Introducing

Robert Brusca

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

Publications by Robert Brusca

Germany| Dec 20 2023
GFK Index Has Slow Rebound from Its Lows in Progress for 2024
The GfK survey for Germany improved to -25.1 from -27.6. It's the largest month to month rise and the climate index since May of 2023. The level of the climate index in January of 2024 at -25.1 is the strongest reading since August of 2023. The reading has a ranking in the 6.8 percentile of its ordered queue of observations, keeping it as a bottom 10 percentile reading to start the new year.

The components of the climate index, economic and income expectations, and the propensity to buy index, each improved in December. The components lag the headline by one month. The economic index rose to -0.4 in December from -2.3 in November income expectations rose to -6.9 from -16.7 in November. The propensity to buy improved to -8.8 in December from -15.0.

Economic expectations were at their strongest since July of 2023 and the same is true for expectations. However, the propensity to buy measure was last stronger back in March of 2022.

The GFK headline as well as its components show improving trends. The chart at the top shows that climate has been engaged in a climb out from a very deep negative reading that bottomed out approximately one-year ago.

The buying index is making a nice jump after a long period of flatness at lower levels. Income expectations are rising back and the neighborhood of a peak that they had seen back in July; economic expectations are making a slow climb up but are still well short of their best readings from earlier of 2023 that were experience in April. There has been some oscillation in the German economic and income expectations readings.

Other Europe Confidence measures for other European countries in the table are stronger than for Germany. Italy and France have observations that are up to date only through November. Italy and France show month-to-month improvements in November compared to October. The Italian measure has a 63-percentile standing while the French measure has a 26 percentile standing. In Italy the standing is above its historic median whereas for France the index is well below its median and barely above the lower quartile compared to historical data back to 2002. The UK has a confidence rating up to date through December. The UK reading strengthened in November and in December rising to the level of -22 and December from -24 in November and from -30 in October before that. That is nearly back to the reading of -21 from September of 2023. However, it still has an extremely low percentile ranking in it's 29th percentile stuck between the Borders of the lower quartile and the lower third of its historic range.

The GfK measure still shows a lot of weakness as the new year begins although there is a dig out in place; we can see the GfK climate measure it is gradually clawing its way to higher levels. Italian consumer confidence is the best of the lot in this table; French confidence is still weak and close to weakness we see in the UK. But in the UK at least is on a strong movement higher over the 12-months; much stronger than the gains being made by confidence in Italy and in France. However, for the most part, I characterize European confidence as weak and still challenged.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Dec 19 2023
UK Industrial Orders Remain Weak but Improve in December
Orders in the United Kingdom (UK) log a -23 reading in December, a weak reading that has a 29th percentile standing on data back to 1991. However, it's a significant improvement from November's reading at -35. It also represents a small improvement from October's reading of -26 for total orders. Still, compared to the 12-month average orders are weaker in December than what they averaged over the last 12-months.

Export orders sketch a similar pattern as they rose to a - 23 reading in December from -31 in November and stand at the same level as in October. December export orders are just a tick weaker than what they have averaged over the past 12-months. Export orders register a 39-percentile standing in their historic queue of data.

Finished stocks in the UK rose but continue to signal modest overall readings. The December reading of +11 has a 43 percentile standing; it's up from a reading of +3 in November and +4 in October. Inventory-building is only slightly faster than its 12-month average pace.

The outlook for output volume in the next three months improved to +5 in December from -7 in November but that's still weaker than the +15 value from October. Historically the standing is weak, residing in the 36th percentile of its historic queue of data. However there is no new weakness signaled here; at + 5 the month’s reading is at the same level as its12-month average.

Average prices in the next three months log a + 7 reading, weaker than November's +11 and identical with the October’s value of +7. The reading is lower than the 12-month average of 20, reflecting that inflation ran higher earlier in the year and it has been coming down. Inflation still has an elevated reading above its historic median; its queue percentile standing on data from 1991 is at a 56.9 percentile, leaving it at a small margin above its historic median on this timeline.

