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

Global| Jun 13 2023
ZEW Eco-situation Readings Ease While Expectations Merely Flounder
ZEW Overview The ZEW economic index weakened for the current situation in June, worsening for the euro area, for Germany, and for the USA. On the other hand, economic expectations improved slightly, but the emphasis here is on ‘slightly’ as economic expectations for Germany and the U.S. remain quite weak and depressed.

• Inflation expectations continued to post large net negative readings. Inflation rates continue to run high in the euro area, in Germany, and in the U.S. with a few ZEW experts thinking the conditions could worsen from where they are as central banks raise rates.

• Short-term rate expectations, on the other hand, are slightly weaker than they were in May. In the euro area, expectations have a ranking in their 86th percentile, reflecting the fact that the ECB is much farther behind raising rates relative to its inflation target. In the U.S., the short-term rate expectation index has only a 35.6 percentile ranking because the Federal Reserve has already raised rates substantially and there is, in the U.S., an ongoing to debate about whether the Fed is going to pause at the meeting this week, and then possibly continue to raise rates, whether it will raise rates at the meeting itself, or exactly where Federal Reserve policy stands. This uncertainty and ambivalence is reflected in this ZEW survey values.

• Long-term rate expectations are weaker in both Germany and the U.S.; both have fallen significantly in June compared to May acknowledging that inflation progress is detectable and that long-term interest rate investors may feel less at risk to what lies ahead.

• Stock market assessments of the euro area, Germany, and the U.S. all improved and all switched from a net negative reading in May to a net positive reading in June. But all the queue percentile standings remain extremely weak. The U.S. standing at nearly its 20th percentile is the strongest of the lot, a reading that itself is still quite weak.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 12 2023
Japan’s PPI Breaks Lower, Following the International Script
Japan's producer price index fell by 0.4% in May after turning up a flat performance in April and a flat performance in March. For all manufacturing, the PPI rose by 0.1% in May after rising by 0.2% in April and by 0.3% in March; the progression to smaller increases is in train month-to-month for manufacturing even if its broader progression is blunted.

PPI progression The progression from 12-months to 6-months to 3-months finds Japan’s PPI up at a 5.1% annual rate over 12 months and at a 0.5% annual rate over 6 months; then it falls at a 1.7% annual rate over 3 months. Japan's manufacturing PPI rises 4.5% over 12 months, then decelerates to a 2.4% annual rate over 6 months as well as over 3 months.
Global PPI disinflation is in gear...so what? Referencing the chart at the top, we can see that this tendency for the PPI to have run hot and then to decelerate sharply is part of an international phenomenon and one that seems to be strongly linked to energy prices (see the correlations to Brent in the table – not the CPI exception). The chart looks at year-over-year percent changes in various PPIs and plots them against the Brent price level that is chronicled on the left scale of a two-scale chart above. But it is not driving the trends central bankers care most about.

The PPI is NOT the index favored by central bankers For producer prices, raw materials, energy, commodities, agricultural goods - all these things - are extremely important. After energy prices had flared along with other commodity prices, they decelerated and this is having a global impact on producer prices; in fact, producer prices are falling much faster than consumer prices - the price indexes that central banks typically look at to set monetary policy.

Consumer prices rule! In the U.S., in Europe, and in the U.K., consumer price gains have long been too high, and they have continued to be stubborn, resistant to slowing enough in the face of these severe drops in producer prices. Markets, to some extent, are confused because, in the past, producer prices have been reasonable harbingers of consumer prices, but we also know that producer prices yield exaggerations of the moves to come from consumer prices. Even in Japan, consumer prices now are failing to show the kind of slowing outside of energy and food prices that the central bank had been expecting. Japan's inflation ‘problem’ is not as bad as the rest of the world. But Japan’s consumer prices are overshooting the Bank of Japan target. The BOJ has been arguing that the rise in inflation is temporary; the central bank has, for the most part, been ignoring it. But maybe now there's something percolating in the price index that Japan is going to have to pay some attention to. Japan may be in the process of becoming less of an exception.

Brent is still an inflation moderator The table still shows that energy is a negative factor, as Brent prices decline 11.5% month-to-month in May after having increased 2.7% in April and fallen 4.8% in March. There is no pent-up pressure coming from oil prices according to Brent. Sequentially Brent price changes are also still negative.

