Introducing

Robert Brusca

Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

Publications by Robert Brusca

United Kingdom| Jul 22 2026
U.K. Headline and Core Inflation Rates Slow Sequentially as BOE Gets Ready to Meet
Inflation progress in the U.K. continues to make its way despite a month-to-month increase in the pace for the HICP measure, as well as for the CPIH headline and its core. The two headline measures for the CPIH and the HICP accelerated in June to 0.2% after each posted a small 0.1% increase in May. The CPIH core, which excludes energy, food, alcohol, and tobacco, advanced by 0.3% in June after rising by 0.2% in May.

Monthly data are ‘noisy’: These are minor and technical month-to-month changes since we're measuring inflation in tenths; this is an increase in the smallest unit that we present. If we look at the inflation progress over broader periods of three months, six months, and 12 months, we find there are ongoing decelerations of inflation in the HICP, the CPIH, and the CPIH core measures. I will continue this discussion solely in terms of the CPIH measures.

Sequential inflation: Headline inflation for the CPIH clocks 2.8% over 12 months; the annualized rate falls to 2.6% over six months and falls further to 1.8% annualized over three months, a clear pattern of progress. Core inflation on the CPIH gauge is also 2.8% over 12 months; it also falls to 2.6% over six months, but its deceleration over three months is to a pace of 2.3% (instead of 1.8% for the headline). Still, that's ongoing progress and the three-month 2.3% pace of core inflation is getting quite close to the Bank of England’s 2% objective.

Component behavior: We're going to further evaluate inflation by looking at how the components behave over different periods. In June, inflation accelerated in 66.7% of the categories. In May, it accelerated in 58.3% of the categories, whereas in April, it accelerated in only 50% of the categories. Inflation acceleration is going in the wrong direction to appease monetary authorities. However, these are calculations made across categories without taking any weighting into account. The headline performance takes weighting into account; the weighted core and the headlines are moving in the right direction.

Sequentially, on this broader basis, trends look better. Over 12 months compared to 12 months earlier, inflation is accelerating in only 33.3% of the categories, but then over six months compared to 12 months, the inflation rate is increasing in half of the categories. Over three months, that diffusion measure falls to 41.7%; i.e., only 41.7% of the categories are experiencing accelerating inflation over three months compared to six months. So, these are much better trends when viewed over a broader period. To bring a little bit more life into these abstract diffusion figures, I've also presented the median and average pace of inflation over three months, six months, and 12 months at the bottom of the table. There you can see that the median pace of inflation on this sequence is 3.5% over 12 months and six months, and then it falls to 3% over three months. The average pace of inflation over 12 months is 3.5%; it stays at 3.5% over six months and then decelerates to 2.9% over three months.

Ranking 12-month inflation rates: The final column ranks the current inflation rates across categories and for the headlines on data back to 2000. The HICP measure has a 62.9 percentile standing, the CPIH measure has a 72.5 percentile standing, while this CPIH core has a 79.6 percentile standing. These standings tell us that the inflation rates for these categories are high relative to where they have been since 2000. At the bottom of the table, we can see that the median inflation rate since 2000 has been 2.2%, while the average pace of inflation has been 2.5%. So, over the full, back-to-2000 span, inflation has been slightly north of the BOE target, depending on which measure we look at, the median or the average. The median pace has been quite close, while the average has been half a percentage point too high. A current ranking that puts the inflation rates above their respective medians (and a ranking of 50 represents the median) evaluated the individual category as above its own median at a time when the median and averages overall were already too hot. For all but three of these categories, inflation is still high by a historic experience (above a ranking of 50%). That probably continues to require a somewhat restrictive interest rate from the central bank. Across categories, the highest-ranking inflation is a 91.1 percentile standing for communication, followed by an 84-percentile standing for restaurants & hotels and standings in the 79th percentile for transportation as well as for the core CPI taken as a whole. Inflation rates below their medians for the period back to 2000 are for food & nonalcoholic beverages, furniture, household equipment & maintenance, and healthcare.
by:Robert Brusca
|in:Economy in Brief
Global| Jul 21 2026
ZEW Shows Mixed Gains in July
The ZEW survey, assessing the opinions of German financial experts for July, showed continuing weak but improving conditions in the euro area, Germany, and the United States, with a slight step back in China. Economic expectations improved month-to-month for Germany and China, while posting a slight setback in the United States. Inflation expectations weakened month-to-month sharply and significantly across the board in all four economic units. Short-term interest rates are broadly expected to fall, while long-term interest rates are also expected to ease, with the exception of China, where some small increases are anticipated. Stock markets are showing weaker performance, with moderate step backs across all four areas.

