Louise Curley

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<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100118a.jpg" align="right" border="0" height="265" width="353"></p>
<p>A lot of data from Japan were released today: Industrial
Production, Operating Rates, Retail and Wholesale Trade, Cash Earnings
and Input and Output prices. All the data, except for the input and
output prices which are for December, are for November,</p>
<p>Input prices in the manufacturing industry have risen and
fallen faster than output prices as shown in the first chart.<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100118b.jpg" style="width: 353px; height: 265px;" align="right" height="265" width="353">
The
swings in the price of oil probably account for much of the greater
volatility in input prices than in output prices. While other factors
influence profits, in the manufacturing industry, the performance of
input and output prices has tended to depress profits.</p>
<p>
One of the other factors influencing profits is employment
cost and here the results for manufacturing are positive. Although the
year to year changes in monthly cash wages have recovered from the big
decline of more than 13% in June they were still 4.2% below the year
ago figure in November, as shown in the second chart</p>
<p>Both industrial production and operating rates continue to
improve from the big year over year decline reached in February of this
year, as can be seen in the third chart. Industrial production, which
had declined 37% from February 2008 to February 2009, was 5.5% below
the year ago figure in November. Comparable figures for operating rates
are 44% and 4.1%.</p>
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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100118c.jpg" style="width: 312px; height: 265px;" height="265" width="312"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100118d.jpg" style="width: 312px; height: 265px;" height="265" width="353">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>JAPAN&nbsp;
(Y/Y% Changes)</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
<th scope="col"><b>Sep 09</b></th>
<th scope="col"><b>Aug 09</b></th>
<th scope="col"><b>July 09</b></th>
<th scope="col"><b>June 09</b></th>
<th scope="col"><b>May 09</b></th>
<th scope="col"><b>Apr 09</b></th>
<th scope="col"><b>Mar 09</b></th>
<th scope="col"><b>Feb 09</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Input Prices (Manufacturing)</td>
<td>-3.50</td>
<td>-8.15</td>
<td>-13.40</td>
<td>-17.30</td>
<td>-19.69</td>
<td>-19.30</td>
<td>-17.33</td>
<td>-15.10</td>
<td>-13.68</td>
<td>-7.93</td>
<td>-8.85</td>
</tr>
<tr>
<td class="firstcol">Output Prices (Manufacturing)</td>
<td>-3.68</td>
<td>-5.72</td>
<td>-8.18</td>
<td>-10.38</td>
<td>-11.30</td>
<td>-11.33</td>
<td>-9.21</td>
<td>-7.82</td>
<td>-6.03</td>
<td>-4.54</td>
<td>-8.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Cash Earnings (Manufacturing)</td>
<td>&nbsp;</td>
<td>-4.17</td>
<td>-2.61</td>
<td>-2.79</td>
<td>-4.37</td>
<td>-8.66</td>
<td>-13.27</td>
<td>-5.34</td>
<td>-5.30</td>
<td>-5.88</td>
<td>-5.42</td>
</tr>
<tr>
<td class="firstcol">Industrial Production
(Manufacturing)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>-5.48</td>
<td>-13.99</td>
<td>-17.28</td>
<td>-18.94</td>
<td>-22.66</td>
<td>-24.63</td>
<td>-27.72</td>
<td>-30.71</td>
<td>-35.02</td>
<td>-36.88</td>
</tr>
<tr class="odd">
<td class="firstcol">Operating Rates&nbsp;
(Manufacturing)</td>
<td>&nbsp;</td>
<td>-4.07</td>
<td>-16.52</td>
<td>-20.04</td>
<td>-20.31</td>
<td>-24.79</td>
<td>-26.93</td>
<td>-32.46</td>
<td>-35.46</td>
<td>-41.15</td>
<td>-44.31</td>
</tr>
<tr>
<td class="firstcol">Wholesale Trade</td>
<td>&nbsp;</td>
<td>-18.75</td>
<td>-24.22</td>
<td>-27.14</td>
<td>-28.04</td>
<td>-29.82</td>
<td>-28.67</td>
<td>-30.35</td>
<td>-27.78</td>
<td>-28.22</td>
<td>-25.74</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Trade</td>
<td>&nbsp;</td>
<td>-1.10</td>
<td>-0.98</td>
<td>-1.35</td>
<td>-1.80</td>
<td>-2.40</td>
<td>-2.91</td>
<td>-2.74</td>
<td>-2.81</td>
<td>-3.80</td>
<td>-5.73</td>
</tr>
</tbody>
</table>
</body></html>

A lot of data from Japan were released today: Industrial Production, Operating Rates, Retail and Wholesale Trade, Cash Earnings and Input and Output prices. All the data, except for the input and output prices which are for December, [...]

