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

Europe| Dec 02 2024
EMU Unemployment Rate Continues to Slide Sideways
Globally unemployment rates are continuing to move sideways or falling but the main exception is the United States with some recent increase in unemployment; unemployment in the U.S. has recently picked up from its cycle low in the wake of the Covid recession and government policies to deal with it.

In the European Monetary Union, the unemployment rate has had its low and it's been stuck here for several months. Despite some disquieting and weak economic data for the monetary union, unemployment has stayed at an extremely low level- its all-time low.

Among the 12 countries listed in the table, 5 of them have higher unemployment rates month-to-month with only Italy seeing the unemployment rate fall in October compared to a month ago. Countries experiencing a rise in their local unemployment rates are Finland, France, Luxembourg, Ireland, and Greece.

In terms of the monetary union aggregates, total unemployment continues to fall in the union as a whole over 12 months, over six months, and over three months.

Unemployment rates fell in only three of the EMU countries listed in the table one month ago. Two months ago, in August, unemployment rates fell in seven EMU member countries, while unemployment rose month-to-month in only three. The impetus for unemployment rates to drop is running out of steam while the list of countries experiencing higher rates of unemployment is rising.

Over broader periods, trends are less clear as there are the same number of countries with unemployment rates falling over three months as there are over six months. Over 12 months, there's one more country that experiences a decline in its unemployment rate compared to the count over three- and six-month horizons. Over three and six months, unemployment falls compared to the previous period in four countries; over 12 months compared to 12 months ago, unemployment rate falls in five countries. So the process of unemployment reduction has slowed then stabilized, based on comparing these trends.

The overall trend as well as the trend for countries in the EMU as well as for the U.S. and Japan shows mostly tempered unemployment rates with unemployment falling or low but with nine showing 12-month increases. Finland and the U.K. show the sharpest 12-month increases. However, global PMI data, for example, and other global data, continue to show more economic weakness. So far that weakness has not permeated the job market that continues to be strong globally, despite some -so far- not very significant backtracking.
by:Robert Brusca
|in:Economy in Brief
Germany| Nov 27 2024
German GfK Confidence Sinks to Seven-Month Low
The GfK reading dropped to a seven-month low, a fall of 4.9 points month-to-month, the 8th largest month-to-month drop in the last 20 years.

In May 2022, the GfK index fell sharply from a level of -15.7 to -26.6. From that point, the reading migrated down to levels as low as -42.8, but it's continued with only a few exceptions to remain at readings of -20 or lower during this period. November 2024 had logged only the second reading that was stronger than -20 during this long episode at -18.4. But now the climate reading is back to -23.3. The German economy is struggling without any clear new shock to blame it on. The two shocks responsible for sending GfK confidence into such a tizzy were, of course, the arrival of COVID and the government response to that pandemic, and then Ukraine's invasion by Russia. The COVID and Russian episodes brought on a surge of global inflation. Globally, central banks are still dealing with it. Inflation continues to linger at a too-high level and the European Monetary Union, although the ECB has been reducing rates steadily and is focused on trying to stabilize the economy and as well as to be mindful of its 2% inflation target.

The global situation has resulted in the unseating of many governments around the world including in Germany. This disruption extended to a long-standing domination of politics by the LDP in Japan. These circumstances are causing many governments around the world to blame their ouster on global economic conditions rather than to engage in self-introspection necessary to reconstitute their political parties. Time will tell how the new arrangements are going to work out. In the U.K., the new government is already floundering. The Jury is out on what Germany’s new administration will do. One thing will be to interact with a new more forceful president in the United States.

The GfK confidence/climate measure provides indications for economic and income expectations as well as an assessment of the propensity to buy environment. The components of the GfK index lag by one month so we have observations for these metrics in November. In November, each of these 3 readings drops and negative readings are recorded for all of them. Income expectations fall the most sharply month-to-month. The queue-percentage or count-percentile standing of the climate index overall is in its 9.5 percentile that tells us it has been this weak or weaker 9.5% of the time historically. The economic gauge has been this week or weaker 29.7% of the time, income expectations have been this weak or weaker 28.5% of the time, and their propensity to buy has been this weak or weaker 30.8% of the time. Conditions across these metrics are consistently weak coalescing around lower 30 percentile standing, which, of course, is a poor result. There is a significantly lower standing for the overall climate gauge; that is reflective of the fact that these three gauges are not usually this weak at the same time. The combination of these three low rankings help to push the overall climate reading even lower.

