Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040305b.jpg" width="353">
Industrial production in Norway rose 1.5% in January, making a 0.5% cumulative gain since January 2003. However, most traditional sectors of Norwegian industry experienced declines. Total manufacturing, for example, was off 2.8% in January from a year ago, encompassing a 10.5% drop in capital goods output.
There is clearly an offsetting factor and for Norway, that is energy production. Statistics Norway informs that the energy sector constitutes more than half of the nation&#39;s industry, 54.9% of value added in 2003. It can thus counter moves in most any other segment of the economy. So the weakness in capital goods, and in a traditional Norwegian stronghold, wood and wood products, is balanced by expansion in the energy sector.
Such domination by one sector obviously works both ways, and declines in energy output worsened economic performance in 1998 and again in 2002. However, a strong gain in 2001 prevented Norway from experiencing contraction then, even as many other major economies were in the doldrums.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">12-Month % Changes, Selected Sectors</th>
<th scope="col">2003 Weights</th>
<th scope="col">Jan 2004</th>
<th scope="col">Dec 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
<th scope="col">1998</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1000.0&nbsp;</td>
<td>+0.5</td>
<td>-1.0</td>
<td>-5.4</td>
<td>+1.0</td>
<td>-0.2</td>
<td>+5.4</td>
<td>-4.6</td>
</tr>
<tr>
<td class="firstcol">Energy Goods</td>
<td>548.7&nbsp;</td>
<td>+3.9</td>
<td>-0.3</td>
<td>-10.4</td>
<td>+7.9</td>
<td>+1.4</td>
<td>+10.2</td>
<td>-8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>138.0&nbsp;</td>
<td>-10.5</td>
<td>-6.9</td>
<td>-0.2</td>
<td>-2.3</td>
<td>-0.4</td>
<td>-11.6</td>
<td>+7.6</td>
</tr>
<tr>
<td class="firstcol">Manufacturing&nbsp;</td>
<td>451.1&nbsp;</td>
<td>-2.8</td>
<td>-0.1</td>
<td>-3.1</td>
<td>-3.1</td>
<td>-4.4</td>
<td>-1.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>72.4&nbsp;</td>
<td>-0.3</td>
<td>+1.9</td>
<td>-3.7</td>
<td>-1.8</td>
<td>-8.1</td>
<td>+6.6</td>
<td>-4.8</td>
</tr>
<tr>
<td class="firstcol">Wood</td>
<td>16.0&nbsp;</td>
<td>-10.7</td>
<td>-2.7</td>
<td>-3.3</td>
<td>-10.0</td>
<td>-1.7</td>
<td>+15.8</td>
<td>-17.5</td>
</tr>
</tbody>
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Industrial production in Norway rose 1.5% in January, making a 0.5% cumulative gain since January 2003. However, most traditional sectors of Norwegian industry experienced declines. Total manufacturing, for example, was off 2.8% in [...]