Japan Data Show Improvement butIndicators Still Below a Year Ago

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Sandy Batten

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The Consumer Price Index increased 0.4% m/m in December, up from 0.3% m/m in November and 0.2% m/m in each of the four preceding months. The Action Economics Forecast Survey had looked for a 0.3% m/m gain. The December monthly increase pushed up the y/y rate to 2.9%, its highest since February, from 2.7% in November. The three-month increase in the headline CPI jumped to 3.9% at an annual rate in December from 3.0% in November. This rate had increased in each of the five previous months. The core CPI (that is, excluding food and energy prices) rose a slightly less-than-expected 0.2% m/m in December following four consecutive months in which the core index increased 0.3% m/m. The Action Economics Survey had expected a 0.3% monthly gain. The y/y rate of advance slowed to 3.2% after four months of a 3.3% annual increase.

Energy prices jumped up 2.6% m/m (-05% y/y), their largest monthly gain since August 2023, accounting for 40% of the monthly increase in the headline index. Monthly price increases were widespread across energy categories, led a 4.4% monthly advance in seasonally adjusted gasoline prices. Not seasonally adjusted gasoline prices usually decline in December. They did fall 1.1% m/m last month, but the seasonal adjustment factor looked for a significantly steeper decline. Food prices rose 0.3% m/m versus a 0.4% monthly gain in November. The y/y increased to 2.5%, the highest annual gain since January, from 2.4%. Cereal and bake goods led the monthly increase with a 1.2% monthly gain, more than offsetting the 1.1% m/m decline in November. Egg prices were up another 3.2% m/m in December, bringing their gain for the past twelve months to a staggering 36.8%.

Goods prices less food and energy edged up 0.1% m/m (-0.5% y/y) in December. Prices of used cars and trucks slowed but still advanced 1.2% m/m (-3.3% y/y) in December on top of a 2.0% m/m increase in November and a 2.7% monthly gain in November. Prices of new vehicles increased 0.5% m/m (-0.4% y/y) following a 0.6% monthly increase in November.

Services prices increased 0.3% m/m in December, the same monthly rise as in November. The y/y rate slipped to 4.4%, the lowest since December 2021 but still well above the 2.5%-2.9% range that existed prior to the pandemic. Service prices less energy services also increased 0.3% m/m in November with the y/y rate also edging down to 4.4%. Shelter prices rose 0.3% m/m in December, the same monthly increase as in November. Both rent of primary residence and owners’ equivalent rent increased 0.3% m/m. Lodging away from home fell 1.0% m/m after having jumped 3.2% m/m in November. Transportation service prices increased 0.5% m/m in December after having been unchanged in November, led by a 3.9% jump in airfares. Motor vehicle insurance prices reaccelerated in December, rising 0.4% m/m after edging up just 0.1% in November and falling 0.1% in October. Prices of medical services slowed with a 0.2% m/m increase in December, down from 0.4% in each of previous two months, bring the y/y rate of advance down to 3.4% from 3.7% in November.

CPI services prices less energy services and the two rent measures is a relatively new core measure that is watched carefully by the Federal Reserve. It increased 0.2% m/m in December, down from 0.3% m/m in November with the y/y rate edging down to 4.2% from 4.3%. While the gradual slowdown over 2024 has been encouraging, the annual rate remains well above the range in which this measure fluctuated prior to the pandemic.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- The headline CPI increased 0.4% m/m. pushing the y/y rate up to 2.9%, the highest rate since July.
- The core index rose 0.2%, pushing the y/y rate down to 3.2% after four months at 3.3%.
- Energy prices were up markedly as the normal decline in gasoline prices was much less than the seasonal factors had anticipated.
- Services prices less energy remained elevated although the y/y rate slowed to 4.4%, the lowest since February 2022.

