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

Global| Nov 02 2026
S&P MFG PMIs Show Modest Global Slowing
The PMI story for October shows PMIs weakening in 11 of the 18 countries that report manufacturing data. The manufacturing PMIs ticked down only slightly month-to-month, falling in 11 of eighteen reporters in October. The median reading over 12 months, six months, and three months progresses from 51.2 over 12 months to 52.2 over six months to 52.1 over three months. There's really not much change there to base a lot of analysis on; conditions have been substantially the same across this broad group of countries.

Sequentially the PMI data show that over three months 13 of the 18 early reporting countries have lower PMI values with only 5 showing better values. Over six months, six countries show worsening results with 12 showing improvement. Over 12 months, only four countries show worsening results with 14 showing improvement. As we look at the breadth of improvement versus deterioration from 12 months to six months to three months, there's a narrowing, a clear narrowing, in terms of the breadth of countries showing conditions getting better compared to those showing conditions getting worse. However, that statement also exists in the same world where the median for the group hasn't changed very much over any of those horizons.

Understanding this period – is it representative? To get a broader perspective, we can look at the rank or queue percentile standings that give us a percentile standing for each of the reporting countries or areas on data back to January 2021, a relatively broad period. However, it's not a time span in which activity was particularly strong. Still, using the EMU Commission readings on the EMU as a benchmark, the average back to 1990 shows the ranking of the current period average assessment as nearly normal; the reading for October is about 3% below the EMU mean on data back to 1990. So, the rankings over this period may also be a reasonable proxy for longer term rankings in the broadest sense.

There was some strength in the recovery and the immediate post-COVID period. And then there was the invasion of Ukraine that really knocked things back down. Subsequently there were U.S. tariffs imposed that created another international kerfuffle, and then the attack by Hamas on Israel, and the subsequent attempt to rein in Iran by the U.S. and Israel with significant knock-on effects that are largely still in place involving the difficulty for oil and other commodities to pass safely through the Strait of Hormuz. So, rankings on this timeline are not for a period of robust growth, but then that is not unusual, statistically. Part of that is that our period begins on a post-COVID high with activity having rebounded. The median percentile standing for this group on data back to January 2021 is a 67.2 percentile standing, which places it just barely into the top third of all observations on this timeline. Only three countries log percentile standings in the top 20% of all their observations during this span. They are Japan, Indonesia, and Malaysia, all Asian economies. The weakest readings on the period, at readings of around 25% and lower, include India at a 20.9 percentile standing, Turkey at a 22.4 percentile standing, and Brazil at a very weak 6th percentile standing. The grouping of these weakest economies includes two BRIC economies plus Turkey.

The large economies are doing well compared to their performance over this timeline, with the euro area economies having a 76.1 percentile standing, Germany, in particular, having a 76.1 percentile standing, the U.S. having a 79.1 percentile standing, the U.K. having a 73.1 percentile standing, and Japan having an 80.6 percentile standing. However, in contrast, France, with all of its fiscal trouble, has only a 53.7 percentile standing over the same period. Oil prices are shooting up again as the U.S. midterm elections draw near. There is a creeping rumor mill of commentary that suggests that the U.S. will be increasing hostilities against Iran after the midterm elections. That buzz has markets on edge and oil prices are moving higher again.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 29 2026
EU Indexes Show EMU Weaker in October
The EU index for the European Monetary Union (EMU) fell to 96.9 in October from 97.5 in September. The index was last lower in June of this year, so this is a multi-month low.

The main sector indexes showed a monthly improvement in only one, the industrial sector, with a rise of one point. Weakening on the month were the construction sector, retail sector, consumer confidence, and the services sector. Each of them slipped by about one point.

Across reporters, eleven of the 16 countries that are early reporting show month-to-month declines. There were monthly increases in France and Italy as well as among the smaller economies Austria, Belgium, and Slovakia. Nine countries had shown monthly declines in September and only seven had logged weakening in August; still, that’s seven out of sixteen.

EMU-wide sectors By sector, only two of the five sectors have rankings in their queue standings of historic data above their respective medians. Those two are the industrial sector (58.0%) and construction (57.7%). Below-median rankings were turned in by retailing (43.9%), services (38.5%), and consumer confidence (13.0%). Consumer confidence globally appears much weaker than the sector you might expect to see it affect, like retailing, wholesaling, or services. Consumers keep worrying but keep spending. Still, the overall ranking for the EMU index is at its 37th percentile. That overall ranking is lower than the unweighted simple average of the five-sector ranking (at 42.2%).

