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

Germany| Mar 25 2025
Germany’s IFO Shows Recovery
Germany's all sector climate index improved in March to -19.8 from -24 in February. Still, the index only has a 13.9 percentile standing on data back to the early 1990s. The all-sector climate index, the current index and expectations all improve month-to-month with the scope of improvement for the all-sector climate and expectations indexes greater only about 10% of the time. These are sharp month-to-month improvements. However, the levels of the indexes are so weak that the rankings continue to scrape very low levels. Overall conditions in Germany have hardly changed despite the solid month-to-month improvement concentrated in climate and expectations.

Climate The climate measure shows improvements for the all-sector reading, manufacturing, construction wholesaling, retailing, and services. The highest percentile standing for any sector is for construction at a below-median 41.5 percentile standing. The next highest standing is for retailing at a 24.5 percentile standing, the weakest reading is a standing of 10.3% in manufacturing, and the services sector is at a 13.2 percentile standing, not too much stronger than that.

Transition-Ho! While climate conditions are still in difficult straits, we find that current conditions standings are largely worse than for climate standings; expectations show uneven comparisons. We know there are big changes coming to Europe, particularly for Germany, because of the new shift to more defense spending. This, obviously, will create improvements in the defense sector but should also have broader multiplier effects for the economy, for the manufacturing sector, but also for the economy in general. We also expect these changes to spread across Europe with similar increases in military spending to be introduced in other countries, as the United States is looking for Europe to carry more of its own security burden. We should continue to see improvements in expectations and in climate in the coming months and those improvements should be translated gradually into improved current conditions as well.

Current conditions-Manufacturing and Construction lead Current conditions in the index show improvement across all sectors with minuscule improvements being posted in wholesaling and in retailing in March. The percentile standing for the current indexes in March show the strongest reading in construction; it is the only sector above its median: above its 50th percentile at 61.6%, with retailing close to its 50th percentile mark at 48.2%. The weakest readings are for manufacturing at an 11.9 percentile standing and then services at a 16.9 percentile standing. But manufacturing has the largest month-to-month gain. The overall standing for current conditions is lower still at its 10.7 percentile standing, indicating a confluence of weakness across sectors, a result that has the overall index at a weaker standing than any for individual sector.

Expectations – Manufacturing surges Expectations show broad improvement and for the most part fairly significant improvement across sectors. The headline improvement shows expectations at -16.1 in March compared to -20.5 in February, which leaves the index at a 16.9 percentile standing overall. Expectation standings are weak, however, with the strongest expectation standing in manufacturing at 21.1%, the second strongest for wholesaling at 19.8%; services rank third with the standing of 15.1%. Construction, the sector that has the strongest current and climate standings, has the weakest expectation-standing at the 8.2 percentile mark.
by:Robert Brusca
|in:Economy in Brief
Global| Mar 24 2025
S&P Flash PMIs-Services Worse, Manufacturing Better
S&P flash PMI statistics for March show very little change in the composite which has been plugging along at 51.4 in January, 51.4 in February and now 51.5 in March. These are readings from unweighted averages from the eight reporting countries and the European Monetary Union. The manufacturing composite is crawling its way higher from 49.1 in January to 49.5 in February to 49.9 in March, putting manufacturing nearly to a breakeven reading after a long period of showing sector contraction. Service sector readings monthly log 52.0 in January, 51.9 in February and 51.6 in March, a steady but very minor trend to erosion.

The sequential growth rates on the quarterly average readings that exclude March are performed only on hard data. They show that the composite reading has also been very stable at 51.6 for the 12-month average, 51.3 over 6 months and 51.3 over the most recent hard 3 months’ worth of data. Manufacturing has also been stagnant with a reading of 48.4 for the 12-month average, 48.4 for the six-month average and 48.6 for the three-month average for the period ended in February. Services show the same minor slippage we see in the monthly data from 52.5 over 12 months to 52.2 over 6 months, to 52.0 over the most recent three-months of hard data. These trends show minor improvement in manufacturing and minor deterioration in services. Manufacturing continues to show minor contraction as services continue to show minor expansion. Neither sector performs particularly well and neither sector has any particularly notable trend to it. The diffusion data across countries show a great deal of variation.
by:Robert Brusca
|in:Economy in Brief
France| Mar 21 2025
INSEE Manufacturing and Services Steady-to-Weaker
The INSEE industry climate index settled lower in March at 95.9, down from 97.0 in February. The index is lower than its year-ago value of 102.1 and since 2001 it has been this low or lower only 7.5% of the time. Despite the sense of some stability in manufacturing in the tabular data for the last year, the chart (of data since 2014) and the table’s own presentation of the queue standing reveals manufacturing to be at a relative weak standing in March.