We also present in this table data on confidence for Italy, France, and the United Kingdom. U.K. and French data are up to date as of November (the same as the components for the GfK index), while Italy lags two months. Italy’s most recent observation is for October. The queue- or count-percentile standings show France, and the U.K. are low and similar to the standings of the components of the GfK index. The U.K. standing is at its 32.8 percentile and the French confidence measure is at the 45th percentile. In Italy, the ISTAT index of confidence has a 77-percentile standing, leaving it much stronger in its historic range. When we look at standings, any metric below the 50% mark is below its historic median; all of these measures are showing below-median values except for Italy.

On balance, it's a very disappointing report from GfK. It is not surprising because other economic data have remained weak, particularly for Europe, and for Germany during this recent period. The GfK reading is a look-ahead reading for December. As such it's our first reading/projection for December and it isn't good news.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Nov 26 2024
U.K. Distributive Trades Survey – Mixed Report/Weak Results
The U.K. Distributive Trades Sector Struggles Quarterly data from the United Kingdom distributed trades survey for the fourth quarter show mixed results from participants although data are still quite clearly weak across the board and, when at their very best, are no better than neutral.

Distributive Trades: Retailing The distributive trades survey shows that imports improved in the fourth quarter to a reading of -6 from -15 in the third quarter. The four-quarter average has been around -11 so this is an improvement relative to the average. Capital spending for the year ahead also made some improvement in retailing to a -27 reading from -35 previously; however, that's still weaker than the four-quarter average of -24. The business situation expected over the next six months; however, deteriorated to -21 from -13 and that's much worse than the four-quarter average of -7. Inflation continues to be an issue in the U.K. although it is moderating. It may be an important reason the business situation is eroding. However, selling prices in the fourth quarter are weaker than in the third quarter at a +24 reading compared to +30 in the third quarter; however, that's a lower reading than the four-quarter average of +32. Employment expectations strengthened to -18 from -25 in the third quarter and that's better than the four-quarter average of -22, indicating some ongoing improvement, the survey on employment. Expected data show that price inflation is expected to be weaker at a +15 reading in the fourth quarter compared to +30 in the third quarter- this compares to a four-quarter average of +43 so inflation progress is being made. Employment expectations, however, are weakening at a -28 reading for the fourth quarter compared to -18 in the third quarter; compared to a four-quarter average of -16. The negative expectations for employment are getting worse.

Distributive Trades: Wholesaling Turning to wholesaling, reported imports are deteriorating, the opposite result that we saw for retailing, with a +7 reading in the fourth quarter compared to a +14 reading in the third quarter; however, the +7 reading is only a tick weaker than the +8 four-quarter average for imports. Capital spending is slightly improved in the fourth quarter compared to the third quarter although slightly weaker than its four-quarter average with a -15 reading for the fourth quarter and a -12 four-quarter average. The business situation expected over the next 12 months deteriorates sharply in the fourth quarter, falling to -12 from a +20 in the third quarter; those readings compare to a four-quarter average of +10, confirming that business expectations are a problem. The selling price for wholesaling ticked up in the fourth quarter to +14 from +12 in the third quarter, but that's significantly lower than the four-quarter average of +24. Inflation progress is being made but HICP data show that inflation, while better, continues to run at a pace above trend. Employment fell off sharply in the fourth quarter; the fall was to a net reading of zero after +14 in the third quarter; those metrics compare to a +9 reading over the last four quarters. Expected prices in the fourth quarter improved significantly (slowing their gain) to +11 from +31 in the third quarter and that survey compares to a +28 over four quarters. Employment expectations in the fourth quarter also declined to +11 from +18 in the third quarter, but they continue to sit on their four-quarter average.