Across countries, the rankings show only five of 16 reporting countries with rankings above the 50% mark, a ranking that would place them above their respective historic medians.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 28 2026
GfK Confidence Eases Slightly in Germany; Major Setback for Confidence in France
Consumer climate in the GfK readings from Germany in November edged slightly lower to -30.8 in November from -30.6 in October; the October level had dropped relatively sharply from -26.8 in September. The queue percentile standing also known as the count standing, was at a 2.7 percentile reading in November, which tells us it's been this weak or weaker only 2.7% of the time (based on data back to May 2002), an extremely weak reading.

The components of the GfK headline lag by one month; they showed an improvement in the economic expectations index to 2.1 in October from -3.4 in September, a deterioration in income expectations to -15.7 from -15.0, and for the propensity to buy there was a slippage to -11.9 in October from -10.8 in September.

The components show count rankings in their 43.9 percentile for economic expectations, in their 9.5 percentile for income expectations, an extremely low reading, and, for the propensity to buy, the standing is in its 26.5 percentile.

Readings for Italy, France, and the United Kingdom are in the far-right-hand portion of the table. France and the U.K. have October readings and are up to date on the same timeline as the components of the GfK index. The reading for Italy is a month older, in September. All of the readings, regardless of how topical they are, for Italy, France, and the U.K., dropped compared to their respective previous monthly values. In the case of Italy, the reading dropped to 91.2 in September from 94.5 in August. In the case of France, the reading for October dropped to 80.3 from 85.1 in September, and the U.K. situation showed the October reading dropped to -24.0 from -13.0.

The count percentile standings for these three countries are around the 51st percentile for Italy, the 25th percentile for the U.K., and the 0.3 percentile (yes, less than one percentile) for France, where the index is hundredths of a point away from being the lowest ever. The level of the reading is a function of how the index itself is formed, but the count percentile standings rank the current reading against the history of the index, giving us a better feel for where the current standing is compared to where it's been in the past. Clearly, France logs the weakest reading, which is not surprising given what's going on in Europe and particularly in France at the moment. Italy has also had some demonstrations, but the month-to-month drop in Italy is not as severe; Italy’s percentile standing is still above its median; however, the reading is for September so we're going to have to hold judgment until we start getting readings in October and later for Italy.
by:Robert Brusca
|in:Economy in Brief
Global| Oct 27 2026
Money Supplies Slow Except in the U.S.
EMU Money Growth Money supply in the European Monetary Union had slowed in September as the near-term growth rates peaked at a 12-month pace of 4.4% annualized. Over six months, growth is 2.7%, annualized; over three months, M2 money supply growth is at an annualized rate of 1.8%. The EMU shows a clear slowing in nominal money growth. This has led to a decline and a contraction in real money balances in the monetary union. Real money supply growth over three years, two years, and one year is locked into a very narrow range of 0.5% to 0.6% at an annual rate. However, over six months, the annualized rate of growth is -1.9%; over three months, the annual rate of growth is -4.4%. Nominal money supply growth and the pace of real money balances are clearly pulling back in the monetary union.

Credit Growth in EMU Nominal credit growth is also slowing in the Monetary Union as nominal credit growth peaked over 12 months at 4.5% and has decelerated to a three-month growth rate annualized at 3.1%. Private sector credit peaked over 12 months at 4.5%, decelerated to a 3.8% annualized rate over six months, and then decelerated again to a 3.2% annualized rate over three months. In real terms, private credit is also slowing and contracting, with both total and private credit growth rates in the neighborhood of -3% growth, expressed at an annual rate over three months.

The U.S. - An Uneven Picture The U.S. shows only a hint of monetary slowing as nominal money growth is 4.1% over the last three years, climbing to 5.7% over 12 months and rising further to a 7.2% pace over six months. It does slow over three months but only to a pace of 6.0%, leaving it below its six-month pace and yet above all the other growth rate calculations, making the assessment of a ‘slowdown’ premature.

The U.S. monetary real balance growth rate shows a hint of slowing, but the signal is not clear. Real M2 growth is 1.1% over three years; it rises to 1.9% over 12 months, rises to 3.4% over six months, and then drifts lower to 1.3% over three months. This pace shows period-to-period deceleration but is still above its three-year pace, and the three-month decline may be too steep to take at face value.

U.K. Money Growth - Lagged Readings The U.K. is a month behind the other countries in reporting money growth for September. U.K. nominal M4 growth is in a nominal slowing mode, with the annualized growth pace down to 3.3% over three months. U.K. real money balances show monetary contraction over six months and three months, with the three-month pace at a chilling -1.8%, still not quite as steep as the money or credit slowing in the EMU.