Energy Output Lifts Norwegian Industrial Production

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040305a.jpg" width="353">
Growth in non-farm payrolls slowed last month to 21,000 (0.0%) from the downwardly revised 97,000 January gain. Consensus expectations had been for a rise of 125,000.
A weak 46,000 (0.4% y/y) gain in service producing payrolls was the source of last month&#39;s disappointment. Monthly gains of just 0.1% were spread across industries except in the leisure and &quot;other&quot; categories where payrolls fell. A sign of strength came from the temporary help services industry where jobs jumped 32,000 (9.1% y/y).
Construction jobs also disappointed and fell 24,000 (+1.8% y/y).
Manufacturing sector payrolls fell 3,000 (-3.1% y/y), the smallest monthly decline since 2000. Perhaps signaling better prospects for factory sector jobs, the one-month diffusion index for manufacturing payrolls rose to 51.8%, the highest level since 2000.
The index of aggregate hours worked (employment times hours worked) fell 0.1% following the downwardly revised 0.6% January gain. Aggregate hours so far in 1Q are up 1.0% (AR) from the 4Q average.
The one-month diffusion index for private non-farm payrolls fell to 50.9% from the upwardly revised 51.1% in January.
Average hourly earnings rose 0.2% (1.6% y/y). Earnings in the factory sector rose 0.2% (2.3% y/y) following a 0.1% January gain, revised from -0.6%.
From the separate household survey, the unemployment rate held steady at 5.6%, as expected.
Household employment fell 265,000 (+0.7% y/y) and the labor force fell 392,000 (+0.4% y/y). The labor force participation rate dropped further to 65.9% versus 67.1% averaged from 1997-2000.
&quot;Your Current Job Probably Won&#39;t Be Your Last&quot; from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20040201/cover.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"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM"> Employment</a></th>
<th scope="col"> Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>21,000</td>
<td>97,000</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-3,000</td>
<td>-13,000</td>
<td>-3.1%</td>
<td>-4.8%</td>
<td>-7.2%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
<td>34.0</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.6%</td>
<td>2.7%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.6%</td>
<td>5.6%</td>
<td>5.9%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>4.8%</td>
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Growth in non-farm payrolls slowed last month to 21,000 (0.0%) from the downwardly revised 97,000 January gain. Consensus expectations had been for a rise of 125,000. A weak 46,000 (0.4% y/y) gain in service producing payrolls was the [...]

U.S. Non-farm Payroll Growth Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040304d.jpg" width="353">
&quot;Low inflation in Latin America&quot; seems almost an oxymoron. Nonetheless, of three major economies in the region, inflation is low and, in one instance, almost non-existent. Chile, whose CPI was reported today for February, has in fact seen no inflation over the past 12 months, following a progressive slowing since the early 1990s.
Argentina is presently experiencing quite modest CPI inflation, just 2.3% over the 12 months to February (the latest figures were published yesterday, March 3). However, a major, widespread surge in prices occurred in 2002, coincident with the decoupling of the peso from the US dollar. Inflation that year was 41.0%.
Inflation is still moderately high in Brazil, with the 12-month rate at 7.7% in January. This compares favorably, however, with triple- and even quadruple-digit rates as recently as 1994.
We wondered if these various inflation patterns were related to overall growth. As noted in the table, Chile, whose CPI is the lowest and the steadiest of these three, also has the steadiest GDP growth, and indeed, the highest 10-year average growth rate, 4.4%. Argentina, with the most variable inflation over the last 10 years, has the lowest 10-year growth rate, a mere 0.6% annualized. Brazil, where inflation is not &quot;low&quot;, but which has made fairly consistent progress bringing it down in recent years, is in the middle growth-wise, with a 10-year average of 2.4%. However, the most recent three years have seen quite tepid growth performance. Thus, the relationship of growth and inflation is not clear, although in this limited sample, it appears that a steady evolution of inflation trends -- as in Chile -- might help foster stronger GDP growth.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Year/Year % Changes</th>
<th scope="col">Feb 2004</th>
<th scope="col">Jan 2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">Average: 1995-2000</th>
<th scope="col">Average: 1990-1995</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Chile</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">CPI</td>
<td>0.0</td>
<td>0.8</td>
<td>1.1</td>
<td>2.8</td>
<td>2.6</td>
<td>4.8</td>
<td>12.1</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP</td>
<td></td>
<td></td>
<td>3.0*</td>
<td>3.2</td>
<td>2.0</td>
<td>4.0</td>
<td>9.2</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Brazil</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">CPI</td>
<td></td>
<td>7.7</td>
<td>9.3</td>
<td>12.5</td>
<td>7.7</td>
<td>6.2</td>
<td>630.0</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP</td>
<td></td>
<td></td>
<td>-0.1</td>
<td>1.9</td>
<td>1.3</td>
<td>2.4</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Argentina</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">CPI</td>
<td>2.3</td>
<td>2.7</td>
<td>3.7</td>
<td>41.0</td>
<td>-1.5</td>
<td>-0.3</td>
<td>19.6</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP</td>
<td></td>
<td></td>
<td>9.8*</td>
<td>-3.4</td>
<td>-10.5</td>
<td>2.6</td>
<td>-5.0</td>
</tr>
</tbody>
</table>
</body>
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"Low inflation in Latin America" seems almost an oxymoron. Nonetheless, of three major economies in the region, inflation is low and, in one instance, almost non-existent. Chile, whose CPI was reported today for February, has in fact [...]