Summing up The rankings are presented in the table and there are but two exceptions where rankings stand above the 50th percentile. Most readings stand below a ranking at the 50th percentile, which puts them below their historic medians calculated from data back to the first quarter of 1990. Only wholesaling imports at a 51.4 percentile standing and expected employment in wholesaling at a 70 percentile standing, have standings above their 50th percentiles. However, wholesaling employment trends over the past have a 49.3 percentile standing, fairly close to neutral, but everything else in the table shows numbers that are quite significantly below the 50th percentile, frequently and most commonly, below the 30th percentile standing. These are readings that have been weaker than their fourth quarter values less than 30% of the time for the most part. Some of them are much weaker than that. The U.K. clearly is experiencing difficulty. There's barely any evidence of any rebound in this survey and only a few categories are improving somewhat in the fourth quarter compared to the third quarter. None of this is very convincing on trend. The ranking data tell us the conditions continue to be extremely weak. The trends tell us that there's very little improvement and still much deterioration going on. It's a grim report for distributive trades survey from the United Kingdom for the fourth quarter. Wholesaling rankings stand broadly higher than those for retailing but without much meaning since both are so weak.
by:Robert Brusca
|in:Economy in Brief
Germany| Nov 25 2024
German IFO Survey Remains Extremely Weak
Covid slammed the global economy and hit Germany hard. But the German economy recovered as the chart shows. Then the Russian invasion of Ukraine occurred and sent a second, more lasting, shock wave across the German economy. Government restrictions during Covid were put on and then taken off. But the Russian invasion occurred as a shock and continues to play out disrupting European energy markets, trade, and trade patterns, as well as leaving heightened international tensions in play.

This month’s report includes a table column that ranks the IFO diffusion gauges across industries and concepts since the Russian invasion of Ukraine. The climate gauges are all low ranking on a 1991-to-date basis as well as ranked just since the invasion. Wholesaling, retailing, and services do rank slightly higher over the post invasion period than overall, but the ranking changes are not really meaningful. What these rankings point out is how weak conditions got after the invasion compared to historic lows and how substantially that weakness has persisted.

The current conditions index shows deterioration month-to-month for the overall (all-sector) reading as well as for two individual sectors (construction and services). However, the current rankings over data since the invasion are universally and substantially lower than the rankings made on data since 1991. The all-sector current index is on a post invasion low. Manufacturing, construction and services in the past invasion period are still extremely low.

What has fared better are expectations. The November expectations standing on data back to 1991, the overall ranking is at its 14.2 percentile. But ranking expectations since the February 2022 invasion shows that expectations have lifted substantially from the post-invasion lows with readings largely in the 60th to 70th percentiles. However, even with these rebounds, the overall ranking shows how extremely low the current reading stands in November.

Apart from the rankings, the all-sector diffusion readings are weaker in each of the three ranking environments of climate, current conditions, and expectations. Month-to-month expectations worsen for manufacturing, construction, and services even though those sectors show much higher rankings since the invasion compared to their overall rankings back to 1991.

These comparisons simply point out that there is little in the way of lasting improvement underway. Conditions are better relative to their median values since the invasion for expectations, but not for climate or current conditions. And despite this improved relative standing for expectations, the expectations readings are especially adverse and without an improving trend.
by:Robert Brusca
|in:Economy in Brief
Global| Nov 22 2024
S&P Flash PMIs Sag Globally
Manufacturing readings fall by a 'tick' in November, but service sector metrics eased by nearly a full point on average. These calculations are for unweighted averages of the above observations. US trends are opposite, so that the overall averages become worse when the US is excluded.

In November the eight reporters in the table have stronger composite readings reported in only three countries, in Japan, India, and the US. The US is the only reporter in the table to show improvements in manufacturing, services, and for the composite at the same time, in November. The UK, France, and EMU each report increased weakness across the composite, the manufacturing sector and in services in November. Among the 24 readings across eight reporters (…and three sectors for each reporter) in November only nine of these twenty-four are stronger month-to-month. This compares to ten in October and eight in September. Weakness has dominated strength over the past three-months across these readings.

Sequentially we look at 12 month, 6-month, and 3-month averages of finalized data, we see only six of twenty-four stronger over three-months compared to 6-months, after the 6-month averages were broadly stronger showing weakening in only seven of twenty-four cases. Over 12-months there were only nine weakening compared to 12-months ago and they were all confined to three economies: Germany, France and Japan. The unweighted averages of these reporters show little change in the averaging of these sector reading over 3-months, 6-months and 12-months.