Japanese Money Trends The last country on the table is Japan, where M2 plus CD nominal growth rates appear fairly flat. The three-year growth rate in Japan has averaged 1.6% at an annual rate; the 12-month pace stepped up to a 1.9% growth rate, which has since ticked down to a 1.8% annualized rate over both three and six months. Money growth in Japan is relatively flat in nominal terms while persistently shrinking in real terms. The growth hit to real balances in Japan shows them contracting over all periods in the table. Over 12 months, real balance growth is -0.3%; then the annual rate of decline becomes more intense over three months and six months at -1.3% for both of those tenors. The real balance slowdown is clear; however, for nominal money, the growth profile is simply flat.

Implications Having more resilient money growth in the U.S. could be a problem for the rest of the world if the U.S. takes this as a sign that it has more of an entrenched or even growing inflation problem because it will be then raising rates while other countries are experiencing weakening money growth and are going to be less able to absorb the increases in interest rates that rate hikes in the U.S. could start to impose on the global economy. All of the central banks in this table are engaged in some process of an interest-rate tightening. The Bank of Japan has been engaged in a very slow and steady process of ‘normalization.’ The ECB process has been a little bit more aggressive and preemptive, while in the U.K. the inflation numbers are starting to look a little bit worse and could motivate the Bank of England to go back on the rate hiking path after it had sought some moderation.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Oct 26 2026
U.K. CBI Survey Remains Weak but Sharply Rebounds
The Confederation of British Industry (CBI) survey responses in October, for October itself or looking to the month ahead, show sharp improvements in the current results and significant improvement in expected retail sales and less broad improvement for expected wholesale orders and sales.

The rank standings of the survey categories all are below their 50% marks, their respective medians, for all the survey items except for the retail survey on sales for the time of year and for inventory ratios.

Overview This means that despite some relatively pronounced recovery between September and October, conditions are still subpar for most of the categories. October levels are generally above levels posted a year ago as well and here, we're comparing the actual readings in October to October of one year ago, and the expectations for November to November of one year ago. For the most part, we're seeing significant improvements on that basis. We're also seeing significant improvements in the October-November values for current and expected activities compared to the 12-month averages. So, the U.K. economy has been through a real sort of baptism of fire over the last 12 months, with extremely weak readings having been posted and then, in October, or looking ahead to November, there is quite a remarkable improvement. But the economy was in such a deep hole that even with this sharp month-to-month jump, conditions continue to score out as weak compared to historic benchmarks.

Retailing in real time The retail survey, for example, is showing sales in October for the concept ‘sales compared to a year ago’ at a -10 diffusion reading, compared to -55 in September and a 12-month average of -41. Orders, compared to a year ago, at -36 in October sharply improve; they also are up from -62 in September, but they're only back to their 12-month average, which is -36. Sales ‘for the time of year’ improve sharply to -3 in October from -40 in September; that compares to a 12-month average of -25. Without referencing the ranking statistics, it's clear that there's a sharp improvement underway, but when we reference the queue rankings, we see that it's still an improvement that has a long way to go just to get back to ‘average.’

Retailing expectations Similarly, the expectations for retailing for ‘sales compared to a year ago’ in November are at -10 compared to -37 in October; that compares to a 12-month average of -34. Orders, compared to a year ago, come in at -29 for November’s expectations, up from -63 in October; that compares to a 12-month average of -35. So that marks a sharp improvement month-to-month, but a modest improvement compared to the 12-month average. Sales ‘for the time of year’ also improve to -24 for what's expected in November, from -39 in October; the -24 reading is only marginally better than the -26 average over the last 12 months.

Current wholesaling evaluations The volume assessments for the current situation in wholesaling show similar improvements in October compared to September and also for the October standings relative to the 12-month averages. Sales compared to a year ago, for example, are at a -4 reading in October compared to -24 in September, which compares to a 12-month average of -26. But here again the queue standing for that October reading is only in its 34th percentile, barely above the lower third of all readings chronicled back to August 2002. Orders compared to a year ago come in at -10 compared to -22 in September, which compares to a -34 average over 12 months. Sales ‘for the time of year,’ a sort of seasonally adjusted view, actually deteriorate in wholesaling to -26 in October from -21 in September, but there is an improvement when compared to the 12-month average of -31.

Wholesaling expectations Wholesaling expectations improve to -10 in November on the metric ‘sales compared to a year ago,’ a significant improvement from October’s -23 reading and an improvement from the 12-month average of -29. Orders ‘compared to a year ago’ improve to a reading of -21 in November from -28 in October; that's a nice improvement from the -37 average over 12 months. Sales ‘for the time of year,’ however, deteriorate slightly in November to -26 from -24 in October, although there is an improvement from the 12-month average of -32. Expected ‘sales for the time of year’ have an extremely low ranking, with a lower 12th percentile standing. But that was also the low ranking in retailing this month, for expected sales for the time of year in November, even though in retailing there was a sharp monthly improvement.
by:Robert Brusca
|in:Economy in Brief
Global| Oct 23 2026
S&P PMIs Show Mixed but Broad Weakening in October
Among the early reporting countries, I present flash readings for the S&P PMIs in October. Only two of these reporters, the United Kingdom and India, show stronger headline PMI readings in October than they had in September. For reporters Germany, the U.K., Australia, and the United States, stronger PMI readings for the manufacturing sector emerge in October compared to September. However, only the U.K. and Japan report stronger services readings in October than they reported in September.

