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| Aug 25 2023
German IFO Survey Continues to Weaken
Overview IFO climate, current conditions, and expectations all slipped to lower readings in August compared to their levels in July. The rankings of the August indexes for climate, current conditions, and expectations are all extremely weak. The climate index has a 7.5 percentile standing, current conditions have a 14.3 percentile standing, and expectations have a 5.4 percentile standing. Over the last four months, there has been a cumulative drop in the diffusion gauges of 20 points for climate, 14.1 points for current conditions, and 19.8 points for expectations.

Climate Climate rankings by sector show the highest standing for construction at a 31.8 percentile standing compared to the lower 6.8 percentile standing for services. None of the sectors displays a climate reading above the 50% mark that designates, in each case, the median for the sector. Climate changes are negative in each of the last four months across all sectors. Wholesaling and retailing are weaker month-to-month for five straight months.

Current Conditions Current conditions erode and erode significantly in each sector compared to July. The current business situation shows declines across each of the last five months for the headline as well as in manufacturing, construction, and wholesaling. Retailing and services have shown month-to-month declines in four of the last five months. Construction actually has declined for six months in a row. Over the last 14 months, manufacturing, construction and wholesaling have seen diffusion fall month-to-month in 11 of those 14 instances. Retailing and services have declined in 8 of those 14 instances. There has clearly been an intense period of weakness over the past five months, there was some respite 6 to 9 months ago, and then 10 to 14 months ago, there was a previous heavy menu of persistent month-to-month declines. The current period represents another significant step down in current activity.

Expectations Expectations weakened in August compared to July for overall expectations as well as all sectors except retailing. Month-to-month expectations have weakened for four months in a row for overall expectations, manufacturing and construction. Expectations have weakened for three of four months in wholesaling and service and in two of four months in retailing. Expectations also have been through cold, warm, cold cycling phases with sectors generally showing persistent declines from September 2022 to March 2022, improving more persistently form December 2022 to April 2023, and then eroding consistently over the last four months.
by:Robert Brusca
|in:Economy in Brief
France| Aug 24 2023
French Economic Sectors Erode in August
French manufacturing and services sectors weakened in August. The climate indicator for industry fell to 96.2 from 100.7 and sits in the lower 20% of its historic range of values. The services indicator fell to 100 from 101.6 and has a queue percentile ranking in its 42.7 percentile, a standing below its historic median, but relatively stronger than the standing for industry.

Manufacturing Manufacturing production expectations weakened in August to -9.5 from -8.7 in July.

For production itself, the recent trend fell sharply to a -5.4 reading in August from 9.2 in July. Survey respondents present their own industries’ likely trend as stronger, giving it a +1 reading in August compared to a -4 reading in July. This means respondents were considerably more negative on the economy overall while expectations for their own individual industries were for conditions to improve.

Orders and demand in August fell sharply to -21.4 from -14.8 in July. Foreign orders and demand also fell sharply on the month to -15.3 from -5.1 in July. Inventory levels in general crept higher in August from July as July had crept higher from June.

Price trends in their own industries are still showing pressure, but less than in July, as the August reading was 2.8 compared to 6.9 in July. However, for the overall manufacturing price level, respondents saw overall stronger pressures, logging a 5.0 reading in August compared to 4.3 in July.

All the components show weaker values in August 2023 than in August 2022 with the sole exception of a slightly larger reading for inventories.