The queue rankings underscore the sense of weakness. Assessed among the most industrialized countries, the US is starting to gain separation as its service sector is carrying it to a better overall (composite) standing. The US composite standing is at 69.5% and compares to Japan, the UK, France, Germany and EMU whose highest standing for the composite among these five reporters is a reading of 42.4% -as the group produces an average standing at the 26.1%.

The US is still strongly ‘plugged into’ the global economy as its manufacturing sector is still the third weakest by queue percentile standing in the table. But the vibrant US services sector is the economy’s guiding light – plus manufacturing has improved for two months in a row. The global economy is still floundering while the US shows signs of strengthening.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Nov 21 2024
UK Industry Strengthens as Outlook Improves, Right Direction/Marginal Moves
UK improvement is shallow - The UK total orders position improved in November, but the reading went up to -19 from -27 in October, remaining deeply in negative territory. Looking ahead over the next three-months, finds volume improved to a +9 reading from -1 in October, while prices expected over the next three-months move sharply higher to a reading a + 11 from a reading of zero in October. The month-to-month movements show changes in the positive direction; however, the readings show that orders are still net negative readings and the broader standings for these assessments are still low.

Orders- Total orders in November that moved to a - 19 reading also represent an improvement from the 12-month average of -25, export orders that were unchanged month-to-month at -27 we're also stuck at the same average value they've had over 12-months at -27. On the export front, orders reveal that nothing has changed at all.

Stocks assessments- Stocks of finished goods rose to a + 21 level from +17 in October and compare to a 12-month average of 13. Rising inventories at a time when orders are not improving may be an ominous indication of what lies ahead. The outlook for volume three-months ahead improved month-to-month but the +9 reading from November compares to a +8 reading over its six-month average and a + 8 reading for its 12-months average. November shows an improvement from October but not much of an improvement from what had been the main conditions over the last 6- and 12-months.

Prices firm- Meanwhile prices are showing some pressure with the reading of +11 that is stronger than the +6 that we've seen over three-months and the average of +9 over 6-months. The November reading is slightly weaker than the +13 reading over 12-months. However, this sequence of readings seems to suggest that the disinflationary forces are abating and inflation at some level once again is going to become an issue.

Broader standing evaluated in November- Backing away from the diffusion levels and the survey levels per se, we can look at the queue standings for these levels to get a better assessment of where this months’ survey responses lie and a broader historic perspective than just month-to-month or over 12-months. Total orders evaluated over data back to 1992 have a standing in their 35th percentile. Export orders occupy their 31st percentile. The stocks reading for finished goods has a very high, 93.9 percentile standing, which, as I noted above, is not good news in an environment where the outlook for sales and orders is not expanding solidly. Output volume for three months ahead has a 46-percentile standing which is below the median value that occurs at a percentile standing of 50%. And while that's slightly below median, it's not dramatically below the median, and it comes closer to putting the UK economy back into some kind of moderate equilibrium even though there's a modest shortfall form the median in November. On the price front, the percentile standing is about at its 65th percentile, which makes it mildly inflationary. Inflation forces are above their median value on data back to 1992, however, a reading in the 65th percentile is only moderately firm. The more pressing issue is that it comes in a period where the UK has been running persistently excessive rates of inflation.

Compared to lagging IP trends- UK industrial production data are up-to-date through September. September showed a decline in industrial production of 1%, the three-month decline in this lagged industrial production reading is at about -4% annualized; over 6-months it's -2 1/2% annualized, and over 12-months it's a little bit less than a 1% decline. These sequential readings are not reassuring because they show that industrial production has been declining at increasingly faster rates of change rather than at diminishing rates of change. Output does not seem to be righting itself, even though in the CBI survey the outlook for volume has been firming back to 12-month average levels.

Summary and assessment- The outlook for volume has been oscillating in a very low range for the last two-years after going through a bust and boom cycle related to COVID and its aftermath. The expected volume series now is making some upward adjustment after a minor downturn that seems to have followed a modest upswing. There's nothing in this report that suggests that there's any kind of lasting improvement in the works, although it's reassuring to see that the recent weakness is dissipating. The order book balance, however, remains in deeply negative territory and while the CBI order readings had been much weaker during the COVID period, apart from the COVID period, we are looking at a string of consistent weakness that otherwise hasn't been seen at least back to 2014. In addition, there is some resurging pressure on inflation. All this makes picture for UK industry less than positive, despite some month-to-month improvement in November.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Nov 20 2024
UK Inflation: Too High Stuck, & Disappointing
UK inflation jumped more than expected in October with the CPI-H rising 0.5% after being flat in September. The CPI-H core measure excluding energy, food, alcohol, & tobacco rose by 0.4% month-to-month after rising 0.1% in September.