The weakness in services is very broad-based, while the weakness in manufacturing is mixed. The impact on the headline causes readings to be weaker in most cases in October than they were in September. This rounds out the picture of an uneven economy as central banks are on the path to fight what has been an excess of inflation, as energy prices continue at uncomfortably high levels.

However, these results are only for the month of October. If we look at the three-month averages, which are based on historical final data and so do not include the October ‘flash’ readings, we have stronger readings across the board for the headline PMI. We have stronger readings across the board except for India in services. Also, over three months, the performance of the manufacturing sector is mixed, with four stronger and four weaker reporters.

For six months the picture is more uneven, as slightly more readings are weakening compared to the 12-month readings that are strengthening. However, over six months the U.S. shows strengthening on all three sector readings, as does India. Three-sector weakness over six months comes from Australia, while Japan, the U.K., France, Germany, and the European Monetary Union all show the headline weaker over six months, driven by a weaker services sector.

Over 12 months all the readings are stronger for all three sectors for all country comparisons except the U.S. For the U.S., weaker readings are in the services sector and the composite index compared to a year ago.

The queue percentile standings paint an upbeat picture, with the average composite reading at a 52nd percentile standing, above its historic median; manufacturing at a 58th percentile standing is looking quite strong, while services at a 46.8 percentile standing shows that the services sector has performed below its median performance on data back to 2021. Australia and India are the weakest on these timelines in terms of their ranking for their composites as well as because they have below-median results for their manufacturing and services sectors. The U.S. shows the strongest statistics on this comparison, with an 86.8 percentile standing for its composite, a 77.9 percentile standing for manufacturing, and an 85.3 percentile standing for services. Among the remaining countries, only France has a composite reading below its median, meaning it is below a ranking of 50%, while Japan manages a headline ranking of 72.1% despite having a services ranking below its 50% mark, and it does that on the strength of a manufacturing ranking in its 80.9 percentile.

Changes over 12 months show declines in all three PMI sector readings only in India and in Australia. The U.K. and France show improvements in all three sectors over 12 months, while the monetary union and Germany show headline declines over 12 months caused by a weakening services sector in the face of solid increases in manufacturing.
by:Robert Brusca
|in:Economy in Brief
France| Oct 22 2026
French Industry and Services Both Improve
The INSEE survey for France that evaluates manufacturing and services sector firms shows a strong rebound for manufacturing in October and a solid rebound for services in the same month. However, the two sectors are experiencing significantly different environments, with the industry climate reading for manufacturing at a 76.5 percentile standing, putting it in the top 25 percentile of all performances back to 2001. The services climate reading is at a 42.8 percentile standing, leaving it below its historic median over the same period.

Manufacturing The manufacturing survey shows manufacturing production expectations improved slightly, moving from a -9 reading in September to -8.5 in October; the recent trend for production increased to 2.3 in October from -1.4 in September. While participants in the survey found the prospects for their own industry, the personal likely trend rose to 18.6 from 14.3 in September. The assessment of the industry trend is still a weak one with a 40th percentile standing; however, the personal likely trend is quite strong at a 93.8 percentile standing. This shows that participants have a much more upbeat view of their own industry compared to their expectations for the manufacturing sector as a whole. Since the survey is a broad one across sectors, these results make the survey somewhat inconsistent with itself.

Orders and demand improved sharply in October with the net rating of -10.5, sharply improved from -15.8 in September. The response for foreign orders and demand showed an even stronger positive shift to -1 from -10.1 in September. The rankings for orders and demand show a 74.2 percentile standing for the overall reading, while foreign orders & demand have an 87.3 percentile standing; both of these are quite strong.

The outlook for prices diverges, with firms seeing their own likely price and trend for their industry at 10.6 in October, lower than 14.6 in September. However, for the manufacturing sector price level, they look for an escalation to 31.1 in October from 24.7 in September. The own likely price trend has a 78.1 percentile standing, while the manufacturing price level has an 83.3 percentile standing; both are looking for significant upward pressure on prices.