The average of the percentile standings for the four economic units surveyed is a standing in the 44th percentile. That average reflects China as the only survey member above its median observation. Germany has the lowest reading at a 17.8 percentile standing. Next, economic expectations have a 44-percentile average as Germany is the only one above its 50th percentile mark, putting it above its median. The U.S. and China show weaker level standings around their respective 40th percentiles. Inflation expectations have a midstream ranking at their 47th percentile, below their historic medians, with China above its historic median, Germany very close to its historic median, and the euro area and the U.S. posting more moderate standings. Short-term rate expectations have an average standing in their 68th percentile; all of the readings are above their 50th percentile mark, marginally so for the U.S. but more substantially for China and the euro area. Long-rate expectations have a 46.4 percentile average standing, with China well above its median on a ranking above the 50th percentile and with rankings between the 35th and 40th percentiles for Germany and the U.S. Stock market expectations average a 36.9 percentile standing for the four economic units, with the U.S. and China above their 50th percentile mark and the euro area and Germany, substantially weaker.

Most notably, inflation expectations fell sharply in July across the board. But that was probably earlier in the month and reflected a belief that the U.S.-Iran ceasefire would hold. Now that is largely reversed as the hot war is back in Iran. So, we will expect to see backtracking in this survey next month. Of course, that means that the interest rate portion of the survey might also be in for a rehash. That will be something to watch for.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 20 2026
German PPI Shows Pressure but Backs Off in June
The German PPI excluding construction fell by 0.3% in June following three months of increases. Sequentially, the PPI is accelerating, with a 1.8% rise over 12 months, a gain at a 4.3% annual rate over six months, and a gain at a 4.8% annual rate over three months. They are joined by PPI excluding energy index, which also shows an accelerating pattern, rising 2.4% over 12 months, at a 4.4% annual rate over six months, and then at a 6.4% annual rate over three months.

The inflation picture for in June is fine if you restrict your view to the headline, where it dropped by 0.3%. However, the PPI excluding energy rose by 0.3% in June after rising by 0.7% in May and by 0.5% in April, definitely a string of unruly increases for producer prices in Germany.

Sector trends: The sector inflation metrics are not seasonally adjusted; as a result, a sequential trend may not be as reliable. On the other hand, when data aren't seasonally adjusted, it's often because the statistical authorities haven't detected stable patterns of seasonality and so they present the data as not seasonally adjusted. Let’s look at the sector trends, NSA. For consumer goods, prices fall by 1.7% over 12 months, followed by a 0.2% annualized fall over six months and at a 0.3% annual drop over three months. The pattern is not particularly reassuring as the pace of decline is waning sequentially, although consumer goods are producing declines and showing price weakness. Investment goods, on the other hand, show prices steadily expanding, by 2.1% over 12 months, by 3.2% annually over six months but then stepping back slightly toward a 2.4% annual gain over three months. Not surprisingly, the inflation fire is really cooking under intermediate goods, where raw materials have a bigger role. Intermediate goods prices are up by 5.1% over 12 months; unadjusted prices are up at a 10.9% annual rate over six months and then at a 13.8% annual rate over three months. This is clearly the source of the price pressure in the PPI.

Energy prices: Energy prices are only part of the problem, however, and we can see in the energy prices at the bottom of the table that they are producing some strange and unstable price trends. Brent oil prices measured in euros fell 17% month-to-month in June after rising by 0.8% in May and by 1.6% in April. Sequentially, Brent prices are up by 20.2% over 12 months and up at a 94.1% annual rate over six months, but then they fall to a 47.6% annual rate over three months. Against that background, prices in the second quarter compared to the first quarter show an increase at a 141.3% annual rate. These metrics explain why it's hard to pin down the oil-price impact on the PPI. The quarter-to-quarter changes are enormous, the three-month change is extremely weak, but that follows an extraordinary annualized gain over six months, and in June alone oil prices fell sharply by 17%. It is hard to keep track of the oil-price passthrough cycle. So, we're going to have to wait for these trends to sort themselves out to get a better fix on the impact of oil and energy prices. However, we know that the recent good news on oil has since been rescinded as the Strait of Hormuz, which was briefly open, is shut again and the U.S. and Iran have scrapped their fledgling ceasefire agreement.