Manufacturing production expectations have a 34.4 percentile standing but did improve slightly from the February reading of -14.8. The recent trend of production weakens on the month to a lower quartile standing at its 23.7 percentile. The personal likely trend, which is the reading for each respondent gives to the prospects for his own industry, ticked higher in March to a 40.5 percentile standing. That is better than the percentile for industry over all but still below the level that marks the historic median – a standing at the 50th percentile.

Orders and demand as well as foreign orders and demand each weakened. They each have standing at or below their respective 20th percentile around the lower one-fifth of all historic readings. In addition, the March reading for orders and demand are substantially weaker than they were a year ago and the slippage has been worse for foreign orders.

In contrast, inventory level show few changes and are similar to their year-ago readings and close to their historic median.

Prices have moved to lower readings in recent months. However, price trends and level readings are higher than they were a year ago. In terms of rankings, the own likely price trend is at a 61.5 percentile standing, above its historic median while the manufacturing price level has a relatively weak 36.1 percentile standing.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 20 2025
German PPI Inflation Settles Down
German PPI inflation fell by 0.2% in February for the headline series, ‘PPI excluding construction.’ The drop marks a string of declines in German headline PPI inflation. For the PPI excluding energy, inflation rose by 0.1% in February after a 0.1% rise in January and no change in December. This is a clear winning streak for German inflation trends at the producer level.

Inflation results from 12-months to 6-months to 3-months show German headline PPI inflation decelerating steadily and somewhat aggressively from an increase of 0.8% over 12 months to a -0.6% annual rate over six months to a -2.5% annual rate over three months. For the PPI excluding energy, German inflation is up 1.5% over 12 months, which eases to a 0.5% annual rate over six months, and then stabilizes but accelerates slightly at a 0.7% annual rate over three months. The performance and behavior of headline inflation obviously shows a great deal more weakness than in the PPI excluding energy. But both are well-behaved.

Oil price trends Brent oil prices declined by 10% over the previous year and have declined by 8% over the most recent 12 months. Over six months they're falling at a 9% annual rate, but then over the last three months they've been increasing at a 9.5% annual rate. Monthly Brent oil prices fell slightly in December, fell by 3.8% in February, but rose by 6.5% in between, during the month of January. The oscillation in oil prices makes it just a little bit difficult to nail down the impact of oil prices on the inflation numbers, but generally oil has been weak and there has only been a slight amount of pressure from oil recently compared to past trends.

German PPI component trends German PPI components are not seasonally adjusted; they generally show inflation is relatively stable. For consumer prices, the 12-month, 6-month and 3-month pace is just under 3%. For investment goods, inflation is accelerating slightly from 2% over 12 months to a 4.2% annual rate over three months. Intermediate goods display growth rates for inflation that fluctuate between -0.9% at an annual rate over six months to +1.4% at an annual rate over three months. The PPI trends compare to CPI trends that are really quite flat with the headline CPI between 2.5 and 2.2% at an annual rate across horizons and the CPI excluding energy at a pace of expansion between 2.4% and 2.7%.

All-in-all German inflation appears to be contained and at a relatively low level. This should be a report that the European Central Bank is pleased with.
by:Robert Brusca
|in:Economy in Brief
Europe| Mar 19 2025
EMU Inflation Pace Is Lower Y/Y; Still Too High- and Not Clearly Falling or Prone to Fall
EMU inflation overview By category, inflation is not accelerating over shortening periods. The year-over-year chart shows inflation in the EMU is lower and less prone to rise over 12 months than other major monetary centers. But, break it down… to 12-months vs. 6-months…to 6-months vs. 12-months…to 3-months vs. 6-months and EMU inflation goes from accelerating over 12 months (compared to 12-months ago) to accelerating in 38% of categories over 6 months (compared to their 12-month pace) to accelerating in 53.8% of categories over 3 months (compared to their pace over 6-months). The inflation worm is beginning to turn within the EMU and within the one-year time horizon. And we know that what is next is more growth, more price pressure, and more military spending in the EMU because of change in upcoming fiscal policy. So, it is becoming clear that the ECB is not going to get back to its 2% target unless or until it is ready to raise rates again. And NO ONE is saying that yet.