Services The services survey in October shows an increase in the climate indicator to 99.3 from 97.8 in September; however, it still leaves the sector with a 42.8 percentile standing, below its historic median. The three-month average and the 12-month average of the climate gauge both show improvements; in both cases, they're relatively small, but a lot of that is the result of the smoothing. In terms of the rankings, the rankings for the three-month and 12-month measures are fairly similar to the ranking for the reading for the current month in October.

The outlook improved to -9 in October from -10 in September but still has only a 34.6 percentile standing, nearly a lower 1/3 standing for the outlook.

For sales, the observed performance over the last three months weakened to -5 in October from -1 in September. However, the expectations for three months ahead improved to 3.9 from 0.6 in September. The past observed trend is weak with a 22.5 percentile standing, while the expected result for the three months ahead has an above median, at a 60.8 percentile standing. With such a weak outlook, the turnaround on sales is surprising.

On the price side, there are slightly mixed results, with the observed trend over three months falling to 2.2 in October from 3.4 in September against the expected trend over the next three months, which moved up to 5 from 4.6 in September. The ranking of the past three-month trend is a 77.8 percentile standing; the ranking for the expected trend is a stronger 89.2 percentile standing.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Oct 21 2026
U.K. CPI Goes Off the Rails Ahead of BOE Meeting
Inflation in the United Kingdom is back to misbehaving in September. The HICP rendition of inflation posted a 0.5% increase, its second in a row, following a 0.6% increase in July. The CPIH, however, performed exactly the same, with a 0.5% increase in September and August, after a 0.6% gain in July. This is going to put the Bank of England's back up against the wall when it comes to making its next interest rate decision.

Hot, hot, hot: Inflation runs hot in the United Kingdom. The CPIH version shows a 6.6% annual rate over three months, a 4.2% pace over six months, and 3.6% over 12 months. This is a clear accelerating profile with inflation clearly over the 2% mark over each one of those horizons. A year ago, inflation was rising 4.1% year-over-year. There's very little here to provide any escape from the conclusion that interest rates need to go up and inflation is a problem that needs some strict attention.

Core inflation is rising as well: Core inflation in the U.K. under the CPIH measure rose 0.4% in September after rising 0.2% in August and 0.4% in July. The sequence of core inflation rates from 12 months inward shows a 12-month pace of 3.1%, a six-month pace of 3.2%, and a three-month pace of 4.1%. These increases are faster-paced step by step as horizons shorten. However, like the headline, all three of these metrics are above 2% and once again there is this accelerating trend in place, even for the core, and that has to be an even more difficult pill for the Bank of England to swallow.

Inflation acceleration: If we look at the tendency to accelerate, acceleration occurred in 58.3% of the categories in July; that proportion fell to 41.7% in August, and it was back up to 50% in September. So, as of September, the proportion of these categories showing acceleration is split pretty much 50/50, making it less of a clear acceleration imperative on volatile monthly data. However, over three months compared to six months, 75% of the categories are accelerating; over six months compared to 12 months, again 75% of the categories are accelerating; over 12 months compared to 12 months ago, that proportion drops to 41.7%. But the drop in the breadth of inflation is also related to the fact that the 12-month inflation rate had dropped from a year ago at 3.8% to 3.5%; it dropped more, from 4% to 3.1%, in the case of the core CPIH. In other words, inflation has fallen from a very excessive pace to a still excessive pace, and that drop is ‘endorsed’ by a drop in breadth. Breadth can reinforce direction. And now inflation and breadth both are rising – a bad sign.

Inflation ranking: We also can look at how inflation ranks compared to where it's been and on this basis that we wind up with another troubling finding. The HICP version of inflation has an 82nd percentile standing; the CPIH version also has an 82nd percentile standing and the CPIH core measure has a slightly higher 82.7 percentile standing. So, inflation is high even by historic experience; that compares current year-over-year inflation in September to inflation rates back to the year 2000. On that timeline, in fact, the median for inflation has a 77th percentile standing and the average pace for inflation has a 72nd percentile standing across categories. Now both of these are slightly lower than the actual CPIH version at a ranking of 82%. What that tells us is that inflation has been even more virulent in those categories that have a higher weight in the CPI.

Summing up On balance, this is a poor report; it will probably put the Bank of England's back up against the wall to enforce another rate hike. It's hard to see how the central bank can look at these various measures of inflation and their path and decide to pass on a rate hike at its next meeting, so brace yourself.
by:Robert Brusca
|in:Economy in Brief
Global| Oct 20 2026
ZEW Survey Shows a Sharp Reduction in Inflation Concerns
The current situation assessment is mixed To the ZEW experts, economic assessments of the current situation in October are split, with slight deterioration reported for the euro area as a whole and a two-point step-back for China. However, for Germany and the United States, there were significant improvements with the month-to-month diffusion indexes improving by 6 points in the U.S. and by 11 points in Germany. Ironically, both of the weakening areas, the euro area and China, have percentile standings above their historic medians, with China at a 76.1 percentile standing and the euro area at a 58.7 percentile standing. Germany and the U.S. show some strengthening month-to-month, but their standings are still below their historic medians. The German standing is at a 42.5 percentile and the U.S. standing is at a 46.2 percentile.

