Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525d.jpg" width="353">
The Federal Reserve released commercial bank &quot;loan performance&quot; data for Q1 2007 late yesterday, May 24. This information includes the dollar amounts of delinquent loans and loan charge-offs, which are taken as percentages of bank assets outstanding to produce delinquency and charge-off rates. Both kinds of rates are published with seasonal adjustment and the charge-off rates are annualized.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525e.jpg" width="353">
The overall delinquency rate for Q1 was 1.72%, up 0.03% from Q4&#39;s 1.69%. These are somewhat high compared with the last couple of years, but the period from 2000 to 2004 averaged 2.30%, that is, higher still. The latter time span included the recession following the tech boom/bust cycle. The charge-off rate in Q1 was 0.53%. As with delinquencies, this is higher than the most recent periods, but noticeably lower than the 0.82% average of 2000-2004. Delinquencies are loans overdue by 30 days or more; these remain active loans and continue to accrue interest. Charge-offs are loans removed from the books as uncollectible.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525f.jpg" width="353">
We illustrate the behavior of a few major types of bank loans. Total consumer loan delinquencies were just under 3% of the total amount of those loans, and as with total loans, larger than most recent quarters, but less than earlier times. In the second graph, we see that credit card debt, included within total consumer loans, has about a percentage point higher delinquency rate presently; this too has been higher in the past, both absolutely and relative to the total consumer loan amount.
The behavior of residential real estate credit highlights the secured nature of these loans. As widely publicized, the delinquency rate is rising. The new data here show that slightly more than 2% of banks&#39; residential mortgages were delinquent in Q1, the largest proportion since Q3 2002. As with other loans, these delinquencies also remain lower than most prior periods, although the steep rise from just 1.62% in Q2 last year is discomforting. As to charge-offs, they are much different because they are &quot;net&quot;; the bank forecloses on the house and then sells it, recouping a good part of its loan value. So the amount it must charge off is really quite modest, as seen in the third graph. In looking at the graph, recall that the charge-off rates are annualized, so 0.16% in Q1 is really 0.04% at a quarterly rate. In other measures of mortgage quality, such as those from the Mortgage Bankers&#39; Association, we focus on the foreclosure itself, so those rates are much higher than the net charge-off rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525g.jpg" width="353">
Business loans are seen to behave differently still. Delinquency rates in this sector are still going down, and Q1, at 1.18%, is the lowest in the 20-year history of the delinquency data. Charge-offs came at a 0.39% annual rate in Q1, also among the lowest for this series. These rates have ranged from 0.14% in Q2 1995 to 2.04% in Q3 2002. This latter would be quite severe: in that quarter 0.51% of business loans outstanding were deemed total losses. The US economy was coming out of a shallow recession, so the cyclical sensitivity of business credit is readily apparent.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Commercial Banks, SA</th>
<th scope="col">Q1 2007</th>
<th scope="col">Q4 2006</th>
<th scope="col">Q3 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">Avg 2000 -2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Delinquency Rate: Total </td>
<td>1.72</td>
<td>1.69</td>
<td>1.58</td>
<td>1.50</td>
<td>1.57</td>
<td>1.57</td>
<td>2.30</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Loans</td>
<td>2.96</td>
<td>2.96</td>
<td>2.95</td>
<td>2.79</td>
<td>2.90</td>
<td>2.81</td>
<td>3.40</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential Real Estate</td>
<td>2.04</td>
<td>1.94</td>
<td>1.76</td>
<td>1.59</td>
<td>1.75</td>
<td>1.55</td>
<td>1.93</td>
</tr>
<tr class="odd">
<td class="firstcol">Business*</td>
<td>1.18</td>
<td>1.18</td>
<td>1.26</td>
<td>1.39</td>
<td>1.27</td>
<td>1.51</td>
<td>2.92</td>
</tr>
<tr>
<td class="firstcol">Annual Rates</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Charge-Off Rate: Total </td>
<td>0.53</td>
<td>0.40</td>
<td>0.42</td>
<td>0.40</td>
<td>0.42</td>
<td>0.54</td>
<td>0.82</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Loans</td>
<td>2.44</td>
<td>2.18</td>
<td>2.15</td>
<td>1.84</td>
<td>2.06</td>
<td>2.75</td>
<td>2.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential Real Estate</td>
<td>0.16</td>
<td>0.13</td>
<td>0.11</td>
<td>0.09</td>
<td>0.11</td>
<td>0.08</td>
<td>0.16</td>
</tr>
<tr class="odd">
<td class="firstcol">Business*</td>
<td>0.39</td>
<td>0.31</td>
<td>0.31</td>
<td>0.26</td>
<td>0.30</td>
<td>0.26</td>
<td>1.14</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Reserve released commercial bank "loan performance" data for Q1 2007 late yesterday, May 24. This information includes the dollar amounts of delinquent loans and loan charge-offs, which are taken as percentages of bank [...]

Bank Loan Delinquencies & Charge-Offs Increase in Q1, But Remain Lower than During Last Recession; Great Variation [...]

