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

Japan| Mar 12 2025
Japan’s Cabinet Office Survey Edges Lower in 2025-Q1
The Cabinet Office: General business conditions Japan's Cabinet Office survey of general business conditions shows a diffusion reading of +2 in the first quarter of 2025 compared to a net of +5.7 last quarter. This is the reading for all big companies. The reading for large manufacturers slipped to -2.4 from +6.3, a much sharper drop. Unfortunately, manufacturing is often looked upon as the harbinger for future developments in the economy. Non-manufacturers show their reading slip as well, to +4.1 from +5.4 in the first quarter of 2025 compared to the fourth quarter of last year.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Growth rate standings The second set of standings is applied to year-over-year growth rates and here we see total orders foreign and domestic orders all are below their median growth rate with rankings in the 24th to the 44th percentiles. Real sector sales post only a 32-percentile standing for all manufacturing although year-over-year sales or consumer nondurable goods have a 74-percentile standing and that helps to elevate overall consumer goods to a 63-percentile standing.
by:Robert Brusca
|in:Economy in Brief
Europe| Mar 05 2025
PPI Inflation Has Been Rising But Is Still Moderate
PPI inflation was up by a strong 1.2% in January after rising by 0.4% in December. Headline inflation is accelerating sharply from 1.9% over 12 months to a 4.1% pace over six months to a 12.9% pace over three months. However, core inflation in the EMU has been much more tempered and steadier. Core PPI inflation in the European Monetary Union (EMU) is up by 0.2% in January, the same as in December. Core inflation has been relatively steady at 2.7% over 12 months and a bit weaker at 2.4% over six months and at 2.6% over three months. It’s above the ECB targeted pace, mildly above the pace that the ECB sets for the HICP, but still only a moderate overshoot.

The table on PPI inflation rates sequentially shows that inflation on the PPI gauge has been flaring sharply across members of the EMU and in other non-EMU countries. Annualized inflation ranges from a low of 0.9% over three months in Austria to 67.6% in Ireland. 84.6 percent of the reporting countries in the table show accelerating inflation from 6-months to 3-months; in fact, inflation has been accelerating from 12-months to 12-months ago and over 6-months vs. the 12-month pace.

The average annualized inflation rate rises from 3.6% across countries (unweighted) over 12 months to 7.4% over six months to 18.3% over three months. The price action for the EMU (top of the table) is a bit softer because that process uses a GDP weighting scheme. But the signals are much the same.

In context, we see a much more stable core environment also reported near the top of this table. I use Germany as an individual example. Its gauge for the PPI excluding energy rises by 1.3% over 12 months, then at only a 0.5% pace over six months. Over three months, German ex-energy inflation is at a 1% pace. The moderation in core inflation stands in marked contrast to headline inflation.

Oil prices show recent pressure from Brent in the table over three months. However, Brent is still lower on balance over 12 months and six months.

EMU PPI inflation is not a reassuring report. Inflation is flaring sharply across the community for the PPI. However, this is mostly headline inflation, energy and commodities are driving this performance. Core inflation or ex energy inflation metrics show much more tempered and stable inflation. There is a good chance that this current spike will simply pass. Oil prices in markets today – live market prices- are actually weakening suggesting that the bubble in oil prices will not have lasting impact on the PPI. Short-term inflation trends are volatile and are not to be trusted. And the PPI is as guilty on this score as any price index.
by:Robert Brusca
|in:Economy in Brief
Europe| Mar 04 2025
Select EMU Unemployment Rates Remain Low
Unemployment in the European Monetary Union (EMU) continues to hug all-time lows at 6.2%. In the EU, the unemployment rate is at 5.8% in January, also an all-time low for that reading.

On a year-over-year basis, trends for unemployment are mixed, falling in six of the 12 monetary union countries in the table and rising for six others. However, because of country size differences, the EMU shows that the unemployment rate falls by three-tenths of a percentage point over 12 months as does the rate for the EU.

What is remarkable about these statistics is that we are looking at very tight and well performing labor markets, even though the European economy has not been doing particularly well- even with war on its doorstep and with the manufacturing sector performing particularly poorly for a long stretch of time. The local service sectors have carried the monetary union and for the most part its member countries to sustained strong economic conditions as far as the labor market is concerned.