Economic expectations ease broadly Economic expectations, however, are unequivocally weaker across the reporting countries. There were declines in expectations in Germany of 6.6 points, in the U.S. of 5.3 points, and in China of 4.2 points; each of these three reporters shows a measurable slippage in October. Among the three countries showing slippage, only Germany continues to report economic expectations ranking above its historic median, at a standing of its 53rd percentile (a ranking above 50 means above median).

Inflation makes a sharp step back The real story of the ZEW survey this month, however, is on inflation where the inflation expectations dropped sharply across the board. For the euro area, expectations dropped 26 diffusion points; in Germany, they dropped 24 diffusion points; in the U.S., they dropped 22 diffusion points; and in China, they dropped by 15 diffusion points. Inflation expectations are above their median now only in China, with a 62nd percentile standing. In the U.S., inflation expectations have dropped to a 28th percentile standing.

Rising short-term rates continue as inflation is expected to abate With the decline in inflation expectations, however, short-term interest rate expectations rose by 2 points in the euro area and by 5.2 points in the United States, while in China there was a step-back of 4.1 diffusion points. All three areas, however, have short-term rate expectations well above the historic median levels.

Low inflation expectations boost bond values The reduction in inflation expectations has had the biggest impact on long-term interest rate expectations. Those have fallen in Germany by 13.2 diffusion points; they've fallen in the U.S. by 18.3 diffusion points; and they've fallen in China by 5.0 diffusion points. The ZEW experts apparently think that central banks are going to continue to raise interest rates and the impact is going to be to flatten yield curves globally.

ZEW experts’ outlook for stocks The final market expectation of the ZEW experts is that stock markets generally are seen improving in this environment. For the euro area, there's a 4.1-point improvement; for Germany, a 5.8-point improvement; and for China, the diffusion index is 4.9 points higher. Only the U.S. has a slightly weaker outlook as the outlook falls by 2.3 diffusion points. All the stock market expectations are above their historic medians, generally ranging between readings above 50, at the 54th percentile to the 57th percentile, except for China, where the stock market expectation is in its 83rd percentile, extremely strong.
by:Robert Brusca
|in:Economy in Brief
Japan| Oct 19 2026
Japan Shows Growth Progress and Ongoing Weakness
Japan’s sector surveys are showing some progress. However, the most recent observation from the METI sector indexes shows that the tertiary sector in August, which is the services sector in Japan, eased slightly to an index level of 106.8 from 106.9 in July. The rank for this sector based on growth over the last year is in its 64.1 percentile standing; that compares to the industry index that actually stepped down more sharply in August to 101.9 from 104.4 but still has a growth rank in the 84th percentile. The METI indexes can also be ranked according to the index levels rather than their growth rates; on that basis, the tertiary index ranks much higher in its 98th percentile, while the industry index ranks only at its 18th percentile on data back to 2012. You can see that a lot of this is from the post-COVID period since the change in the index from January 2020 to date is a decline of 6.3% for the industry index and an increase of 4.6% for the tertiary index. Japan's economy has clearly been hobbled since the onset of COVID and the recovery from it.

While the METI sector indexes show weakness in August, the leading economic index rose to a level of 118 from a level of 117.6 in July; the year-over-year growth rate ranking of the LEI is in its 92.5 percentile, quite strong. The index level ranked back to 2012 on the same timeline as the METI indexes has a 98.3 percentile standing. These are very different takes on the economy compared to METI, albeit based on different conceptual readings.

Economy Watchers Other indexes weighing in on growth in the Japanese economy come from the economy watchers index, where that overall index rose in August to a diffusion value of 46.4 from 45.7 in July. Over the past year, its growth rate (for the change in the diffusion index) ranked in its 53.5 percentile, while its index level rank is only in its 36.6 percentile. The economy watcher shows a year-over-year growth ranking above the 50th percentile for the retail sector, for eating & drinking places, for employment, and for the future index, with only the services sector lagging behind at the 40th percentile standing. However, when we rank the levels of these sector indexes, which are diffusion indexes, only the eating & drinking places category has a percentile standing above the 50th percentile, which means it's the only sector above its median value on data back to 2012. Meanwhile, all the August values for the diffusion readings themselves are below 50, indicating sector contraction across the board.