Robert Brusca

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524b.jpg" width="353">
New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down year/year but only by 10.6%. Conditions are still spotty. While Toll Brothers reported somewhat improved results, that home builder is still not comfortable enough with prospects to give earnings guidance. However, it did say that it had seen glimmerings of strength- not just an abatement of weakness. 
The new home sales report shows the small and volatile Northeast up by 43% Y/Y and the largest region, the South, off by just 3.4% Y/Y. The West and Midwest are off by Y/Y values in the range of 25% to 30%. 
Cleary the rise in sales is the big news in this report. But a rival bit of news is the drop in prices. Last month average and median pries were up Y/Y. But Median prices have swung from +7.9% Y/Y in March to -10.9% Y/Y in April. What&#146;s that line from Frank&#146;s song? Riding high in March, shot down in April &#133;hmmm not quite the verse, but those are the facts. Average prices have switched from a March gain of 8.7% Y/Y to a drop of 3.6% Y/Y in April. The relatively larger drop in median prices speaks of more weakness at the lower priced end of the market and may have something to do with sub-prime problems. Cleary builders have been cutting prices and just as clearly, the strategy has been working. 
If we look at trends in average new home prices around the time of the last recession, we see that builder capitulation on prices was the catalyst in that recession for spurring house prices back up and for ending the weakness in the sector as recovery took hold in the economy at large. House prices then snapped back up into a positive growth range quickly as the economy transitioned from recession to growth. House prices could be performing this same function again. The low prices jump start demand and get some inventory off homebuilder&#146;s hands giving the market a push and creating some buzz at the same time. With continued growth in the rest of the economy housing is able to move ahead and dig itself out of the slump. It looks like a good story to me&#133;Oh, and they all live happily ever after, too.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
New Single Family Home Sales
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="6">Momentum: Annualized Rates Of Change</td>
<td colspan="2">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">As of:</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr class="odd">
<td colspan="8">Month-to-month percent change</td>
</tr>
<tr>
<td class="firstcol">Apr.07</td>
<td>16.2%</td>
<td>3.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>8.5%</td>
<td>-11.1%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Mar.07</td>
<td>-1.4%</td>
<td>77.8%</td>
<td>1.6%</td>
<td>-8.9%</td>
<td>-2.9%</td>
<td>3.0%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Feb.07</td>
<td>-3.8%</td>
<td>-27.4%</td>
<td>-25.9%</td>
<td>-2.0%</td>
<td>21.2%</td>
<td>-1.7%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="8">Annualized Rates</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>40.9%</td>
<td>135.5%</td>
<td>-110.8%</td>
<td>56.1%</td>
<td>110.6%</td>
<td>-34.2%</td>
<td>-18.3%</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>6.1%</td>
<td>225.6%</td>
<td>-24.8%</td>
<td>12.9%</td>
<td>-25.7%</td>
<td>-16.3%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">1-Yr</td>
<td>-10.6%</td>
<td>43.1%</td>
<td>-28.1%</td>
<td>-3.4%</td>
<td>-25.4%</td>
<td>-10.9%</td>
<td>-3.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down [...]

New Home Sales Jump and Prices Dive. Bad News as Good?

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524a.jpg" width="353">
Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be strong as well. Excluding aircraft, nondefense capital goods orders are up strongly for two straight months. Shipments and most cuts on capital goods shipments were strong in the month. 
The chart for durable goods looks immediately better. 
While three-month growth rates for durable goods can be very volatile, the graphs on the left documents a strong rise in new orders. A reversal (one month only) in shipments growth now shows advance instead of decline. And, more impressive, is the reduction in the rate of slowing for the declining pace of inventory growth. If firms are no longer seeking to cut inventory growth that could be very helpful to the sector assuming, of course, that the shipment pick up and order pick up are for real. 
Diffusion to relieve confusion&#133; 
The statistics in the table below show that suddenly durable goods shipments and orders join unfilled orders in revealing that growth is broad-based across industries. Our (proprietary) diffusion readings are generally in the 70s or higher; 50 is neutral. These readings look for acceleration in sequential annualized growth rates (3-month Vs six-month, six-month Vs Yr/Yr, Yr/Yr Vs Yr ago, etc). We obtain these results from calculations of annualized growth rates performed across the main durables sectors. Diffusion calculations are helpful in this many-faceted report to distill common themes from an otherwise confusing array of components and subcomponent constructions. As of April, the various reading have begun to show signs of strength across most main sectors.
Sales have begun to exceed inventory growth in most industries over three and six months but are still lower in most for year/year growth (diffusion of 0.14 on this basis). Still, that weakness is an air-pocket of sorts since sales have begun to outpace inventories again just as they had done so one year ago. The report seems to show that the period of distress may have been put behind us even though the month&#146;s reading was no clarion call to growth. It was however a step in the right direction that followed two previous stronger steps.
Orders in the once weak machinery category have broken higher. Primary metals orders again are very strong and transportation orders are strong again. Shipments data show some spottiness across industries but where there is strength it is very strong: primary metals, machinery and electrical equipment.
The report is the most upbeat from durables that we have seen for sometime.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
All Main Industries DIFFUSION Category
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mo</td>
<td>6Mo</td>
<td>9Mo</td>
<td>12Mo</td>
<td>Year Ago</td>
</tr>
<tr class="odd">
<td colspan="6">Durables Diffusion</td>
</tr>
<tr>
<td class="firstcol"> Shipments</td>
<td>71.4</td>
<td>85.7</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Orders</td>
<td>100.0</td>
<td>71.4</td>
<td>42.9</td>
<td>57.1</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Unfilled Orders</td>
<td>100.0</td>
<td>100.0</td>
<td>85.7</td>
<td>100.0</td>
<td>85.7</td>
</tr>
<tr>
<td class="firstcol"> Inventories</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
<td>100.0</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> S&gt;I Diffusion</td>
<td>85.7</td>
<td>57.1</td>
<td>28.6</td>
<td>14.3</td>
<td>57.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be [...]

