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| Oct 09 2024
Japan’s Economy Watchers Index Takes a Step Back
Japan's economy watchers index took a step back in September after rising in August. The step back takes the September level down to just a few ticks above its value in July. The future index for the economy watchers survey also edged lower, although not as definitively as the current index; it fell to 49.7 in September from 50.3 in August, still above its July value by more than a point. Ranked on data back to 2002, the current economy watchers index has a queue standing in its 53rd percentile, putting it just slightly above its median for that period. The median on ranked data occurs at a ranking of 50%. The future index is slightly stronger with a ranking on the same timeline at about its 59th percentile.

Performance overview Both the current and the future indexes show widespread declines in diffusion values in September compared to August. In the current index, only the rating for eating and drinking establishments shows improvement in September; for the future index there are increases in the services index and in the reading for overall employment. Both the current and the future indexes are below the 50 threshold, which on the diffusion index implies a decline in activity. Looking at components, the current index has only one value - that for eating and drinking establishments - above 50 and has a reading for nonmanufacturing establishments exactly at 50. For the future index, the services reading has a diffusion value above 50 along with employment index and eating and drinking establishments; the reading for manufacturers is at 50.1, barely above 50.

Changes in index values; momentum Looking at changes in the current and future indexes over three months, six months and 12 months, both surveys show improvements over three months preceded by net declines over six months and over 12 months. The current index shows a continuous decline over three months, six months and 12 months for the retail sector, as well as for services. In contrast, it shows steady improvements over three months, six months and 12 months in manufacturing. The future index does not show any steady stream of sequential deterioration; however, it shows steady improvement with gains on all three horizons for services, for manufacturing firms, and for employment conditions.

Reading level evaluations Current- The queue percentile readings calculated on data back to 2002 show the current index at a standing of 53 percentile, above its historic median; however, there are below median readings in retailing and services and for employment - with employment having a particularly worrisome, weak standing in its 29th percentile. That means that the employment reading has been weaker than this, only about 29% of the time. In terms of strong standings, only eating and drinking establishments have a standing above the 80th percentile with an 87.7 percentile standing.

Future- By comparison, the future index has a stronger headline standing at 58.9 percentile and has two component readings with standings in their 80th percentiles for eating and drinking establishments and for services. The future index has two relatively weak readings that are below their 50th percentile mark; those are for housing and for employment. The housing standing is in its 34th percentile, a relatively weak standing; employment doesn't do much better with a standing at the 43.9 percentile.

A difficult employment scenario Employment scores out as weak in both the current and in the future standings although the future metrics show that employment has been improving over three months, six months and 12 months; in the current survey, employment only improves on balance over three months. Moreover, in the current survey the employment diffusion index falls by nearly a point month-to-month, while in the future survey the employment reading gains by nearly a point.

Summing up The economy watchers index shows a relatively broad weakening for conditions in September. While the economy watcher indexes continue to log levels above their historic medians, both the future and the current standings are showing some degree of decline in activity in September. Manufacturing tends to be a bellwether industry for Japan; it shows consistent improvement over 12 months, six months and three months in the current survey as well as in the future survey And manufacturing has above-median standings in both surveys although the standings are particularly strong; on the future reading has a diffusion value above 50. Because of the declines in September, we have to mark the survey overall as disappointing; however, there are some positive aspects in the report, particularly for the manufacturing sector.
by:Robert Brusca
|in:Economy in Brief
Germany| Oct 08 2024
German Output Pops in August
Industrial output in Germany rose by 2.9% in August compared to July; consumer goods output was flat, capital goods output surged by 6.9%, while the output of intermediate goods ticked up by 0.1%. The gain in output clearly is being carried by capital goods in August reflecting that sector’s turnaround from a sharp drop in July.

Monthly patterns The monthly output figures for July show that German output fell in all major categories a month ago, so the August report is substantially a rebound report. However, in June output was broadly higher as it rose in all categories except for consumer goods output, where it fell by 0.9% on the month.