Inflation Coming Under Control in Latin America

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040304a.jpg" width="353">
Initial claims for jobless insurance fell 7,000 (-2.0%) to 345,000 last week, again matching Consensus expectations. That reversed the prior week&#39;s rise (revised up slightly).
During the last ten years there has been a 77% (negative) correlation between the level of initial claims and the three-month change in non-farm payrolls.
The four-week moving average of initial claims fell to 352,250 (-13.8% y/y).
Continuing claims for unemployment insurance were unchanged from the prior week&#39;s level that was revised lower.
The insured rate of unemployment was unchanged at 2.4% and the prior week&#39;s level was revised down.

<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/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">2/28/04</th>
<th scope="col">2/21/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>345.0</td>
<td>352.0</td>
<td>-20.9%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,091</td>
<td>-10.9%</td>
<td>3,535</td>
<td>3,575</td>
<td>3,022</td>
</tr>
</tbody>
</table>
Factory Inventories Up Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040304b.jpg" width="353">
Factory inventories rose in January for the third month in four. The 0.2% m/m increase was hardly strong but recent monthly gains pulled the y/y change in inventories to -1.1% versus rates of decline exceeding 7% two years ago.
The swing to inventory accumulation from decumulation necessitated increases in factory output.
Factory orders fell 0.5% m/m reflecting a sharp 2.3% decline in durable goods orders. that was revised from the advance report of a 1.8% decline. Orders for nondurable goods rose 1.6% as petroleum orders (which equal shipments) jumped 5.1%.
Factory shipments rose 0.5% but gains amongst industries were limited.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.2%</td>
<td>0.1%</td>
<td>-1.1%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-0.5%</td>
<td>1.8%</td>
<td>6.5%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.5%</td>
<td>2.1%</td>
<td>6.2%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>4.5%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
</tr>
</tbody>
</table>
4Q U.S. Productivity Growth Little Revised 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040304c.jpg" width="353">
Non-farm labor productivity grew 2.6% last quarter, little changed from the initial estimate of 2.7% growth. Consensus expectations had been for 2.6% growth.
Hours worked by all persons (employment times hours) were little revised, up 1.5% (-0.3% y/y) and output growth also was little revised at 4.1% (5.1% y/y) versus 10.4% growth in 3Q.
Unit labor costs fell 0.4% versus the initial estimate of a 1.3% decline. The back-to-back annual cost declines in 2003 and 2002 were a record. Compensation growth in 4Q was revised up.
Manufacturing sector productivity growth of 4.8% (5.2% y/y) was unrevised. Unit labor costs in the factory sector fell 2.0% (-0.6% y/y).

<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/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col"> 4Q &#39;03 (Revised</th>
<th scope="col"> 4Q &#39;03 (Prelim.)</th>
<th scope="col">3Q &#39;03</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>2.6%</td>
<td>2.7%</td>
<td>9.5%</td>
<td>5.4%</td>
<td>4.2%</td>
<td>4.9%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>2.2%</td>
<td>1.3%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>2.9%</td>
<td>2.2%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>-0.4%</td>
<td>-1.3%</td>
<td>-5.6%</td>
<td>-1.7%</td>
<td>-1.2%</td>
<td>-2.5%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance fell 7,000 (-2.0%) to 345,000 last week, again matching Consensus expectations. That reversed the prior week's rise (revised up slightly). During the last ten years there has been a 77% (negative) [...]

