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| Jul 25 2023
IFO Weakening Trend Still in Force
IFO climate is changing…for the worse! The IFO climate gauge for Germany weakened month-to-month but the all-sector reading fell to -18.2 in July from -14.7 in June. Current conditions also stepped back in July with the all-sector reading at 8.1 compared to June’s 13.5. The expectations index weakened marginally with July falling to -25.0 compared to June’s -24.3. The IFO survey falls over each of the three broad categories and the weakness in each category is shared across each one of the industry components. There are five separate industry readings for the three survey concepts implying 15 observations overall for July. Among the 15 observations, all of them weaken month-to-month except for retailing under current conditions and services under expectations.

The chart tracks a wild IFO ride The chart shows the roller coaster ride that the IFO survey concepts have been on since COVID struck. 2020 brought a sharp down move to each of the three IFO concepts of climate, current conditions, and expectations. They rebounded through mid-2021 and then underwent a slight deterioration until early 2022 when Russia invaded Ukraine. At that point, another relatively steep drop in the components was recorded, taking some of them back down to lower readings than had been experienced in the depths of the Covid situation. However, after bottoming out in late 2022, these industry metrics staged a recovery into early 2023 and now that recovery is giving way to a series of weaker readings over the past three or four months depending on which of the IFO concepts we track.

Climate Climate weakens broadly with weaker reading in July than in June across all the categories and with net negative readings in all the industries except services; that industry posts a +0.9 reading but still marks a decline from its value in June. The queue rankings of these readings are telling, with all the industry level rankings below their respective 50th percentiles, marking them as below their historic medians back to 1991. The all-sector climate reading has an 11.7 percentile rank, marking it as weaker less than 12% of the time; among industries the strongest reading is construction with a 40.5 percentile standing and in retailing with a 32.7 percentile standing- and those are both weak.

Current conditions The current conditions index fell month-to-month to 8.1 in July from 13.5 in June. It weakens across all industries except retailing, where the July reading of -2.3 is stronger than the June reading of -4.0. However, the rankings for the current index are weak; two of them are above the 50th percentile: retailing has a 65.7 percentile standing and construction has a 60.6 percentile standing. Manufacturing, wholesaling, and services all have standings below the 50th percentile but the all-sector current index is clocking an 18.8 percentile standing. Interestingly, the 18.8 percentile standing appears relatively strong compared to the sector rankings: there's only one sector standing slightly weaker than that (services at 17.3%). But this phenomenon reflects the unusual coincidence of all the industries being relatively weak at the same time.

Expectations While the current index in July shows firmer readings than either the climate or the expectations sectors, the fact that the current economy is least impacted is only one aspect of the German situation. The counterpart is that expectations are extremely weak as the all-sector reading for July has a 6.3 percentile ranking with manufacturing at a 3.5 percentile ranking and with wholesaling at a 2.7 percentile ranking. The strongest sector ranking in July comes from services with an 8.7 percentile ranking. Deterioration is across the board except for the services sector that has a -14.1 reading in July, slightly higher than its -15.4 reading in June. However, the weakness and expectations are clear, severe, and broad.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 24 2023
Flash PMIs Reconfirm Return of the Downtrend; Still No ‘Final Word’ on Inflation...
Flash S&P PMI survey data for July show broad weakening across the large industrial countries that are early reporters to this survey. Germany and France show month-to-month weakness in their composite indexes as well as both components; this weakness is echoed by the European Monetary Union aggregate that weakens in its composite as well as in its two components. The U.K. shows a weaker composite and weakness in its two components; Japan shows an unchanged composite with slightly weaker components. The U.S. shows a weaker composite with weaker services reading juxtaposed with a stronger (but still contracting) manufacturing reading.

Return of the downtrend The chart at the top shows that revival had been in play for the services sector but now that is in the past; services, clearly, for several months, have returned to a downtrend. Manufacturing remains on a steady, slow, but clearly deteriorating path. At the end of 2022, manufacturing went through a brief episode when declines abated; the index stabilized. But it's now clearly back on the move and in the ‘weakening’ category.

Sequential patterns in data The sequential patterns in the data in recent months show a clear tendency to weaken in the month-to-month changes across all the sectors in all the countries among the early reporters. There are six countries and three readings for each. Among the 18 readings, in May seven show period-to-period strength, in June only one reading shows strengthening, in July only manufacturing in the U.S. strengthened while in Japan the composite was unchanged. The encroachment of weakening conditions is clear.