Summing up The UK industrial report suggests expansion continues. Output volume is looked at as continuing to expand in the future and price pressures are expected to be less than what they've been - inflation will linger. Stocks are being built modestly. Total orders and export orders continue to sag, residing in the lower one-third of their historic range of values. The UK economy is still plodding along, however, it's still growing, and the industrial sector is expected to continue to grow.
by:Robert Brusca
|in:Economy in Brief
Germany| Dec 18 2023
German IFO Weakens Again in December
Germany's IFO Climate gauge slipped to -21.2 in December from -18.3 in November. There was significant climate slippage in the manufacturing sector, in construction, in wholesaling, and in retailing. Only the service sector improved slightly in December compared to November, advancing to a - 1.7 reading from -2.5 in November. This is a common theme for the month as the service sector is the only one that is constantly resilient across the three IFO categories of Climate, Current Conditions, and Expectations.

More on Climate The standings find the Climate readings exceptionally weak. The all-sector queue standing is at its 9.9-percentile, manufacturing is at its 8.6-percentile, construction has the strongest standing in its 25th percentile, wholesaling is at its 8.3-percentile, retailing is at its 21st percentile and services are at their 11.6-percentile. The readings are all in the bottom quartile or right at the border of that quartile as of December. All readings are in double-digit points below where they were in January 2020 just before Covid struck. The climate all-sector reading, the manufacturing reading, and the construction reading all are on their weakest marks since Russia's invasion of Ukraine took place. The wholesaling gauge is up 4.3% from that point, retailing is up 34%, and services are improved by 26% on that comparison. But on the comprehensive IFO gauges we see clearly that since Covid and the Russian invasion Germany has been reeling.

Current Conditions The IFO current conditions gauge also showed broad weakness in December with the all-sector reading weakening and four of the five sectors weakening once again with services being the exception. The service reading crept up to 13.5 in December from 12.5 in November. The rankings for the current indices are stronger than for the climate gauge but still weak; only construction and retailing have current standings above their 50th percentiles which puts them above their medians. The all-sector index has a 13.6 percentile standing which is still quite low, manufacturing has a 25-percentile standing, services have an 18.7 percentile standing, and wholesaling has a 31.5 percentile standing.

Expectations The expectations readings weaken across the board except for services. The services reading moves up slightly to -15.8 from -16.4. However, the all-sector summary reading falls to 23.2 in December from 21.7 in November; the all-sector standing is at its 8.8 percentile, once again, a very weak reading. All the percentile standings for expectations are in the lower 10% of their respective historic ranges. Expectations show an even more downbeat view the economy in Germany in December, worse than the readings for their current conditions or climate.

Germany has been weak for some time these weak IFO readings are not coming out of the blue; they're not a surprise, and they're not different from the gauges we've been seeing from other German measures. However, the data from Germany currently are coming in weaker than data from most other European Monetary Union members. That's a problem since the German Economy is the largest economy in the monetary union. The IFO is ending the year on an extremely downbeat fashion with a set of extremely weak readings across the board.
by:Robert Brusca
|in:Economy in Brief
Global| Dec 15 2023
PMI Weakness Finds Its Stasis
The PMI flash data show essentially flatlining, steady, responses over the last six months. There is a hint of uptrend in the EMU manufacturing series but not much more than a hint. Across reporters in the table, three-month changes in the individual gauges are small everywhere, except the U.K. where relatively strong gains are posted.

Over three months all services gauges are weak with Germany’s 5.6 points decline the largest and the U.K.’s one point decline the smallest. Manufacturing shows two declines over six months, one in France and one in Japan. The U.S. and Germany show the largest gains, posting a rise over six months of about 2 points. However, services gauges dominate the total PMI measure that show declines across the board over six months, with Germany, the EMU, and France logging the largest drops over six months. These point-to-point changes might exaggerate the trend. The average PMI gauges are far more stable.