Initial Jobless Insurance Claims Dip

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040303a.jpg" width="353">
Unit sales of light vehicles ticked up a slight 1.5% m/m in February to 16.37M following a 9.1% January slump. Consensus expectations were for sales of 16.5M.
Car sales recovered 5.0% m/m to 7.41M after two months of decline. Sales of light trucks fell 1.2% following a 10.5% drop in January.
Domestic light vehicle sales rose 0.2% m/m to 13.14M (+6.2% y/y). Imported vehicle sales jumped 7.0% m/m to 3.24M (-0.2% y/y).
Imports captured 19.8% of the US market for new vehicles in February versus 19.7% during 2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col"> Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.37</td>
<td>16.13</td>
<td>4.9%</td>
<td>16.69</td>
<td>16.81</td>
<td>17.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.41</td>
<td>7.06</td>
<td>0.4%</td>
<td>7.63</td>
<td>8.07</td>
<td>8.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.96</td>
<td>9.07</td>
<td>8.9%</td>
<td>9.06</td>
<td>8.74</td>
<td>8.78</td>
</tr>
</tbody>
</table>
Mortgage Applications Up for Third Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040303b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association rose 2.8% last week, the third consecutive weekly gain. Applications rose 6.8% during all of last month versus January.
Applications to refinance jumped another 5.1% w/w as interest rates continued down. Refis for the month were up 20.2% from January and 79.6% from the December low.
Purchase applications slipped 0.2% w/w following two weeks of moderate gain. Purchase applications fell 7.4% in February versus January.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-Year mortgage fell to 5.75% from 5.77% the prior week. The effective rate on a 15-year mortgage fell to 5.10%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

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<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">2/27/04</th>
<th scope="col">2/20/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>878.7</td>
<td>854.5</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>422.6</td>
<td>423.5</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,532.2</td>
<td>3,361.9</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
ISM Non-Manufacturing Index Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040303c.jpg" width="353">
The Business Activity Index for the non-manufacturing sector, reported by the Institute for Supply Management, slipped in February to 60.8 from the record high of 65.7 in January. Consensus expectations had been for a a reading of 64.0.
Since the series&#39; inception in 1997 there has been a 41% correlation between the Business Activity Index and the q/q change in the GDP Service Sector Quantity Index.
New orders fell to 60.3 from the near-record high of 64.9 in January.
The employment index fell for the third month to 52.7. It was the seventh month in eight above 50.
Since the series&#39; inception in 1997 there has been a 62% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.
Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
The seasonally adjusted prices index fell to 57.3 from 59.7 in January.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<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/@EF/@EF03/@EF03.HTM">ISM Non-manufacturing Survey</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">&nbsp;Feb &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>60.8</td>
<td>65.7</td>
<td>54.3</td>
<td>58.1</td>
<td>55.1</td>
<td>48.9</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>57.3</td>
<td>59.7</td>
<td>58.9</td>
<td>56.7</td>
<td>53.9</td>
<td>51.5</td>
</tr>
</tbody>
</table>


</html>

Unit sales of light vehicles ticked up a slight 1.5% m/m in February to 16.37M following a 9.1% January slump. Consensus expectations were for sales of 16.5M. Car sales recovered 5.0% m/m to 7.41M after two months of decline. Sales of [...]