The ebb and flow; flows then ebbs Over broader 12-month to 6-month to 3-month horizons, the opposite trend to strengthening conditions is still more common. These calculations are from averages on only finalized data, meaning the data are up-to-date though June. Of 18 readings, 12 show strengthening over three months, 13 show strengthening over six months and only 2 show strengthening over 12 months compared to 12-months ago. The table most clearly shows a transition for trends is progress. From 12-month to 6-month and 3-month, a rebound is in progress through June data. That is turning to decay in the more up-to-date monthly data. These trends correspond well to the various reports we have seen that have shown resiliency in economies despite central banks globally hiking interest rates.

Opinions vs. facts Whatever your mindset, still worried about recession, thinking central banks have done too much, or not enough, the data show a weakening in progress following unexpected strengthening. The queue standings that rank the PMI diffusion levels over a span since January 2019, shows all readings are below their respective medians on this timeline except Japan, where the composite and service sector readings are still relatively strong.

Rankings mostly range from weak to much weaker The average composite ranking in the table is 32.1%. The average manufacturing ranking is 8.4% and the average services sector ranking is 41.8% (all below 50%; all below their respective medians). The EU and Germany are logging their weakest manufacturing readings of the period while the French and U.K. manufacturing sectors log lower 2-percentile standings. Manufacturing is clearly and broadly exceptionally weak. Services rankings range from an unusually strong 86-percentile in Japan to the 35th percentile in the EMU and in the U.S. Yet, only the services sector in France has a raw diffusion value below 50, indicating sector contraction. And France has been buffeted by a series of labor and political actions that have interrupted activity.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Jul 21 2023
U.K. GfK Confidence Index Gives Back Gains
The U.K. confidence measure from GfK slipped to -30 in July from -24 in June; the index had been rising from its depths after reaching a second low following a post-Covid revival in the index that did not last. In September 2022, the index fell to a reading of -49 carving out a new low in this cycle below the immediate post-Covid low.

In July, the current household financial situation backed off, falling to a reading of 19 from 22 and is back to its May level. The only component improving on the month is present savings that ticked up to 26 in July from 25 in June.

The last 12-months Compared to the last 12-months, the household financial situation deteriorated in July to a -20 reading as it fell from -15 in June. The general economic situation fell to -58 from -54. Although the reading on the CPI backed down to 118 in July from 123 in June even though inflation in the U.K. continues to run quite hot. Comparisons to conditions over the previous 12 months nonetheless for two of three metrics deteriorated except for inflation where participants saw some improvement despite what has been dismal incoming inflation news.

12-months ahead Looking ahead to the next 12 months, the household financial situation is expected to be worse, falling to -7 in July compared to -1 in June, but this is still slightly better than May’s -8 reading. The general economic situation is assessed to be worse at a -33 level in July compared to -25 a month ago; this setback interrupts a previous improving trend. Unemployment is seen lower at a reading of 25 in July compared to 30 a month ago. Savings are projected to be weaker; the survey response falls to 16 from 20 but is stronger than the two previous months’ results. And the CPI expected for 12-months ahead shows a small improvement to 76 in July from 78 in June and that compares to 83 in May. However, so far, improvement on the inflation front has been elusive.

By income group By income class, lower income people see a worsening in July compared to what they saw in June; the just survey response fell to -43 from -41 although that's an improvement from May at -47 and April at -50. For upper income persons, the outlook worsened more sharply in July at a -9 compared to a +4 in June and zero in May.

Rankings are generally low The rankings for these metrics show only four responses above the historic medians; we've ranked the data over the last 20 years, a reading of 50% on the queue assessment puts an indicator at its median for the period. On this basis, only present savings, future savings and the CPI compared to the last 12- months and the CPI compared to the next 12-months show standings above the 50th percentile mark. The high rankings for inflation are not reassuring. Overall consumer confidence has a 16.5 percentile standing with the current household financial situation at a 37.7 percentile standing and the household financial situation for 12-months ahead having a 22.9 percentile standing - some improvement on a rank-standing basis, but not much. The general economic situation has a 22-percentile standing over the last 12-months. Looking ahead to the next 12-months, it has a nearly identical 21.6 percentile standing. Both are quite weak. Unemployment prospects have a 44.9 percentile standing putting them below their historic median; in this case, a rating below the median is better than one above it. On the other hand, it's not below the median by that much as it's a 44.9 percentile standing.
by:Robert Brusca
|in:Economy in Brief
France| Jul 20 2023
French Industry: Climate Improved on Mixed Signals
The French industry gauge from INSEE edged higher, rising to 100.3 in July from 100.0 in June. Despite the increase the standing for the climate gauge is at its 40.4 percentile. That leaves it below 50, the level that marks its median value.