Euro area—what matters: Policy in the euro area is made based upon inflation for the whole union, not just for Germany, but it pays closer attention to the CPI than the PPI. Germany is still the largest economy in the monetary union, and its CPI is up 2.3% over 12 months, up at a 2.5% annual rate over six months, and rising at a 0.3% annual rate over three months. The CPI excluding energy for Germany is considerably more stable, up by 2.3% over 12 months and then rising at a 2% annual rate over both six months and three months. German ex-energy CPI prices appear to be calm, with inflation arrested; however, we can't say the same thing for the PPI ex-energy, with the inflation rate in a clear accelerating mode.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 17 2026
HICP Detail in EMU Shows Inflation Lurking
Inflation in EMU The recent inflation data in the European Monetary Union is emblematic of the kind of issues that central banks typically have to deal with. Casual central bank observers think of central banks as “leaning against the wind,” meaning that they raise rates when inflation is high and then cut rates when the economy gets weak. Indeed, this is largely what central banks do. However, they also try to be anticipatory when they can, seeking to get ahead of surges in inflation and periods when the economy is going to weaken. It's very hard to forecast those shifts in the best of circumstances, and so a great deal of the judgment that central banks form comes from the near-term trends, even though central banks are aware that the most recent data can also be some of the most volatile and prone to revision. With these sorts of caveats, we look at the recent inflation data from the European Monetary Union, and we see less than straightforward trends.

At its last meeting, the European Central Bank got out in front of events and started raising rates ahead of any action by the Federal Reserve. In June, its year-over-year HICP and core HICP rates both decelerated compared to their May values, with the headline easing to 2.8% from 3.2% and the core to 2.4% from 2.6%. Having inflation rates move in the opposite direction of policy, even in the short run, can create rough sledding for a central bank that is, in any event, trying to look at the broader trend rather than the most recent wiggle in the inflation rate.

The good, the bad, and the unexpected If we go back to December, we see the HICP in the monetary union at 2%, followed by 1.7% in January and 1.9% in February. At that point, things seemed to be well in hand. The problem was that the core inflation rate in December was 2.3%; while it fell to 2.2% in January, it popped back up to 2.4% in February. So, February was one of those uncomfortable months where both the headline and core rates were popping up, but the headline rate was still below the 2% target that the ECB seeks to attain. After February, of course, the world changed; the war in Iran spiked up oil prices and that's when inflation rate in the monetary union rose to 2.6% in March, 3% in April, and 3.2% in May. June inflation has backed down from those higher rates of change; however, conditions in the Middle East that had prompted some release of air from the inflation balloon in June have reversed, and so, the outlook once again is for oil prices to remain high and for inflation to remain troublesome.

Inflation still percolates At the bottom of the table, I show the percentage of categories with inflation accelerating over three months, and since February, that percentage is over 50% in each month. The percentage of categories with inflation accelerating over six months strings out to three months in a row. The decision by the ECB to raise rates is entirely understandable given these trends. In addition, and perhaps less tethered to any particular monetary rule, included in the right-hand column, the inflation ranking in June is compared to data back to the year 2001, a roughly 25-year period. Over this timeline, the headline HICP ranks in the 83rd percentile and the core rate in the 82nd percentile. In both cases, we're looking at inflation being higher only 17% or 18% of the time during this span, which once again marks this as a strong inflation period.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 16 2026
EMU Trade Balance Swings to Deficit in May
Global trade volumes continue to expand Despite military actions around various geopolitical hotspots, war zones, and other geopolitical tensions, plus the imposition of tariffs, World Trade volumes in dry goods have continued to expand significantly since early 2025.

Exports from the European monetary Union have grown over the past year by 5.5%, while imports have surged ahead at a 14.3% annual rate. The growth in trade is driven mostly by nonmanufactured goods, and this is largely a pricing effect as inflation has remained high and oil prices during this period have risen sharply.

The trade balance and its dynamics The euro area trade balance in May slipped into a deficit of €4.97 billion after having a surplus of only €836 million in April. Over the last 12 months, the surplus averaged €5.7 billion per month. We can build up the trade balance several different ways to explain it. One way to understand it is that there are certain tensions between manufactured and nonmanufactured goods. The balance on manufactured goods trade 12 months ago was an average €36 billion over the previous 12 months, whereas it's currently showing a 12-month average that has fallen to a €26 billion surplus. However, all of the trend changes appear to have occurred between a year ago and earlier this past year, since the 12-month, six-month, and three-month averages, as well as the stand-alone reading for May, show manufacturing surpluses in the neighborhood of €25 billion. For nonmanufactured goods, 12 months ago the average monthly deficit was €22.8 billion, whereas over the last 12 months the average has been about €20.2 billion; that's a slightly smaller deficit. The sequential nonmanufacturing deficit balance, however, crept up through the course of the last 12 months, and in May it registered a €30.95 billion deficit. Erosion in the deficit position of the euro area is significantly based on an increased deficit in nonmanufactured goods.