U.S. Light Vehicle Sales Tread Water

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040302c.jpg" width="353">
Total retail sales in Germany rose 2.32% in January from December, the first rise in three months. Sales of staples such as food, beverages and tobacco that have generally been in a rising trend, rose 3.62%. In addition, there were significant increases in sales of some of the more discretionary types of spending. Sales of clothing, footwear and leather rose 3.16% and sales of furniture and related items rose 3.77%. Sales of motor vehicles, however, probably declined in January. While actual data on sales of motor vehicles are not available, the fact that total sales were up 2.32% and sales excluding autos were up 2.36%, suggests that auto sales were lower in January.
The increase in spending in January suggests that the reduction in consumer income taxes of some 15 billion euros that became effective on January 1, 2004 may have outweighed the dampening effect of increased medical costs that also became effective on January 1, 2004. As part of a number of reform measures taken over the past year to increase German competitiveness, consumers have to bear a larger cost of doctor visits, hospital stays and medical equipment, such as wheel chairs.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">German Retail Sales (2000 =100)</th>
<th scope="col">Jan 04</th>
<th scope="col">Dec 03</th>
<th scope="col">Jan 03</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total (2000 Prices)</td>
<td>98.9</td>
<td>97.4</td>
<td>99.9</td>
<td>1.54</td>
<td>-1.00</td>
<td>99.9</td>
<td>100.1</td>
<td>101.5</td>
</tr>
<tr>
<td class="firstcol">Total (Current Prices</td>
<td>101.3</td>
<td>99.0</td>
<td>101.5</td>
<td>2.32</td>
<td>-0.20</td>
<td>101.5</td>
<td>101.4</td>
<td>102.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food</td>
<td>111.5</td>
<td>107.6</td>
<td>108.2</td>
<td>3.62</td>
<td>3.05</td>
<td>109.5</td>
<td>107.5</td>
<td>104.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Clothing</td>
<td>88.1</td>
<td>85.4</td>
<td>93.0</td>
<td>3.16</td>
<td>-5.27</td>
<td>90.3</td>
<td>95.0</td>
<td>99.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Furniture</td>
<td>88.0</td>
<td>84.8</td>
<td>88.3</td>
<td>3.77</td>
<td>-0.34</td>
<td>87.9</td>
<td>88.9</td>
<td>96.6R</td>
</tr>
<tr>
<td class="firstcol">Total Sales (Excl Autos)</td>
<td>99.7</td>
<td>97.4</td>
<td>100.2</td>
<td>2.36</td>
<td>-0.50</td>
<td>99.8</td>
<td>100.4</td>
<td>101.9</td>
</tr>
</tbody>
</table>
</body>
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Total retail sales in Germany rose 2.32% in January from December, the first rise in three months. Sales of staples such as food, beverages and tobacco that have generally been in a rising trend, rose 3.62%. In addition, there were [...]

Retail Sales in Germany Rise in January, the First Rise in Three Months

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040302b.jpg" width="353">
Announced job cuts fell 34.3% m/m in February to the lowest level since last September, according to Challenger, Gray &amp; Christmas.
The three month moving average of job cut announcements fell to 95,942 (-20.8% y/y). During the last ten years there has been an 83% (inverse) correlation between the three month average level of announced job cuts and the y/y percent change payroll employment.
The decline in layoffs was widespread across industries. However, large m/m increases in job cut announcements were tallied in the automotive (-35.6% y/y), electronics (-67.4% y/y), health care (+628.4% y/y) and insurance (+171.1% y/y) industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

<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/SURVEYS/@S3/@S301/@S301.HTM"> Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>77,250</td>
<td>117,556</td>
<td>-44.1%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
Chain Store Sales Nudge Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 2, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040302a.jpg" width="353">
Chain store sales rose fractionally last week. That pulled sales for the near-completed month of February 2.0% above January, according to the ICSC-UBS survey.
During the last ten years there has been a 58% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/28/04</th>
<th scope="col">02/21/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.1</td>
<td>437.9</td>
<td>7.9%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Announced job cuts fell 34.3% m/m in February to the lowest level since last September, according to Challenger, Gray & Christmas. The three month moving average of job cut announcements fell to 95,942 (-20.8% y/y). During the last [...]