U.S. Durable Goods Orders: Rise and Shine, A New Dawn?

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524a.jpg" width="353">
Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be strong as well. Excluding aircraft, nondefense capital goods orders are up strongly for two straight months. Shipments and most cuts on capital goods shipments were strong in the month. 
The chart for durable goods looks immediately better. 
While three-month growth rates for durable goods can be very volatile, the graphs on the left documents a strong rise in new orders. A reversal (one month only) in shipments growth now shows advance instead of decline. And, more impressive, is the reduction in the rate of slowing for the declining pace of inventory growth. If firms are no longer seeking to cut inventory growth that could be very helpful to the sector assuming, of course, that the shipment pick up and order pick up are for real. 
Diffusion to relieve confusion&#133; 
The statistics in the table below show that suddenly durable goods shipments and orders join unfilled orders in revealing that growth is broad-based across industries. Our (proprietary) diffusion readings are generally in the 70s or higher; 50 is neutral. These readings look for acceleration in sequential annualized growth rates (3-month Vs six-month, six-month Vs Yr/Yr, Yr/Yr Vs Yr ago, etc). We obtain these results from calculations of annualized growth rates performed across the main durables sectors. Diffusion calculations are helpful in this many-faceted report to distill common themes from an otherwise confusing array of components and subcomponent constructions. As of April, the various reading have begun to show signs of strength across most main sectors.
Sales have begun to exceed inventory growth in most industries over three and six months but are still lower in most for year/year growth (diffusion of 0.14 on this basis). Still, that weakness is an air-pocket of sorts since sales have begun to outpace inventories again just as they had done so one year ago. The report seems to show that the period of distress may have been put behind us even though the month&#146;s reading was no clarion call to growth. It was however a step in the right direction that followed two previous stronger steps.
Orders in the once weak machinery category have broken higher. Primary metals orders again are very strong and transportation orders are strong again. Shipments data show some spottiness across industries but where there is strength it is very strong: primary metals, machinery and electrical equipment.
The report is the most upbeat from durables that we have seen for sometime.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
All Main Industries DIFFUSION Category
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mo</td>
<td>6Mo</td>
<td>9Mo</td>
<td>12Mo</td>
<td>Year Ago</td>
</tr>
<tr class="odd">
<td colspan="6">Durables Diffusion</td>
</tr>
<tr>
<td class="firstcol"> Shipments</td>
<td>71.4</td>
<td>85.7</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Orders</td>
<td>100.0</td>
<td>71.4</td>
<td>42.9</td>
<td>57.1</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Unfilled Orders</td>
<td>100.0</td>
<td>100.0</td>
<td>85.7</td>
<td>100.0</td>
<td>85.7</td>
</tr>
<tr>
<td class="firstcol"> Inventories</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
<td>100.0</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> S&gt;I Diffusion</td>
<td>85.7</td>
<td>57.1</td>
<td>28.6</td>
<td>14.3</td>
<td>57.1</td>
</tr>
</tbody>
</table>
New Home Sales Jump and Prices Dive. Bad News as Good? 
by <a href="/comment/Brusca.html">Robert Brusca</a> May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524b.jpg" width="353">
New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down year/year but only by 10.6%. Conditions are still spotty. While Toll Brothers reported somewhat improved results, that home builder is still not comfortable enough with prospects to give earnings guidance. However, it did say that it had seen glimmerings of strength- not just an abatement of weakness. 
The new home sales report shows the small and volatile Northeast up by 43% Y/Y and the largest region, the South, off by just 3.4% Y/Y. The West and Midwest are off by Y/Y values in the range of 25% to 30%. 
Cleary the rise in sales is the big news in this report. But a rival bit of news is the drop in prices. Last month average and median pries were up Y/Y. But Median prices have swung from +7.9% Y/Y in March to -10.9% Y/Y in April. What&#146;s that line from Frank&#146;s song? Riding high in March, shot down in April &#133;hmmm not quite the verse, but those are the facts. Average prices have switched from a March gain of 8.7% Y/Y to a drop of 3.6% Y/Y in April. The relatively larger drop in median prices speaks of more weakness at the lower priced end of the market and may have something to do with sub-prime problems. Cleary builders have been cutting prices and just as clearly, the strategy has been working. 
If we look at trends in average new home prices around the time of the last recession, we see that builder capitulation on prices was the catalyst in that recession for spurring house prices back up and for ending the weakness in the sector as recovery took hold in the economy at large. House prices then snapped back up into a positive growth range quickly as the economy transitioned from recession to growth. House prices could be performing this same function again. The low prices jump start demand and get some inventory off homebuilder&#146;s hands giving the market a push and creating some buzz at the same time. With continued growth in the rest of the economy housing is able to move ahead and dig itself out of the slump. It looks like a good story to me&#133;Oh, and they all live happily ever after, too.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
New Single Family Home Sales
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="6">Momentum: Annualized Rates Of Change</td>
<td colspan="2">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">As of:</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr class="odd">
<td colspan="8">Month-to-month percent change</td>
</tr>
<tr>
<td class="firstcol">Apr.07</td>
<td>16.2%</td>
<td>3.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>8.5%</td>
<td>-11.1%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Mar.07</td>
<td>-1.4%</td>
<td>77.8%</td>
<td>1.6%</td>
<td>-8.9%</td>
<td>-2.9%</td>
<td>3.0%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Feb.07</td>
<td>-3.8%</td>
<td>-27.4%</td>
<td>-25.9%</td>
<td>-2.0%</td>
<td>21.2%</td>
<td>-1.7%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="8">Annualized Rates</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>40.9%</td>
<td>135.5%</td>
<td>-110.8%</td>
<td>56.1%</td>
<td>110.6%</td>
<td>-34.2%</td>
<td>-18.3%</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>6.1%</td>
<td>225.6%</td>
<td>-24.8%</td>
<td>12.9%</td>
<td>-25.7%</td>
<td>-16.3%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">1-Yr</td>
<td>-10.6%</td>
<td>43.1%</td>
<td>-28.1%</td>
<td>-3.4%</td>
<td>-25.4%</td>
<td>-10.9%</td>
<td>-3.6%</td>
</tr>
</tbody>
</table>
-3.6% 