Aggregate trade flows show exports accelerating from 12-months to six-months to three-months, with the same progression for imports, except that the import growth rates are substantially higher than for exports. Exports of manufactured goods accelerate from 12-months to six-months to three-months, but the exports of nonmanufactured goods are stronger and accelerate much more on that same timeline. Imports show manufactured goods in a relatively weak acceleration mode from 12-months to three-months as well. For nonmanufactured goods, the import growth rates post incredible results; they're extremely strong. This, of course, is mostly a pricing effect reflecting the impact of oil prices.

The table includes a few bilateral comparisons. Germany shows accelerating imports, and while there's steady growth in exports, they're not accelerating the same as imports. For France, exports accelerate quite strongly while imports accelerated, but with much less vigor. Much of this has to do with France’s greater reliance on nuclear power as France gets about 65% or more of its electricity from nuclear energy compared to only 11% for Germany, which has cut back and is transitioning away from nuclear power, making it more dependence on other energy sources and boosting energy imports. U.K. exports and imports are both showing growth, but there is no clear trend.

The table also presents export data for five European nations. Exports accelerate for each of them except for Italy, where exports are in a markedly different and decelerating pattern.

On balance, trade trends are in flux although manufacturing trends seem to be quite stable. Volatile oil and other commodity prices are causing severe swings in trade flows across Europe and certainly globally as well. With the situation in the Strait of Hormuz still unresolved, the outlook for trade will continue to expect volatility.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 15 2026
IP in EMU Remains Weak
Industrial production in the European Monetary Union (EMU) shows only a very minor and idiosyncratic sector acceleration in the nondurable goods sector. Other sectors show trends that are not focused and drift into random variability. Nondurable goods output shows growth of -10.9% over 12 months, improving to a pace of -9.9% over six months annualized and improving further to -8.7% annualized over three months. The irony is that nondurable output is contracting over all these periods, but the contractions are becoming slightly less virulent. It is nothing to base any optimism on despite the technically ‘improving’ trend.

Total output and manufacturing output in the EMU each show strong gains annualized over three months after declines on balance over six months and 12 months.

While the secular trends are not clear in showing persistent accelerations or decelerations for the most part, it's true that output across the consumer industries continues to show contraction on all timelines. When we move to intermediate goods and capital goods, we're looking at output showing increases over 12 months, six months, and three months. Even if there are not clear progressions, the persistence of output gains is notable. This again underscores the extent to which expansion is being carried ahead by business and not by the consumer, even in Europe.

On a quarter-to-date (QTD) basis (two months into the second quarter), output is generally showing increases, with the exception of consumer durable goods showing an output decline at a 2.4% annual rate. Top-line growth is still very unimpressive, with total industrial production at a 0.6% annual growth rate and manufacturing alone at a 0.4% annual growth rate; neither of these is strong, solid, or impressive.

Turning to the percentile standing data that evaluate the strength of year-over-year growth on a historic timeline, we see that manufacturing and total output growth log percentile standings just below the 30th percentile. Consumer goods, as an aggregate category, have a 1.3% standing, which is extremely weak. That standing consists of a 29% standing for consumer durables and a 1.3 percentile standing for consumer nondurables output.

Once again, it is intermediate and capital goods that are the backbone of support for output. Intermediate goods’ annual growth rate has a 63-percentile standing, and the year-over-year growth rate for capital goods has a 52.9 percentile standing. Both being above the 50% mark puts them above their median for the period of analysis; that period extends back to August 2006, roughly a 20-year period.

I previously reported on the country detail. The country detail shows accelerating manufacturing output in Ireland, Portugal, and Sweden (Sweden that is not a monetary union member). Austria, a monetary union member, shows persistent deceleration, while the rest of the countries in the group show somewhat chaotic patterns.