Even though this is the UK reporting a bad number after a good number, its good number in September had followed another bad number in August so on balance the trend for the UK is remaining higher than the result that policy seeks.

Inflation’s trend - Sequentially headline CPI-H inflation is up by 3.2% over 12 months it's up at a 3.2% pace over six-months and it's up at a 3.6% annual rate over three-months. Those numbers compare to a 2% target for inflation in the UK; the core for the CPI-H that is described above, rises 4.1% over 12-months, rises at a 3.9% annual rate over six-months, and gains 3.7% at an annual rate over three-months. This rate shows some minor disinflation and progress but at a pace that's still terribly high and with the core rate higher than the headline rate on each of these sequential periods. That's disappointing because the core rate tends to be more stuck and it's harder to move.

Inflation’s breadth - Diffusion measures the breadth of inflation acceleration. That metric is at 54.5% in October, September, and in August. It tells us that the month-to-month inflation changes have had just a little bit more acceleration than deceleration over these last three months, a period when inflation has been running too hot. Sequentially, if we look at diffusion over 12 months, that diffusion is low with the reading of 18.2%. Over 12 months inflation is accelerating in only about 18% of the categories! But, of course, a year ago headline inflation was 4.7% and core inflation was 5.7% so it's not surprising that there's a broad deceleration from those sorts of numbers. Over six-months we find diffusion is a lot higher but the reading on diffusion is still quite low, showing a tendency for inflation to fall, since the diffusion index is only at 36.4%. Diffusion shows a lot more step down in inflation from six-months to 12-months than what we see in the actual inflation numbers measured either by the headline or the core CPI-H. The inflation rate over three-months, however, shows that diffusion marks inflation as accelerating again. Three-month diffusion is at 63.6% indicating that inflation is accelerating in nearly two-thirds of the categories over three-months compared to six-months. This is certainly not acceptable with the three-month inflation rate running at 3.6% and with the core slightly hotter.

Unemployment is low - During this period, the economy has continued to generate low unemployment rates. The unemployment rate in August is 4.3%. That compares to a 12-month-ago unemployment rate of 4.1% twenty-four months ago it was at 3.8%. There has been only a small rise in the unemployment rate from some extremely low numbers. The claimant rate of unemployment shows a little more up-creep at 4.7% in October that compares to 4.6% in August; it compares to a rate 6 months ago at 4.1%. The claimant rate is showing slightly more lift but still a relatively moderate rate of unemployment.

Summing up - These conditions are going to continue to make policy-making difficult at the Bank of England. Inflation is running hot, and it looks like it's stuck. The economy is performing reasonably well, judging from the state of the labor market. But there's also some evidence of economic weakness, certainly broader macroeconomic data have shown more weakness than just the unemployment rate. Policy in the UK is going to continue to face challenges as 2024 draws to a close.
by:Robert Brusca
|in:Economy in Brief
Germany| Nov 19 2024
German Orders Thrust to Acceleration by International Forces
Foreign orders have been trying to pull total German orders higher for some time now. In September both foreign and domestic orders show solid increases with overall orders rising 4.2% month-to-month foreign orders rising 4.4% and domestic orders rising 3.6%. Sequentially, however, it's foreign orders that really stepped to the fore. The overall order pattern shows acceleration with growth going from 1% over 12-months, to a 9.8% annual rate over six-months, and rising further to a 10.2% annual rate over three-months. However, this result is substantially driven by foreign orders which rise by 0.8% over 12-months, advance at a 10.2% annual rate over six-months, and then spurt at a 35.1% annual rate over three-months. The impact on overall orders is blunted by domestic orders that began to seriously lag over three-months. The 12-month growth of domestic orders is 1.5%, over 6-months they perk up to a 9% annual rate, in line with foreign orders. But over three-months domestic orders fall at nearly an 18% annual rate, a stunning departure from the acceleration in foreign orders.