The percentile standings are calculated on data back to 2001; that process produces an overall percentile standing in manufacturing at the 20th percentile. For manufacturing production expectations, a 33-percentile standing emerges; the recent trend and the own industry or ‘personal likely trend’ for production are both weak standings, at their respective 16th and 18th percentiles. The orders and demand category has a 32.8 percentile standing with foreign orders and demand at a 36.8 percentile standing. Prices shown as ‘own industry’s likely trend’ are at a 47-percentile standing with the manufacturing price level at a 40.9 percentile standing. The only strong ranking in the table is for inventories; they have a 95-percentile standing and are rising. An environment where everything else is weak as inventories rise likely suggests undesired building. The INSEE manufacturing survey is weak and weakening.
by:Robert Brusca
|in:Economy in Brief
Europe| Aug 23 2023
Flash PMIs Mostly Weaken in August
The S&P Global flash PMI for August shows broad weakening with a couple of warmer spots as France and Japan showed stronger composite PMIs month-to-month. However, decaying on the month were the composite PMIs from the European Monetary Union, from Germany, from the United Kingdom, and from the United States. Only Japan showed strengthening across the board with improvement in manufacturing, services, and, of course, the composite. France showed resilience in the composite supported by manufacturing. Both Germany and the European Monetary Union showed month-to-month improvements in manufacturing, but they were not strong enough gains to translate to the composite index in the face of service sector weakness.

In August, only the U.K. and the U.S. show weakening in manufacturing, services, and the composite. The U.K. also shows triple weakening on those metrics in July as well. The U.S. does not follow that pattern because in July there was an improvement in manufacturing; however, in June the U.S. showed weakening in all three measures.

The overriding theme for the month, despite some mixed signals in month-to-month changes, is that the queue percentile standings are broadly and severely weak with the single exception of Japan where the services sector has a 92.5 percentile standing and the composite has an 88.7 percentile standing. Japan still has a subpar manufacturing sector with a 47.2 percentile standing. All the rest of the metrics in the table have queue percentile standings below the 50th percentile, meaning they're below their medians on data since January 2019, and for the most part, very substantially below their medians. For every reporting unit in the table, the standings for manufacturing are weaker than for services; the partial exception to that is France where the percentile standings for manufacturing and services are identical at a pathetically weak 9.4 percentile standing.

Compared to the responses in July, August does reflect some scattered improvements and August is also improved relative to the June period. In June there were only two sectors that were stronger; they were for manufacturing in the U.K. and in France.

Over three months there are net declines for all the countries and all the diffusion readings but the one exception being manufacturing in France which is up by 0.3 diffusion points over three months.

Assessing the PMI standings from January 2020 before COVID struck, all the sector readings for all the countries are weaker on balance except Japan. The composite in Japan is higher by 2.5 points, manufacturing is better by 0.9 points and services are better by 3.3 points over that period. But that is the exception. The U.S. composite is lower by 2.8 points, the European Monetary Union composite is lowered by 3.9 points, the U.K. composite is lower by 4.5 points, the French composite is lower by 5.0 points, and the German composite is lower by 6.4 points. After three and two-thirds years, most of the sectors were reporting weaker conditions than those that prevailed before COVID struck. It gives you some idea of the impact of COVID on the global economy. It created a short sharp recession in a lot of countries, but it has more broadly created a legacy of lethargy; the countries have had a very difficult time breaking out from it. The average percentile standing in manufacturing in August is a 9.7 percentile standing with services at a 29.9 percentile standing and the composite and a 22.6 percentile standing. Conditions are not only weaker than they were in January 2020, but compared to where they've been since 2019, they rank as extremely weak.
by:Robert Brusca
|in:Economy in Brief
Belgium| Aug 22 2023
Mixed Bag for Belgian Confidence Indicator
Belgian consumer confidence in the National Bank of Belgium consumer survey slipped to -7 in August from -6 in July. However, that is still slightly better than the June reading of -9. The queue standing of the consumer confidence metric on data back to 1991 places the indicator at a 48.3 percentile, marking it is just slightly below its median reading over that period. Tracking Belgian consumer confidence since January 2020 before Covid started, the indicator is one point lower than it was prior to the onset of the Covid episode.

The economic situation over the next 12 months for Belgium is assessed as weaker at -17 compared to -13 in July and -15 in June. The readings from 12 months ago and 6 months ago showed that there had been some improvement and that there was backtracking over 3 months, but the current reading is still slightly better than the reading from 3 months ago. However, the standing for the August reading is at its 25th percentile right at the border of the lowest quartile of its queue of data since 1991, not a very impressive result. The economic situation has a stronger diffusion index than the assessment over the last 12 months; however, the percentile standing for the next 12 months is weaker than it was for the last 12 months; the previous 12 months had a standing in its 30th percentile.