The 6-month vs. 3-month averages were consistently weaker by about one point or less for the PMI total index except for the U.S. where a near 2-point drop prevailed. Manufacturing 6-month vs. 3-month PMI averages differ by small inconsistent amounts of change across table reporters – the U.S. logs a drop of one point. And the services 6-month vs. 3-month average difference fell by about one point across the board across table entries, but nearly double that in the U.S.

The color-coded table shows strengthening and weakening on the monthly and period sequential data. Monthly data show a good deal of chaos. The 54 observations over those six reporters with 3-metrics each (Composite, Manufacturing, and Services) over 3-months tallied 25 monthly weakening observations vs. 29 strengthening observations. That is quite mixed.

However, the broader sequential changes are much more consistent, showing over the three periods 45 weakening observations vs. nine improvements over 54 observations. The sequential data show clear-cut weakening. Only manufacturing shows strengthening over three months – three of them: for the EMU, Germany, and the U.K. Over six months only the U.S. shows an improvement- it was also in manufacturing. The upshot is that monthly data may be chaotic, but there is a clear trend there.

The queue standings show an average composite standing across members in their 28th percentile. Manufacturing stands in its 11th percentile and services in its 35th percentile – all quite weak. However, only the EMU, Germany, and France had composite PMI diffusion index levels below 50 in December. This underscores that to be weak (in a ranking sense) the PMI does not need to show a decline (reading below 50). PMIs are usually above 50 because services and manufacturing usually expand. Even over this weak-stretch, the service sector PMIs across the reporters in the table were above the breakeven level of 50 about 64% of the time vs. 53% of the time for manufacturing.

From May 2021 to June 2022, the proportion of reporters with both services and manufacturers at PMI values above 50 in the same month, was above 50% consistently. After July 2023, fewer than 20% of the reporters have both services and manufacturing above 50 in the same month. This has been a period of protracted weakness - and it continues.
by:Robert Brusca
|in:Economy in Brief
Global| Dec 14 2023
Dropping Inflation Puts Central Banks in an Undesired Spotlight
All of the countries in this table have inflation targets of some sort set up at the 2% mark. While inflation rates clearly have worked lower, this has only come after an extended period of inflation having overshot in each of these countries. However, central banks have generally raised interest rates quite a lot and concerns have been raised globally about the potential for recession- the Bank of Japan has been the exception to these circumstances, having expended effort trying to recover from deflation and avoid a low inflation trap.

Something in the water?- I don't know if there is something in the water- which I should note would imply the oceans- or more properly the global aquifers as well as the impact of global rainfall (climate change at work?). Something has caused central banks to change their tune as central bankers, in this cycle, have clearly acted differently than in the past and have not aggressively gone out to contain inflation overshooting. Instead, central banks have been slow to act and tolerant of inflation over their respective targets. I'm not aware of global monetary conference that established that this was now the correct way to approach inflation in the new millennium. However, this is the situation that has simply developed and seemingly developed in each country on its own.

Fed policy puts Europe’s central bankers on the spot- Key central banking decisions have been made over the last several days with the Federal Reserve opting to not change policy but to provide statements about its intent in the future as well as a procedure known as forward guidance that is encompassed in a collection of forecasts that the Fed makes public four times a year in a presentation known as the Summary of Economic Projections (SEPs) or sometimes somewhat more colloquially called ‘the dots.’ With its new guidance, the Federal Reserve put markets on notice for a likely easier policy in the period ahead and this caused expectations to ramp up for the policy meetings today at the Bank of England and the European Central Bank. However, neither of these banks took the bait that the Fed went for. The ECB went out of its way to say there was a large distance between raising rates and cutting rates and that rate reductions were not even discussed at this meeting.

Central bankers’ dilemma- Central banks are in this somewhat curious position where inflation has fallen sharply. Although I've only presented year-over-year, three-month, and six-month calculations for some of the more ‘popular’ inflation measures, there is also core inflation, which is inflation excluding food and energy, and there are inflation calculations that make other exclusions that can cause the short-term inflation rate to look much lower. This fact has raised pressure on central banks particularly on the Fed in the U.S. to begin to consider an easier policy. The Federal Reserve, of course, is in a different position than these other central banks because while the Fed has an inflation target, it also has a dual mandate. The ECB, for example, has no such dilemma. It only has an inflation mandate to keep inflation at 2%.