Real Sales - Sales do not show the same kind of turn around. For manufacturing and mining real sales fall by 4.2% over 12-months, contract at 5.7% annual rate over six-months, and contract at 3.3% annual rate over three-months. The pattern for manufacturing is similar. Individual industries show little guidance as far as illuminating acceleration or deceleration, since the sector changes remain chaotic. Not only do the sectors failed to show clear trend developments, they don't even grow or shrink consistently over 12-months, six-months, and three-months. The sales picture in Germany is quite confusing.

European Industrial Confidence - Measures of industrial confidence show consistent negative values in September for Germany, France, Italy, and Spain. All of them show deterioration compared to August except Spain where there's an improvement to -0.9 from -3.6 in August. Spain shows improvement over four months in a row on this score. Looking at the sequential values for industrial confidence, the German average is declining consistently, from 12-months, to six-months, to three-months; the same trend is implied for Italy. France shows little-change but logs consistent negative readings while Spain shows negative readings of diminishing intensity as the sequence that moves toward improvement.

QTD - Quarter-to-date data are now for the just completed third quarter. German orders show clear strong accelerations on this basis. Real sales across sectors show weakness and declines. Economic indicators are presented as rankings; all show below-median standings (below 50%) except Spain that shows a solid-strong 73.7 percentile standing for industrial confidence-and stands by itself in this grouping.
by:Robert Brusca
|in:Economy in Brief
Europe| Nov 18 2024
EMU Trade Surplus Rises
The EMU trade surplus rose in September to €13.5b from €10.8b in August. However, the average surplus size has been shrinking as the 12-month average is €14.9b, the 6-Mo average is €13.9b, and the 3-Mo average is €12.4bl. The September surplus has risen above its 3-month average but does not seem to be part of a trend.

The table chronicles the gradual erosion in the trade surplus on manufacturing trade from 12-mo to 6-mo to 3-mo. On the same timeline the deficits on non-manufacturing trade in EMU has become only slightly smaller partly offsetting the effect of the shrinking manufacturing surpluses on the overall trade picture.

Export trade trends for total trade as well as for Manufacturing and nonmanufacturing viewed separately show no clear trend on the 12-Mo to 6-Mo to 3-Mo timeline.

Import trends show overall acceleration that is supported by both accelerating manufacturing imports and non-manufacturing imports.

The Euro-Area trade data are for net flows in and out of the whole area with intra-regional trade netted out. The EMU area is showing an acceleration in imports that suggests a strengthening in demand. However, the area’s exports are not picking up in step. These trends are not borne out in the month-to-month changes but are fully reflected in the sequential averages.

However, it is too soon to view Europe as in recovery or out of the woods based on some strength in imports. While the sequence of import growth rates improves steadily over shorter periods, the more reliable year-on-year rate of growth for imports still register declines for overall imports driven by more extreme weakness in non-manufacturing imports.

While exports are not trending to stronger growth, at least export flows appear to be stable with positive growth rates for the most part. Manufacturing exports gain 1.2% over 12-months and rise at a 0.8% annual rate over three-months. The nominal growth is slow and is indicating only slow decay in real terms.

Country level data are, of course, of a very different quality, since these data are by the reporting country and will include as ‘exports’ goods sent anywhere outside that country’s borders which will include exports within the Euro-Area itself. On this basis German exports and imports are declining and decelerating. France shows exports steadily accelerating with imports not trending but clearly declining on all horizons. The UK, a non-EMU/NonEU country, shows exports reviving from a steep negative 12-month growth rate to show strong gains over three months. Meanwhile, UK imports also recover from steep year-on-year declines to post a more neutral result over three-months. On the export side alone Finland shows exports growing on all horizons while Portugal and Belgium show export growth turning negative over shorter horizons.

On balance, EMU and European trends are mixed. There is some hint of stabilization on the import side, but that trend development is new and not echoed by year-over-year strength. Germany and France, the two largest EMU economies, both show consistently weak imports. There is precious little good news in the September trade report from EMU.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Nov 15 2024
UK Manufacturing Weakens
Industrial production in the United Kingdom fell by 1% in September after rising by 1.3% in August and falling by 1.3% in July, continuing a choppy pattern. In September output declined for capital goods, for intermediate goods, and for consumer nondurable goods with consumer durable goods output unchanged on the month. This bevy of declines followed monthly output increases across all sectors in August which followed output declines in all sectors in July. The monthly output trends have had all this stability of a car suspension on a cobblestone road.