The percentile standings in the table are telling. For production, the personal likely trend is at an anemic 6.9 percentile standing. That response tells us that the likely trend for production in the respondents’ own industry is exceptionally low. Interestingly respondents to this survey – quite different from being in denial- are much more downbeat on their own prospects compared to industry overall where the recent trend is higher on the month at +8.8, up from +2.6 in June. The recent trend also has a standing in its 57th percentile. While industry overall performs solidly, firms are very worried about their own prospects.

External demand is king Orders and demand overall have a 49.4 percentile standing, essentially on top of their historic median. And foreign orders, that improved sharply to -5.7 in July from -15.0 in June, have a 74.5 percentile standing - much stronger than for orders and demand overall. France seems to have a lot of its stimulus and support coming from external demand.

Meanwhile, inventory levels rank high at an 88.3 percentile standing. This is not a good sign. When demand weakens inventories often are ‘the residual’ that firms can’t control. As firms move to cut orders in a weakening environment, there are always lags, goods in shipment, and if sales continue to weaken, inventories will continue to pile up as a result.

Own-prices rose in July while the manufacturing price level response slipped to +4 in July from +7.1 in June. Respondents own likely price level has a 63.6 percentile standing compared to a standing at its 38.1 percentile standing for manufacturing prices. For services inflation forces are much stronger.
by:Robert Brusca
|in:Economy in Brief
Japan| Jul 18 2023
METI Indexes Show a Mixed May; Industry Weaker; Services Stronger
The just-released METI sector indexes for May show that the industry index has stepped down to 103.2 from 105.5 in April. The tertiary index, an indicator for the services sector, moved up to 102.0 from 100.8.

More on METI The graph shows that year-on-year growth for both sectors is positive, which is a good sign. The growth rate for the industry index is at its 78th percentile while the growth rate for services is at its 90th percentile. Both indexes log growth rates rankings over the past year that are solid and positive in comparison with their own histories.

However, in terms of levels, the industry index is extremely weak, at a 9.4-percentile standing. The level of industrial activity in May is in the lower 10-percentile of activity among all months since 1990. That is impressively disappointing. Comparing the services level historically we obtain a solid reading, at its 81st percentile. Of course, over time these indexes should grow; even an 81-percentile standing is not particularly strong. However, for industry having an index level that says weak as 9.4% on data since 2009, the ranking tells us that industry in Japan has been lagging recently, since it is a real activity index, not a diffusion index.

The table also looks at the growth in the industry and tertiary sectors from January 2020 just before COVID struck the worldwide economy. On that basis, the industry index is lower by 5.1% and the services sector is higher by only 0.4%, the former very weak, the latter, a small gain over such a long period of time.

Other Metrics The Economy Watchers Index In addition to the METI indexes, the table offers the economy watchers readings (a diffusion index). In May, the economy watchers index moved up to 55 from 54.6 in April; the growth rate of the index has a 55.2 percentile standing. However, the economy watchers index level was at 95.3%. So, the index level was solid/strong, but its growth rate over the last year is weaker than for the METI indexes. The economy watchers indicator for the service sector in May ticked up to 59.2 from 59.1; it has only a 47.6 percentile standing on growth, which puts it below its median growth rate since 1990 although for the service sector the index level has a 97.7 percentile standing. Strictly speaking, the standings of an index like METI, versus a diffusion index, like the economy watchers, are not directly comparable- one measures breadth, the other activity in absolute terms. The economy watchers index for employment overall moved up to 57.1 in May from 55.8 in April. The ranking of the growth rate is below its median at a 47.6 percentile standing and the standing of the index level, at its 76-percentile, a relatively a moderately firm standing for an index level on diffusion. The economy watchers survey also has a future gauge; in May, it slipped to 54.4 from 55.7; the growth of the future gauge sits in its 65.7 percentile, above its historic median. The index level for the future index is also relatively high at a 93-percentile standing. All the various components of the economy watchers index are higher compared to January 2020.