Core trends in EMU- Core inflation shows prices better-behaved than headline inflation and across the four largest EMU nations. Inflation is excessive on core inflation year-on-year in Germany and Spain; over 6 months, in Germany and over 3 months, in both Germany and France. Inflation is accelerating on the core measure for German inflation over 6 months and for French and Spanish inflation over 3 months.

Headline inflation- By comparisons, headline inflation is flaring more but it is less stable, more mercurial, so these trends may not prove to be lasting. Still, headline inflation accelerates over 3 months compared to 6 months in three of four countries and is excessive (above 2%) in three of four of the largest EMU nations. Over 6 months, two of them are showing acceleration and excess inflation at the same time.

Commodity level trends across EMU- By commodity category or economic grouping, inflation is prone to accelerate as we note in the first paragraph. Contrarily, the monthly data show decelerating pressures while the sequential 12-, 6-, and 3-month data show a tendency to more acceleration. On monthly data, inflation accelerates in 12 categories in December, in 6 categories in January and in 4 categories in February.
by:Robert Brusca
|in:Economy in Brief
Global| Mar 18 2025
ZEW Experts See German Outlook JUMP and U.S. Outlook TANK!
WOW! What a chart!! Enter the Post-War age of the rediscovery of geopolitics Press reports this morning are all over the new ZEW release that shows that macroeconomic expectations for Germany have jumped sharply to a level of 51.6 in March from 26.0 in February. This, of course, is being heralded as a result of the great German turnaround and Germany discovering that it really needs to provide for its own security rather than to spend its money paying down its debt and letting the U.S. provide its protective defense umbrella. A real epiphany… After years of turning down U.S. entreaties to be more careful with its security that started with Barack Obama and went on to Donald Trump, Germany refused to spend more money in NATO and brushed off Trump's concerns about being linked to Russia through a pipeline. It basically did just about whatever it could to cause Russia to think that the Germans no longer had any interest in NATO which played a part and fueling Russian boldness and its attack of Ukraine. Russia thought Germany would leave NATO to preserve its economic ties to Russia! Wrong. But a war’s start often is based on poor assumptions or hidden factors. Had Germany wanted to spend the least it could on the military, it should have listened to Barack and to Trump. However, it didn't, and so now we have this huge military buildup that is really pushing macroeconomic expectations ahead in Germany. While we can argue about military spending and whether it's good or bad, right now, it's providing the stimulus that Germany and Europe need to jumpstart their economy out of this long period of weakness that stemmed from COVID, its aftermath, and from of the Ukraine invasion by Russia.

Dramatic shifts However, the part of this new survey that is not getting as much attention is that U.S. macroeconomic expectations that were +1.3 in February have dropped to -48.7 in March, a massive drop in one month; the ranking or queue standing of the U.S. macro-expectations in March is at a 4.4 percentile mark which means that since the early 1990s that has been weaker than this only 4% of the time. In contrast, the jump in German expectations have boosted German expectations up to the 75th percentile of their ranking over the same period. The economic situation in March, which is less malleable because it's tethered to what's happening ‘on the ground’ says the euro area is roughly unchanged at a ratio of -45.2. Germany’s situation is also roughly unchanged, slightly improved, at a level of -87.6; but the U.S. current index drops sharply to +6.7 in March from +42.6 in February, down to a 37-percentile standing. I frankly wonder if it's possible for current conditions - actual current conditions - apart from expectations, to deteriorate that sharply in one month but that's the result we have here to report.

Stunning developments On dating back to early 1992, U.S. current conditions have fallen (experienced a deterioration) month-to-month more than they have in March 2025 on only four other occasions and those were generally in the middle of either COVID or a sharp stock market sell off or some clear precipitating event. In this case, I suppose we would say it's the fear of Donald Trump, his geopolitical stance, his government overhaul, and tariffs are driving these changes. Macroeconomic expectations in the United States have deteriorated month-to-month more than this only once, and in Germany macroeconomic expectations have improved more sharply than they have in March only five other occasions in the past. This report from ZEW is a watershed report; it's fair to say we've never seen anything like it in the past because not only are these statistically highly unusual moves, but it is unprecedented to see the U.S. and the German macroeconomic expectations move so sharply in one month in completely different directions. This result is simply stunning.