Manufacturing and industry: Sequential growth in output Sequential growth rates show headline output in Germany on the road to repair; while the road may not be long, it still is winding. Industrial output fell by 2.5% over 12 months. That led to a 3.5% annual rate drop over six months as the sector weakened further, but then it jumped to a 6.7% annual rate increase over three months. Over the same sequence of months, the output of consumer goods drops at progressively faster growth rates. On the other hand, capital goods show acceleration and progress on this same timeline; after falling by 1.1% over 12 months, capital goods output rises by 2.4% at an annual rate over six months, and then explodes at a 23.9% annual rate over three months. Intermediate goods output declines over all horizons, dropping by 5.6% over 12 months, dropping even faster at a 7.5% annual rate over six months, then trimming the decline pace to minus 2.8% over three months.

Construction Construction also shows an uneven path with output dropping in August and in July and with sequential growth rates for construction falling over six months and 12 months but then eking out a small gain over three months.

Industrial surveys Industrial surveys for Germany show slowing. These gauges in August compared to July are weaker across the broad. The August values are also weaker than their June values. Sequential averages of these industrial surveys show some creeping improvement in the ZEW survey, little change in the IFO manufacturing survey, some small tendency for improvement in IFO manufacturing expectations, while the EU Commission industrial index for Germany progressively weakens from its averages over 12-months to six-months to three-months.

Other Europe (Four early reporters) Industrial output in four other early reporting European countries shows increases in output for France and Portugal, contrasted to declines for Spain and Norway. None of these countries have two months in a row of output gains or output declines in August or July. June is another month in which output increases in two of them and decreases in two others. The recent monthly readings of output in Europe have been uneven. Sequential calculations for output in these countries shows manufacturing staggering towards better days in France where output posts a 10.4% annual rate increase over three months, following weak and uneven performance over six months and 12 months. Spain shows clear progressive deterioration with output moving from a 3.7% decline over 12 months to a 19.4% annual rate decline over six months to a 27.1% annual rate decline over three months. Portugal follows that progression but with negative growth rates that are about half of the ones posted by Spain. Contrarily, Norway shows progressive acceleration from their 3% growth over 12 months to a 9.1% annual rate increase over six months, and to a 12% annual rate increase over three months.

Quarter-to-date With all the monthly volatility, the quarter-to-date progress is not a given. It turns out to be negative for overall industrial production in Germany as well as for all three major sectors and construction. Real manufacturing orders are increasing in the quarter, despite falling in August; they are rising at an annualized quarterly rate of 16.9%. Real manufacturing sales, however, make a gain in August after declines in June and July but log a 6.6% annual rate decline in the quarter to date. The four industrial surveys for Germany show declines in the quarter-to-date compared to the previous quarter for three of the four metrics. Industrial output in the four other early reporting European countries shows exactly what you would expect: two increases versus 2 declines among the four reporters.

Queue standings over 24 years The queue standings that rank either growth rates or survey levels over the last 24 years shows rankings up and down the line regardless of whether it's a growth rate or a survey value compared to its history with rankings under 50%- with one exception. Industrial production in Norway has the year-over-year growth rate that ranks in the 70th percentile (the top 30% of all its historic growth rates). However, apart from Norway, the strongest rankings in the table are for industrial production in France with a 45.9 percentile standing, and in Portugal with a 43.4 percentile standing. For Germany, the strongest sector growth rate as a standing in the 29th percentile and that's for capital goods output. German real manufacturing orders have a 23.3 percentile standing, real sales in manufacturing have a 17.4 percentile standing, ranked on the level of their surveys in August. The various 4 surveys in the table have rankings that range from a high of 14.2% for the ZEW current index to 4.9% for IFO manufacturing output.

Summing up Despite a nice bump up in output in August, there is little here to bend trends higher or buoy expectations. Output growth and industrial rankings are still weak. European countries are mired in the same weakness as Germany. Conditions remain touch and go in an environment with a deteriorating geopolitical background and lingering inflation that is keeping central bankers wary, and for a time, back on the sidelines on hold despite being in easing cycles.
by:Robert Brusca
|in:Economy in Brief
Germany| Oct 07 2024
German Orders Sink
German orders fell by 5.8% in August as foreign orders fell by 2.2% and domestic orders plunged by 10.9%. This weakness offsets a period of strength in July and June in which total orders had risen 3.9% and 4.6% in respective months, and in which foreign orders had risen by 5.2% and 1.4%, while domestic orders had risen by 2.2% in July and by 9.1% in June. The sizeable declines in August nullify or substantially blunt the strength in orders seen in the previous two months. Domestic orders measured year-over-year in July mark their first increase since February 2022; however, that gain is now gone and turned to a year-on-year drop in August. Foreign orders have had more episodes of showing gains year-over-year; they too showed a year-over-year gain in July, but in August that's also gone. However, foreign orders also showed a year-over-year gain in April of this year, and in March, and in December of last year. Year-over-year gains are not so unusual for foreign orders; however, gains have been very scarce for domestic orders.