The trends for the next 12 months have a -1 diffusion reading which is a reading showing higher price pressure than in June or July. However, the longer progression for prices from 12-months to 6-months to 3-months shows expected pressure being relieved. And the standing for price trends in August is only at the 4th percentile, an extremely weak reading of expected inflation. This compares to the last 12 months where the reading had a massive 96-percentile standing.

Unemployment expectations according to the survey are going up. The response for June was +17 and July settled back at a + 15, but August sees a reading of +20. The progression from 12-months to 6-months to 3-months is flat but with a small uptick to +18 from +16 one year ago. The percentile standing for the unemployment gauge in August is at a 40.8 percentile; unemployment expectations are still below their median.

Household purchasing assessments slipped for both the next 12 months and in the current period. Apart from the month-to-month changes, the 12-month, to 6-month, to 3-month metrics show slight slippage in both of those categories. The environment for household purchases over the next 12 months, however, has a 66.6 percentile standing, at the border of the top third of its historic queue of data. The favorability of buying at present has only a 6.2 percentile standing, extremely weak.

The financial situation for households over the last 12 months were range-bound oscillations over 6 months and 3 months, but those reading in August now have a lower 5.9 percentile standing. Over the next 12 months, the August reading is near its median with a 49.3 percentile standing; August shows a net assessment at zero, the same as it was in July. Twelve-months ago this assessment was -8 with improvement in train, very weak. The outlook is for something much better. The standing for the household financial situation currently has improved sharply from this lower 5.9 percentile over the last 12 months, to a standing of 49.3% over the next 12 months. The current situation standing is at its 86th percentile.

The environment for household savings is positive over the next 12 months; the assessment has a 65.8 percentile standing. The favorability for savings at present has a 73.7 percentile standing. However, favorability of saving responses often reflect negativity on the outlook. If it's favorable to save, it's often not favorable to spend. And we see that less in the outlook for the next 12 months and more in the current assessment of conditions.
by:Robert Brusca
|in:Economy in Brief
Germany| Aug 21 2023
German PPI Is Off Sharply But It’s the Usual Dilemma
The German PPI is falling by 1.1% in July compared to June. The PPI now has a string of months in which prices are falling. This in fact looks even more persuasive because the PPI ex-energy fell by 0.4% in July, and it also has a string of months in which inflation is falling. But it’s only PPI inflation, not the sky. Central banks do not target producer prices. Table 1 also shows for comparison what's going on with the CPI; it has increased in two of the last three months. The CPI ex-energy has also increased in two of the last three months. As you look at these trends more broadly, producer prices are in fact coming to heel very sharply. And more than that, PPI prices are weak. However, consumer prices have hardly benefited from this trend at all.

The PPI excluding construction in Germany has fallen by 6% over 12 months; it falls at a 10.1% annual rate over 6 months and falls at a 10.4% annual rate over 3 months. That's impressive weakness. The PPI excluding energy rises 2.1% over 12 months, falls at a 1.1% annual rate over 6 months and falls at a 3.9% annual rate over 3 months indicating ongoing deceleration in the PPI ex-energy.

In comparison, the CPI, which is emphasized by the ECB (it targets the HICP), is up by 6.1% over 12 months; however, the pace slows to 3.5% over 6 months and slows further to 1.7% over 3 months. This declining progression brings the 3-month growth rate inside the target range for the ECB, but again central banks do not typically place a great deal of weight on these shorter-term compounded inflation rates. Looking at the CPI ex-energy we also see a 6.1% gain over 12 months, a 4% annual rate gain over 6 months, and a 2.5% annual rate gain over 3 months. Once again, we see clear inflation deceleration and progress but less deceleration than for the headline and even over 3 months there is less good news when the CPI ex=energy fails to drop inside of the ECB target range.