by <a href="/comment/Brusca.html">Robert Brusca</a> Germany’s IFO Steadies But Index Shows Threat of Decay May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524c.jpg" width="353">
Germany&#146;s IFO index steadied at 108.6 in May a tick below its current cycle peak at 108.7 reached in December 2006. The reading continues to be a strong one and it is said to point to further expansion. But the index is slowing its rate of ascent, as the accompanying chart shows. On that score the good news this month is that expectations improved (to 104.8 in May from 104.3 in April) and that was enough to hike the growth rate for expectations and stave off a decay in the growth of the overall index. The index&#146;s peak growth rate came in mid- 2006 and it has been slowing ever since. The pace of decline reached a local low in March of this year but the renewed upward momentum in the growth rate is without conviction. Right now the trend is up for grabs even though the expectations index moved into a positive growth phase this month following four straight months of negative readings. The current situation index continues to improve at a decelerating pace.
While the index is said to portray conditions of continuing growth, we can see the opposite signal may well be waiting in the wings to supplant it. 
The diffusion readings for the IFO are up to date for May although much of the sector detail for this report is held back for another week. The diffusion indexes show us that overall conditions have been little changed month to month. The overall diffusion index is a tick lower at 16.3. Manufacturing is a bit stronger moving up to 27.6 from 27.1. Construction, however, is slipping. The wholesale sector improved sharply in May rising to 18.4 from a 17.2 in April to 18.4 in May. Retail, however gave ground as did the services sector. 
However the service sector is still at a relatively strong reading in its range (top 5%), while retailing is weak (middle of range at 56.6 percentile). Manufacturing is still the flagship of strength sitting at the top of its range of values back to 1991. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Summary of IFO Sector Climate Readings
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>&nbsp;</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Average</td>
<td>Median</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>% Range</td>
</tr>
<tr class="odd">
<td class="firstcol">All Sectors</td>
<td>16.3</td>
<td>16.4</td>
<td>-8.8</td>
<td>-9.6</td>
<td>16.5</td>
<td>-30.6</td>
<td>47.1</td>
<td>99.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>27.6</td>
<td>27.1</td>
<td>-1.2</td>
<td>0.3</td>
<td>27.6</td>
<td>-35.6</td>
<td>63.2</td>
<td>100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-14.6</td>
<td>-13.9</td>
<td>-29.1</td>
<td>-32.2</td>
<td>1.4</td>
<td>-50.7</td>
<td>52.1</td>
<td>69.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale</td>
<td>18.4</td>
<td>17.2</td>
<td>-14.8</td>
<td>-16.5</td>
<td>23.3</td>
<td>-39.6</td>
<td>62.9</td>
<td>92.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-3.2</td>
<td>-0.5</td>
<td>-14.7</td>
<td>-14.8</td>
<td>25.2</td>
<td>-40.3</td>
<td>65.5</td>
<td>56.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>26.5</td>
<td>28.5</td>
<td>8.2</td>
<td>7.8</td>
<td>28.5</td>
<td>-15.7</td>
<td>44.2</td>
<td>95.5%</td>
</tr>
<tr>
<td colspan="4">* May 2001 for Services</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
95.5% 
by <a href="/comment/Stone.html">Carol Stone</a> Canada Corporations Operating Profits Bolstered by Higher Commodity Prices, But ROE Edges Down May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524d.jpg" width="353">
Corporate profits in Canada picked up vigorously in Q1, by 12.2% at an annual rate over Q4 2006 to C$63.8 billion, a record high. While profits have expanded more strongly in recent years, they had slowed in 2006, so this was the best performance since Q4 2005.
As might be expected, the gain was generated in commodity-related industries, where prices have been rising rapidly. A prime example is the oil &amp; gas sector, which staged something of a rebound from a steep decline in Q4. Metals processing industries within the manufacturing sector also saw increases, with manufacturing as a whole up 7.4% on the quarter (at a quarterly rate) and 15.2% from a year ago. Manufacturing profits, as evident in the second graph, struggled in 2005 and 2006, so this Q1 year-on-year performance is the best since late 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524e.jpg" width="353">
Among non-manufacturing sectors, retailing, information and culture, and business services had bounces in their operating profits after weak periods. Real estate and transportation extended trends of less dramatic but consistent growth.
Financial industries, in contrast, saw their profits fall, particularly among security dealers and insurance companies. The financial sector as a whole experienced a decline of 2.5% on the quarter; however, they had been strong in Q4, so the year-on-year result was up 10.4%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524f.jpg" width="353">
These generally good operating results were offset by lower non-operating revenues and higher expenses and taxes, so that profits after tax rose only slightly, from C$41.6 billion in Q4 to C$42.0 billion. On a not seasonally adjusted basis, this was actually a small decline from Q4, cutting the rate of return on shareholders&#39; equity from 11.94% to 11.76%.
All of these data are contained in Haver&#39;s CANSIM database from Statistics Canada.The profits series are reported under &quot;National Accounts&quot;, and the non-operating data in &quot;Balance Sheet and Income Statement&quot; and &quot;Statement of Change in Cash Position&quot; in the &quot;Financial&quot; section. Data are available for 17 nonfinancial industries and five financial industries. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CANADA, Bil.C$</th>
<th scope="col">Q1 2007*</th>
<th scope="col">Q4 2006*</th>
<th scope="col">Q1 2006*</th>
Quarterly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">Total Operating Profit</td>
<td>63.8</td>
<td>62.0</td>
<td>59.6</td>
<td>60.9</td>
<td>55.9</td>
<td>48.5</td>
</tr>
<tr>
<td class="firstcol">% Change (Qtrs at Ann Rate)</td>
<td>12.2%</td>
<td>4.1%</td>
<td>7.5% (Yr/Yr)</td>
<td>8.8%</td>
<td>15.3%</td>
<td>19.9%</td>
</tr>
<tr>
<td class="firstcol">Nonfinancial Industries</td>
<td>46.2</td>
<td>43.9</td>
<td>43.8</td>
<td>44.1</td>
<td>41.1</td>
<td>35.1</td>
</tr>
<tr>
<td class="firstcol">Oil &amp; Gas Extraction</td>
<td>7.4</td>
<td>7.1</td>
<td>8.6</td>
<td>8.1</td>
<td>7.4</td>
<td>5.1</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>11.8</td>
<td>10.9</td>
<td>10.5</td>
<td>10.7</td>
<td>11.1</td>
<td>11.3</td>
</tr>
<tr>
<td class="firstcol">Finance &amp; Insurance </td>
<td>17.6</td>
<td>18.1</td>
<td>15.9</td>
<td>16.8</td>
<td>14.9</td>
<td>13.5</td>
</tr>
<tr>
<td class="firstcol">Total Net Profit</td>
<td>42.0</td>
<td>41.6</td>
<td>37.8</td>
<td>42.1</td>
<td>39.4</td>
<td>33.1</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. Durable Goods Orders: Rise and Shine: A New Dawn?