The nail in coffin of deflation In the wake of these findings, it's not surprising to see that inflation expectations have jumped in the euro area from -18.6 in February to +6 in March. In Germany, they've jumped from -17.9 in February to +7.9 in March while in the U.S. they have jumped from 35.3 to 52.3. The queue standings now for inflation expectations are in the 38.3 percentile for the euro area (since the early 1990s), in the 39.5 percentile for Germany, and in the 71.5 percentile for the U.S. Quite apparently the period where we will worry about deflation and the zero bound, and all of those things is over, and we are back to worrying about inflation...hello darkness my old friend...
by:Robert Brusca
|in:Economy in Brief
Italy| Mar 17 2025
Italian Inflation Slows Down and Speeds Up; Headline Stronger; Core Weaker on Trend
Italian inflation shows the headline HICP measure at 0.2%, rising in February slower than the January gain of 0.5%. Core inflation was flat in February after rising 0.3% in January. The Italian domestic headline CPI measure also rose 0.2% in February, a little weaker than the 0.3% gain in January. The core to the domestic CPI was flat in February compared with 0.1% rise in January. Month-to-month inflation slowed. The January-February data generally show inflation contained except for uncomfortable readings for the headlines in January for both the HICP measure and the domestic CPI measure.

Sequential trends Stepping back from monthly data, the sequential HICP measures show inflation moving back up again; there's a 1.7% gain over 12 months that dips to 1.3% at an annual rate over six months then accelerates to a 3% annual rate over three months. In contrast, the HICP core decelerates steadily, rising 1.7% over 12 months, at a 1.4% pace over six months, and settling down to a 1% annual rate over three months. The domestic CPI basically mimics those trends, but the headline CPI is up 1.6% over 12 months, up at a 1.2% at an annual rate over six months and then climbing at a 2.3% annual rate over three months. The core domestic CPI is up 1.7% over 12 months, up at a 1.2% pace over six months and up at only a 0.7% annual rate over three months. Both inflation surveys show uneven inflation in the headlines with the tendency to accelerate against clear decelerating trends for the core. However, the 12-month measures for inflation in Italy on headline and core for either survey are all below the 2% pace sought by the ECB for the target for the overall Monetary Union. Inflation in Italy is contained in the range desired by the European Central Bank

Inflation quarter-to-date The trends for the HICP and for the domestic inflation gauge reveal a headline series that shows more inflation than the core series and for each of them. In the quarter-to-date, annualized headline inflation is above 2%. It’s at 3.2% on the HICP measure and at 2.5% for the domestic CPI measure. However, in each case, the core measures are well below what the ECB seeks for an inflation target with the HICP core at a 1.5% annual rate and with the domestic core CPI pace at 1% at an annual rate. Having the better news on the core is good since that measure trends to be more stable while the headline is especially kicked around by energy prices.

Inflation breadth (diffusion) Generally speaking, inflation in Italy has been under control for some time. Diffusion measures show that inflation is not accelerating in more categories than it's decelerating over 12 months, six months, or three-months. Over 12 months, the diffusion gauge is at 41.7%, indicating that only about 41% of the categories are showing acceleration, the same as over three months, which means that inflation is more broadly decelerating than accelerating.

Monthly inflation diffusion by category However, in terms of categories we find that looking at monthly data, inflation is steadily accelerating for (1) alcohol & tobacco, (2) clothing & footwear, (3) rent & utilities, (4) housing & furniture, and (5) restaurants & hotels. This is a significant number of categories looking at the price changes monthly for December, January, and February. On the same monthly timeline, prices are steadily decelerating for (1) transportation equipment and (2) recreation & culture while (3) education logs zero inflation in each of the most recent three months!

Sequential price trends and extreme price changes Looking at inflation categories over 12 months to 6 months to 3 months, the picture shifts. On this timeline, (1) alcohol & tobacco shows acceleration, (2) clothing & footwear prices show acceleration, and (3) health care tends to acceleration. Prices show decelerating trends sequentially for (1) housing & furniture, (2) communications, and (3) recreation & culture. In terms of extreme price changes over 12 months, communications prices fall 4.9% while rent & utilities, and restaurant & hotel prices each rise by 3% or more. Over three months prices fall by 6.4% annualized for communications; they also fall for housing & furniture, and recreation & culture but fall mildly. Prices rise by 17.9% annualized for rent & utilities and by 5.2% for alcohol & tobacco over three months.
by:Robert Brusca
|in:Economy in Brief
Europe| Mar 13 2025
EMU IP: A Long Dig-out Is Underway
Industrial output European monetary union rose 0.8% in January; this is for the headline series that excludes construction. Manufacturing output rose by 1% in January as well.