Order trend- The trend for German orders is positive overall with a three-month growth rate of 9.6% up from -1.9% over six months and that's up from -4% over 12 months; the progression is a reassuring acceleration. However, the monthly detail and pattern of how this progression has been created is not so reassuring. Foreign orders are the driving force behind this improvement with a three-month real order growth rate at an 18.4% annual rate, up from 1.9% annual growth over six months, and that's up from a decline of 1.3% over 12 months. There is also progress in terms of domestic orders, but it's much less robust. Over three months domestic orders fall at a 2.5% annual rate; that's less than a 6.9% annual rate fall over six months which is less than an 8% drop over 12 months. It is a progression toward improvement, but these are all negative numbers.

Sales trends- Trends for real sales show mixed results in August compared to July. Over three months manufacturing shows a gain in real sales at a 0.4% annual rate; that's up from a 3.2% annual rate decline over six months, but the six-month decline was slightly worse than a 3.1% annual rate drop over 12 months. There's only a hint of better sales based on real sales trends; looking at sector data is not terribly rewarding either.

Industrial surveys- industrial gauges for Germany, France, Italy, and Spain all show negative readings in August. For Germany and Italy the negative readings worsen while for France and Spain the negative readings slightly improve month-to-month. There was also split performance in July between these four countries in terms of improvement or deterioration.

Quarter to date- Quarter-to-date trends show strong results for German orders overall, but these are supported by a tenuous monthly pattern that has the strength mostly back-loaded in June, and to some extent, in July as August parades significant weakness. Quarter-to-date German real orders are growing at a 16.9% annual rate, foreign real orders are up at a 20.4% annual rate, domestic real orders are up at a 12.5% annual rate. In the same quarter-to-date period, real sales overall, as well as by sector, produce negative numbers for growth.

Industrial data queue standings- The queue standings for the industrial data show Germany and Italy with extreme weakness as exhibited in their low standings on ranked data back to 1990. Both France and Spain have rankings just short of the 60-percentile mark, for each; it’s a reading above their respective median, but still a moderate reading- not a strong one.

Summing up The August orders report for Germany unravels what had been an improving trend. While real sales showed a rebound in August, it was not enough to create a solid uptrend for momentum. In the rest of Europe, industrial indicators rank from moderate to very weak. The German industrial picture remains soured while Europe shows no sign of breaking out of its industrial torpor.
by:Robert Brusca
|in:Economy in Brief
France| Oct 04 2024
French IP Ignites for a Month
French industrial output rose sharply in August, a gain of 1.6% after declining by 0.2% in July. Output in August was led by consumer goods; nondurable goods output increased 4.2% month-to-month in August while consumer durable goods output increased by 3% month-to-month. Output of capital goods was also strong during the month, with a 1.6% gain, although intermediate goods output continued to be weak, falling by 0.4% in August and dropping for the second month in a row.

Sequentially French output explodes over three months although it's relatively mild mannered over 12 months and over six months. The strength in French output is relatively recent. Manufacturing output gains 0.3% over 12 months; over six months it is falling at a 0.5% annual rate but that transforms into a 31.1% annual rate over three months as output sharply recovered in June and in August.

Sequential growth for MFG components Components find consumer durable goods output falling by 6.3% over 12 months, gaining at a 4% annual rate over six months then rising at a strong 14.9% annual rate over three months showing steady acceleration. Consumer nondurable goods output rises by 5.9% over 12 months; output slows to gain at a 4.3% annual rate over six months then it expands sharply to grow at a 19% annual rate over three months. French capital goods output is up only 0.3% over 12 months, but it then expands at a 1.5% annual rate over six months and gains at a 14.2% annual rate over three months showing steadily accelerating growth on this time sequence. Intermediate goods output falls by 3.4% over 12 months, falls more sharply, at a 6.6% annual rate over six months, then cuts that weakness to only a 0.2% annual rate drop over three months.