The Teikoku Index The Teikoku index is another diffusion index that looks at various sectors. Teikoku in May shows a slight improvement for manufacturing at a 41.5 diffusion reading; still with a diffusion value below 50 indicating contraction, but ever-so-slightly less contraction than a month ago as the reading ticked up from 41.4 in April. The growth ranking for the index is at its 53.1 percentile, modestly above its historic median. With the index level at a 57.6 percentile standing, the assessment is not particularly impressive. For services in May, the Teikoku index moves up to 51.6 from 50.8; the growth rate of services over the past year has a 79-percentile standing, a relatively solid standing with an index level standing at 87.2%. The Teikoku indices show all the components somewhat higher compared to their respective levels of January 2020, apart from construction that's lower on balance from its January level by 3.1 points.

Leading Economic Index The final metric in the table is the leading economic index. As of May, that index moved up to 109.5 from April’s 108.1. The growth rate for the leading index has a ranking at the 41.9 percentile which puts it below its historic median growth rate. The index level for the LEI is a weak 35-percentile standing, another relatively weak response based on the level of an activity index. However, leading index is higher by 7.7% from its level in January 2020, before the COVID virus struck the world economy; that’s something.
by:Robert Brusca
|in:Economy in Brief
Italy| Jul 17 2023
Italian Inflation Edges Lower in June; A Benevolent Trend- But a Stingy One
HICP Trends- Italian inflation fell by 0.2% in June; its core elevated by 0.4% month-to-month. Sequentially, headline inflation paces at 6.7% over 12 months, that falls to a very skinny 0.3% over 6 months, and then expands sharply to register an annualized gain of 5.5% over 3 months. The headline figure has been quite volatile. However, core inflation is up by 6.1% over 12 months, up at a 5.3% annual rate over 6 months and at a 4.3% annual rate over 3 months. The core rate shows sequential deceleration in the face of headline inflation turbulence.

Domestic inflation trends- Italy's domestic CPI follows the same pattern as the EMU-wide harmonized gauge (HICP) for its headline and core. The headline for domestic inflation rises 6.4% over 12 months, falls sharply on a 0.8% annual rate increase over 6 months, and then rises back to a 4.1% annual rate of change over 3 months. The domestic Italian CPI excluding food & energy shows sequential deceleration like its HICP counterpart. It rises at a 5.6% pace over 12 months, slides to a 4.8% pace over 6 months, and logs a 4.0% annual rate over 3 months. The HICP measure and the Italian domestic measure of inflation are giving the same signals about inflation. Headline inflation has been high and volatile and has had some bounce back over the last three months, while core inflation, undeterred, continues to edge down. But core inflation is still running at a rate of 4% or more over the last 3 months. Its pace over 12 months, on the other hand, a pace that that the ECB pays more attention to, is still in the area of 5 ½ percent to 6 ½ percent.

Acceleration/deceleration trends are mixed- The table provides evidence on inflation’s acceleration and deceleration over 3 months, 6 months, and 12 months. Over 3 months compared to 6 months, gauging acceleration across categories, inflation is accelerating in half the categories (diffusion = 50%). Over 6 months compared to 12 months, inflation accelerates in only about 42% of the categories. Over 12 months compared to 12-months ago, inflation accelerates in 83% of the categories. Looking at the data in the table, the year-on-year acceleration figure seems high considering that the HICP headline and the domestic CPI headline both show increases on the order of 6 ½ percent or so over 12 months compared to gains of over 8% a year ago. If inflation is so much lower now, why is diffusion higher in comparison? Looking at the core inflation rates, we find the answer: the year-ago HICP core inflation was 4.1%; over the last 12 months the core inflation rate is 6.1%; a year ago the domestic core rate was at 3.8% and over the last 12 months is 5.6%. So, while the headline gauges have decelerated, it’s the core rates that are accelerating and reflected in the diffusion index.

Quarter-to-date inflation- The quarter-to-date data reflect the finished second quarter. Inflation in Q2 logs in at a 2.8% annual rate increase for the headline and a 3.8% annual rate increase for the core in the HICP. Domestic inflation on the Italian gauge has a headline gain of 2.4% with the core much hotter at a 4.7% annual rate increase.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 14 2023
EMU Trade Deficit Is Cut Sharply in May
The deficit on trade in the European Monetary Union in May fell to €0.86 billion from €7.95 billion in April. The deficit decline was the product of trends that we can express in several different ways. • One way to look at it is to chronicle the trade balances by main product types. For example, the balance on manufacturing trade moved into a stronger surplus at €28.2 billion up from €23.3 billion in April. Also contributing to improvement is a smaller deficit in the balance on nonmanufacturing trade that fell to -€29.1 billion in May from -€31.3 billion in April. • Another way to look at the deficit contraction is to note that exports rose by 2.9% in May as imports fell by 0.1%. On a month-to-month basis, exports gained much more traction than imports, which backed off, helping to move the trade balance into a smaller deficit position.