Saying you do not believe in gravity does not allow you to escape its pull- While the Fed in the U.S. always says it doesn't react to political pressure, the Fed has been under tremendous political pressure especially by progressive Democrats to do nothing to cause the unemployment rate to rise despite the height of inflation that U.S. economy has been laboring under. In addition, the U.S. faces presidential elections within the next year and that's been a burden that the Fed has had to deal with. And it simply isn't possible to have been involved in policy economics in the United States to not think this has been a factor regardless of what Jerome Powell or anybody at the Fed says about making policy.

An uncomfortable reality- The situation all the central banks find themselves in is that inflation has been too high for too long. Year-over-year inflation is still too high, but over shorter periods inflation is running at a much lower pace and coming closer to their desired targets. And, of course, politicians in all countries whether they're running for office this year or not, want to keep the unemployment rates low as do other policymakers- hey it’s everyone’s objective, but within reason and context. Unemployment rates globally remain low; the European Monetary Union is experiencing among the lowest unemployment rates it has seen in its life; the U.S. unemployment rate is not far from the lowest it has experienced in the last 50 years; U.K. unemployment is not so well positioned. It may seem somewhat curious that in the case of the U.S. central bank that has a dual mandate it is protecting an unemployment rate near a 50-year low and tolerating an inflation rate that has had horrific overshoot that has been above its target for 34 months in a row -and may remain out of range for another 24 months – if you miss it for five year in a row, is it still relevant as a target? Still, we're supposed to believe that this set of decisions has occurred without any reference to politics.

Japan’s unique state- The Bank of Japan now faces the most consistent persisting inflation among this group of countries; however, it's in a different circumstance because prior to the impact of COVID and the global recession that resulted, it was chronically undershooting its inflation target and worried about that. In Japan, the concerns are rather opposite to those in the European Monetary Union, the U.K., and the U.S., as in Japan policymakers wonder if the increase in inflation is going to be permanent or not. Japan is still relatively more worried about a possible return to low inflation or even deflationary circumstances - although you can't see any evidence of that in the data presented in the table.
by:Robert Brusca
|in:Economy in Brief
Europe| Dec 13 2023
EMU Industrial Production Falls Again
Industrial production in the European Monetary Union fell by 0.7% for the headline series that excludes construction. Output on this gauge also fell by 1% in September. It is also the second month in a row of manufacturing output declining. Output trends for manufacturing, for manufacturing sectors and for 13 of the oldest members of the union show broad declines and ongoing declines in industrial production.

Manufacturing- The headline series shows a negative growth rate over 12 months, six months and three months; while the declines are of a slightly lesser magnitude over shorter durations, that trend shift is minor. For manufacturing, there is an IP decline of 6.1% over 12 months, a decline at a 7.4% annual rate over six months and then a slower decline at a 3.4% annual rate over three months.

Sector trends- Looking at sectors, consumer goods hint at a slowdown in the rate of contraction with a 7.6% decline in output over 12 months that's reduced to a 1.6% annual rate decline over six months and to a 2.5% annual rate decline over three months. Intermediate goods output shows a less optimistic trend, but not a clear changing trend with output falling 4.1% over 12 months; the decline scales back to an annual rate of -3.6% over six months and then the decline steps up to a 5.2% annual rate over three months. Capital goods output shows a decelerating pace amid an ongoing contraction of output, with output falling 7.4% over 12 months, backing down to a -6.3% annual rate over six months and reduced further to a 2.9% decline over three months.

Member country trends- Among the 13 monetary union reporters on the table, six of them show declines in output in October that's after ten reported declines in September, and six reported declines in August. Over three months seven of these members show output declines; over six months eight members show output declines; and over 12 months nine members experience output declines. The quarter-to-date calculations, one month into the fourth quarter, show six of these reporters with output declining early in the quarter.