The chart (on the right) plots the PPI ex-energy against the CPI ex-energy. The chart is perhaps the best way to understand the stark difference and the difference in trend between these two metrics. The chart gives you a hint that historically the PPI is more volatile than the CPI and that it goes through exaggerated cycles in comparison with the CPI. In other words, just because the PPI accelerates sharply or decelerates sharply doesn't mean the CPI will run the same magnitudes; however, usually, the accelerations and decelerations of the PPI are reflected in some acceleration or deceleration in the CPI. It's just less pronounced. That seems to hold in this cycle as well.
by:Robert Brusca
|in:Economy in Brief
Japan| Aug 18 2023
Japan’s Inflation Remains High and Stubborn
Japan’s inflation in July continues at a pace in excess of the target sought by the Bank of Japan. However, inflation is not running wild; it's simply running hotter than the BOJ wants it to. Inflation had moved quite low in May with the headline of 0.1% and then picked up to 0.2% in June. The core rate, that had risen by 0.4% in May, slipped to a weaker rise of 0.1%. July shows the headline pace continues to accelerate with an increase of 0.4% and the core (all items excluding food & energy) logs the somewhat neutral 0.2% increase on the month.

July was an empty pinata for the hopeful On balance, the progression of inflation through July is disappointing. The monthly patterns are no longer encouraging and their progression of inflation from 12-months to 6-months to 3-months is neither disturbing nor encouraging and instead depicts an inflation rate that is wandering at a pace that's simply too high but without a clear trend. Headline inflation is up 3.2% over 12 months; that pace slips to 1.9% over 6 months but then moves back up to 2.7% over 3 months. The core pace that excludes food & energy shows the 2.6% increase over 12 months, rising to a 3.6% annual rate over 6 months, then settling back to a 2.8% annual rate over 3 months. While the core rate decelerates from 6-months to 3-months, the 3-months the rate is still above the 12-month pace which is not the signal that the Bank of Japan is looking for from the inflation rate.

Monthly inflation patterns If we rummage through the details of monthly inflation by industry, in July there are strong gains in reading and recreation as prices rose by 1.5%; also, for food and beverages as prices rose 0.8%; for clothing and personal items prices rose by 0.5%. In June there are not as many pressures present, but the largest month-to-month gain in these major categories is 0.3%. Categories with the max gain include food & beverages, clothing & personal items, and the miscellaneous category. Meanwhile, housing costs were flat in June as reading & recreational prices slipped by 0.2% month-to-month. In May when headline inflation was so low, four categories had increases of 0.4%; those were food & beverages, medical care, reading & recreation, as well as transportation & communication.

Longer inflation patterns Looking at these industry patterns, sequentially there's scant evidence of categories with inflation accelerating or decelerating for the most part inflation is just gyrating. Inflation changes look more chaotic or somewhat random. Over 3 months inflation decelerates for food & beverages, for educational costs, for medical care, for reading & recreation, and for transportation & communication. There are two decelerations in a row only for food & beverage prices that slip from an 8.7% gain over 12 months to an 8.6% gain annualized over 6 months, to a 6.2% annual rate over 3 months. That's the only category that shows clear directional progress; it's also the category with the hottest 3-month inflation growth rate.

Inflation steps into a new quarter With the July report, we're one month into a new quarter and looking at the rise in inflation in July relative to the previous quarterly average. The quarter-to-date headline inflation at 3.3% with core inflation running at a 2.4% annual rate, finds inflation is excessive for food & beverages at 7% in the quarter, clothing and personal items inflation is at 4.4%, reading & recreation prices are up at a 9.4% annual rate, while transportation & communication prices are up to a 3.6% annual rate. However, housing prices, education, medical care, and miscellaneous items are all running inflation rates in the one to 1 ½ percent range, quite subdued.
by:Robert Brusca
|in:Economy in Brief
Japan| Aug 17 2023
Japan’s Trade Trends Wither…to the Delight of GDP
Japan's trade trends continue to show deterioration. The early press reports on Japan's trade picture have focused on weak Japanese exports and how this weakness is going to constrain domestic growth. But such analysis dwells on only half of the picture in trade.

