the United States, Germany, and the European Monetary Union; in each case, the exception was that the manufacturing sector improved month-to-month, while the composite and services both weakened.

This has been a period of weakening—in March and April—since the war in Iran began. The 48 separate sector readings produced 30 readings that were weaker month-to-month in March and April. Among the 16 composite readings, 12 reported weaker conditions month-to-month. In March, the immediate aftermath of the outbreak of war brought instantaneous step backs across the PMI readings, while April, responding to at least a military success in the area, has shown a significant bounce back that is now more common than further weakness.

The sequential data over three months, six months, and 12 months are based only on completed data; therefore, they're up to date through March. On that basis, we have triple sector weakness in the U.S., India, and Australia, with only Japan and the United Kingdom showing triple-sector improvement over three months. However, if we look at six months compared to 12 months, we have triple sector strength in the Monetary Union, Germany, France, the United Kingdom, Japan, and Australia. India and the U.S. each show only one stronger sector over that comparison—services in India’s case and manufacturing in the U.S. case.

**Ranking Peculiarity**
The ranking data take the current flash data and compare them to the history of observations back to January 2022. What is quite surprising is that, on that timeline, the manufacturing sectors of all the countries in the table—except for Australia and India—show manufacturing standings in their respective 80th to 90th percentiles. Meanwhile, services standings are typically in the 30th percentile or lower.

**Odd Impact of War**
If the war in Iran has an impact on something, we would expect that to fall on the goods trade sector. We would expect this to have an impact on manufacturing although it's the opposite thing that's happening. Manufacturing is showing a revival, while services sectors are showing weaker performance across these countries generally. India is an interesting case, with manufacturing only in its 32nd percentile; however, India’s raw diffusion reading for manufacturing is the strongest raw diffusion reading in the table. What India's ranking is telling us is that India had been extremely strong over the period since 2022, and now compared to that past standard, it's relatively weaker. However, it's still strong in absolute terms, showing a great deal of strength based on its pure diffusion value, just not in comparison to historic performance.

260423.jpg

**Next?**
At this point, it's not clear to me at least what these PMI data are telling us since the strength in manufacturing is a curiosity as is the weakness in the services sector. You see these two phenomena displayed in the chart above, in the case of the European Monetary Union’s flash readings as well.

**War breeds negative effects**
It's not a surprise that war would take some toll on consumer confidence or that it would be reflected in the services sector. However, seeing the kind of weakness being portrayed now in services against the strength in manufacturing is simply a bit hard to rationalize and understand. So, I think we're going to have to keep an eye on these readings as well as other readings in the months ahead to try to discern how global events, the war, conditions in the Strait of Hormuz, inflation currency shifts, and central bank policy are playing out across these various countries. None of what is happening is obvious to me. Japan clearly continues to benefit from a weak yen as its manufacturing sector is flying high, at its best reading since January 2022.

Economy in Brief: 2010

Jump to:

U.S. GDP Growth Moderates As LiftFrom Inventories Fades

Globally Money Growth Is Just Not Getting Into Gear. So Where’s The Real Risk?

U.S. Unemployment Insurance Claims Fall To Last Month's Low

Chicago Fed Index Improves Modestly

Chicago Fed Index Improves Modestly

Japan’s Retail Sales Are On The Road To Recovery

An Assortment Of Consumer Confidence Indicators

U.S. Consumer Confidence Improves Further