Challenger Layoffs Plunge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040301a.jpg" width="353">
Personal income rose just 0.2% (+4.1% y/y) in January versus Consensus expectations for a 0.4% gain. The increase was held back by declines in proprietors&#39; income and rental income which had been quite strong. 
Personal disposable income jumped 0.8% (5.2% y/y), goosed by 4.9% drop in tax payments which are down 5.1% y/y. 
Wages &amp; salaries rose a strong 0.5% (+3.0% y/y) and the decline in December was lessened to -0.1%. The January gain was spread evenly across industries. 
Proprietors&#39; income fell 0.6% (+8.0% y/y) and rental income dropped 1.9% (+17.9% y/y). 
Consumer spending rose a moderate 0.4%, the gain held back by a 3.3% decline in durable goods spending. Unit sales of light vehicles fell 9.0% m/m to 16.09M. Spending on nondurables jumped 1.5% (6.7% y/y) as higher gasoline prices, up 6.3% m/m, lifted the price deflator for nondurables by 0.7%. Services spending rose 0.7% (4.7% y/y). 
The PCE price deflator rose 0.3%. Less food and energy prices rose 0.1% in January (0.8% y/y). 
The savings rate ticked up to 1.8%. 

<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/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.2%</td>
<td>0.3%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>0.5%</td>
<td>5.3%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>1.8%</td>
<td>1.4%</td>
<td>1.7%</td>
<td>2.0%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Price Deflator</td>
<td>0.3%</td>
<td>0.2%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
ISM Factory Index Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040301b.jpg" width="353">
The Purchasing Managers&#146; Composite Index (PMI) released by the Institute of Supply Management fell to 61.4 in February from 63.6 in January. Consensus expectations were for a lesser decline to 62.0.
During the last twenty years there has been a 71% correlation between the level of the Composite Index and the three month growth in factory sector industrial production. There has been a 58% correlation between the level of the Composite Index and quarterly growth in real GDP.
The new orders index dropped to 66.4 from 71.1. The series&#39; high was in December at 73.1. The production index fell to 63.9 from 71.1.
The employment index rose sharply to 56.3, the highest level since December 1987. There has been a 65% correlation during the last twenty years between the ISM employment index and the one-month change in factory sector payrolls.
The inventory index improved to 49.4. The Jan-Feb average of 49.2 is versus 44.5 during all of last year and a low of 39.6 during 2001.
The prices paid index jumped further to 81.5, the highest level since January 1995.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM"> ISM Manufacturing Survey</a></th>
<th scope="col"> Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>61.4</td>
<td>63.6</td>
<td>49.4</td>
<td>53.3</td>
<td>52.4</td>
<td>43.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>66.4</td>
<td>71.1</td>
<td>51.9</td>
<td>58.1</td>
<td>56.6</td>
<td>46.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>81.5</td>
<td>75.5</td>
<td>65.5</td>
<td>59.6</td>
<td>57.6</td>
<td>42.9</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040301c.jpg" width="353">
The value of total construction put in place fell 0.3% in January (+5.4% y/y). December activity was revised up due to a raised figure for nonresidential building. A 0.2% gain was expected for January.
Private residential building activity was unchanged following six months of strong gain (11.4% y/y). Single family home building fell a slight 0.2% (16.1% y/y).
Nonresidential building fell 1.7% following an upwardly revised December. Office building slumped 5.2% (-5.0% y/y) and commercial construction dropped 2.6% (-1.9% y/y). Education spending fell for the fifth month in the last seven (+1.0% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM"> Construction Put-in-place</a></th>
<th scope="col"> Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>5.4%</td>
<td>4.0%</td>
<td>1.1%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.5%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>4.6%</td>
<td>-0.2%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.0%</td>
<td>0.9%</td>
<td>11.4%</td>
<td>10.1%</td>
<td>8.6%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.7%</td>
<td>1.1%</td>
<td>-1.5%</td>
<td>-5.5%</td>
<td>-13.0%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.2%</td>
<td>-0.4%</td>
<td>-0.1%</td>
<td>2.2%</td>
<td>5.3%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

Personal income rose just 0.2% (+4.1% y/y) in January versus Consensus expectations for a 0.4% gain. The increase was held back by declines in proprietors' income and rental income which had been quite strong. Personal disposable [...]

U.S. Personal Income Up

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

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**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

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**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

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**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

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**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

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**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Robert Brusca

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

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**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief: 2004

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