International trade and the theory of relativity The international contribution to GDP comes from the current account and with some small adjustments it becomes something called GDP net exports. This measure is the difference between exports and imports- as always expressed in real terms since we are always interested in real GDP growth. When exports exceed imports, there's a boost to GDP from trade; if imports exceed exports, there's a subtraction from GDP. It is not just exports that matter, or just imports; it’s one flow relative to the other. They both matter. Like any other flow quarter-to-quarter, the impact of the flow, in this case the net flow, on GDP, depends on the change in this balance or net. The second quarter in Japan saw that trade made an enormous impact on GDP; in fact, trade accounted for all the growth in GDP in the second quarter by itself. As we look at Japanese trade trends, July is starting the third quarter with the same forces as those in gear during the second quarter.

Strength though weakness… Seasonally adjusted exports were up by 0.5% over 12 months and that's a weak showing. However, imports are falling by 14.7%. That means imports are weaker than exports and it implies that the contribution from imports to GDP is going to be larger than the contribution of exports to GDP. Since imports are a subtraction from GDP, the weaker import number implies a positive kick to GDP, even as exports slow. Of course, we're very early in the third quarter and we're going to be concerned with the year-over-year change but what happens in the third quarter compared to the second quarter. In July itself, exports and imports each rose by 2% marking a sort of standoff in terms of their impact on GDP. But I simply do not see the rationale for being worried about Japanese growth because Japanese exports are weak. Global trade is weak. It looks like Japan is having weaker imports than exports which should be a positive development for Japan's GDP accounts.

Foreign exchange Japan's exchange rate against the dollar has deteriorated only slightly; based on year-over-year changes it's only 3.1% weaker. The real broad exchange rate that is trade weighted and price adjusted yen against all of Japan's trading partners is weaker by only 1.7% over the past 12 months. There is some evidence of growing weakness in the exchange grade from 12-months to 6-months to 3-months.

Export and import yen prices and volumes Export and import prices show export prices down 0.2% over 12 months. Import prices are down by 14.2% over 12 months. This means a lot of the weakness in imports has come on the price side rather than on the volume side. However, the volume statistics echo what we see in the nominal data as well with real exports growing by 0.8% over 12 months and real imports falling by 0.5%. Over 3 months exports fell at a 0.3% annual rate in real terms while imports fell at a 5.1% annual rate in real terms.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| Aug 16 2023
The UK CPI and Its ‘Many Paths’
The United Kingdom is facing the same dilemma as other central banks as core inflation remains stubborn and headline inflation has dived sharply. The weakness in headline inflation has to do with its commodity components; we can particularly point to oil. On the other hand, core inflation, which shows some signs of moderating across most highly developed economies, shows a much slower progression, especially in the UK.
by:Robert Brusca
|in:Economy in Brief
Japan| Aug 15 2023
Trade Drives a Jump in Japan’s Q2 GDP to 6%
Japan's GDP in the second quarter of 2023 jumped to a 6% annual rate after gaining 3.7% at an annual rate in the first quarter. These two growth rates are a sharp breakout from the 2022-Q4 growth rate of 0.2% and the Q3 growth rate of -1.2% for real GDP.

However, on close inspection of the numbers, there's not much in this GDP report that is terribly impressive about the performance of the domestic economy nor does the domestic economy seem to be the source of inflation pressures.

The major GDP accounts Quarterly annual rates of growth show private consumption falling at a 2.1% annual rate with public consumption up at a 0.4% annual rate in the second quarter. Those are weak metrics. Gross capital formation produces a second positive growth rate in a row in the second quarter, rising at a 2.2% annual rate compared to the first quarter when it had grown at a 6.8% annual rate. Spending on capital equipment in the second quarter was up at only a 0.1% pace after a very strong 7.6% growth rate in the first quarter. Housing was strong, with real spending growing at a 7.7% annual rate, stepping up strongly from solid growth rates in the previous two quarters as the housing recovery continued. Net exports exploded in the quarter, rising by two trillion yen with the export/import gap accounting for all the quarter-to-quarter increase in GDP by itself. Exports grew at a 13.6% annualized rate after falling at a 14.4% annualized rate in the first quarter. Imports fell again at a 16.2% annualized rate after falling at an 8.7% annualized rate in the first quarter. Domestic demand fell at a 1.1% annualized rate after rising at a 4.6% annualized rate in the first quarter.