However, as we can tell from recent elections in Europe and in the United States, there's been a great deal of disappointment and disillusionment about economic performance. Unemployment rates may be low, and may have remained low; however, economic conditions generally are not that favorable. People are not that happy and, despite the low rates of unemployment, both Europe and the United States have been battling sustained above-target rates of inflation.

Are we learning that consumers hate inflation more than we thought? The other thing that is strange about this period is that inflation has been overshooting for a long time. It's closer to being in its range in Europe than it is in the U.S. (45-continuous months of missing its target). However, both the U.S. and Europe have had a very long period of time when their target either has not been met (as in the U.S.) or has been only sporadically met (EMU) and still has inflation regarded as being excessive. Central banks have not taken the steps to control inflation even though labor market performance is excellent by historic standards. And while central banks have bent over backwards in this respect, generally consumers are not particularly swayed by the excellence of the conditions created by these policies.

Central banks chose to let inflation run hot Central banks’ choice to pursue some sort of soft-landing and avoid recession has not been particularly popular with people although they have remained for the most part fully employed. In fact, the overshooting of inflation seems to have created a great deal of unrest despite conditions of ongoing full employment both in the United States and across Europe. This will be something that economists are going to have to look at because there's nothing about this reaction that is obvious that people should naturally react this way to this kind of economic performance. One might expect that people would be happy to have full employment and although the inflation overshoot was horrific for a period of time it has since come under ‘better’ control and isn't as particularly as high as it once was; although it's also true that because of inflation being what it was, we have a situation in which prices are still quite high. High inflation can be cooled but it generally leaves higher prices in its wake, even once it is stamped out for good. And inflation is not yet stamped out for good. Economist stress that inflation has been largely tamed but… are they forgetting that consumers pay those still high prices, not just the inflation rate?

Sequential and monthly inflation changes point lower Sequentially among the 12 EMU countries in the table, six of them show unemployment declines over 12 months and six others show increases. Six of them show unemployment declines over six months while five show increases. Over three months, five of them show unemployment declines while three of them show increases. In terms of the monthly data, in November there are four countries reporting month-to-month declines compared to two reporting increases; in December five countries report month-to-month declines with five others reporting month-to-month increases. In January, the split is six reported inflation declines to four reported month-to-month increases.

Trend to lower unemployment rates cut across country size Generally, there are more unemployment rate declines being reported than increases being reported across countries; that is supported by and consistent with the aggregate data for the monetary union that shows the unemployment rate has fallen over the last year. However, the further meaning of the country level data is that the trend for the monetary union is broad, and it's not being dominated by the large countries; the small countries are not being left out of the improving process. Over the last three months, Greece and Spain are the only countries showing declines in the unemployment rate in each month. Over the broader period, looking at changes over 12 months, six months and three months, there are consistent declines in unemployment being reported in Portugal, Greece, Ireland, and Spain. There are consistent increases the unemployment rate being reported in the Netherlands. However, there also are countries with strings of increases mixed with unchanged unemployment rates reported over these three periods: Belgium, Germany, Finland, and Luxembourg.

Very little evidence of unemployment stress Among monetary union members, only three countries Luxembourg, Finland, and Austria have unemployment rates above their respective median rates that they have recorded on data since 1994. For those three countries Finland and Austria report unemployment rates above their median by a small amount by 0.4 percentage points for Austria and 0.4 percentage points for Finland. Only Luxembourg has a ‘substantial’ unemployment rate overshoot with the current unemployment rate at 6.4% compared to a median of 4.8%.
by:Robert Brusca
|in:Economy in Brief
Global| Mar 03 2025
Global Manufacturing Assessments Show Ongoing Manufacturing Weakness
Among these 18 countries and regions reporting manufacturing information in February, 12 of them show month-to-month improvement. Ten showed improvement over three months compared to six months while only three have improved over six months compared to 12 months. Eight of eighteen showed improvement over 12 months compared to 12-months ago.

The median manufacturing PMI reading for February is 49.5, just below the level of 50 that marks the level where manufacturing is considered unchanged. The average over 3 months, 6 months, and 12 months all are below the 50-mark. However, the median reading in the table marked with percent sign (%) measures the percentage of the raw PMI diffusion readings that are improving period-to-period. All are above the 50% mark, showing that there are more reporters showing improvement period-to-period than showing weakness. However, the percentage improvement does not reflect the value of the underlaying PMI index or if it is above or below its break-even value; it only shows relative improvement.

In that sense, there are some mixed signals in this report. Conditions are slowly improving, but they still show a tendency for output to fall.