While the percentile standing for year-over-year growth in manufacturing is at the 27th percentile mark for the whole of the monetary union, that amalgamation includes size weighting for that evaluation. If we take the unweighted averages for the percentile standings for 11 of the oldest monetary union members, their average individual ranking is much higher at a 48.3 percentile mark. Clearly, there are great differences by country across the monetary union, and this gives the ECB an additional headache in trying to make one monetary policy for such a varied group of economies.
by:Robert Brusca
|in:Economy in Brief
Japan| Jul 14 2026
Japan’s IP Is Fighting Off Weak Trends
Industrial production in Japan fell by 0.5% in May after rising by 0.7% in April and declining by 0.2% in March. Manufacturing output rose by 0.1% in May after rising by 0.4% in April and declining by 0.3% in March. Total industrial output shows a 0.7% gain over 12 months, a 3.4% annual rate gain over six months, and zero change in output over three months. For manufacturing, 12-month output is up 0.7%; over six months, output is up at a 6.1% annual rate; and over three months, output is up by 0.8% at an annual rate.

These trends show that output continues to grow for manufacturing as well for total industry, but not by a great margin. In fact, there are still a number of industries still fighting off negative trends, such as textiles, where output falls over three months, six months, and 12 months, as well as investment goods and mining, both of which show declines over three months, six months and 12 months. One year ago, all of these sectors were showing year-over-year declines except for manufacturing, which was up by 0.5% over 12 months. Manufacturing output is now up by 0.7% year-over-year, with consumer goods up by 1.8%, intermediate goods output up by 2%, and investment goods falling by 3%. Japan is currently trying to fight off a legacy of weakness. The strength of the rebound is being borne by consumer goods and intermediate goods, with investment goods undergoing significant contractive effects.

Manufacturing is showing gains on all three sequential horizons. Utilities output is showing growth on each horizon, and actually shows gathering strength, rising by 0.9% over 12 months, at a 1.4% annual rate over six months, and at a very strong 7.9% annual rate over three months.

In the quarter-to-date (QTD) basis, most of these sectors are losing the battle against weakness, with most industry or sectors showing declines two months into the new quarter. Overall output declines at a 0.2% annual rate. Manufacturing output falls at a 2.2% annual rate, intermediate goods output falls at a 0.2% annual rate, and investment goods output falls at a 7.2% annual rate. The only exception is consumer goods output, which is rising at a solid 5.3% annual rate, but that's not strong enough to drag all of industrial output or even manufacturing into the plus column.

Manufacturing output currently is at about 87.7% of its past peak. Activity in electric and gas utilities are at 90.4% of their past peak, while mining is only at 59.6% of its past peak of activity. Comparing levels of output to where they were in January 2020, manufacturing is at 94% of that value, with total industry also at 94% of that value. Consumer goods are at 98% of that value, intermediate goods at 92%, and investment goods at 93%. Mining is only at 74% of its January 2020 value, while electric and gas utilities have moved beyond the January 2020 level and are 3.3% higher than they were and early 2020.

Since 2020, it has been a relatively difficult time for the global economy. The Japanese statistics show only one sector that has managed to create positive growth compared to its level in January 2020. The current month is a mix of plus-and-minus activity changes. Sequential trends generally show more positives than negatives, but there are still a lot of negatives in train that keep Japanese manufacturing from reaching clearly solid footing. When the Strait of Hormuz opened, it appeared that Japan would be in a position to build on its recovery, but now, with the failed peace agreement and failed ceasefire, the strait once again has been closed and the outlook is shrouded in negativity.
by:Robert Brusca
|in:Economy in Brief
Norway| Jul 13 2026
Norwegian IP Struggles, but Manufacturing Shows Some Strength
Industrial output in Norway fell by 1% in May after rising by 0.6 in April and falling by 1.1% in March. The seesaw act for output continues. Over broader horizons, however, output is falling. It falls by 0.1% over 12 months, falls at a 1.1% annual rate over six months, and falls at a 6.2% annual rate over three months, giving us a clear sequential trend toward falling and decelerating output. Utilities output has chaotic trends, as do mining and quarrying; however, manufacturing shows a clear trend toward output acceleration, with a 2.1% output increase over 12 months, a 2.6% annual rate rise over six months, and a 9% annual rate increase over three months.

Manufacturing sectors show consumer goods output increasing in May, also showing secular acceleration from 12 months to six months to three months. Durable goods, however, are the fly in the ointment, with output up 2.2% over 12 months, accelerating over six months, and then dropping at a 20.4% annual rate over three months. However, consumer nondurables show growth and acceleration, with a 12-month gain of 1.8%, rising to a 3.6% annual rate increase over six months and a 10.9% annual rate increase over three months. Intermediate goods output trends return to more difficult times and show declines over 12 months, six months, and three months, but not a clear path of deceleration. Capital goods output is up 5.4% over 12 months and at an 8.5% annual rate over three months, but there is an intervening soft spot with output up at only a 3.4% annual rate over six months.