Global trends compared and contrasted Japan gives us the first inflation observation from May; for other countries we're looking at data up-to-date through April: for the European Monetary Union and for the U.S. and in comparison with Japan's own CPI. We can look at the sequential price trends and there we see U.S. and European PPIs showing decelerations from 12-months to 6-months to 3-months. Japan's CPI also shows decelerations from 12-months to 6-months to 3-months. But Japan’s CPI core shows an acceleration from 12-months to 6-months to 3-months. For comparison, I also reoffer Japan’s PPI on a one-month lag basis so we can compare it to the other indexes on the same, albeit less topical, timeline. On that basis, Japan's overall PPI still shows steady deceleration, but the manufacturing gauge shows the deceleration from 12-months to 6-months and then from 6-months to 3-months a very slight pickup: from 3.3% at an annual rate over 6 months to 3.5% at an annualized rate over 3 months. As far as comparisons go, it is hair splitting to call that ‘acceleration.’
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 09 2023
Industrial Trends in Europe Are Challenging
In April, manufacturing IP among select early reporting EMU members and other European economies fell in nine of the fifteen countries in the table. Among the 13-early reporting EMU members, the median manufacturing output decline was 2% in April. The percentage of EMU economics with IP accelerating month-to-month remained low at 38.5% in April compared to 30.8% in March. In February, output showed a preponderance of acceleration (69.2%).

Sequential growth Over three months, six months and 12 months, IP among EMU members showed declines in the median gauge, but the drop is not worsening persistently as the annualized output drop over six months was less than the drop over 12 months. But then, the median drop over three months accelerated again surpassing the speed of the drop over both six months and 12 months.

Manufacturing output momentum EMU members show the proportion of members with output acceleration at or below 50% on all horizons. In addition, over three months, manufacturing output declines in nine of fifteen reporters in the table, eight of fifteen reporters over six months, and eight of fifteen over 12 months. Output is not just weak, but it is declining in a preponderance of European economies. Germany, the largest EMU economy, shows manufacturing output down over three months but rising over six months and 12 months. France, the second largest EMU economy, has no output declines over these periods. Italian manufacturing output declines each of the periods. Spain, the fourth largest economy, shows output declines over three months and 12 months. So far, the largest of the large economies in the EMU show the most resilience. But Germany gives way to an output decline over three months. In addition, Belgium, Finland, the Netherlands, Portugal, and Norway- in addition to Italy- show output declines over each of the three periods. Only the Dutch and Norwegians show progressive deterioration in this group. However, Germany, with only one output decline over three months, shows progressive slowing in growth from 12-months, to 6-months, to 3-month; so, do Malta and Ireland, two of the smaller economies.
by:Robert Brusca
|in:Economy in Brief
Europe| Jun 08 2023
EMU Is in a Recession! Really? Will Someone Please Tell the Labor Market?
I'm reading stories today about how Europe is now in recession. There was a revision to GDP growth for the European Monetary Union that puts first quarter growth in negative territory at -0.4% (annualized Q/Q) matching it with a -0.4% (annualized Q/Q) change in the fourth quarter. This magically gives us two quarters in a row of negative GDP growth – and… here we go again.

Is 1+1=2 the ‘technical definition’ of arithmetic? I have long railed against using this ‘rule of thumb’ as an unimpeachable definition of recession. I am completely opposed to anyone using the expression ‘two consecutive quarters of negative GDP growth is a technical definition of recession.’ When was the last time you ever thought of 1 + 1 equaling 2 being something that was technical? There was nothing technical about this. It is, in fact, what we economists call a ‘rule of thumb,’ and that denigrates the concept to something that more accurately describes what it is. It's an exaggeration or a simplification of an underlying process that is much more complicated than the rule that we are applying to it. In this case, two consecutive quarters of negative GDP growth is a gross simplification of what are rather complex underlying economic processes. In the U.S., the NBER uses 3-concepts to vet a period as recession: (1) Is the period of economic disruptions long enough? (2) Is the disruption deep enough to be termed ‘recession?’ (3) Is the disruption broad enough across the bulk of the economy? One plus one equals two glosses over most of that.