Manufacturing trade Manufacturing trade in May produced an export gain of 2.9% against the rise in imports of 0.4%. Exports dominated the scene, driving the export surplus and manufacturing trade that we referred to above. This compares to April when exports of manufacturers fell by 4.8% and imports of manufacturers rose by 3.6% creating the exact opposite result.

Viewed sequentially, exports are weakening in manufacturing. Still, they rise by 1.7% over 12 months, fall at a 7.6% annual rate over 6 months and then reducing that pace of decline but still falling by 4% at an annual rate over three months. Manufacturing imports on a sequential basis fall by 2.8% over 12 months, fall at a 6.2% annual rate over six months but then rise at a 2% annual rate over three months. Except for the year-over-year changes, import trends and manufacturing are stronger than export trends.

Nonmanufacturing trade Nonmanufacturing exports in May rose by 2.9%, stronger than their 1.3% gain in April. In comparison, imports of nonmanufacturing goods fell by 1.4% in May helping to drive the overall trade picture toward surplus while in April nonmanufacturing exports rose by 1.3% as imports surged, rising by 7.6% month-to-month, sharply widening the deficit.

Sequentially nonmanufacturing exports are strengthening as weakness dissipates. Nonmanufacturing exports fall 10.4% over 12 months, fall at a 9% annual rate over six months and then fall at a 1.4% annual rate over three months. All those flows showed declines in value, but the pace of decline is easing. For imports, there is a more erratic pattern and one that leads to slightly less weakness over three months than 12 months. Still, the data show nonmanufacturing imports are falling at a rapid rate and that helps to contract the deficit on all the horizons. Over 12 months nonmanufacturing imports fall by 26.9%. Over 6 months they fall at an annualized rate of 38.9%; that result was cut nearly in half to a decline of 21.1% at an annual rate over 3 months. Yet, the pace of decline is still very steep- about 15-times-the weakness in nonmanufacturing exports on the same period. A lot of the improvement in trade is on the import side and coming through persistent weakness in nonmanufacturing imports.

Much of the progress in trade that we have seen globally has come on the back of lower commodity prices, explaining the weakness in nonmanufacturing flows. Oil and energy product prices have been weakening. Energy flows were greatly interrupted at the start of the Russia Ukraine war and since then a lot has been done to try to achieve some increases in energy supply and altogether these efforts along with slowing economic growth and what was a warmer than expected winter have helped to contain energy prices. Those prices continued to be soft although OPEC has been making noises that it is ready to take steps to try to firm up prices in the oil market.

Export-import trends in Germany, France, and the U.K. The table contains data for Germany, France, and the U.K. for exports and imports to take a country-specific look at what is going on with trends. In Germany, exports are increasing on all horizons but they steadily slowing from 12-months to 6-months to 3-months. Imports, on the other hand, rise by nearly 4% over 12 months then fall at a 20% annual rate over 6 months and fall at about a 13% annual rate over 3 months- not exactly sequential slowing, but a continued pattern of contraction, nonetheless. France’s sequential trade patterns are less clear for exports where exports rise by 9.5% over 12 months, decline at a 6.5% rate over 6 months and then rebound to grow by less than 1% at an annual rate over 3 months. But same horizons imports are getting progressively much weaker in France as imports fall by 2.4% over 12 months, decelerate sharply to fall at a nearly 30% rate over 6 months and then decline at an expedited 37% annual rate over 3 months. Again, with France the driving force for trade improvement comes from import weakness. The U.K., of course, is not a European Monetary Union or EU member; its exports show clear sequential deterioration along with export growth of 24% over 12 months, an export decline at a 14.6% annual rate over 6 months and then a horrific decline at a 55% annual rate over 3 months. For the U.K. except for the year-over-year result exports are much weaker than imports persistently; U.K. imports fall by 1.2% over 12 months; they fall at a 10% annual rate over 6-months and then at a 7% annual rate over 3 months.