Growth rate rankings- The far-right column in this table ranks growth rates by country and by overall manufacturing sector on data back to October 2006. On this basis, all the sectors report growth rates that rank at least in the bottom 20% of their respective historic queues on this timeline. Consumer goods output, and particularly consumer goods output for nondurables, is especially weak. Among the EMU member countries reporting in this table, Ireland alone reports the weakest growth in manufacturing IP it has had during this whole period. Greece, surprisingly, logs growth that's in the top 4% of all its historic growth rates on this timeline. Only four countries report growth rates above their 50th percentile rank, which means only four have growth rates that are above the median growth rate for this span. Growth rates rank extremely low with an average ranking of about 36% and the median ranking in the 30th percentile.
by:Robert Brusca
|in:Economy in Brief
Global| Dec 12 2023
ZEW Readings for Germany Improve Slightly
The ZEW economic situation assessment for December improved slightly for Germany but worsened for the EMU and for the United States. Still, Germany has a lower rank standing for its December reading at a 14.8% mark compared to a 22.7 percentile reading for the EMU and a 38.4 percentile standing for the U.S.

Macroeconomic expectations for Germany rose while expectations for the U.S. just ticked higher. German expectations surpass the U.S. reading with a 38.4 percentile standing versus U.S. expectations at a 23 percentile standing.

Interestingly, on the month inflation expectations for the U.S., Germany, and the EMU all rose and did so rather decisively (smaller negative expectations all around).

However, short-term rate expectations still are impressively more negative in December than in November for the EMU, Germany, and the U.S. The queue standings are below their historic 15th percentile levels for all three countries/areas indicating still very strong prospects for lower rates despite the inflation lift.

For long-term rates, expectations have low rankings as small declines in expectations on the month – quite small compared to the change in short-term rate expectations. On balance, percentile standings of rates are low but are also little-changed on the month.

Stock market expectations were cut sharply in the EMU, for Germany, and for the U.S. Market expectations still have a 43.88 percentile standing, but the EMU and Germany have stock market expectations around or below their respective 15th percentiles- relatively poor readings.
by:Robert Brusca
|in:Economy in Brief
Japan| Dec 11 2023
MOF Outlook Survey Shows Upbeat Large Manufacturers
Japan's Ministry of Finance outlook index paints a positive assessment of the economy and especially for the outlook over the next two quarters. The reading for large enterprises across all industries did backtrack for the current quarter to 4.8 from 5.8, but the bellwether manufacturing reading for large enterprises improved to 5.7 from 5.4. The headline was dragged down by nonmanufacturing where the net index fell to 4.4 in the fourth quarter from 6.0 in the third quarter.

The standing for the current reading for large enterprise manufacturing is at its 66th percentile just barely in the top two-thirds of historic observations back to 1990. That's the same relative standing for the quarter ahead outlook; however, for the quarter after that that percentile standing jumps to its 95th percentile. Whatever hesitation is present in the current ranking it is not souring expectations for the next two quarters.

Nonmanufacturing large enterprises have a current quarter standing in the 78th percentile with the quarter ahead assessment at its 80th percentile and the quarter after that at its 81st percentile. On balance, these are all strong readings for this survey and are led forward by the bellwether large manufacturer’s outlook.
by:Robert Brusca
|in:Economy in Brief
Germany| Dec 08 2023
German Inflation Sinks Lower
The inflation picture in Germany is improving rapidly. In November the HIPC measure fell by 0.1%; in October it fell by 0.2%; and in September it was flat. This is an impressive string of month-to-month weakness in prices. During the same period, the core HICP fell by 0.2% in November compared to October, it rose by 0.2% in October, while in September the core declined by 0.2%. Again, that's an impressive string of weakness in prices – this time in the less-volatile core prices.

Sequential trends- Looking at sequential headline price trends from 12-months, to six-months, to three-months - at annual rates of change- inflation logged a 2.2% gain over 12 months, it edged up to a 2.7% pace over six months and then, over three months, prices fell at a 1.3% annual rate. Core inflation rose by 3.9% over 12 months, the six-month annual rate fell to 2.8%, and the core rate over three months annualizes to a minus 0.6% change. Inflation is controlled and largely falling. Will this trend remain in place?