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523a.jpg" width="353">
Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in data seasonally adjusted by Haver Analytics. On a year-to-year basis, the more closely watched not-seasonally-adjusted figure was up 5.8%, the largest growth since Q2 2005.
Among industries, the boost to year/year growth came from the leader in Chile, copper mining (6.2% of GDP in 2006), which escalated from a mere 0.5% in Q4 to 7.1% in the latest period. Another major contributor was the trade and hotel/restaurant sector (10.0% of GDP), which picked up from 3.8% in Q4 to 6.9% in Q1. Other gains were widespread as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523b.jpg" width="353">
The Chilean economy does appear to be diversifying. While copper mining remains the keystone, other industry sectors are moving ahead. The value-added data for industries are available since 2003. In the second graph, we&#39;ve indexed the NSA figures for Q2 2003 and then applied a 4-quarter moving average. This illustrates the &quot;nested function&quot; feature of the new DLXVG3, now in internal testing here at Haver. We&#39;ve also edited the titles a bit -- you can already do that, of course -- but ordinarily they will show the database &quot;code&quot; for the series to signal to the analyst that calculations are in &quot;nested&quot; mode. Anyway, this graph indicates that copper production has held basically steady over the last four years, but financial services are growing more rapidly than GDP. Other service sectors, especially communications, are also expanding.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523c.jpg" width="353">
On the demand side, every major line item performed well in Q1. Private consumption was up 7.7% from the year earlier versus 6.7% in Q4. Fixed investment accelerated to 7.9% in Q1 from 3.0% in Q4. And exports surged by 9.5% following &quot;just&quot; 2.3%, while imports grew 10.0% compared with 8.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CHILE (% Changes)</th>
<th scope="col">Q1 2007(SAQR*)</th>
<th scope="col">Q4 2006 (SAQR*)</th>
<th scope="col">Q3 2006 (SAQR*) </th>
<th scope="col">Year/Year</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>3.0</td>
<td>2.0</td>
<td>-0.3</td>
<td>5.8</td>
<td>4.0</td>
<td>5.7</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">Copper Industry</td>
<td>5.3</td>
<td>6.7</td>
<td>-4.5</td>
<td>7.1</td>
<td>0.1</td>
<td>-2.5</td>
<td>4.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>3.9</td>
<td>1.3</td>
<td>1.3</td>
<td>7.7</td>
<td>7.1</td>
<td>7.9</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Gross Fixed Investment</td>
<td>5.2</td>
<td>0.6</td>
<td>3.0</td>
<td>7.9</td>
<td>4.0</td>
<td>21.9</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">Exports G &amp; S</td>
<td>6.2</td>
<td>-1.0</td>
<td>3.1</td>
<td>9.5</td>
<td>4.2</td>
<td>3.5</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports G &amp; S</td>
<td>3.8</td>
<td>2.6</td>
<td>2.5</td>
<td>10.0</td>
<td>9.4</td>
<td>17.7</td>
<td>16.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in [...]