Beyond the monthly gyrations sequential output trends show output getting progressively weaker. Manufacturing output falls by 0.7% over 12-months; it declines at a 2.4% annual rate over six-months and then accelerates that decline to a 3.9% annual rate drop over three-months. However, output does not get sequentially weaker across all of the sectors; it only weakens sequentially for intermediate goods output. However, of the 12-sequential sector calculations (across 4 sectors and three periods) all of the observations are negative except three. The bottom line is that the overall trend shows output declines are becoming steeper, and the sector level observations show that output is broadly declining across sectors.

The September figure ends, data for the third quarter; in that quarter (to date) output managed to increase by 0.8% at an annual rate with increases in all of the sectors except capital goods where output fell in the third quarter at a 1.7% annual rate.

Looking at some key industry details, we see quarter-to-date declines or flat performance at all industries in the table except for food, drink, & tobacco where there's a 1.8% annual rate increase in the third quarter.

The UK remains in a troubled spot and although the Bank of England has started to reduce interest rates, it has done it in an environment where inflation is not entirely behaving and perhaps this is because of the observation that economic growth is so weak and the belief that with growth this week inflation excesses will not be able to persist. Weak manufacturing is a global phenomenon. The UK does not set itself apart from the countries of the G7 by posting weak industrial results. It is unclear when there will be a turn-around in global manufacturing. The US economy that often leads business cycles is showing some signs of doing better, but its manufacturing data have not turned around partly because its economy has been hit by a significant strike and by a series of hurricanes that have interrupted the good sector of the economy. The outlook remains unclear and marred by ongoing geopolitical tensions with governments staffed by new participants all around.
by:Robert Brusca
|in:Economy in Brief
Europe| Nov 14 2024
EMU IP Falls and Stays on a Sequentially Declining Path
Output in the European Monetary Union (EMU) falls by 2% month-to-month for the headline series that excludes construction. This follows an increase of 1.5% in August and decline of 0.3% in July.

Sequentially, output excluding construction follows 2.4% over 12 months it follows at a 3.8% annual rate over six months and falls at a 3.7% annual rate over three months showing a tendency toward accelerating weakness.

Manufacturing output follows suit, falling by 3.1% over 12-months falling at a 6.2% annual rate over six-months and following at a 6.8% annual rate over three-months.

The sectors for industrial production show vastly different results and trends. For consumer goods output is up by 3.6% / 12 months it accelerates to growth and 11.8% annual rate over six months and holds a strong 10.8% annual rate of expansion over three months. This tendency toward acceleration contrasts sharply with intermediate goods output output falls by 2.7% / 12 months accelerates the drop to a 4.9% annual rate of decline over six months and then falls at an even faster 7.2% annual rate over three months. Capital goods output shows relatively steady declines over all the time horizons output of capital goods falls by 5.2% / 12 months at a 5.6% annual rate over six months and then it falls at a 4.3% annual rate over three months.

The strength that we see in industrial production is lodged in the consumer goods sector and concentrated and non durables where the growth rates show clear acceleration meanwhile the output of durable goods under consumer goods shows waffling and mostly negative output trends.

Across the monetary union in September We followed 13 early reporting members and among those 6 show declines in output what's 7 showing increases in output. Among the largest countries in the monetary union Germany and France show output declines well Italy and Spain show output increases. In August six countries showed output declines and in July seven showed output declines. The performance of output in the last three months has been decidedly mixed.

Looking at output sequentially over 12 months output declines in eight of these 13 reporters over 12 months I'll put the kleines in nine of them over six months well I'll put the clines for eight of them over three months. Quite apart from looking at the weighting involved which is involved in looking at the headlines for the monetary union that we previously reported the breadth of declines across these countries shows the weakness is widespread. However, putting aside the issue of whether output is rising or declining, the separate question is whether output is accelerating or decelerating. Over 12-months output accelerates in 75% of these reporters compared to a year ago. Over six-months output accelerates across 41% of reporters compared to their 12-month growth rates. Over three-months output accelerates across 54% of the reporters compared to six-month growth rates. The 12-month result shows impressive breadth, however, the growth rate over 12 months is still negative and so it's simply the European Monetary Union stuck in a shallower hole than it was 12-months ago.