The table also looks at a broad assessment by ranking the level of the diffusion reading this month across all countries on a timeline back to January 2021. On this basis, 9 of 18 are below the 50% mark. This metric identifies the median of the series since January 2021. The median of the rank standing is at the 49-percentile mark, just below 50%, which marks the median of group for the entire period.

None of this is really good news for manufacturing globally. But it is an absence of really bad news and contains news that conditions are worsening. Improvement is more common than worsening. So that is something. It is a back door to better times ahead but again it is true that manufacturing has been weak for quite a long time. In the last 31 months, the median for the group has been above the ‘50’ mark only twice in June and July of 2024. However, over the last eight months the diffusion median has been at a reading of 49-point ‘something.’ The manufacturing median has been on cusp of moving to signal expansion. But manufacturing in the global economy has not been able to go over the hurdle despite as close as it has come. We remain dwellers on the threshold…of expansion. Still not quite there yet.
by:Robert Brusca
|in:Economy in Brief
Europe| Feb 28 2025
EMU Member Inflation Still Mixed and High
French inflation trends alone among the largest four EMU economies is showing a break lower. Twelve-month inflation across the EMU is however quite mixed with Germany and Spain knocking on the door of 3% inflation while France is below 1% and Italy is below 2%.

And the divergences diverge further from there...

German inflation rises from 2.8% over 12 months to a 3.3% pace over six months to 4.1% over three months – a classic ongoing acceleration. Spain’s 12-month pace of 2.9% also steps up to 4.5% annualized over six months then explodes to 5.7% over three months. The accelerations are not good for central bank trying to hit a 2% inflation goal.

But the accelerations are counterbalanced by some moderation and even weakness. French inflation decelerates steadily, and prices actually decline over six months and three months. For Italy, the 12-month pace of 1.7%, steps back to 1.3% over six months, then rises back to a 3% annual rate over three months.

Even so, the best news is from Italy and Spain on the measure of core inflation. Each of them reports a steady menu of inflation rates over 12 months, six months, and three months below 2% and decelerating. This is notable because both Italy and Spain have badly behaving headline inflation trends.

However, energy prices are moving up, too, over the last three months as well as sequentially.

While inflation is still far from well-behaved, it may still be slowing. Signs of conforming Italian and Spanish core results are the most encouraging news. Still, over the past five years, inflation has averaged 3.2% in France and 4.4% in Germany, with Italy and Spain seeing inflation at the 3.7% to 3.8% mark. Core inflation over five years, however, has been lower and closer to the 2% goal at 2.5% in France, 2.8% in Italy, 3.2% in Spain, and 3.6% in Germany. Still, it’s not there but it is closer.
by:Robert Brusca
|in:Economy in Brief
Global| Feb 27 2025
Global Money Supply – Some Recovery Afoot
Money event overview- Global money supply shows money supply in major money center countries is expanding. Money supply deflated for the impact of inflation is weaker and mixed contracting in Japan and in the United Kingdom along with credit in the EMU while real balances for the EMU and in the United States log positive growth is year-over-year in January. Inflation globally is over-target in the money center countries and areas where inflation of 2% is targeted.

The chart shows that money supply growth is steadily improving in nominal terms across countries, with the exception of Japan where M2-plus CD growth is gradually in a state of ongoing slowdown.

EMU In the European Monetary Union, nominal money growth has stepped up from 1.7% over three years, slowed to 1% over two years and accelerated to 3.3% over one year. Private credit growth has fallen from a 2.1% annual rate over three years, to 0.9% over two years and picked up to 2.1%, again, over one year. Real money balance growth in the EMU has progressed from -2.8% annual rate over three years to a -1.6% pace over two years to +0.8% over the last 12 months. Similarly, real credit to private residents has improved steadily but is still contracting by 0.4% over 12 months.