Chile GDP Growth Picks Up in Q1; Copper Up, but Other Sectors Also Expanding

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523d.jpg" width="353">
The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The services line seems to be accelerating. But a closer look at the data shows that services lay off events for January and February are below the levels in 2006; cumulative layoff events did rise in March above what is seasonably normal and that has boosted the year to date total to be even with 2006, after being below it for January and February.
As far as the number of workers laid off, those figures are lower in Q1 2007 than in Q1 2006. Their pattern has been choppy.
The big picture trend seems to show some slight upward pressure on the incidence of layoff events.
But if we construct the same sort of chart on the number of persons laid off, instead of events, the layoff total for Q1 is down sharply. So while the number of incidents may have risen in the service sector for April, for Q1, taken as a whole, the number of workers laid off is down sharply. Actually, the number of service workers laid off in mass events according to the definition* is closer to half of that for Q1 last year. For MFG the number of workers laid off is also low relative to last year and relative to this expansion cycle. Construction layoffs are up significantly in Q1 2007 compared to Q1 2006, at 27,000 compared to 21,341 in the year-ago quarter. But the number of construction layoffs is still moderate by the standards of the past six years where layoffs in Q1 had previously averaged 26,036. 
On balance there is no evidence of layoffs rising in a significant way in any sector although there is some tentative evidence that the incidence of layoff events - apparently smaller events -- may have stepped up its pace. Construction may yet prove to be an exception though the data are not clear.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Mass Corporate Layoffs
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="4">Number of Separations</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Manufacturing</td>
<td>Services</td>
<td>Construction</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>51,424</td>
<td>59,545</td>
<td>27,457</td>
</tr>
<tr>
<td colspan="4">Change Yr Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>-11,712</td>
<td>-38,688</td>
<td>6,116</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-06</td>
<td>22,079</td>
<td>17,573</td>
<td>5,572</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-06</td>
<td>530</td>
<td>-47,862</td>
<td>5,611</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-06</td>
<td>15,456</td>
<td>32,559</td>
<td>710</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The [...]