A year-on-year focus- Central banks tend to emphasize the year-over-year rates of change in prices to be sure they are reacting to the trend and not to transient volatility. The year-on-year gain in the headline HICP for Germany is at 2.2%, the core is nearly double that at 3.9%. While there are no targets for country level inflation in the European Monetary Union, the German economy is a large economy and gets a very large weight in the statistics for the EMU. Germany's progression to lower rates of inflation is going to have an important and impressive impact on the EMU community.

The German domestic inflation gauge- The current domestic version of inflation has not been quite as favorable but the headline fell by 0.1% in November, was flat in October, and rose by 0.3% in September. The domestic German CPI excluding energy rose by 0.2% in November, rose by 0.1% in October, and rose by 0.2% in September. Its sequential annual rates for headline inflation, however, fall steadily from 3.2% over 12 months, to a 2.4% pace over six months, to a 0.7% pace over three months. That’s clearer deceleration than for the HICP headline measure. The German CPI excluding energy also shows a steady deceleration but logs inflation rates higher than those for the core HICP. The CPI excluding energy rises at a 4.1% annual rate over 12 months, at a 3% annual rate over six months and then decelerates to a 1.8% pace over three-months - still a nice progression of prices behaving- but not the same as the -0.6% three-month pace that the core HICP posts.

Diffusion signals are encouraging- Diffusion measures the breadth of the change in inflation across categories over the various periods. Over 12 months, the diffusion measure registers 45%, which tells us that inflation is accelerating in only 45% of the categories. Over six months, diffusion is 18%, which tells us that inflation accelerated over six months compared to 12 months in only 18% of the categories. Over three months, diffusion stood at 36%, telling us that inflation accelerated in only 36% of the categories over three months compared to six months.

Inflation signals showing progress reinforce one-another- Breadth statistics back up what's going on with headline and core inflation. Inflation is broadly falling and not accelerating; we see that both headline and core inflation rates are decelerating. These trends echo trends that we see in the United Kingdom and in the United States. Inflation progress is being aided by weakness in global oil prices. OPEC as well as OPEC-plus have not been able to cut back output fast enough to stabilize oil prices. Measured in euros, the Brent oil price is down by 15% over 12 months; it rises at an 18.3% annual rate over six months, but then it’s falling at a 9.4% annual rate over three months. Brent prices expressed in euros fell by 9.2% month-to-month in November after falling 2.9% month-to-month in October; those progressions followed a 10.7% increase in September. Oil’s contribution is erratic.
by:Robert Brusca
|in:Economy in Brief
Germany| Dec 07 2023
German IP Struggles
IP in Germany remains pressured- Industrial production in Germany is under pressure. Production declined in each of the last FIVE months, three of them presented in this table. Consumer goods production is down in two of the last three months. Capital goods production is down in two of last three months and intermediate goods production is down in two of the last three months as well. Do you see a pattern here?

Trends show continued weakness and some step up in the pace of deterioration- In addition, sequential growth rates show that the growth rates over three months and six months have weakened compared to 12 months. Overall 12-month growth is at -3.4% with industrial output growth over six months at -7.4% annualized and at -6.9% annualized over three months. The numbers stop short of signaling a clear ongoing deceleration but do not miss it by much. For consumer goods, sequential growth rates progress from bad to even worse. For capital goods, the trend is a little more erratic with a decline of 0.8% over 12 months, a bigger decline at a 6.6% annual rate over six months and then flat performance over the last three months. Intermediate goods show sequential deterioration with annualized growth rates running from -4.5% over 12 months, to -6% over six months, to -7% over three months.

Other industrial gauges weaken- These IP trends dove-tail with the weakness we have seen in some of the earlier releases on real manufacturing orders and real sales in manufacturing.