Sequential calculations show that overall manufacturing fell by 0.1% over 12 months, rose at a 0.8% annual rate over six months, and is now rising at a 2.1% annual rate over three months and accelerating pattern. Similarly, manufacturing output rises by 0.1% over 12 months, gains 0.2% at an annual rate over six months, and expands at a 2.1% annual rate over three months Like the headline series, manufacturing also shows acceleration in output is underway. The effect is present but not powerful.

Sectors In January, the gain in overall output was mostly on the back of intermediate goods where output rose 1.6%, capital goods output also rose by 0.5%, consumer goods output fell by 2.8%. In the month, however, the strength of intermediate goods and capital goods was enough to carry the day to an overall output expansion. Sequentially, looking at growth rates over 12 months, six months, and three months, we see a steady acceleration for overall consumer goods output, for the output of consumer durable goods, and generally for the output of consumer nondurables (with a very small exception). Intermediate goods output also shows steady acceleration. The only real exception is for capital goods, where output falls by 2.1% over 12 months, improves to a decline of only 1% over six months but then lapses into a 4.7% annual rate decline over three months. Manufacturing, except for capital goods output, is showing acceleration that is broad-based.

Quarter-to-date In the quarter to date, overall output is growing at a 3.6% annual rate. Manufacturing output is growing at a 3.3% annual rate. Output growth is positive in all the manufacturing sectors and subsectors except for capital goods where output is falling quarter-to-date at a substantial 4.1% annual rate. All of these, of course, are nascent figures because we are only one-month into the quarter. These growth rates are calculated by taking the compounded annual rate for January over the centered fourth quarter average for all of output, sector-by-sector.

More broadly, the queue percentile standings show that year-over-year output growth is below its median. The queue percentile standing data show broad-based weakness in the industrial sector. Overall output has a 32.6 percentile standing; manufacturing has a 26.6 percentile standing. Across sectors, consumer goods output is still strong with an 88.5 percentile standing- that's the result of strength in consumer nondurables that have a 90.4 percentile standing. However, consumer goods output is still held back by a consumer durable goods output standing, at a 38.1 percentile. Intermediate goods have a 32.1 percentile standing, while capital goods, which is an important sector in the European Monetary Union, have only a 15.6 percentile standing, extremely weak.

Across countries Reviewing the data across countries, Among the 11 reporting EMU countries, five of them show IP growth above its historic median rate since 2006. Austria, Germany, and the Netherlands show output on an accelerating path, while France, Spain, Malta, and Ireland show decelerations in train. Viewed separately rather than as part of a sequence, output is nonetheless accelerating in 50% of the reporters over 12 months, in 41.7% over six months and among 54.5% over three months. There is progress but it is uneven and still slow. However, with the new tilt to more military spending – something that is already agreed to in Germany - we can expect output progress will step up more readily in the months ahead.
by:Robert Brusca
|in:Economy in Brief
Japan| Mar 12 2025
Japan’s Cabinet Office Survey Edges Lower in 2025-Q1
The Cabinet Office: General business conditions Japan's Cabinet Office survey of general business conditions shows a diffusion reading of +2 in the first quarter of 2025 compared to a net of +5.7 last quarter. This is the reading for all big companies. The reading for large manufacturers slipped to -2.4 from +6.3, a much sharper drop. Unfortunately, manufacturing is often looked upon as the harbinger for future developments in the economy. Non-manufacturers show their reading slip as well, to +4.1 from +5.4 in the first quarter of 2025 compared to the fourth quarter of last year.

Smaller company results- Medium-sized manufacturing companies, posted a decline in the fourth quarter and a bigger decline than this first quarter, logging a reading of -1.5 at the end of last year and the reading of -6.9 in the current quarter. Small manufacturing companies continue to post negative results, and they also saw substantial slippage, falling from a -12.4 reading in the fourth quarter to a -18.3 reading in the first quarter of 2025.

Rankings In the table, I include rank standings for these readings on data that are back to 2004, an approximate 20-year horizon. The overall reading for large companies has a 54.8 percentile standing, which is above its historic median for that timeline. However, large manufacturing companies have a standing only at their 38.1 percentile. Medium-sized manufacturers have a reading at their 34.9 percentile, not too different from large manufacturing enterprises. Small manufacturers, despite their much-weaker negative reading in the first quarter, show a queue percentile standing in their 44.6 percentile. They chronically pose weaker numbers than their larger counterparts; therefore, when ranked relative to their own history, their current weaker diffusion readings don't seem to be quite as weak on a ranking basis. However, none of this puts too much positive spin on the data for the quarter.