Against this background, inflation in Norway showed solid increases in May, rising by 0.2% overall and by 0.3% for the core HICP. However, sequentially inflation gains 3% over 12 months, rises at a 3.8% annual rate over six months, and then backs down to a 1.2% annual rate over three months. The core HICP is steadier, with a 3.4% gain over 12 months, rising to a 3.8% annual rate over six months, and then backing down to 3.2% at an annual rate over three months. That's a set of growth rates that are more stable than either accelerating or decelerating.

In the quarter-to-date (QTD) basis, industrial production is falling 4.6%; this is two months into the second quarter. On the other hand, manufacturing output is rising QTD at a 4.9% annual rate, with consumer nondurables showing strong positive growth along with intermediate goods output. There is a solid gain of 3.1% at an annual rate from capital goods. The QTD inflation trends remain somewhat mixed, with a weak headline showing a 1.6% annual rate, against a core HICP at a 3.4% annual rate rise, the latter gain being well in step with its sequential results.

The far right-hand column compares industrial production over the broad period from just before COVID (in January 2020) looking at the ratio of the level of output in May 2026 to its index value in January 2020. Remember that IP data are inflation-adjusted, so these are real data. Over this span, industrial production excluding construction is up by approximately 10%, with utilities output up at about 21%, mining and quarrying up about 5%, and manufacturing up a little more than 7%. This is a 5½-year period. Consumer goods output is up by 2.7%, led by consumer nondurables which rise 4.1% on the period and against durable goods output where there is a decline of about 13% on that timeline. Intermediate goods output drops slightly on the timeline by less than half a percentage point, while capital goods output is up at a solid and strong 23% gain. Looking at prices over the same period, the headline HICP is higher by 27% while the core is higher by 24%.

The weakened output shows the stresses and strains of the period, with weak gains in place over the last 5½ years and with the consumer showing considerable wear and tear, leaving consumer goods output lower on balance over this 5½-year span. It hasn't been such a bad time for capital goods, where output rose by 23% over the period. Inflation got out-of-the-box and grew quite strongly. The headline HICP grew by 27% since January 2020, a duration of time during which, sticking to its target, would have implied a gain in the price level of only 11.5%.

Ongoing overshooting Even now central banks are trying to decide how to come to grips with the inflation pressures from that. Pressures continue to linger and threaten the economies. Of course, there are some new factors in place, but that's the nature of inflation: if it's not one thing, it's something else. And failing to respond to the one thing means that you're going to get hit even worse when it becomes something else. This is the lesson the central banks haven't learned during this period.

Have central banks learned their lesson? Noting that inflation is over target and then forecasting that it's going to come back down to target over some period ahead puts the inflation performance at risk to whatever happens between now and the end of that period ‘ahead.’ If that forecast isn't perfectly right and if there's something else that disturbs the path of prices, what will happen is that an inflation that is already over the top of the target will push even farther over the top of the target and the dilemma faced by the central bank will become even worse. This is why kicking the can down the road generally is not a very good strategy, but it's one that virtually all the central banks pursued in the wake of COVID. So, will central bankers come to see inflation that is here and now as a here-and-now problem to be addressed here and now, or as a candidate for tomorrow land? The ECB seems to be changing, and the Fed has formed task forces. What about Norway and the rest of the world? Norway did push its target rate up as the ECB hiked. But what is its plan?
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 10 2026
Industrial Sector Remains Under Pressure in EMU
Manufacturing output in the countries of the European Monetary Union continues to underperform. The median change for the 11 countries reporting on the table is a 0.5% decline in May following a 0.3% increase in April. However, only 41.7% of the reporters are accelerating in May, compared to 25% in April, although in March over half of the reporters had showed some acceleration, with output at 61.5%.

In May, of these eleven early reporters, seven showed month-to-month declines in output. This compares to four showing declines in April and four showing declines in March.

Sequential trends Over 12 months, output is declining in four of these eleven countries: Germany, Luxembourg, Ireland, and Portugal. Over six months, output declines in five of the eleven countries. Over three months, output declines in four of the eleven countries. Over these broader sequential periods, output is increasing in most cases; only one country, Ireland, shows consistent declines in output over three months, six months, and 12 months. However, among EMU countries, only Italy shows output expanding on all three timelines, although Sweden, an EU member country, also shows output increasing in all three periods.

Amid the output weakness in May, the quarter-to-date calculation for industrial production growth is also broadly weak. In May, seven of the eleven quarter-to-date changes in industrial production are negative. Positive results, increases in the quarter-to-date, are registered by Germany, Luxembourg, Greece, and Portugal.