U.S. Mass Corporate Layoffs Still Are Subdued

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523a.jpg" width="353">
Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in data seasonally adjusted by Haver Analytics. On a year-to-year basis, the more closely watched not-seasonally-adjusted figure was up 5.8%, the largest growth since Q2 2005.
Among industries, the boost to year/year growth came from the leader in Chile, copper mining (6.2% of GDP in 2006), which escalated from a mere 0.5% in Q4 to 7.1% in the latest period. Another major contributor was the trade and hotel/restaurant sector (10.0% of GDP), which picked up from 3.8% in Q4 to 6.9% in Q1. Other gains were widespread as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523b.jpg" width="353">
The Chilean economy does appear to be diversifying. While copper mining remains the keystone, other industry sectors are moving ahead. The value-added data for industries are available since 2003. In the second graph, we&#39;ve indexed the NSA figures for Q2 2003 and then applied a 4-quarter moving average. This illustrates the &quot;nested function&quot; feature of the new DLXVG3, now in internal testing here at Haver. We&#39;ve also edited the titles a bit -- you can already do that, of course -- but ordinarily they will show the database &quot;code&quot; for the series to signal to the analyst that calculations are in &quot;nested&quot; mode. Anyway, this graph indicates that copper production has held basically steady over the last four years, but financial services are growing more rapidly than GDP. Other service sectors, especially communications, are also expanding.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523c.jpg" width="353">
On the demand side, every major line item performed well in Q1. Private consumption was up 7.7% from the year earlier versus 6.7% in Q4. Fixed investment accelerated to 7.9% in Q1 from 3.0% in Q4. And exports surged by 9.5% following &quot;just&quot; 2.3%, while imports grew 10.0% compared with 8.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CHILE (% Changes)</th>
<th scope="col">Q1 2007(SAQR*)</th>
<th scope="col">Q4 2006 (SAQR*)</th>
<th scope="col">Q3 2006 (SAQR*) </th>
<th scope="col">Year/Year</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>3.0</td>
<td>2.0</td>
<td>-0.3</td>
<td>5.8</td>
<td>4.0</td>
<td>5.7</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">Copper Industry</td>
<td>5.3</td>
<td>6.7</td>
<td>-4.5</td>
<td>7.1</td>
<td>0.1</td>
<td>-2.5</td>
<td>4.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>3.9</td>
<td>1.3</td>
<td>1.3</td>
<td>7.7</td>
<td>7.1</td>
<td>7.9</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Gross Fixed Investment</td>
<td>5.2</td>
<td>0.6</td>
<td>3.0</td>
<td>7.9</td>
<td>4.0</td>
<td>21.9</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">Exports G &amp; S</td>
<td>6.2</td>
<td>-1.0</td>
<td>3.1</td>
<td>9.5</td>
<td>4.2</td>
<td>3.5</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports G &amp; S</td>
<td>3.8</td>
<td>2.6</td>
<td>2.5</td>
<td>10.0</td>
<td>9.4</td>
<td>17.7</td>
<td>16.9</td>
</tr>
</tbody>
</table>
U.S. Mass Corporate Layoffs Still Are Subdued 
by <a href="/comment/Brusca.html">Robert Brusca</a> May 23, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523d.jpg" width="353">
The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The services line seems to be accelerating. But a closer look at the data shows that services lay off events for January and February are below the levels in 2006; cumulative layoff events did rise in March above what is seasonably normal and that has boosted the year to date total to be even with 2006, after being below it for January and February.
As far as the number of workers laid off, those figures are lower in Q1 2007 than in Q1 2006. Their pattern has been choppy.
The big picture trend seems to show some slight upward pressure on the incidence of layoff events.
But if we construct the same sort of chart on the number of persons laid off, instead of events, the layoff total for Q1 is down sharply. So while the number of incidents may have risen in the service sector for April, for Q1, taken as a whole, the number of workers laid off is down sharply. Actually, the number of service workers laid off in mass events according to the definition* is closer to half of that for Q1 last year. For MFG the number of workers laid off is also low relative to last year and relative to this expansion cycle. Construction layoffs are up significantly in Q1 2007 compared to Q1 2006, at 27,000 compared to 21,341 in the year-ago quarter. But the number of construction layoffs is still moderate by the standards of the past six years where layoffs in Q1 had previously averaged 26,036. 
On balance there is no evidence of layoffs rising in a significant way in any sector although there is some tentative evidence that the incidence of layoff events - apparently smaller events -- may have stepped up its pace. Construction may yet prove to be an exception though the data are not clear.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Mass Corporate Layoffs
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="4">Number of Separations</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Manufacturing</td>
<td>Services</td>
<td>Construction</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>51,424</td>
<td>59,545</td>
<td>27,457</td>
</tr>
<tr>
<td colspan="4">Change Yr Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>-11,712</td>
<td>-38,688</td>
<td>6,116</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-06</td>
<td>22,079</td>
<td>17,573</td>
<td>5,572</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-06</td>
<td>530</td>
<td>-47,862</td>
<td>5,611</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-06</td>
<td>15,456</td>
<td>32,559</td>
<td>710</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522a.jpg" width="353">
Among the Euro area analysts and institutional investors surveyed by the Center for European Economic Research (ZEW) in Manheim Germany, the excess of those who feel good about the current situation over those who feel bad rose to an all time high of 81.8% in May, an increase of 11.9 percentage points over April, and 63.5 points above May 2006. These same financial types became more optimistic regarding the economic outlook six months ahead. The optimists exceeded the pessimists by 24.0% in May. This is 11.6 percentage points higher than in April, but 26.0 percentage points below May of 2006. In the eight plus years that the data have been available, the level of optimism seems cautious as can be seen in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522b.jpg" width="353">
A similar pattern emerges in the ZEW results for Germany alone, as shown in the second chart. An excess of 88% (again an all time high) of the respondents found current conditions good over those who found them bad. This was 11.1 percentage points above April and 79.3 points above May 2006. The excess of optimists over pessimists regarding the economic outlook rose to 24.0% in May, 7.5 percentage points above April, but 26.0 points below May 2006. It is also well below the long term average of expectations in Germany, which is an excess of optimists over pessimists of 33%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522c.jpg" width="353">
Two indicators of consumer confidence were also released today--one for Italy and one for Turkey. Consumer confidence in Italy, expressed in terms of an index with the base 1980, has increased irregularly since May 2004 as can be seen in the third chart that shows the historical record for this series. The May figure was 109.5 up 1.6 points from April but still well below the previous peaks of 126.9 in February 2002 and 130.7 in November 1988.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522d.jpg" width="353">
The Turkish measure of consumer confidence has four components: Personal Financial Standing, General Economic Situation, Expenditures and Price Expectations. The results of the surveys of these factors are shown as four diffusion indexes. The general index is calculated by taking arithmetic means of the four diffusion indexes. The range of the general index is 0 to 200. If it is above (below)100, it means consumer confidence is optimistic (pessimistic). A value of 100 indicates a neutral position. Data are available only since December 2003. The fourth chart shows that while consumer confidence in Turkey has recovered from a low point reached in July 2006, it is still in pessimistic territory.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">BUSINESS AND CONSUMER CONFIDENCE IN EUROPE</th>
<th scope="col">May 07</th>
<th scope="col">Apr 07&nbsp;</th>
<th scope="col">May 06</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area&nbsp; (ZEW)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions % Balance</td>
<td>81.8</td>
<td>69.9</td>
<td>18.3</td>
<td>11.9</td>
<td>63.5</td>
<td>23.8</td>
<td>-28.7</td>
<td>-41.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations Six Months Ahead, &nbsp; % Balance</td>
<td>22.3</td>
<td>10.7</td>
<td>47.7</td>
<td>11.6</td>
<td>-25.4</td>
<td>26.6</td>
<td>32.3</td>
<td>52.1</td>
</tr>
<tr>
<td class="firstcol"> Germany (ZEW) </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Conditions % Balance</td>
<td>88.0</td>
<td>76.9</td>
<td>8.7</td>
<td>11.1</td>
<td>79.3</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations Six Months Ahead, &nbsp; % Balance</td>
<td>24.0</td>
<td>16.5</td>
<td>50.0</td>
<td>7.5</td>
<td>-26.0</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>May 07</td>
<td>Apr 07&nbsp;</td>
<td>Mar 07</td>
<td>Feb 07&nbsp;</td>
<td>Jan 07</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Consumer Confidence&nbsp; (1980=100) </td>
<td>109.5</td>
<td>107.9</td>
<td>112.5</td>
<td>111.6</td>
<td>110.3</td>
<td>105.7</td>
<td>104.2</td>
<td>101.5</td>
</tr>
<tr>
<td class="firstcol"> Turkey&nbsp; </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;Consumer Confidence (Index &gt;100, &nbsp;Optimistic: &lt; 100, Pessimistic: &nbsp;100=Neutral) </td>
<td>n.a.</td>
<td>93.7</td>
<td>92.4</td>
<td>92.7</td>
<td>91.8</td>
<td>95.6</td>
<td>100.2</td>
<td>106.7</td>
</tr>
</tbody>
</table>
</body>
</html>