General domestic conditions The readings for general business conditions show even a higher percentage of readings that are below their 50th percentile which puts them below their median ranking. The reading for all large companies decreased to 3.1 in the first quarter of 2025 from 4.2 at the end of last year. Large manufacturers slipped from +2 at the end of the year to -1.3 in the current quarter; medium-sized manufacturers slipped to -8.7 in the current quarter from -3.8 in the fourth quarter of last year while small manufacturers slipped to -22.8 from -20.9. The standings show the reading for all big companies at a 45.8 percentile standing; the standing for large manufacturers at 33.7 percentile; the standing for medium-sized manufacturers had a 34.1 percentile standing and for small manufacturers there is a 43.9 percentile standing.

Number of employees The readings for the number of employees conversely improved for large companies, moving to 28.3 in the first quarter of 2025 from 27.4 at the end of the year; for large manufacturers there is an improvement as well to 20 in 2025-Q1 from 19 in the fourth quarter. Medium-sized manufacturers see slight slippage to 32.7 from 33.3 at the end of the year, and small manufacturers see a slippage as well to 21.7 from 24.4 at the end of the year. Large companies and large manufacturers are improving while the smaller firms are falling behind. However, there's a proliferation of rankings for these results in the 90th percentile in fact, in the high 90th percentiles. For all big companies, there's a 98-percentile standing, the same as for large manufacturers. Medium-sized manufacturing companies have an 89.3 percentile standing and small manufacturers have a 79.8 percentile standing. None of these are weak or disappointing readings.

Quarters ahead... Beyond the current quarter, there are also readings in the table for the next quarter and the second quarter ahead. I provide only rankings for these readings and what we see is that for the quarter ahead conditions for large firms and large manufacturers are generally weakening and weakening significantly comparing the queue percentile standings in the current quarter to the standings for the next quarter ahead. However, for the second quarter ahead, there's generally a bounce back from the weakness in the quarter ahead, but that bounce back still does not take the ranking readings back to the levels achieved in the first quarter. For the most part, this is not particularly impressive result. The cabinet report retains a downcast view of the futures as well as a weak – and weakening- assessment of current economic performance. This deteriorated view is not as widespread as it might have been since it seems to have bypassed at least a piece of the job market where readings remain firm to strong in historic comparison.
by:Robert Brusca
|in:Economy in Brief
Japan| Mar 11 2025
Japan’s GDP Posts Solid Results
Japan's GDP growth has picked up rising by 2.2% in the fourth quarter at an annual rate and rising 1.2% in the fourth quarter over the 4th quarter of one year ago. The 1.2% year-over-year growth rate in GDP is the strongest since the second quarter of 2023, six quarters ago. The chart showed that both measures- both the year-over-year and the annualized quarter-to-quarter results, for Japan's GDP are signaling an ongoing revival in growth after a more difficult period from mid-2023 to early-2024.

Consumption- Private consumption spending in Japan rose by only 0.1% quarter-to-quarter but it's rising by 1.1% year-over-year; the year-over-year gain was last stronger in the first quarter of 2023. Public consumption in Japan rose by 1.6% at an annualized quarter-to-quarter rate, at almost the same pace, at 1.7% in year-over-year terms. The 1.7% year-over-year pace is strong, the strongest since the first quarter of 2022, again, in terms of year-over-year public sector consumption spending.

Fixed capital- Gross fixed capital formation rose by 0.9% in the quarter at an annual rate, reversing a decline of the same magnitude one quarter ago. Capital spending generally has been higher than this in the preceding quarters.

Plant & Equipment- Spending on plant & equipment rose by 2.3% annualized in the quarter; its rise year-over-year in the fourth quarter is 1.2%. That 1.2% rise is one of the weaker increases recently. This is the weakest result in the last four-quarters in plant and equipment spending. While consumption seems to have come online, fixed investment and plant & equipment capital spending definitely are lagging behind the consumer sector.