The ranking of the year-over-year growth rates shows seven countries with output growth rate rankings below 50%, marking them as below their respective medians. The comparisons for output growth are taken back to 2006, a period of about 20 years.

Four EMU countries rank above their twenty-year medians: France, Italy, Luxembourg, and Greece.

The snapshot of industry in the monetary union is consistent, showing little momentum, little strength, and relatively low rankings for current growth rates; only a minority of reporters show an acceleration in growth in May compared to April. With the situation in the Strait of Hormuz deteriorating again, the outlook for industrial production has to remain guarded.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 09 2026
German Trades Surplus Balloons
The German trade surplus surged in May to €19.1 billion from €14.7 billion in April. Exports rose by 0.9% in May while imports fell by 2.5%, creating a jump in the surplus month-to-month. In April, exports increased by 0.8% while imports rose by 1.1%.

Details on exports and imports lag by one month. In April, exports for motor vehicles and consumer goods declined, while exports of capital goods and other exports rose. On the import side, there were increases in imports ranging from 2.8% to 4.3% month-to-month across capital goods, motor vehicles, and consumer goods, but for the catch-all category ‘other’ imports fell by 2.7% month-to-month.

Flows adjusted for inflation showed an increase in exports of 0.4% in May while real imports fell by 3.3%. In April, real exports were flat while real imports fell by 0.2%.

The sequential behavior of real exports and real imports show independent activity. Imports log a clear weakening, rising 0.1% over 12 months, falling at a 5% annual rate over six months, and then falling at a 10.3% annual rate over three months. On the export side, real exports rose by 2.6% over 12 months, accelerated to a 7.2% annual rate over six months, but over three months have pulled back and fallen at a 1.6% annual rate. However, export growth still exceeds import growth over each of these horizons: 12 months, six months, and three months.

Trade trends paint a darkening picture of the German economy, with imports weak in real terms and trending even weaker, while activity on the export side of the equation pops over 12 months and six months but takes a hit over three months.
by:Robert Brusca
|in:Economy in Brief
Japan| Jul 08 2026
Economy Watchers Poll Marks Revival—Still Weak; What’s Next Now with a New Rift?
The Clash! The U.S.-Iranian clash in the Middle East resulted in a closure of the Strait of Hormuz that collapsed the economy watchers index in Japan earlier this year. However, as the war-like conditions settled down and the two sides have moved toward some kind of cease fire or a more permanent arrangement, in the wake of that comparative tranquility, the economy watchers index improved, and its future index improved more sharply. These comments applied to the data in the table and conditions up to the end of June.

New day dawning... However, the data in the table are unrelated to what has happened in the past two days, when Iran took potshots at a couple of ships in the Strait, causing the U.S. to retaliate and President Trump to declare that the ceasefire has now ended. The door remains open for some kind of talks; however, the president’s recent remarks carried in the newspapers has clearly stated that the ceasefire has ended, and the U.S. intends to hit Iran and has suggested that it intends to hit it ‘hard.’ At the same time, Mr. Trump has said the door remains open to continuing talk and negotiations if both sides still want to get together; however, he admits he is not optimistic.

Precarious times and conditions So, these are precarious conditions. Oil prices have already responded and moved higher. We have Japan’s economic data for June showing some revival in the current index and some sharply higher revivals over the last few months in the future index. However, when the dust clears the queue standings of the current and future indexes are revealed, they are pretty similar, with the current index at a standing of 29.6% and the future index of 31.6%. Both the current and future readings coalesce around a 30-percentile standing, marking the two segments of the survey as usually stronger about 70% of the time which marks the latest readings as relatively weak. And that is before we take the new realities of July into account.

The current IS the future... There isn't too much point in talking about the two parts of the survey separately. The current and future surveys are simply not that different. This month, the lowest percentile standing in the current subindexes is housing, at an 11.5 percentile standing, followed by employment at a 17.8 percentile standing. In the future index, housing has an 11.1 percentile standing and employment has an 18.6 percentile standing; these readings are also the two lowest rankings in the future survey.