Teikoku A separate set of readings comes from Teikoku, where the manufacturing and wholesaling indexes both have readings above the 50th percentile, at the 59th percentile for wholesaling and at the 81st percentile for manufacturing. These are also diffusion indexes; if we look at the levels of the indexes, both manufacturing and wholesaling also have level rankings that are strong in the 80th percentile for manufacturing and in the 64th percentile for wholesaling. Retailing is at the 43rd percentile standing, while services and construction are weaker, with readings closer to their lower third, at the 34th percentile standing for services and at the 35th percentile standing for construction. Like the economy watchers index, these are also diffusion indexes and all of the raw diffusion readings are below 50, showing sector contraction in August.

Every sector tells a story These various indexes tell differing stories depending on the index doing the telling. But the stories aren't so different overall. They show generally that the manufacturing sector is doing well recently, although industry ranks much lower in the METI framework than manufacturing ranks in the Teikoku framework. Services have a sub-50 percentile standing for both growth and level in both the economy watchers and the Teikoku framework, whereas in the METI framework, the services sector is above its median on the same timeline. One of the reasons for the weaker industrial index in the METI framework is that the designation ‘industry’ mixes manufacturing with mining, and the mining sector has been lagging. The differences in the services categories are harder to explain, with much stronger growth in both the ranking and the levels in the METI framework compared to the economy watchers or the Teikoku. However, in the economy watchers segment, the employment index growth rank is quite high in the 71st percentile, but in level terms it's still weak at the 30th percentile. That seems to provide a sort of halfway house to understanding the differences. From that index, it would appear that recent employment growth has picked up, very likely underpinning the services sector. However, the employment index, compared to where it's been historically, remains weak; that leaves the strong reading for the tertiary index ranking as the odd man out and harder to explain.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 16 2026
EMU HICP Detail and Building Pressures
Think of this as though it's mixed doubles in tennis. This is a chart of the PPI pressures in the monetary union, while the table is a more detailed decomposition of pressures within the HICP consumer price measure. The PPI report is a graphic depiction of where the pressures are coming from in the inflation process at the primary levels. It shows us that the greatest pressures are coming from intermediate goods, where the kick to inflation is the strongest. Next, capital goods prices at the producer level are rising on a milder gradient, enjoying an increase at a pace above 2%. However, consumer goods prices in the PPI framework are weak, with a growth rate that has migrated back down toward zero. Yet in the overall HICP data, consumer prices at the consumer level are showing considerable pressure. They're also showing considerable upward momentum, and they're showing us broad inflation pressures all on their own.

The pressures we see in consumer prices are not being pushed up through the producer-price process per se. However, depending on how you look at or think about consumer prices, we know that PPI prices are part of the cost of consumer goods and transportation costs are actually part of the cost of selling to the public as well. That requires not just the production of consumer goods but also the transportation of them to the wholesale location and then to the retail location. Transportation costs are an important part of consumer prices, and we're more aware of that these days because people do a lot more online shopping. They can see the difference between going to the store for a good and having it delivered to their house, where they have to pay an explicit delivery charge. A delivery charge would reflect the fact that somebody has to come to deliver it, but also that a vehicle has to be driven and that vehicle has to be fueled. The PPI shows us that a lot of the pressure being passed on is coming through that fuel channel.

Despite the fact that there's not a lot of cost-push pressure coming from the producer-price stage of production to the consumer, that certainly does not mean that final product consumer price pressures don't exist. We see those pressures in the detailed consumer price report exhibited in the table. As of September, the HICP headline was up 3.8% over 12 months, with the core at 2.5%. Both of those ring the cash register at a pace too high for the ECB target. As of September, that 3.8% pace is at a 90.8 percentile standing on year-over-year inflation data back to 2001, a 25-year comparison. But the lower 2.5% core pace still has an 85.6 percentile standing on that same timeline. These metrics tell us that not only is inflation too high by the standards of the European Central Bank, but they are also significantly elevated compared to what they've been historically.

We provide year-over-year inflation rates for detailed categories within the HICP as well as in the right-hand column, the rankings of inflation for those different categories. Inflation clocks a pace above the 50% ranking for nine of the categories in the HICP presented in the table. In contrast, only five categories have rankings below 50%. The 50% level is significant for rankings because it identifies the median for each of these measures, so we have above-median inflation in nine categories and below-median inflation in only five.