Housing- Spending on housing fell by 0.8% at an annual rate in the fourth quarter compared to 1.8% annual rate gain in the third quarter. The Q4 year-over-year change in housing spending is -1.2%; for this particular series there are negative year-over-year numbers for the last four-quarters. However, the -1.2% year-over-year rate on the fourth quarter of 2024 is the ‘least weak’ of the last four quarters in terms of year-on-year growth rates, so there may be some signal of progress buried in these numbers on housing.

International Sector- The quarter-to-quarter change in Japan's real net export numbers move into positive territory in the fourth quarter after four previous quarters of negative numbers. Turning to year-over-year changes in Japanese net exports, they remain negative in the fourth quarter, the third consecutive negative year-over-year change in a row by quarter. However, it's the smallest negative change of the last three quarters so this period of net export deterioration may be coming to a close, which is what the strong quarter-to-quarter reading implies. Looked at separately, export growth has been slowing down; the annualized quarterly rate had logged a -15.5% annual rate in the first quarter of 2024 accelerated to 6.8% at an annualized quarterly rate in Q2, softened to a 6.1% annual rate gain in Q3 and now, in the fourth quarter, it logs an even weaker 4.1% annualized rate quarter-to-quarter. The year-over-year export growth figures turn negative in the fourth quarter to -0.1% and this is the first negative growth rate for exports year-over-year since the fourth quarter of 2020. On the import side, imports fall by 8.3% at an annual rate quarter-to-quarter after rising 8.1% at an annualized rate in the third quarter. Imports also fall by 0.1% year-over-year at end 2024; the last time import numbers were negative year-over-year was in the first quarter of 2024. So, this is not such a watershed for weakness. But weakness in imports suggests that GDP may not be doing as well as the aggregate number suggests because we'd expect with strong GDP to have stronger imports in place.

Summing up- In fact, the weak import numbers are in some way also inconsistent with domestic demand. Year-over-year domestic demand rises by 1.1%, a bit weaker than it posted in the third quarter of 2024, but still the number that is quite solid by recent experience. I’d expect to see either Japan’s imports pick up, or GDP to cool. Since GDP seems to be in an early acceleration phase, Japan is probably going to see imports step up.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 10 2025
German IP Growth Crawls Higher; Slowly I Turn, Inch by Inch, Step by Step...
German IP is on the brink of a sea-change with the new German focus on rearming and increased military spending. Still, that is in planned-policy; it will take a while for it to be reflected in actual economic performance and in economic data. For now, the trend tells us what is in train, but we should expect a marked improvement IN TREND in the future.

The sector trends year-over-year show that the declining way of output still mostly holds sway, but that year-over-year output declines have been getting smaller and smaller. Consumer goods output growth is now showing positive growth year-over-year.

Monthly growth rates Monthly IP growth rates by sector are all positive in January, a sharp contrast with December when output fell sharply across sectors, except output of consumer goods. Manufacturing orders show drops in January and November with a rise in December sandwiched in between.

Sequential German growth rates German IP is showing accelerating growth rates from 12-months to 6-months to 3-months overall and for all sectors except for capital goods, where output is back-tracking at a 2% annual rate over three months. Real sales are also accelerating sequentially, but real orders show strong deceleration. Normally this would be a situation of a coming grim reality since orders lead sales and output. But since we know military spending is going to become stimulative, we have a reasonable expectation that the weakness in orders will fail in this case to be a harbinger for future output and sales.

German indicators German indicators show mostly improvement month-to-month; the IFO manufacturing expectations series is the exception in January. And sequentially the industrial surveys are still on weakening trends: the ZEW current, IFO for manufacturing, IFO manufacturing expectations, and EU Commission industrial index.

Other Europe Other European economics in the EMU offer an array of experiences for industrial production performance and trends in January. Among the six early reporters in the EMU for other Europe in the table, three show output increases in January, three also in December, and three in November. Their sequential performances in terms of growth rates over 12 months to 6 months to 3 months show France and Spain logging declines on all three horizons. The Netherlands shows increases on all horizons. Three countries show persistent deceleration: France, Spain, and Ireland. The Netherlands shows persisting acceleration. Two non-EMU reporters, Sweden and Norway, also show persistent acceleration.
by:Robert Brusca
|in:Economy in Brief
Germany| Mar 07 2025
German Orders Drop
German real orders, those are orders adjusted for the effects of inflation, fell by 70% in January, with foreign orders falling 2.3% and domestic orders falling 13.2%. These results follow increases for all the categories December reported a rise in total real orders of 5.9%, foreign orders of 0.5% and domestic orders of 14%. In November total orders and foreign orders fell while domestic orders rose by 3.5%.