Surveys weaken- Manufacturing surveys have weakened as well with the ZEW current index showing sequential deterioration, along with the IFO manufacturing index, IFO manufacturing expectations, as well as the EU Commission industrial survey. Any way you seem to slice the statistics, they seem to be weak and getting weaker.

Other Europe is mixed- Early manufacturing results for a few other European countries (at the bottom of the table) show trends for Portugal, Spain, France, and Norway. These reveal production increases in October after widespread declines in September and mixed declines in August. Sequential growth rates for other Europe tell a mixed story as Spain and Norway show clear accelerations in train, France shows a clear deceleration in train, and Portugal shows a mixed trend anchored by declines in output over 12 months and three months.
by:Robert Brusca
|in:Economy in Brief
Germany| Dec 06 2023
Slippage and Decline Hit German Real Manufacturing Sales and Orders
German manufacturing orders and sales both fell in October. Total orders fell by 3.7% month-to-month after climbing by 0.7% in September. Foreign orders fell by 7.6% in October after rising 5% in September. Domestic orders rose 2.4% month-to-month after falling 5.7% in September. The sector results between foreign and domestic trends, therefore, are not completely in-sync, but they're not completely different either since over two months, both series show net declines.

Recalibrating to look at order-trends sequentially, over 12 months, six months, and three months, declines persist but are not the case for every single one of the sub-periods. • Total orders fall 7.2% over 12 months, then go flat over six months, and then fall again over three months at a 4.9% annual rate. • Foreign orders fall 7.1% over 12 months, but then rebound to rise at a 5.8% pace over three months, and then continue to drop at a 5.4% annual rate pace over three months. • Domestic orders fall 7.3% over 12 months, fall at a faster 8% pace over six months, and then trim their rate of descent to -4.8% annualized over three months. • Domestic orders clearly have the worse profile in comparison with foreign orders; however, neither domestic nor foreign orders show clear ongoing decelerating patterns although they both show patterns revealing persistent declines.

Real sales trends show all manufacturing sales declined by 0.5% in October, by 1.4% in September, and by 0.5% in August. German sales have a clear losing streak. The sequential trends for manufacturing sales show the following: • A 2.2% drop over 12 months, a faster 2.6% pace of decline over six months, and a much faster 9.2% pace of decline over three months. Unlike orders, sales are showing a truly clear decelerating pace. Looking at sectors... • Consumer goods overall show declines in sales over three months, six months, and 12 months and there is a tendency for the pace of decline to worsen over this profile although it's only a tendency not an ironclad rule. • Consumer durables are a subset of total consumer spending. Sales fall 9.3% over 12 months, but then the six-month pace goes to -21% annualized, and the three-month pace is -19.6% annualized; it’s not precisely a deceleration but close enough for me with enough weakness over six and three months and worse weakness that over 12 months to look a lot like deceleration in progress. • Sales of consumer nondurable goods fall by 2.7% over 12 months, make a small gain of 0.6% at an annual rate over six months and then continue declining at an accelerated 5.2% annual rate. • Capital goods sales rise 1.4% over 12 months, worsen to a -0.4% annualized pace over six months, and then worsen further to a -12.2% annual rate over 3 months, a clear deceleration. • Intermediate goods essentially show deterioration as well: sales fall at a 5.8% annual rate over 12 months, show a very slight improvement at -5.3% annualized over six months, and then accelerate the decline to -6% over three months. Clearly, sales show a preponderance of weakness, a preponderance of declines, and a clear tendency for the rate of decline to worsen over shorter periods.

Emerging sales and order trends in the fourth quarter The most up-to-date data are for October, which means we have data through the first month of the fourth-quarter; we can annualize this behavior by looking at the annual rate gain of orders or sales in October compared to the third quarter average. Doing this, we find that orders are falling at a 15.1% annual rate, led by a 21.9% annual rate fall in foreign orders and joined by a 4.8% annual rate decline in domestic orders. Real sector sales show a decline in manufacturing sales at a 9.2% annual rate; consumer durable goods sales fall at a 29.9% annual rate; consumer nondurables sales fall at a 4.1% annual rate; capital goods sales fall at a 7.8% annual rate; intermediate goods sales fall at a 12% annual rate. Both orders and sales fall on a quarter-to-date basis across all these categories and fall at relatively high rates of decline.