U.S., U.K., and Japan U.S. nominal money growth is gradually improving from an average of zero over three years to a pace of 3.9% over 12 months. Real balance growth in the U.S. also improves steadily from -4% over three years to +0.8% over 12 months. U.K. nominal money growth improves from 1.0% over three years to a pace of 2.7% over 12 months. U.K. real balances show monetary shrinkage, but the shrinkage is steadily lessening from -4.3% over three years to a pace of -0.8% over 12 months. Japan’s nominal monthly growth shows little variation, but it does gradually slow from 2.2% over three years to 1.3% over 12 months. Japanese real balance growth rates all are negative at -1.3% over three years, at -1.2% over two years and at a weaker -2.7% over 12 months. Japan’s inflation has recently picked up and after wondering if its inflation was real following a decade of deflation flirtation, Japan now has over-the-top inflation to deal with.
by:Robert Brusca
|in:Economy in Brief
Germany| Feb 26 2025
Germany: GfK Climate Gauge Sags Again
This month in my presentation of the German GfK consumer climate index, I extend the chart back historically to make a point about German climate and how strong and steady it used to be compared to what it has become. The components of economic expectations, income expectations, continue to fluctuate about the same as in the past; however, the propensity to buy is more variable and the climate gauge itself is decidedly weaker and more variable than it used to be when Germany was the ironclad economy of Europe something that it can claim to be no more.

Post Covid vs. Pre-Covid (and Post Ukraine Invasion) Also, since Covid, the correlation of the economic situation to Climate has gotten slightly stronger perhaps suggesting that the German social welfare system has been under pressure since economics assessments are more strongly correlated with economic conditions post-Covid. And Income and Economic expectations are much more highly correlated. There is a weakening connection between the propensity to buy and economic conditions post-Covid and a weakened link between the propensity to buy and income expectations. The reduced link between income and spending suggests a more cautious public and higher savings as does the weakened link to income. The latter may reflect more social welfare dependency. Overall, the correlation between the components and the Climate gauge are still relatively the same before and after Covid, with only economic expectations showing a slightly tighter correlation.

Pre-Covid/Post-Covid Averages The average readings (pre-2020), of course, are all lower post-Covid than pre-Covid. Because some average readings are positive, and others negative, it is difficult to look at the change or ratio of the average after vs. before, as a gauge for comparison. Instead, I have calculated each average, pre-Covid and post-Covid and ranked each of them as if they were observations in the full sample of historic observations. Put that way the average post-Covid Climate reading is 36 ranking positions lower than it was pre-Covid. That is a drop in ranking positions of about 13%. The economy and buying climates are each lower by 22 places. But the post-Covid income average reading falls a very sharp 63 places on the ranking gauge. Income expectations have been hit very hard in the post-Covid period more so that economic assessments or spending propensity.

Current Results In March, the German climate gauge from GfK has slipped from -22.6 to -24.7. It is at an 8.2 percentile standing in its historic queue of data, making the March reading weaker than this only about 8% of the time. In contrast, the components which are up to date through February show an improvement in economic expectations from January to February and a slip in income expectations from -1.1 to -5.4. There's also a slip in the propensity to buy from -8.4 to -11.1. These components have standings and their historic queues of data at the 39th percentile for economic expectations, nearly the 25th percentile for income expectations and about the 29th percentile for the propensity to buy. The median for these gauges would occur at their 50th percentile so all of them are significantly below their historic medians on data back to January 2002.

The German economy is not only weak, but it's been weakening again on a mild gradient after having shown some tendency to stabilize and even to improve. Political instability has married economic weakness throughout Europe and recent German elections now put the country in a position perhaps to deal with some of its issues if the new government is able.

Other Europe The table also presents consumer confidence statistics for Italy, France, and the United Kingdom. French and U.K. statistics are up to date through February; Italian statistics are up to date through January. Each of these readings shows some recent improvement. For Italy and France, the improvement is more ongoing whereas for the U.K. the improvement is very short term as the February reading is lower than readings for November and December; February in the U.K. constitutes an improvement only from January.

The queue percentile standings (or count percentile standings) for Italy, France, and the U.K. have those metrics at the 79th percentile for Italy, the 39th percentile for France, and the 29th percentile for the U.K. These percentile standings are quite similar to the standings for the components of the GfK index but certainly nothing is as weak as the GfK climate headline for Germany. And that has been the case for some time. Italy is an exception to everything showing above-median and relatively strong readings for consumer confidence at the 79th percentile level.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Feb 25 2025
U.K. Distributive Trade- A Still-Weak February
Distributive trades retailing Sales- The U.K. distributive trades survey for retailing in February produced another sequence of weak results. Sales compared to a year ago improved incrementally in February; orders compared to a year ago improved to a -38 reading compared to -43 in January. Each of these is an improvement but it's a small improvement and correspond to a weak overall reading. Sales for the time of year weakened further, however, to -34 in February from -24 in January. The percentile standings for these metrics put sales compared to a year ago at a 12.7 percentile standing, orders compared to a year ago with a 7.4 percentile standing, and sales for the time of year at a 9.5 percentile standing. All of these are extremely weak readings regardless of whether they get slightly better or worse month-to-month.