U.S. Headline Consumer Price Inflation Edged Up in December

Kathleen Stephansen, CBE

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Mortgage applications jumped 33.3% (6.6% y/y) in the week ended January 10, after a decline of 3.7% (-11.6% y/y) in the week ended January 3, and ending a streak of four consecutive weekly declines. Applications for loans to purchase a house jumped 26.9% (-0.1% y/y) in the week ended January 10, following a drop of 6.6% (-14.1% y/y) in the week ended January 3. Applications to refinance a loan surged 43.5% (22.2% y/y) in the latest week, after a rise of 1.5% (-5.7% y/y) in the prior week. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey and the amounts quoted are seasonally adjusted.

The effective interest rate on a 30-year fixed rate loan was 7.28% in the week ended January 10, up 10bps from 7.18% in the week ended January 3. The effective rate on a 15-year fixed rate mortgage inched down 1bp to 6.61% in the week ended January 10 from 6.62% in the week ended January 3. The rate on a 30-year jumbo loan rose 2bps to 7.22% in the latest week from 7.20% in the January 3 week. The rate on a 5-year ARM rose 31bps to 6.38% from 6.07% in the week ended January 3.

The share of applications to refinance an existing mortgage was 42.7% in the week ended January 10, up from 40.8% in the week ended January 3. The share of applications for ARMs was 5.0% in the latest week, up from 4.7% in the January 3 week.

The average loan size in the January 10 week was $367,100, up 2.1% (1.7% y/y) from $359,500 in the January 3 week. The average size of an application for a loan to purchase a house was up 1.3% (1.1% y/y) to $419,600 in the week ended January 10 from $414,400 in the week ended January 3. The average size of an application to refinance an existing loan rose by 6.0% (9.6% y/y) to $296,800 in the week ended January 10 from $279,900 in the week ended January 3. 

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Applications to purchase and to refinance loans jumped.
- Rates on 30-year fixed-rate loans rose moderately.
- Average loan size rose modestly in latest week.


U.S. Mortgage Applications Surged in the January 10 Week

Robert Brusca

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Industrial output in the European Monetary Union continued to struggle. In November, it has advanced (for the headline series excluding construction) for the second month in row. However, a sharp drop in September leaves the three-month change in output falling at a 4.8% annual rate. Output still grows by 0.2% at an annual rate over six months but falls by 1.9% year-over-year. The output path is not draconianly weak, it is not even clearly weakening further, it is simply still challenged, fighting what appears to be still-stiff headwinds.

**Manufacturing sector trends-** Manufacturing output results are nearly the same as for the headline. Manufacturing sectors show progressive weakening from 12-months, to 6-months, to 3-months for consumer goods output. Both consumer durables and nondurable goods output show sporadic weakens but it is only when they are combined that consumer goods output as a total makes the progressive nature of weakening apparent. Intermediate goods output declines on all horizons from 12-months to 6-months to 3-months, but it is not clearly trending. Capital goods output drops over 12 months and falls even more sharply over three months but manages to make a gain over six months preventing a clear statement about the trend being made.

**EMU PMI for MFG-** The manufacturing PMI for the EMU is below 50 for each of the last two months and over three months, six months, and 12 months as well.

**QTD: Quarter-to-date-** Quarter to date IP tracking shows declines in all sectors except capital goods output. Tracking output developments since COVID arrived from January 2020-to-date, output is higher only for overall consumer goods and that is driven only by the component consumer nondurable goods output. However, capital goods output is nearly unchanged on that horizon; the current level of capital goods output is lower than its January 2020 level by only 0.5%.

**Growth rankings-** The ranking of year-on-year growth rates for November compared to all year-on-year growth rates since early-2007 shows no sector ranking higher than 38%. All rankings are below their median rates of growth over this period. The growth ranking for overall IP and for manufacturing are near their 25th percentiles marking them essentially lower quartile growth results.

**Country data**
The country data for 13 EMU members show four declines in November month-to-month following five with month-to-month declines in October and seven in September. The breadth of weakness on this measure has been diminishing. The country of declining output over 12 months, six months, and three months has been progressively falling as well -another good sign. And the median annualized growth rate has been rising over this span. However, quarter-to-date as of November, there are still seven countries showing output declines in progress with one at unchanged. Output is rising QTD in only five of thirteen EMU nations. However, in terms of growth rankings, there is relatively stronger growth only for the smallest countries in the EMU.