Other export trends At the bottom of the table, we look at export trends in four additional EMU members: Finland, Portugal, Belgium, and Italy. Three of these four show export declines in May. Three of these four show export declines in April; three of the four show export declines over three months. All of them show export declines over six months and all of them show export declines over 12 months. In addition, three of four countries report double-digit export decline over 12-months; only Portugal escapes that fate and does so only technically with 9.9% decline over 12 months. All have double-digit declines in exports over 6 months and all have double-digit declines of 20% or more except Portugal (-15.7%). Three of four have double-digit export declines of 15% or more annualized over 3 months; the exception is Finland that posts the opposite- a surge in exports at a nearly 40% annual rate.
by:Robert Brusca
|in:Economy in Brief
Europe| Jul 13 2023
EMU IP Snakes Ahead in May, But Rides a Downtrend
Industrial output in the European Monetary Union in May rose by 0.2%. This is the headline series excluding construction. The gain follows a rise in output of 1% in April and a much sharper fall of 4.4% in March. The incidental growth rate for output in May occurs amid a challenging period for output, a profile that is declining and unraveling at an increasingly rapid pace. Output falls by 2.1% over 12 months; over 6 months it falls at a 4.7% annual rate and over 3 months it falls at a 12.5% annual rate. The trends for output in the EMU are weak.

Quarter-to-date The quarter-to-date result for the headline shows output is falling at a 9.1% annual rate. Manufacturing output falls on the same deteriorating pattern as the headline with progressively deteriorating results. Manufacturing shows output falling at a 13.8% annual rate, two months into the second quarter. Manufacturing is quite weak.

Sectors Turning to sector results, consumer goods, intermediate goods, and capital goods log month-to-month increases in output across the board in May. In April, consumer goods output declines by 2.6% month-to-month, intermediate goods output falls by 0.9%, while capital goods output surges by 14.7% month-to-month. However, in March consumer goods output declined, intermediate goods output declined, and capital goods output plunged by 14.9%. Therefore, the sharp gain for capital goods in April was simply a bounce back from an even sharper loss in March. On balance, the sectors largely show the same deterioration as the headline in manufacturing.

Sectors sequentially Viewing the sectors sequentially, consumer goods output falls 3% over 12 months, falls at a 9.4% annual rate over 6 months and then falls at an 11% annual rate over 3 months. The consumer sector follows the pattern of across-the-board declines and generates a progressive series of decline that has output falls accelerating. Capital goods offer their own twist with a gain of 1.3% over 12 months; that gain diminishes to a rise at a 0.2% annual rate over 6 months and then gives way to a decline of 5.3% at an annual rate over 3 months. Intermediate goods follow with the only exception to the ever-deteriorating trend displayed by the headline, by manufacturing, and by other sectors. However, it's a modest deviation; as intermediate goods output falls on all horizons, it falls at a 5.4% annual rate over 12 months that's reduced to a 4.7% pace of decline over 6 months and then it returns to a 5.4% annual rate decline over 3 months. None of that makes the intermediate good sector look any healthier than the rest of output.

Quarter-to-date by sector On a quarter-to-date (QTD) basis, consumer goods output is falling at a 7.3% annual rate, intermediate goods output is falling at a 2% annual rate, and capital goods output is falling at an 18.7% annual rate. Within consumer goods, consumer nondurables are showing a decline in the QTD at a 9.7% annual rate. That contrasts to an increase in durable goods output that's expanding at a 2.3% annual rate, about midway through the second quarter.

By country... Output trends across EMU members in May show us declines in output in five of the 13 members shown in the table. The largest economies are still reporting gains in May with Germany posting a 0.2% rise in output, France a 1.4% rise, Italy a 1.4% rise, and in Spain a sizable, 8.1% annual rate increase. However, monthly data are ragged and irregular. In April, nine of 13 member countries in the table logged output declines. In March, eight of the 13 countries logged output declines.

Countries sequentially Sequentially EMU countries show output declines over 3 months in 10 of 13 countries. Over six months 7 countries show output declines; over 12 months the same seven countries show output declines. In fact, there are seven countries that report output declines on all three horizons, those are: Austria, Belgium, Italy, the Netherlands, Luxembourg, Ireland, and Portugal. Among those countries, the sequential declines are getting progressively worse in Austria, Belgium, the Netherlands, Ireland, and Portugal.

Isolated strength Only Finland, France and Spain show output increases on all three horizons. Finland shows progressive strength with growth moving up from 0.7% over 12 months to a pace of 3.6% over 6 months to a pace of 9.8% over 3 months. Spain also shows progressive acceleration with output moving from 1.1% over 12 months to 11.4% annualized over 6 months to a pace of 21.8% over 3 months.