Quarter-to-date With two months into the third quarter, manufacturing output is rising at 1.6% annual rate, with consumer nondurable output up at a 7% annual rate and consumer durable goods output up at a 3.8% annual rate. Capital goods output is up at a 4.3% annual rate; intermediate goods output is falling at a 5% annual rate in the quarter-to-date.

During this period when output has been experiencing some mild increases, they have transformed into strong increases over three months. Yet, motor vehicle registrations have been consistently weak. That important big ticket consumer item has not taken off.
by:Robert Brusca
|in:Economy in Brief
Global| Oct 03 2024
S&P Composite PMIs Weaken in September
It has been a weak month for the S&P PMI readings. S&P previously reported manufacturing’s slide lower and with the services PMIs now engaged in a general topping formation and easing this month the composite PMI is continuing to slide and currently is embraced in a downtrend.

September assessments The sample of 25 countries that report PMI data show 13 of these reporters with composite PMI values below 50 that indicates an economic contraction since the composite is a comprehensive score.

76% of the reporters in September showed a slowing month-to-month; that is a decline in the PMI value compared to the month before. This compares to 20% slowing in August which had been a month of some improvement; however, August compared to July when 60% of the reporters had weakened month-to-month. And so, the data see-saw goes.

The unweighted average of the PMI readings among the 25 reporters in September is down to 51.5 from 52.4 in August; the 51.5 average is below the 51.7 average for July. The median reading for September slips more sharply to 49.8 from 52.5 in August whereas August had been an improvement from 51.3 in July. Of course, the September value at 49.8 is below the July value as well. While the average score in September shows a slight expansion at a PMI average of 51.5, the median shows there is a slight contraction in place at a median value of 49.8.

Sequential patterns The sequential readings are based on the average observations over three months, six months, and 12 months. Very little changes looking at either the average or the median metrics on these horizons. The average readings over these 3 periods have clustered around or just below the diffusion value of 52 while the median readings have clustered about a point lower around the median reading of 51; but both have been very consistent around these markers with no indication of anything that we could call a trend change. Over these periods, the number of reporters with diffusion below value of 50 which indicates contraction has been at six to seven members for 12-months, six-months and three-months. These sequential statistics also show that the proportion slowing over 12 months compared to 12 months ago is 56.5%, just slightly above half. Over six months, about 34.8% are slowing compared to their 12-month average, representing about 1/3 of the reporters. However, over the recent three months, the proportion slowing compared to six-month values is up closer to 2/3 of the reporters.

Standings The queue percentile standings which are presented in the final column give us the rankings of the level of the PMI readings since January 2020. The average ranking has been at its 43rd percentile while the median ranking has been at its 38th percentile. Both aggregate statistics, of course, are weak. Since we're looking at percentile standings, the median for any member in the group would occur at a 50-percentile standing. We can see that by a large margin the prototypical reporter is below its median, below the 50% standing mark. Only six members have rankings above their 50th percentile mark. Those are Egypt, with a 66-percentile standing, Japan, with a 71-percentile standing, Singapore, with an 80th percentile standing, Spain with an 80th percentile standing, and India & Brazil both with 84-percentile standings. Similarly, there are six members with percentile standings below the 25th percentile mark.

Conclusion: The clear conclusion from this is that the global economy remains weak and it's clear from the graphic above that we have weakness in manufacturing and in services although on the data back to 2021 quite clearly the manufacturing sector is relatively much weaker while the services sector has fared better despite its recent weakness. Still, both these sectors are undergoing downward pressure currently even though central banks engaged in easing patterns. Those easing patterns have been either put on hold or slowed given the reality of inflation that continues to run above targets that central banks have set.

Trends for the Better vs. Worse Worse- The grey backgrounds in the table identify countries where there has been persistent weakness over the designated periods with PMI reading below 50. For sequential data, there has been persistent contraction over three months, six months, and 12 months in Germany, France, Hong Kong, Zambia, Egypt, and Kenya. Over the most recent three-month period, there is persistent month-to-month contraction in each of these months in Germany, Hong Kong, Zambia, and Nigeria.