The bottom of the table presents readings from the European Commission on industrial confidence for Germany, France, Italy, and Spain, the four largest economies in the European Monetary Union (EMU). • The month-by-month industrial confidence figures for Germany show a slight tendency toward improvement from August to September to October. France also shows a small improvement in train, while Italy and Spain show a tendency toward slippage across this three-month horizon. • Turning to the broader picture of trends over 12 months, to six months, to three months, we find the German trends show clear slippage worsening from a -5.1 survey value over 12 months to a -14.8 survey value over three months; France also worsens on this horizon; Italy steadily worsens on this horizon; so does Spain. • The upshot is that over the last few months, there have been mixed trends, but the broader trend for the year favors the conclusion that there is weakening all around in the European Monetary Union at least based on the four largest economies. The queue or ranked standings for the EU Commission readings in October compare these up-to-date readings to their historic values, revealing consistent readings across these four countries. Germany has a 23-percentile standing, like Italy's 24-percentile standing, while both France and Spain have 34-percentile standings. • The standing data read 100% when the EU Commission indexes are at their highest values and they're at 0% when it's at their lowest values. The median for the EU survey occurs at a rank standing of 50%; all these readings are below the 50th percentile, placing them below their medians significantly below their medians over this timeline.
by:Robert Brusca
|in:Economy in Brief
Global| Dec 01 2023
Slight Improvement in November Breadth for Global MFG PMIs
The S&P manufacturing PMI indexes improved in November as slightly more countries saw increases than saw deterioration. However, the median gauge slipped slightly on a month-to-month basis. Rather than thinking of the report as being better or worse month-to-month, it seems more productive to recognize how stable the readings have been over the past year, at least in PMI terms. The median readings for 12-month, six-month, and three-month averages across countries/regions are in a range of 48.6 to 48.7 – quite tight. The period-to-period changes are quite small except that the 12-month average compared to 12-months ago shows substantial slippage of 3.4 diffusion points. But since that slippage, the readings have been quite consistent.

The queue or rank percentile standings have a median at the 24th percentile; however, if we choose to place the monthly observations in a range of high to low, the median is at the 58.4 percentile. I prefer the queue percentile standings, because they include all the observations while the percent-of-range calculations only involve the very highest, the very lowest, and the current observations. The queue percentile standings reveal a few extremely strong readings. Mexico has a 96.2 percentile standing and that is matched by Russia - if you believe that response. India has a 65.4 percentile standing. Indonesia sports a 57.7 percentile standing. South Korea logs a 55.8 percentile standing. All the rest of the standings are below the 50th percentile which places them below their historic medians. The most industrialized and developed countries are giving us the worst readings in November.

Diffusion measures the percentage of countries where there is improvement; that reading goes to a 61-percent diffusion reading for 12-months compared to 12-months ago. There is also a 61-percent diffusion reading for six-months compared to 12-months and a 50-percent reading for three-months compared to six-months. In the current month the diffusion reading has a 66.7 percent breadth reading implying an improvement in about two-thirds of the observations compared to one-month ago. Breadth is generally improving slowly. The grey highlights in the table flag those observations with diffusion readings above 50. There you can see that readings above 50 have not been sporadic but have been consistent with Mexico, Russia, India, and Indonesia showing readings above 50 on a consistent basis; South Korea shows a reading above 50 in November alone.

The percentile standings for groups at the bottom of the table reveal that the queue percentile standing for the U.S., the U.K., European Monetary Union, Canada, and Japan is at the 16.9 percentile. BRIC countries are at their 53.8 percentile, while the average for Asia is at its 34.6 percentile. The BRIC readings are considerably influenced by Russia where the economy is believed to be performing poorly although Russia continues to report extremely strong readings. India tends to report PMI values above 50, while China and Brazil tend to report PMI values below 50.
by:Robert Brusca
|in:Economy in Brief