The active forces at work The sharp turn-around in GDP net exports has to do with the sharp reversal of exports in the second quarter along with the sharp reversal in imports as those two changes worked in tandem to magnify the impact on the current account balance (GDP-net exports). The contribution of net exports to GDP in the second quarter is greater than the increase in GDP on its own and the change in net exports from a deficit position in the first quarter is greater still. That change is being driven by some unexpected strength in exports, although exports, if we look at year-over-year data, are not performing in an exceptional way in the second quarter. Year-over-year export growth moves up to 3.2% in the second quarter compared to 1.9% in the first quarter, but that's still weaker than the export year-over-year growth rate in the third and fourth quarters of 2022. The main contribution of exports is that they jumped back to trend growth so quickly after having had a very weak first quarter. Imports, on the other hand, are showing some pronounced and sequential weakness; imports grew sharply in the third quarter of 2022, but after that they've declined quarter-to-quarter for three quarters in a row and they have logged progressively larger rates of decline. It's in the import growth rate where we see the real trend because year-over-year import are lower by 1.5% in the second quarter; they had been up by 4.1% in the first quarter, and in the previous two quarters, year-on-year imports grew at annual rates of about 10%. There is a clear import slowdown and contraction in progress linked to weak domestic demand conditions.

Strength though weakness- really! Japan's GDP report is basically a study in irony. Japanese GDP growth is strong because Japanese domestic demand is weak <- not a typo or a mistake. Domestic demand falls at a 1.1% annual rate in the second quarter with private consumption falling at a 2.1% annual rate and with public consumption weak at only a 0.4% annualized gain. Capital formation for plant & equipment also slowed sharply to only a 0.1% pace although gross fixed capital formation grew at a 2.2% annual rate and housing stepped up to log a strong growth rate at 7.7%. However, adding these all together, we get very weak domestic growth as is evident in the aggregate figure. Weak domestic demand means weak imports, explaining the sharp drop in imports that imparted a boost to GDP, hence strength though weakness! Meanwhile, exports picked up in the quarter and moved back to trend growth.

Year-on-year trends Year-over-year figures show relatively weak domestic demand growing at only a 0.9% annual rate in the second quarter, with private consumption growing at a 0.3% annual rate and public consumption also at a 0.3% annual rate. The capital formation figures and housing show growth rates in the neighborhood of 3 to 3 ½ percent per year. The year-on-year growth rate for GDP in the second quarter moved up to 2.1% from 1.9% in the first quarter and it was boosted by 3.2% increase in exports and once again - ironically – ‘helped’ by a 1.5% decline in imports, since imports are a subtraction from GDP. All things equal weaker imports produce stronger GDP.
by:Robert Brusca
|in:Economy in Brief
Finland| Aug 14 2023
Inflation in Finland Ends Its Tranquility; Is Finland a Bellwether?
The chart (on the left) is a reminder about how inflation works. This chart works for Finland; it works for most countries showing the tracking of overall inflation against oil prices. The chart shows current developments as well as some from 2016 and 2018 when oil prices flared and had a much more muted impact on overall inflation in Finland. However, the spike in oil prices in 2021 has added to other factors and had a substantial impact on inflation; meanwhile, the subsequent runoff in Brent prices preceded the deceleration of inflation in Finland as well as globally.

Once you have those results, it's instructive to look at what oil prices are doing currently. From the chart (on the right), we can see that the long run down in oil prices has finally bottomed and between June and August oil prices are once again rising. This plot of daily oil prices includes the European free market price of Brent as well as the U.S. domestic price for West Texas intermediate. This turnabout in crude prices suggests that some of the best news on inflation may be over at least for the headline.
by:Robert Brusca
|in:Economy in Brief
Italy| Aug 10 2023
Italian Inflation Trends Cool…Relatively
Italy's inflation metrics in July showed a headline for the HICP rose 0.3% after falling 0.2% in June. The core rate was unchanged after rising 0.4% in June. The domestic CPI measure rose 0.2% in July after falling 0.1% in June. And the domestic CPI excluding food & energy rose 0.1% in July after rising 0.2% in June. These comparisons show that the HICP and the domestic inflation metrics for Italy had been behaving much the same in the last couple of months.