Better- Only Brazil and Egypt show progression of better readings over 12 months, six months, and three months; however, for Egypt the readings have remained below 50 indicating contraction. Conditions are persistently worsening for oil producers Saudi Arabia and United Arab Emirates, as well as in Zambia, Ghana, and Nigeria. That list is weighted to all producers and less developed economies and focuses attention on how the rest of the world is eager to see the money center economies continue their progression to cut rates to provide relief to these peripheral areas.
by:Robert Brusca
|in:Economy in Brief
Europe| Oct 02 2024
Unemployment Realities Strike in EMU
There is still a great deal of growth pessimism about prospects in Europe. The August unemployment data, however, make it unquestionably clear that the labor market continues to perform quite well. The unemployment rate in August for the European Monetary Union (EMU) stood at 6.4%, same as its level in July. The unemployment rate continues to sit at its historic low.

Still more unemployment progress that regress Scanning the unemployment rates for 12 of the longest standing European Monetary Union members as of August, unemployment rates month-to-month fell in six of them, while unemployment rates rose in only three of them. Labor market progress is still more widespread than labor market backtracking in the European Monetary Union. Unemployment rates in August fell in Finland, Italy, Spain, Ireland, Greece, and Portugal. Unemployment rates rose in August in Austria, Luxembourg, and the Netherlands. EMU-wide the number unemployed continues to fall.

We can also rank unemployment rates in their historic queue of data back to 1994. On this basis among the 12 monetary union members in the table, only two of them are above their historic medians. The medians in terms of ranked data occur at the 50th percentile mark. Luxembourg has an unemployment rate that ranks in its 85.5 percentile; Austria has an unemployment rate that ranks in its 60.5 percentile. All the rest of the country-level unemployment rates rank below their 50th percentile, with the highest ranking among the remaining countries being Finland where the unemployment rate stands at its 39th percentile, still well below its historic median. Germany, that has been in the news for unemployment slippage and economic weakening, has a 19.5% ranking in its unemployment rate – that is in the bottom 20-percentile of its historic queue of ranked data. The bottom line for the European Monetary Union is that the labor market is still quite solid and although there are concerns about weakness and perhaps concerns that the European Central Bank needs to cut interest rates more rapidly, the ECB is paying attention to inflation being over the top of its 2% target and at the same time it is looking at unemployment in the EMU that is tied for its all-time record low rate since the monetary union was formed.
by:Robert Brusca
|in:Economy in Brief
Japan| Oct 01 2024
Tankan Shows Steady MFG Reading in Q3
Japan’s Tankan for 2024-Q3 scored a +13.0 for large manufacturing firms, the same as in Q2. Large manufacturing firms are the bellwether reading for this survey. However, there also was an improvement for nonmanufacturing firms in Q3.

There is also a look ahead reading for Q4 in the survey. Again, on this basis, the large manufacturers log a reading of +14, the same as in Q3. Nonmanufacturers show a one-point improvement in their outlook.

The percentile standing data show large manufacturers have a 69.3 percentile standing in Q3. Nonmanufacturing firms are stronger with a 98.7 percentile standing. The outlook shows manufacturing firms at a 76-percentile standing with nonmanufacturing firms at a 100% percentile range standing – at their strongest standing on data back to 2006.

Across the various detailed nonmanufacturing sectors, six of these sectors have rankings in their 90th percentile. The sector, taken as a whole, has a 97.1 percentile standing. Personal services have a ranking only in its 50.7 percentile. Construction has a 65.3 percentile standing.

None of the Tankan sector readings are weak. The industry series are essentially at their medians or better- personal services is essentially a median reading. All nonmanufacturing industries except wholesaling and personal services are above their respective one-year averages. Manufacturing also is above its one-year average.
by:Robert Brusca
|in:Economy in Brief
Europe| Sep 30 2024
Early Inflation Readings in Large EMU Economies Show Promise
Inflation charts an uncertain path in the European Monetary Union (EMU). Early-reporting large countries are reporting weak inflation readings for their headlines in September. Three of the four largest EMU economies Germany, France, and Spain report declines in their headline HICP indexes in September. The exception, Italy, reports a headline that's unchanged month-to-month. That’s a “good news” month for headline inflation in no uncertain terms. These numbers follow an August in which two of these countries also had posted headline price declines and where one of them had posted an unchanged index month-to-month. These excellent results for August and September followed July that had been a difficult one with three of the member countries posting month-to-month increases in the headline HICP's ranging from 0.4% to 0.8% month-to-month.