Not long, not severe, a breadth of discomfort…not pain More to the point, this is a two-quarter decline in GDP that's less than 1% at an annual rate - and that's true even when the two declines are combined! I thought that we put this nonsense behind us in 2022 when everyone failed to call two key back-to-back declines in quarterly U.S. GDP a recession. U.S. GDP in the first quarter of 2022 declined by 1.6% at an annual rate; it declined in the second quarter at 0.6% at an annual rate. These are combined annual rate declines much larger than what we're seeing in the European Monetary Union. And yet we denied calling that a U.S. recession. One of the reasons for this was because the rest of the economy was performing quite well. The labor market continued to perform extremely well and so it was quite clear to everybody that this ‘rule of thumb’ had failed. In the European Monetary Union, the unemployment rate continues to drop. The economy has been under some stress. But I'm still quite against using this two-consecutive-quarter of GDP decline rule to call a recession now.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 07 2023
OECD LEIs Tilt to Continued Weakness
OECD leading indicators show mostly weakness but mixed performance among the top regions. The level of economic performance grades as consistently weak or very weak while various measures of momentum are mixed.

Recent momentum Month-to-month in May the OECD 7, the European Big 4 and the U.S. show essentially unchanged normalized leading indicators while Japan ticks up by 0.1% as does the index for the Asian Major 5 (China, India, Indonesia, Japan, and South Korea). Over three months, the OECD-7 index falls by 0.1% and the U.S. index falls by 0.6%. But rising by 0.6% is the European Big 4 and the OECD Japan; the Asian Major-5 index is rising by 0.9%. Over six months, the OECD-7 index has been flat. The U.S. index is down by 0.5%, Japan's index is up by 0.2% while the Asian Major-5 index is up by 0.7% and Europe's Big-4 index is up by 0.9%. The broader 12-month change indexes show declines for all the metrics except for Japan; it is flat over 12 months.

Normalized index standings are weak These normalized indexes all have standings that are below their midpoints (below the 50-percentile mark). Japan comes the closest to being near its neutral mark with a 48.3% standing. After that, the Major 5 in Asia have a 28.4 percentile standing, but then the U.S. reading has a 14.7 percentile standing, the OECD 7 has a 12-percentile standing and Europe's Big 4 have an 11.6 percentile standing. All the major groups show weakness; Japan, viewed in isolation, is closer to a neutral reading and it is the only comparison like that.

Six-month changes The OECD expresses the preference to look at its indicators over six months. In the second panel of the table, we see changes in the 6-month averages that show declines in May for all these groups except for the Europe Big-4 measure that is up by 0.1% and for China that is up by 0.6%. A month ago, all the readings were negative except for China with a 0.4% reading. Looking at point-to-point 6-month changes on intervals of 6-months, we see many more negative readings although the recent 6-months show an increase in Europe’s Big 4 (of 0.9%) and a gain in Japan. There are 6-month declines in the U.S. and in China and with the OECD-7 measure flat. But 6-months ago the 6-month point-to-point changes show all negative readings and for 12-months ago the six-month changes are all negative except for Japan (at 0.1). Mixed 6-month results are a new phenomenon.

The bottom panel of the table looks at the amplitude adjusted readings in level format. In terms of levels, only Japan has a reading above 100 in May, indicating that it is above its adjusted trend. China has a reading in the table above 100 and its colored red because the underlying data are below 100 but round up to 100. What you see in this panel of the chart is a persistence of indexes languishing below 100 that signal performance is below trend values. On the far right, we have queue standings for the levels and again all of them are below the 50th percentile mark. Japan has the strongest reading at a 48th percentile standing along with Germany; China logs a 44.5 percentile standing. All the rest are more substantially below the 50% mark indicating weakness and below trend growth.
by:Robert Brusca
|in:Economy in Brief
Germany| Jun 06 2023
German Orders Continue Their Steady Melt
German orders in April fell by 0.4% in April as foreign orders led the way lower on a 1.8% month-to-month decline. Domestic orders rebounded from a steep decline in March to rise by 1.6% month-to-month. Both foreign and domestic orders had fallen sharply in March. Foreign orders fell by 13.1% and domestic orders fell by 7.7% even though February had produced strong gains in both categories. Over three months both foreign and domestic orders now are showing steep declines.