Expectations- The expectations for March are still very weak in terms of ranking and generally weakened month-to-month. Sales expectations compared to a year ago in March weakened to -30 compared to -26 in February; orders for the time of year weakened to -47, a sharp drop, from -25 in February; sales for the time of year improved slightly to -27 from -31 in February. The rankings on these three metrics are displayed on the table - they all stand below their 10th percentile.

Distributive trades wholesaling Sales- The distributive trade readings for wholesaling are slightly more optimistic than for retailing. The rankings are still weak; while numerically stronger than for retail sales, they are not really demonstrably stronger, at least, in economic terms month-to-month distributive trades show sales compared to a year ago at -19 in February, an improvement from -30 in January. Orders for the year ago improved to -30 in February from -33 in January while sales for the time of year improved to -29 a small improvement from -31 in January. The percentile standings for these readings are in their lower 16th percentile or lower.

Expectations- Moving to expected sales for wholesaling, the March numbers improved to -14 compared to a year ago, that matched up to -28 in February. Order expectations compared to a year ago improved to -21 in March relative to -30 in February. Sales for the time of year logged -23 reading, a sharp improvement from -35 in February. The rank standings for these have sales and orders compared to a year ago at or close to their 20th percentile while sales for the time of year have a standing below their 10th percentile. These are stronger readings than for expectations for retailing; however, they're still extremely weak. The 20th percentile is really not significantly better in economic terms than being in the 10th percentile.

Summing up For all the distributive trades, survey results remain weak with mixed performance month-to-month in the retailing and wholesaling sectors. The U.K. economy continues to struggle and the survey this month doesn't do anything to increase confidence about economic performance.
by:Robert Brusca
|in:Economy in Brief
Germany| Feb 24 2025
IFO Makes Slight Improvement Except for Services
The IFO index in February produced improvements for all environmental assessments: climate, current conditions, and expectations. Conditions in Germany improved even if only slightly across all four of five industry groups- all except services. Improving were manufacturing, construction, wholesale, and retail. Each improved for climate, for current conditions, and for expectations. However, in each case conditions worsened for services climate saw its services diffusion reading fall to -4.3 in February from -2.2 in January, current conditions saw the services current conditions reading fall to 10 from 13.9, and expectations saw the services expectations conditions reading fall to -17.7 from -17.

It's unusual to see something like this happen, especially with two dedicated readings for services subsectors, wholesaling and for retailing, improving in each of the three categories of climate, current conditions, and expectations. However, conditions have been weak in Germany for quite a long time and the services sector has been the only sector with positive current conditions readings for some time; it may be that after all this pulling that the services sector has done, it has run out of gas and now the pulling in the opposite direction by manufacturing, construction, wholesaling, and retailing is taking its toll on services.

The rankings continue to produce low readings and although the diffusion readings for services are the highest in each category services, looked at on a percentile standing basis on data back the late-1991, reveals the sector to have the weakest climate ranking; It has the 2nd weakest current conditions ranking, and it has the weakest expectations ranking among all industry groups.

As always, it's hard to tell how this is going to play out. Manufacturing tends to be the cutting edge; it is the sector with volatility that tends to move down the soonest when the economy is weakening and move up the fastest when the economy is strengthening. But, right now, there's not a whole lot of trend going on for any of the sectors. The chart at the top shows that there has been stability for most of the sectors with the exception of services where the chart plots a gradual erosion in progress.

Among the IFO reading, the only reading that stands above its median reading on data back to 1991 is the construction sector with a 59.5 percentile standing for current conditions. Any reading above the 50th percentile is above its median. Retailing is one of the sectors that comes close to doing this, also for current conditions, with a reading at its 48.2 percentile, closing in on that neutral 50% mark.

Conditions in Germany remain touch and go; there remains political stability in the country where national elections are pending. In the euro area, there has been a lot of political reversals for long entrenched national parties. Europe displays a good deal of uncertainty particularly regarding recent U.S. policies that have pressured Europe over some of its past conduct and where a new system of support for Ukraine is in the offing. The times they are a changin.’
by:Robert Brusca
|in:Economy in Brief