We also have early reporting results on core inflation or (in the case of Germany) for inflation excluding energy for three of these reporters. Here the results are good but not excellent because the German figure shows an increase of 0.3% month-to-month, Italy logs a core index that is unchanged, while Spain logs a core that's down by 0.1%.

Headline HICP- As tantalizing as these figures are, they produce a mixed picture on sequential inflation when we look at the longer inflation picture from 12-months to six-months, to three-months. On the 12-month basis, all the headline readings for these four countries are below 2% which is the target number for the European Central Bank. However, over six months, inflation in Italy runs at a 2.8% pace, in Germany it runs at a 2.7% pace, while in France inflation accelerates but only to a 2.0% pace. Over three months, again headline inflation settles down with three of the four countries showing an annual rate of inflation over three months of a half a percent or less, but with Italy showing an annual rate at 2.6%. These are good results for the headline, with three-month inflation largely behaving and 12-month inflation, the usual preferred gauge of the central bank, below 2% across the board.

Core CPI- The problem emerges when we start to look at core inflation and we realize that a lot of this inflation progress has come because of weak oil prices. We have ex-energy or core inflation for Germany, Italy, and Spain and two of those three countries have year-over-year inflation rates on the core or ex-energy basis that are above 2%. German ex-energy inflation comes in at 2.6% over 12 months, Spanish core inflation comes at 2.4%, while Italian core inflation comes in just under the wire at 1.9%. Over six months, inflation accelerates in Italy from its 12-month pace of 1.9% to 2.4%. In Germany, ex-energy inflation ticks down to 2.4% over six months, while Spanish core inflation also ticks down to run at a 2.2% annual rate over six months. All the readings are above a 2% at an annual rate over six months. But over three months, Italy logs a pace for core inflation that's just barely excessive at 2.1%. Spanish inflation runs back up to a 2.4% annual rate over three months, the same as its year-over-year core. In Germany, ex-energy inflation jumps to 2.8% over three months, stronger than its six-month pace, or its 12-month pace.

Core inflation is still too-high- Headline inflation from the monetary union is certainly encouraging. However, looking a little bit deeper at core inflation which excludes the volatile food & energy components, we see inflation under the surface is continuing to percolate at a slightly excessive pace. The bad news is that inflation is slightly excessive on a relatively broad basis judging from these three economies. On the other hand, while it might be broadly excessive, it is not significantly excessive. Among all these inflation rates, the highest is over three months and it's Germany's ex-energy gain at 2.8%.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Sep 27 2024
U.K. Distributive Trades Show Improved Retailing and Sagging Wholesaling
The U.K. distributive trades picture in September shows sales compared to a year ago moving into a positive reading of +4 in September after logging a -27 reading in August – a sharp turnaround. For wholesale trades, September continues to deteriorate with the September reading on sales compared to a year ago at -8, slightly weaker than the -7 reading in August. Other retail readings are also on an improving trend in September compared to August while for wholesale trades the evidence is of deterioration in September compared to August. These two key distributive trades sectors are not moving in tandem. And that phenomenon also holds for the look-ahead survey that samples expectations for October. Expected sales volumes in retailing in October compared to September have moved up to a +5 in October compared to -17 for September; for wholesaling, the October expectation for sales compared to a year ago is -6 compared with September's expectation of +6. Other expectations for October compared to September show improvements in retailing compared to further deterioration in wholesaling, further underscoring that these two sectors are experiencing very different trends. If there is incipient strength coming to retail, it has not percolated down to wholesaling yet.

Retailing The retail readings since September show improvement in sales compared to a year ago, orders compared to a year ago, and for sales evaluated for the time of year. The stock-sales ratio also moves up in September compared to August. The rankings for these September values show that sales compared to a year ago have a 44.4 percentile standing, orders compared to a year ago have a 24.6 percentile standing, and sales for the time of year have a 36.6 percentile standing. All of these are below the 50-percentile mark and therefore all reside below their historic medians. The stock-sales ratio has 66.2 percentile standing and is above its historic median. While showing monthly improvement, retail remains weak.