At the bottom of the table, we look at the percent of categories for which inflation is accelerating over three months and over six months. Over three months, inflation is accelerating for 56% of the categories, whereas over six months inflation is accelerating in 50% of the categories. Acceleration tendencies are neutral; by this, I mean that, in data back to 2001, the average percent accelerating over three months is 50% and the average accelerating over six months is 50.2%, so that inflation accelerating or decelerating over this broad period has been an even-handed proposition, with inflation accelerating about half the time and decelerating about half the time. That's just a statement about the proportion of categories that are accelerating; the next question is how strong the acceleration is, because the ranking at the far-right hand side of the table shows that, for three-month inflation, the ranking for the proportion of categories that are accelerating is at 53.9%, whereas over six months, the ranking is at 53.7%. The table also shows the median inflation for the categories listed in the table as well as the average. In September, the median category saw inflation at 2.7%, while the average category was at 2.9%. The median rank of inflation on data back to 2001 is at 63.6%, while the average rank of inflation back to 2001 is 59.9%. There was a slight step down in the median and average inflation rates between August and September even though the inflation rate had gone up between the two periods.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 15 2026
EMU IP Weakness Intensifies
Industrial and manufacturing output in the European Monetary Union remains under intense downward pressure. The chart that plots the individual sectors highlights year-over-year growth rates. It shows that consumer goods output continues to contract at a pace that is not healthy. Intermediate goods output has basically been at a point of stasis for the last year. Capital goods output continues to be the only robust part of the industrial economy; it shows persistent increases in output since the first quarter of 2025.

Monthly output The monthly changes showed declines in overall industrial production of 0.5% in August. The decline in manufacturing was 0.4% in August; by sector, consumer goods output declined by 2.4% month-to-month, intermediate goods output declined by 0.8%, while capital goods increased 0.4%. Within the consumer sector, consumer durables had a small output increase of 0.2%, with nondurables output falling by 0.8% month-to-month.

Sequential growth The sequential growth rates delineate growth over 12 months, six months, and three months, showing some weakness over each of those spans, with output falling by 1.2% over 12 months, being flat over six months, and declining at a 3.6% annual rate over three months. Manufacturing shows a similar trend, with a decline of 1.6% over 12 months, a decline at a 0.2% annual rate over six months, and a decline at a 4% annual rate over three months.

By sector: The sequential growth rates show declines in consumer output over 12 months, six months, and three months, with weaker growth over three months than over 12 months. For the subsector, consumer nondurables follow the same pattern and trend; so, do intermediate goods. Capital goods are a departure. They show a 1.9% increase over 12 months, a 1.6% annualized increase over six months, and a 2.6% annual rate decline over three months. Next, the only sector showing persisting increases is durable goods within the consumer sector. It shows output up 0.2% over 12 months, rising at a 2.4% annual rate over six months, and accelerating to a 5.3% annual rate over three months. The trends that we see in the headline are echoed in most of the components, which tend to show output declines over 12 months, some moderation over six months, and then an acceleration of weakness over three months. Capital goods also break that pattern by showing persisting deceleration in output growth trends from 12 months to six months to three months.

Quarter-to-date output: QTD output is falling in all sectors except for consumer durables. The headline shows a 2.7% annual rate decline; manufacturing is at a 3.5% annual rate drop. There is still one month’s worth of data needed to fill out the third quarter.

Annual growth rate ranking: Growth rates generally are weak. We rank the growth rates on a 20-year timeline back to 2006. The headline series—total industrial production excluding construction and manufacturing—have rankings for year-over-year output growth in their 28th and 25th percentiles, respectively. Consumer goods output for the entire sector has been weaker only 1.7% of the time on this timeline, with most of that weakness due to consumer nondurables output, which has been weaker only 1.3% of the time. Consumer durable goods output is above its median with a 55.5 percentile standing. Capital goods are the only other sector above the 50th percentile, with a 51.7 percentile standing. Intermediate goods come close, with a 48.3 percentile standing, annual growth that is barely below its historic median on this timeline.

Member country trends The table also presents results for 13 European monetary union member countries and for the United Kingdom and Sweden, as fellow European economies. EMU members show an unweighted average decline across this group of countries of 0.5% for output in August, a weakening from a 0.2% median increase in July and weaker than a 0.1% median gain in June. These countries have median declines of 0.1% over 12 months, 1.5% over six months, and 5.6% over three months. Quarter-to-date, the unweighted average for the group is a 7.5% decline for manufacturing output. Also, the average rank standing for EMU manufacturing growth on the timeline from 2006, as an unweighted average, has a 44.5 percentile standing, below its historic median, which puts it below median by about 6 percentage points. The only countries above their respective medians for year-over-year growth on that timeline are the Netherlands with a 97.5 percentile standing, Greece with an 86.1 percentile standing, Malta with a 69.3 percentile standing, and Spain, whose result is right on top of its median with a 50th percentile standing. There are additional five countries with percentile standings in their 40th percentile, including Finland, Italy, France, Germany, and Austria.
by:Robert Brusca
|in:Economy in Brief