If we take a longer perspective, we find that we get pretty much the same readings and trends out of both the domestic CPI and the HICP gauges. For this discussion, I'm not going to repeat the HICP, and I will simply talk about the domestic CPI prices because they are the prices consistent with the detail in the table below.

Sequentially, Italy's CPI headline rises 6% over 12 months, eases to 1.9% pace over 6 months and then picks-up to a 3.1% annual rate over 3 months. The core measure gains 5.2% over 12 months, then slows to a 4.2% annual rate over 6 months and slides further to a 2.9% annual rate over 3 months. Italy's headline inflation rate appears to be cooling although it isn't doing it precisely sequentially; the core measure is showing a decline in inflation that is occurring sequentially.

Sequentially, the details on Italian inflation show broad deceleration occurring over 3 months and 6 months. Comparing 3-month inflation to its 6-month pace, only three categories show an accelerated pace; those are: rent & utilities, education, and restaurants & hotels. Over 6 months inflation is stronger than it is over 12 months in only three categories: alcohol & tobacco, transportation, and restaurants & hotels. Over 12 months compared to 12-months ago annual inflation is broadly hotter across categories; it's lower in only two categories: rent & utilities and transportation.

Calculating third quarter inflation by looking at the July increase over the quarter average in Q2, gives us a properly compounded annual rate of 2.0% for the CPI headline compared to 2.1% for the core CPI. The domestic inflation gauges are showing headline and core inflation running out of neck-to-neck pace that would be completely in-lined with the ECB's 2% target.
by:Robert Brusca
|in:Economy in Brief
France| Aug 09 2023
French Trade Trends Show Deficit Contraction
French trade trends show slowing year-over-year patterns for both exports and imports of goods excluding military equipment. While both flows are decelerating, it's imports where growth has turned negative. Imports show negative growth rates over 12 months, 6 months and 3 months. Exports are slowing year-over-year; however, in terms of shorter-term trends, exports show growth of 4.3% over 12 months, growth at an annual rate of 5.3% over 6 months, and growth accelerating to an 11.9% annual rate over 3 months. This is an accelerating short-term pattern that defies its longer-term year-over-year slowing trend.

For exports, the three-component flows depicted in the table {for 1) food, beverages & tobacco, 2) Transportation equipment, and 3) Other} all show positive trends. There are accelerations in progress from 12-months to 6-months to 3-months for all of them. From that standpoint, the strengthening of exports within the last year is a durable trend.

For imports, food, beverages & tobacco hint at some acceleration with very similar 6- and 12-month growth rates between 3- and 3½-percent that then accelerate to 9.6% over 3 months. Imports of transportation equipment, however, show waffling as they grow at a 12.4% annual rate over 12 months, slow to a 3.5% annual rate over 6 months, and then accelerate to a 10.4% annual rate over 3 months; that's a 3-month growth rate that's still below the 12-month growth rate and does not count as a tendency to accelerate. For ‘other’ imports, French trade results show declines on all horizons, but without any clear trend. Other import flows decline at a 13.7% annual rate over 12-months, that decline steps up to a -25.6% annual rate over 6 months, then it trims the speed of decline to -5.5% over 3 months. On balance, the ‘other’ category for French imports simply shows ongoing weakness but without a clear trend.

France’s current account in June swings into surplus after logging a deficit in May and rather persistent deficits in previous months. One year ago, imports outgained exports on a growth rate of 35.8% for imports compared to 20.7% for exports. However, over the last 12 months, that worm has turned, and imports are falling at a 9.2% annual rate, while exports have advanced at a 4.3% annual rate. The changes in these growth rates are what underline the swing in the current account from deficit territory into surplus territory. France’s trade balance continues to be in deficit in June. However, the deficit in June is only about 60% the size of the deficit averaged over the last 12 months.
by:Robert Brusca
|in:Economy in Brief