Expectations for October find sales compared to a year ago, orders compared to a year ago, and sales for ‘the time of year’ all improved compared to what had been expected in September. However, only sales compared to a year ago have a net positive reading. Again, the stock-sales ratio has a positive value that moves up to a reading of 20 in October from 18 in September. The rankings for these expectations are similar to the rankings for the currently reported counterparts of these indicators. Expected sales compared to a year ago have a 40-percentile standing, expected orders compared to a year ago have a 29.1 percentile standing, and expected sales for the time of year compared to a year ago have a 29.8 percentile standing. The expected stock-sales ratio has a very high 89.5 percentile standing. The readings are not strong, but they do show improvements in September and expected improvements for October and therefore they do represent some progress. However, the absolute readings for sales and expectations both are subpar.

Wholesaling Wholesaling shows deterioration in September compared to August for sales compared to a year ago, for orders compared to a year ago, and for sales for the time of year; the stock sales ratio moves up and has a positive reading. With all negative readings up and down the line, the stock-sales ratio would seem to be indicating an undesired increase in stocks relative to sales. The rankings for these measures are weaker than the counterpart rankings for retailing. And like the retailing rankings, the rankings for the stock-sales ratio was the highest.

Looking at expectations for October, again we see deterioration for all the metrics for wholesale sales compared to a year ago, for expected orders compared to a year ago, and for expected sales for the time of year. While they all deteriorate in October compared to September, they're roughly in line with or better than the surveyed numbers that had been reported for August. Once again, the stock-sales ratio is positive and moves up in October compared to September and once again the rankings for these expected readings are weaker than the retail sales counterpart expectations for the same measures.
by:Robert Brusca
|in:Economy in Brief
Germany| Sep 26 2024
German Consumer Climate Remains Weak- A Slight Oct. Improvement Is Mooted
Since late-2022 the German GfK measure of consumer climate has improved but has been doing so very slowly and in fits and starts. Climate improved sharply from the end of 2022 until early to mid-2023 but the sharp rise did not go on for long. Afterwards some slight erosion took place. However, near the end of 2023, there was another step up as an improvement in German climate began. Since that point, confidence has remained steady in the region of about -21 or so (a weak level) in terms of the climate headline from GfK. More recently, economic expectations have logged some fresh erosion after having a similar path and moderate rebound.

Even so, the statistics on the GfK readings are clear. Climate is at the bottom 10% of all ranked historic readings. Economic expectations, income expectations, and the propensity to buy, are the three components that lag the GfK headline by a month. Their observations through September show economic expectations at a 37-percentile standing, the propensity to buy at a 30-percentile standing, and income expectations at a 44-percentile standing. Income expectations have clawed their way higher to stand near neutrality, as the median for ranked statistics -on any measure- occurs at a ranking at the 50th percentile mark. Income expectations are coming the closest to being back at neutral although they still fall short. The propensity to buy, at the 30% ranking mark, is still substantially short of neutrality, and the same is true of economic expectations with roughly a 37-percentile standing. But overall economic climate is in much worse shape than the components on the comparison of standings. The headline GfK reading is much weaker than any average of the ranking for its components. That is not unusual because historically the average component rank only explains about 60% of the variability in the ranking of climate.

GfK components The GfK components show improvement in train as of September for the propensity to buy measure and for income expectations while economic expectations are faltering and weakening. However, the GfK component improvements where they exist are only month-to-month. All three components are weaker compared to two months ago and two of three are net weaker compared to three months ago.

Elsewhere in Europe Other European confidence measures are up-to-date only through September, like the GfK components. Italy and France show solid month-to-month improvements in September confidence while the United Kingdom shows a sizeable drop in September. Over two months only France shows an improvement and over three months Italy is unchanged as France continues to show a gain and the U.K. shows a worsening. It would be hard to look at these data and find anything better than a possible spark of good news. In terms of the standing of confidence, Italy shows strong results apart from its recent trend changes with September marking an 80.5 percentile standing in its confidence measure. France has only a 43-percentile standing despite its recent gains. The U.K. is still nearly at its median level with a standing at its 49.2 percentile despite its recent sharp erosion.
by:Robert Brusca
|in:Economy in Brief
France| Sep 25 2024
In France Household Confidence Is on the Upswing
With so much weak data being reported, the INSEE household survey out of France is a breath of fresh air. Household confidence is sharply higher, rising to 95.1 in September from 92.5 in August, a jump that has been exceeded on a month-to-month basis only 12% of the time over the past 18 years. It was last stronger in February 2022, over two years ago. Yes, the September gain is sizeable.