Nonmonetary union Europe Clearly weakness in the monetary union dominates strength; it would be surprising to see the strength in these few economies hold up given the weakness and that abounds in the euro area around them. However, at the bottom of the table, we see that there is more strength for nonmonetary union members. Sweden and Norway both show output increases over all three timelines, but persisting growth is not building momentum. The U.K. shows output increases over three months and six months after it logs a 1.2% decline over 12 months.

QTD by country In the quarter-to-date, output is falling in all the members (in the table) except for France and Greece. Finland that has a string of output increases blogs are minus 1% contraction in the quarter-to-date.
by:Robert Brusca
|in:Economy in Brief
Netherlands| Jul 12 2023
Dutch Exports Rise as Imports Fall in May
Dutch goods trade moved to a greater surplus in May as exports rose by 0.6% and imports fell by 3.0%. Nonetheless the sequential profiles for exports and imports both continue to point to the implosion of trade flows. Goods exports are falling by 3.4% over 12 months, falling at an 18% pace over 6 months, and falling at a 21.5% pace over 3 months. For goods imports, there's a decline of 7.2% over 12 months, a decline at a 15.8% pace over 6 months and then a decline at a 19.3% pace over 3 months. Exports and imports are sequentially falling as well as worsening their rate of decline.

The Netherlands is at the crossroads of Europe; it does a great deal of trading as many goods flow as transshipments through the Netherlands. The Dutch statistics are about trade originating from the Netherlands and exclude the transshipments that come through the economy from other European states. The Dutch economy, however, is very plugged into the world economy as far as international trade is concerned.

The negative trends that we see from exports and imports here are disturbing because they've turned sharply negative so quickly. Export and import gains were very strong toward the end of 2022; then all of a sudden the bottom began to fall out and since that point there has been a very steady deceleration in the growth of exports and imports. The Baltic dry goods index chronicles the slow down in world trade. The recovery of world trade flows from the COVID recession peaked late in 2021 and then fell off sharply in early 2022, had a small rebound, and has since continued to wither into lower territory. According to this index, world trade flows continue to wind-down.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 11 2023
German Inflation Accelerates on Narrow Breadth
German inflation accelerated in June rising by 0.7% month-to-month compared to falling 0.2% in May. The HICP core rate rose by 0.8% after a flat performance in May. The pattern for the HICP inflation rates in Germany’s domestic CPI headline and core, while showing similar trends to the HICP, also shows very different magnitudes. The German CPI accelerates to 0.3% in June after falling by 0.1% in May. The CPI excluding energy rose in June by 0.4% after being flat in May. The accelerations experienced in the domestic indexes month-to-month are far below the accelerations experienced in the HICP measure.

Inflation diffusion as the arbiter The table calculates diffusion data based on the domestic CPI data. Diffusion data look across the various categories and calculate the breadth of the price increases period-to-period. The diffusion data presented in the table follow the practice for the U.S. ISM where diffusion is calculated as the percentage of inflation increases month-to-month plus half of the percentage that are unchanged. Inflation diffusion above 50% indicates that there is more acceleration than deceleration on the period. Below 50% there is more deceleration than acceleration across CPI categories. Inflation diffusion in April month-to-month was very narrow even though the headline showed that the domestic CPI rose by 0.1%; diffusion in April compared to March was only at 9.1%- extremely little inflation acceleration occurred in the month. However, diffusion stepped up sharply to 54.5% in May. This indicates inflation was accelerating in more categories than it was decelerated but by a very small margin. And this is even though, in May, the headline for inflation fell month-to-month after rising the month before. Essentially the diffusion calculation from May was saying that the headline exaggerated the beneficial trend for inflation. And that turns out to be true. In June we see the inflation metrics indicating a 0.3% headline gain and a 0.4% gain in the CPI excluding energy. But once again inflation diffusion remained at only 54.5%, barely showing inflation accelerating in more categories than it was decelerating. On balance, despite the headlines on the HICP, German domestic inflation data suggest that inflation is not increasing by much month-to-month. It sees June more as a hiccup in inflation. The HCP measure appears to be exaggerated. Supporting this view, Brent energy prices fell in each of the last two months as well.

Sequential trends Sequential data that measure inflation over 12 months, 6 months and 3 months on the HICP shows that there is a steady deceleration of headline inflation from a 6.9% pace over 12 months to a 4.3% pace over 6 months to a 2.9% pace over 3 months. This deceleration is echoed by the HICP core measure.