Among the Euro area analysts and institutional investors surveyed by the Center for European Economic Research (ZEW) in Manheim Germany, the excess of those who feel good about the current situation over those who feel bad rose to an [...]

European Surveys of Business and Consumer Confidence Show Increases in Optimism but Level Remains Subdued

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

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

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

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

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

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

260205C15.jpg

260205D15.jpg

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

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

Sandy Batten

260205A2.jpg

260205B2.jpg

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

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

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

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

260205C2.jpg

260205D2.jpg

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

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

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

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

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

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

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

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

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

Economy in Brief: 2007

Jump to:

Bank Loan Delinquencies & Charge-Offs Increase in Q1, But Remain Lower than During Last Recession; Great Variation [...]

New Home Sales Jump and Prices Dive. Bad News as Good?

U.S. Durable Goods Orders: Rise and Shine, A New Dawn?

U.S. Durable Goods Orders: Rise and Shine: A New Dawn?

Chile GDP Growth Picks Up in Q1; Copper Up, but Other Sectors Also Expanding

U.S. Mass Corporate Layoffs Still Are Subdued

Chile GDP Growth Picks Up in Q1; Copper Up, but Other Sectors Also Expanding

European Surveys of Business and Consumer Confidence Show Increases in Optimism but Level Remains Subdued