The gain brings the level of confidence to a standing at its 49.6 percentile, near to its historic median on data back to 2001 (the median for ranked data occurs at a ranking of 50).

Granted, this only puts household confidence back at its median, but it is slightly above its mean. This qualifies as being called ‘normal.’ France has normalized its household sector despite all the Covid and post-Covid chaos that for France includes now the installation of a new government. France is also in the aftermath of having hosted the Olympics and having dealt with a nationwide transportation sabotage associated with forces trying to disrupt that event.

The headline index is below the 50% mark by small amount and among the 10-components five are also below their respective 50-percentiel standings – but not all those sub-50 readings are bad. Living standards for the past 12 months as well as the future 12 months are below, but close to their 50-percentiel ranking; the assessment for the next 12 months is one point below its mean. Next, unemployment assessment is below its median value at a percentile standing of 39.4. That is good news that expected unemployment is well-below its median.

While prices over the past 12 months register a median assessment at the 50-percentiel mark, the look-ahead for the next 12 months gets a very low 3.6 percentile standing. Inflation in France is widely, strongly, expected to be lower. That is more good news. And the favorability to save metrics are high.

One fly in the ointment is that it is not considered a favorable time to make a major purchase, as the rank standing for that assessment is a lower 18-percentile reading. Still, households rate their past financial situation as strong with a 64.2 percentile standing; the next 12 months ahead are even better with a 70.4 percentile standing.

The INSEE survey of France households in September is a refreshingly optimistic take on conditions in Europe’s second largest economy. This is particularly good news since conditions in Germany, Europe’s largest economy, still show that it is under pressure.
by:Robert Brusca
|in:Economy in Brief
Belgium| Sep 24 2024
Belgian National Bank Index Continues to Weaken
The Belgian National Bank index has weakened in each of the last four months. Manufacturing also has weakened for four months running. The production index has suddenly, in September, declined sharply, falling from a small negative reading over the previous four months to a suddenly much weaker reading of -23 in September. A case of SOW: Sudden onset weakness. And central banks remain concerned. They already are cutting inflation ‘slack’ to hover at above target levels as they find reasons to cut rates and try to preserve growth while exuding optimism on inflation coming to heel…some day.

Meanwhile, trends have broadly shifted in Belgium. The domestic order trend is weaker in September, falling to -15 from -6 in August. But that is no example of sudden onset weakness. The domestic orders index has been even weaker in recent months and has been fluctuating. However, foreign orders have turned sharply weaker in September, falling to -26 from -3 in August after four months of logging small negative numbers. Foreign orders are back to the sort of weak reading they had logged in February of this year except they are even a bit weaker now, in September. Prices also have turned weaker; they were last weaker back in March of this year. The coincident weakness in activity orders and prices makes it look as though encroaching economic weakness is for real.

Current assessments show persistently larger negative readings and readings with a slightly weaker tone when assessed over equal time periods on a ranking basis. Both total and foreign orders are quite weak in September and are weakening further. On a ranking basis, they have a standing in their 6th to 9th percentiles- exceptionally weak- when ranked on data back to 1997.

However, the other metrics, such as for the BNB headline, for production and trend analysis can be even weaker on ranking basis than these deep negative survey readings assessing orders. For example, the headline for the Belgian Bank index has an 11.9 percentile standing. Manufacturing has a 10.6 percentile standing. The production trend has a 1.5 percentile standing - an exceptionally weak trend assessment. The domestic order trend has a 17.9 percentile standing, but the foreign order trend has an extremely low, 2.4 percentile standing. The price trend lags behind these weak readings with a still very weak 16.1 percentile standing of its own. There is nothing here that is reassuring, and Belgium is a European country at the crossroads of a lot of trade.

The assessments for other sectors such as wholesaling & retailing, construction, and business services show rankings that range from a low at an 11.9 percentile ranking for construction to a 37.1 percentile ranking for wholesaling & retailing. Services are generally more resilient.
by:Robert Brusca
|in:Economy in Brief