**Summing up**
Growth rankings are above the 50% median mark only for Finland, Greece, Belgium, and Malta. The big four economies Germany, France, Italy, and Spain, each have growth rankings below their respective historic medians with an average ranking of 26.5% - again near the lower quartile border. The EMU area is performing poorly with growth sputtering and weak growth still the order of business across sectors as well as across member nations.

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EMU Industrial Output Sputters Ahead

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The Producer Price Index for final demand rose 0.2% (3.3% y/y) in December, following an increase of 0.4% (3.0% y/y) during November, according to the Bureau of Labor Statistics (BLS). The December monthly reading compared to a 0.4% rise expected in the Action Economics Forecast Survey. Producer prices excluding food, energy & trade services edged 0.1% higher (3.3% y/y) following a similar monthly rise (3.5% y/y) in November. The PPI excluding food & energy was unchanged (3.5% y/y) in December after rising 0.2% (3.5% y/y) in November. The BLS reported that on an unadjusted basis, prices for final demand increased 3.3% in 2024 after moving up 1.1% in 2023, while prices for final demand excluding food, energy & trade services rose 3.3% in 2024 following a 2.7% advance in 2023.

Final demand food prices eased 0.1% (4.7% y/y) in December, following a rise of 2.9% (4.9% y/y) in November, revised from a rise of 3.1% (4.9% y/y). Prices for fresh and dry vegetables declined by 14.7% (+21.3% y/y), while egg prices rose 0.5% (127.9% y/y) after a surge of 55.6% over the month in November.

Energy prices increased 3.5% (-2.0% y/y) during December, after holding steady (-6.1% y/y) in November, revised from a rise of 0.2% (-6.2% y/y). Gasoline costs rose 9.7% (-2.5% y/y) while home heating oil prices rose 4.0% (-12.6% y/y). Electric power prices rose 1.0% (1.8% y/y) and natural gas costs gained 0.7% (2.2% y/y). Diesel fuel dropped 1.3% (-13.9% y/y).

Final demand goods prices excluding food & energy were unchanged over the month (2.1% y/y) during December, following a rise of 0.2% (2.2% y/y) in November. Core finished consumer goods prices increased 0.1% (2.4% y/y) after a rise of 0.3% (2.3% y/y) in November. The increase in core nondurable goods prices rose 0.1% (2.9% y/y) last month after a rise of 0.4% (2.9% y/y) in November. Durable consumer goods prices rose 0.2% (1.6% y/y) in December following a rise of 0.1% (1.3% y/y) in November. Capital equipment prices rose 0.2% (2.8% y/y) last month following a similar monthly rise (2.7% y/y) in November. Core government-purchased goods prices edged 0.1% higher (2.1% y/y) in December, after similar monthly and year-on-year rises in November.

Final demand services prices were unchanged (4.0% y/y) in December after rising 0.3% (3.9% y/y) in November. Trade services prices eased 0.1% (+4.4% y/y) last month following a rise of 0.7% (3.2% y/y). Trade of finished goods prices were unchanged (3.8% y/y) in December, after rising 0.6% (2.8% y/y) in November. Prices for final demand transportation and warehousing services rose 2.2% (2.1% y/y) last month, after falling 0.6% (-0.3% y/y) in November. Services prices less these costs fell 0.2% (+4.1% y/y) last month, after a rise of 0.2% (4.7% y/y) in November.

Construction costs rose 0.2% (1.7% y/y) in December, after holding steady (+1.6% y/y) during November.

Prices for intermediate demand of processed goods rose 0.3% (0.2% y/y) in December after holding steady (-0.6% y/y) in November. Processed energy goods prices rose 1.6% last month after easing 1.2% in November, while food prices rose 0.4% following a 0.8% advance in November.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver’s **USECON** database. Further detail is contained in **PPI** and **PPIR**. The expectations figures are available in the **AS1REPNA** database.

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- Overall index rise softer than expected.
- Advance in core goods prices is steady.
- Advance in services price is steady.

U.S. PPI and Core PPI Gains Ease in December