Sequential improvement is only point-to-point Over three months, we can see the point-to-point changes in the current index and some improvements in all of the components except housing. In the future index, the three-month changes show point-to-point improvements in all of the components. However, both surveys show point-to-point declines over six months and broad point-to-point declines over 12 months as well. Looking at the changes based on smooth data (shown at the bottom of the table), for the three-month averages compared to six-month averages and six-month averages compared to 12-month averages, conditions show no improvement. We see no improvements in the current or future indexes over three months or six months, and no improvement in the future index in the 12-month average compared to 12-month average of 12 months ago—although 40% of the components in the current index are improved over 12 months compared to 12 months ago.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 07 2026
German IP Marks Large Gain
German industrial production in May rose by 0.9% after rising by 0.2% in April. Top-line growth for industrial production shows an increase of 0.1% over 12 months, a decline of 0.2% over six months, but a revival with growth at a 4% annual rate over three months. The revival was led by consumer goods output, which gained 1.2% in May after rising 2.2% in April. Consumer goods output is lower by 0.1% over 12 months, rises at a 2.6% annual rate over six months, and again at an 8.6% annual rate over three months, marking an acceleration over this three-period sequence. Capital goods, however, an important sector in the German economy, continued to be erratic in May. Capital goods output rose by 1.3% in May after falling by more than 1% in each of the two previous months. Capital goods output is lower by 2.8% over 12 months, falling at an 8.6% annual rate over six months, and that drop is trimmed to a 4.4% contraction over three months.

The output of consumer goods is pushing industry production higher, but the output of capital goods is pulling industrial production back lower. Intermediate goods, however, are showing growth and acceleration, despite falling by 0.4% in May after increases in each of the two previous months. Nevertheless, intermediate goods output is up by 1.1% over 12 months; it accelerates from a 1.9% annual rate over six months to a 6.4% annual rate over three months.

Focusing on manufacturing output alone, there was a gain in output of 0.8% in May and a gain of 0.3% in April. However, manufacturing output is still lower by 0.6% over 12 months and falls at a 2.3% annual rate over six months before recovering a 2.2% annual rate gain over three months; nothing in this sequence is an impressive performance.

Real manufacturing orders have been oscillating back and forth, rising by 1.9% in May after falling 3.2% in April. However, over 12 months, real orders for manufactured goods are up 6.3%; yet that same series falls at a 4% annual rate over six months and then rebounds to surge ahead at a 12.8% annual rate over three months. That's an erratic performance, but with a good ending trend. Real sales in manufacturing show gains in each of the last three months, including a 1.8% month-over-month increase in May. Real sales in manufacturing rise to a 4.2% annual rate over six months and 12 months and then accelerate to a 12.4% annual rate over three months. The performance of sales is encouraging and fits well at least with the three-month spurt in real manufacturing orders.

Indicators for the German economy show that the ZEW current index weakened to -77.8 in May from -73.7 in April. The IFO manufacturing index moved higher, with the May reading of 86.7 compared to 86.3 in April. Manufacturing expectations in the IFO framework, however, weakened to 87.7 in May from 88.2 in April. The EU Commission industrial index registered -15.6 in May after -14.5 in April, another sign of weakening. Two of these four indexes weakened sequentially, looking at the values from 12 months to six months to three months; improvements were seen in the ZEW current index and the EU Commission index on this timeline.

Looking at manufacturing IP output data from select other European countries, France and Spain showed slippage in May compared to April, while Portugal posted a gain in May after a decline in April. Over 12 months, six months, and three months, France shows period-to-period positive growth, but growth is not gaining momentum. Spain shows an increase of 0.4% in output over 12 months, with slippage over six months and a solid gain over three months. In Portugal, output acceleration is in gear, with a 2.2% decline over 12 months shifting to a 6.7% annual rate gain over six months and a 10.6% annual rate gain over three months.

On a quarter-to-date (QTD) basis, German industrial production is rising for all the major sectors except for capital goods. Manufacturing output is rising QTD, along with real manufacturing orders and real sales in manufacturing. The industrial surveys for Germany all weaken QTD. Industrial production shows QTD declines for France and Spain, while Portugal posts a gain.

The ranking of year-over-year growth rates, or, for indicators, the ranking of the level compared to the past back to 2006, shows mostly weak performance for German output. There is a stronger assessment for the intermediate goods with a year-over-year growth rate ranking above the 50% rank, putting it above its historic median. Demand indicators, however, as reflected in real manufacturing orders and real sales for manufactured goods, have rankings in the 70th percentile, showing some better life for demand—that could bode well for output in the future. The industrial indicators, however, are all weak and substantially weak compared to their historic levels back to 2006.

On balance, the manufacturing and industrial data as well as surveys as of May for Germany and Europe show mixed results. There are a few pockets of strength; one of the bright spots is demand, but supply has not consistently responded to it yet. The industrial surveys are uniformly weak and definitely not a bright spot. Overall, the results are not reassuring.
by:Robert Brusca
|in:Economy in Brief