Weakness overall German orders remain in a period of weakness as overall orders are dominated by foreign orders which continued to decline. Foreign orders are falling at an accelerating pace that's strong enough to drive the total order series to a decelerating pace despite the fact that the domestic order series falls over 12 months and gets even weaker over six months but then shows a strong gain over three months. That strong 3-month gain is buried in the total by the extreme weakness in foreign orders; it declined at a 40.2% annual rate over three months.

The statistics behind these trends show total orders down by 2.5% over 12 months, falling at a 12.2% annual rate over six months and falling at a 24.3% annual rate over three months. Foreign orders fall by 3.8% over 12 months, at an 8.4% annual rate over six months and at a 40.2% annual rate over three months. Domestic orders only fall by 0.5% over 12 months but then accelerate that drop falling at a 17.1% annual rate over six months and then rebounded to rise at a 10.5% annual rate over three months.

On a quarter-to-date basis, total orders, foreign orders, and domestic orders are falling at deep double-digit paces of about 25% or more at an annual rate, but this is early in the first quarter with only January data in hand. Things could change.

Real sector sales Real sector sales show greater firmness; real sales fall only in consumer durable goods and in intermediate goods in January. They fell for capital goods and intermediate goods in December. A 3-month growth rate for real sector sales shows an 8.2% annual drop for consumer durable goods, and a 4% annual rate drop for intermediate goods, with increases elsewhere for all the manufacturing. Sales are not just improving but they're accelerating from -0.8% growth over 12 months, to a +5.4% annual rate growth pace over six months to +9.7% annualized growth over three months. Even though orders are weakening at a rapid pace, sales continue to plow ahead, and they've actually been plowing ahead at an improving pace.

On quarter-to-date basis, real sector sales are growing for all categories except for consumer durables and intermediate goods. For all manufacturing, the growth rate is 7.6% at an annual rate.

Industrial indicators for Europe Industrial indicators for Germany, France, Italy, and Spain, the four largest economies in the European Monetary Union, show negative readings in January. But there is some improvement afoot. In Germany, the reading improved slightly to -25.2 in January from -28.2 in December. France’s rating improved slightly to -11 from -11.4. Italy's reading improved to -8.2 from -9.4. Spain's reading improved to -4.4 from -4.6. Industrial confidence in these four economies improved in January across the board, but these are small improvements and improvements are from very weak readings. Looking at a broader changes, the change in these readings from a year ago finds Germany worse off by 20 points with the decline of 20.4 points and with more modest but still negative results for France, Italy, and Spain, all of which are weaker in January 2025 than they were in January 2024.

Industrial queue standings - The table provides queue standings for the industrial confidence indicators since 1990 and here we see how weak conditions are: the German numbers on industrial confidence have been weaker only about 4% of the time. France and Italy have been weaker only about 21% of the time; however, Spain shows the reading above its median! The Spanish reading for January has actually been weaker 51.6% of the time and stronger less than 50% of the time. Spain is above its median.

Queue standings reveal weakness On the upper part of the table, I present two different kinds of queue standing data, one set of percentile standings is applied to the levels of orders expressed in real terms. There we see that overall orders are above their 50th percentile, at 50.5 percentile. Foreign orders have a 64.1 percentile standing. Domestic orders are only at a 27.4 percentile standing, substantially below their historic median. Quite apart from the growth rates, the level of orders Germany is getting from abroad are still above what it has been historically, above the historic median. Domestic orders generate only a 27-percentile standing. The queue standings for real sector sales show manufacturing sales above their historic median at a 51.3 percentile mark, led by a 70.5 percentile standing in capital goods. Intermediate goods are below their median at a 43.9% standing and consumer nondurables are at a 44.4 percentile standing; both of those are marginally below the 50th percentile mark which would designate the median reading since 1990. The levels that are extremely weak are levels of real orders for consumer goods particularly weighed down by consumer durables that have been weaker only 3.2% of the time.

Growth rate standings The second set of standings is applied to year-over-year growth rates and here we see total orders foreign and domestic orders all are below their median growth rate with rankings in the 24th to the 44th percentiles. Real sector sales post only a 32-percentile standing for all manufacturing although year-over-year sales or consumer nondurable goods have a 74-percentile standing and that helps to elevate overall consumer goods to a 63-percentile standing.
by:Robert Brusca
|in:Economy in Brief