The German domestic CPI measure also shows inflation decelerating with the headlines displaying 6.4% inflation over 12 months, a 5.7% pace over 6 months, decelerating to 1.4% pace over 3 months. And like with the HICP core, the CPI excluding energy also shows inflation decelerating, in this case, from 6.7% over 12 months to a 4.9% pace over 6 months to a 2.1% annual rate over 3 months.

Sequential diffusion Diffusion data are calculated from the domestic CPI data. They show inflation over 3 months with diffusion at 27.3%; this compares the 3-month inflation rates across CPI components to their performance over 6 months. Over 6 months diffusion is 36.4%; this measure compares 6-month inflation rates across components to component inflation over 12 months. Over 12 months the diffusion measure is hot, showing a 72.7% pace; this compares inflation by category over 12-months to what it was across components 12-months ago. Interestingly, the comparison of 12-months to 12-months ago shows a headline of 6.4% over 12 months as of June 2023; this compares to 6.6% twelve-months ago. The CPI ex-energy is at 6.7% over 12 months currently, compared to a 4.4% twelve-month pace twelve months ago. The diffusion measures confirm and reinforce the notion from the HICP headline and core and from CPI headline as well as ex-energy measure that inflation has been decelerating and that the deceleration is widespread.
by:Robert Brusca
|in:Economy in Brief
Finland| Jul 10 2023
Finland Logs a Strong IP Gain Tagged onto an Erratic Annual Trend
The year-on-year trend depicted in the chart on Finland’s IP growth shows an erratic recovery. Finland’s IP nose-dived during Covid as IP did across the world. It similarly staged a strong post-Covid recovery. But after seeing growth peak early in 2022, the pace of output expansion has slowed steadily and even seen year-on-year results flash between logging expansion and contraction in recent months.

In May output logs a 2.5% month-to-month gain after falling by 2.1% in April and rising 2.8% in March. But on the back of this monthly chop and year-on-year erratic behavior, the sequential growth rates are looking very solid, showing year-on-year output up by 1.2%, a gain at an 8.1% pace over 6 months then up to a 13.3% annual rate pace over 3 months. Still, IP excluding construction is only up at a 0.6% annual rate two months into Q2 2023. Manufacturing output is falling at a 1% annual rate in the unfolding second quarter as well - a complicating offset to sequential strength.

Utilities output is accelerating and exploding sequentially culminating in a 97.7% annual rate of increase over 3 months. But mining & quarrying output is tanking – not in a clear decelerating profile - but still falling at a 65.7% annual rate over 3 months.

Manufacturing shows sequential acceleration with output up 0.7% over 12 months, at a 3.6% pace over 6 months and at a 9.8% pace over 3 months. Still, both food-output and textile-output show weak performance.

Finland’s HIPC gauge is in a clear decelerating pattern in what is a now also common global pattern. While it is joined by deceleration in the core HICP as well, the core pace is much more stubborn with the pace slowing to only a 4.2% annual rate over 3 months. The performance of the HICP headline and core also are quite different in each of the last three months.
by:Robert Brusca
|in:Economy in Brief
Germany| Jul 07 2023
German IP Falls by 0.2% in May
German IP fell by 0.2% in May as manufacturing IP rose by 0.2%. Manufacturing and headline IP both show sequential deterioration in play for their annualized rates of growth from 12-months to 6-months to 3-months. Consumer goods and capital goods output both show secular growth rate deterioration while intermediate goods show only a very minor deviation from that same pattern.

Real manufacturing orders and real sales both show more complex patterns.

The IFO headline for manufacturing and the gauge for expectations both show secular improvement from 12-months to 6-months to 3-months. The ZEW current index shows persistent negative readings, but they show progressive improvement. The EU Commission industrial index shows secular deterioration.

Other early European reporters show different results. France and Spain show ongoing sequential improvement in their output trends for IP. Portugal and Norway show sequential deterioration while Sweden shows a mixed pattern.

There are 17 quarter-to-date calculations in the table. Ten of them show negative growth in progress. Overall, German IP, manufacturing IP and real German orders log negative readings for the quarter to date. The ZEW current treading, as well as France and Sweden, log positive readings along with two key German sectors: capital goods and consumer goods.

Nine of 17 queue rankings show standings below their respective 50 percentile, a level that marks the median value for each series. The weakest percentile standings are for the intermediate goods sector for German manufacturing, the two IFO series (that are more upbeat- but from this lower ranking position) and IP in Portugal.

Twelve of 17 measures show weaker conditions in May 2023 that existed in January 2020 before Covid struck.
by:Robert Brusca
|in:Economy in Brief