In the quarter-to-date there are output declines at 8 of the reporting countries and, since these are September data, they are complete for the third quarter.

Separately, we logged data for Sweden and Norway: these two Northern European economies show different experiences with one showing an output the climb and the other one an output increase over each of the last three months. Sequentially, both of them have mixed trends. However, both of them show increases in output in the third quarter, with output in Sweden rising at a 2.7% annual rate, and output in Norway rising at an 11.7% annual rate.

On balance the industrial output data for Europe remains weak with most trends being weak and with the experience across countries showing a great deal of weakness that continues to be scattered across the various countries. This point is most easily made by noting that among the early reporting monetary union countries in the table not one of them shows output increases over three months six months and 12-months, however, five countries Germany, Ireland, Luxembourg, the Netherlands, and Italy show declines on each of those horizons.

Growth in the monetary union continues to be touch-and-go with a leaning toward stop. Monetary policy has been and appears still to be on a declining path in EMU even though inflation has not remained disciplined.
by:Robert Brusca
|in:Economy in Brief
Portugal| Nov 13 2024
Portugal’s Inflation Puts in a Good Month But No Longer Sports a Strong Down Trend
Portugal's headline inflation rate in October shows the HICP falling by 0.3%. Portugal's National CPI index drops by 0.1% and the National core inflation rate drops by 0.1% as well. These breaks for inflation in October across all the measures reflect reversals from what had been strong gains in September. In September, the HICP measure rose 0.8% month-to-month, the National CPI headline rose by 0.5%, and the National core rate rose by 0.6% month-to-month. Monthly inflation is volatile; good news comes, and good news goes. This month, the good news has come; however, placed in context, the good news doesn't really seem to have been quite good enough.

Portugal’s sequential inflation: Sequential inflation in Portugal shows that the HICP inflation rate is up 2.6% year-over-year; it's up at a 2.5% annual rate over six months and at a 2.5% annual rate over three months. All of these growth rates are above the 2% pace targeted for the euro area as a whole by the European Central Bank. Of course, not every country has to meet that target. The ECB target is for the economic-weighted HICP, which gives each country a weight in accordance with its economic contribution to the euro area.

Portugal’s nation inflation barometer- We look at the National index because it allows us to get an earlier view of the core inflation rate which is not available on an earlier basis in the HICP format. The National data on the CPI in Portugal show 12-month inflation at 2.3%, six-month inflation dipping under that magical 2% level at 1.8% at an annual rate, then moving back up to 2.2% at an annual rate over three months. Meanwhile the National core inflation rate is 2.6% year-over-year; it runs at a 2.5% annual rate over six months and accelerates to a 3.1% annual rate over three months.

The chart’s trends- The chart in this report shows these trends very clearly. It is only a chart of year-over-year inflation, but it includes both the HICP headline and the National core index. It shows that inflation progress had been in train; it since has given way to moving sideways or higher. It's the domestic core index that seems to be trending slightly higher - and that's not good news.

Inflation diffusion (breadth): At the bottom of the table, we look at the various categories in the national CPI index to chronicle whether inflation is accelerating or decelerating. In October we see there are more decelerating pressures with only 41.7% of the categories showing inflation acceleration. September showed 50% of the categories showing acceleration- a balanced result. In August, two-thirds of the categories were showing acceleration- clear pressure. These differences are not so surprising because monthly data do tend to move around quite a lot.

Sequential trends in Portugal- Sequentially, we see the good news in the 12-month index where only 33.3% of the items show acceleration compared to their 12-month ago inflation rate. It's over this long-term comparison that inflation progress is clearest. However, looking at six-month inflation compared to 12-month inflation, deceleration is only at 50% marking overall inflation pressures as balanced with disinflation factors. Over three months, the acceleration factor ramps up to 58.3% showing that there's more acceleration in progress than there is deceleration on the nearest horizon.
by:Robert Brusca
|in:Economy in Brief