German real orders The sequential growth in orders for Germany shows deterioration although not a progressive deterioration across the board. Orders fall by 10% over 12 months. The annual rate picks up to a -14.6% annual rate over six months and then further accelerates to -26.3% over three months. This deterioration is led by foreign orders with a 12-month percent change at -10.7%. The annual rate drop over six months is nearly twice that at a -20% pace and the 3-month decline nearly twice that at a -37.3% pace. Domestic orders follow suit with weakness but are not sequentially worsening. Domestic orders fall by 8.8% over 12 months, then reduce their pace of slippage with a -6.2% annual rate fall over six months, then reaccelerate to a -7% pace over three months, a pace of decline that is a slightly faster drop than over three months but still less than the 12-month pace. On balance, the picture of the German economy is quite clear: weakening over all horizons is in progress and the weakening is worsening overall led by a significant worsening of foreign orders.

Real sales Sector sales in manufacturing show progressive deterioration from a gain of 3.1% over 12 months to a decline at a 3.7% annual rate over six months and a decline at a faster, 7.7% annual rate over three months. Consumer goods contribute to this secular deterioration and deceleration with a 4.4% decline over 12 months, a -5.3% pace over six months and a -6.3% pace of decline over three months. Capital goods follow suit as well. However, they post a strong 13.9% gain over 12 months that quickly dissipates to a -0.8% annual pace of decline over six months and a -13.7% pace over three months. Intermediate goods break the pattern; they show a -4.5% pace of decline in sales over 12 months and a worsening -6.1% pace of decline over six months, but then intermediate goods sales increase by 0.8% at an annual rate over three months. Even though the picture is clear that sales are weakening and for the most part they are deteriorating, the deterioration for consumer goods is caused by nondurable goods whereas consumer durable goods sales are showing acceleration, but not enough to impact and reverse the secular decline in the headline pace of sales for consumer goods overall.

Industrial Europe The EU industrial confidence measures for Germany, France, Italy, and Spain show declines for all four countries in April as well as in March. All four confidence measures worsen in April compared to March. The average EU confidence indicators show worsening in confidence in the 6-month average compared to the 12-month average for all four countries; however, for 3-months compared to 6-months, there is less weakness registered for Spain, for Italy, and for France. Only Germany shows period-to-period deterioration; however, over three months Germany alone shows a net positive reading while the other three countries show negative readings (but negative readings that are smaller over three months than they were over six months on average).

Q2 now in progress April brings us the first reading for the second quarter. To start the second quarter, conditions show negative growth in Germany for total orders, for domestic and foreign orders, and for all the sector sales categories except for sales of consumer durables. The queue percentile standings on the EU industrial measures for Germany, France, Italy, and Spain show only France with a standing that's below its median - that is below a standing of 50%. However, Italy is marginally above 50% with a 53.6 percentile standing.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 05 2023
Global Composite PMIs Show Resilience; U.S. Is an Exception
The Standard and Poor’s Global composite PMI data for May show some degree of resilience. Among the 22 countries and regions featured in the table, the average composite PMI rating rises to 53.5 in May from 51.5 in April. The median reading rises to 54.0 from 53.8. There are only two jurisdictions with readings below 50 indicating contraction; this compares to three in April. For both months, the readings on the number of contractions are quite low. However, the number showing slowing rises to 11 in May compared to 5 in April.

U.S. trends diverge- The fork in the road... To avoid confusion, let me point out that I have presented both U.S. measures in the exhibits. In the table (below), for comparability, I have the U.S. composite as presented by S&P so it's completely comparable with everything else in the table. However, in the chart at the top, I present the U.S. nonmanufacturing or services PMI from the ISM, the survey I prefer. The ISM is showing much more weakness in the U.S. than the S&P reading on the services sector. The chart reveals significant weakening in the U.S. compared to other members whose surveys are based on S&P data. The S&P survey shows some strengthening in the U.S. for the composite, not just less weakness.

S&P readings show resilience overall... The data in the table also showed that the average reading is increasing sequentially: from 12 months to 6 months to 3 months from 51.6 over 12 months on average to 52 over 6 months on average to 53.3 over 3 months on average. The median region also increases from 51.2 over 12 months to 51.8 over 6 months to 53.5 over 3 months. S&P data are consistent with the notion that there's been some firming in the global indexes and a back-off in activity in the manufacturing sector.

Still, there is little evidence of composites showing contraction. The number of jurisdictions with readings below 50 over 12 months is five, the same as for 6 months; that number diminishes to 3 over 3 months. The number readings that are slowing over 12 months compared to 12-months ago is 20; the number slowing over 6 months compared to 12 months is 7; the number slowing over 3 months compared to 6 months is 3. In terms of either slowing or outright contraction, both approaches show that there is less weakness in train according to the S&P readings applied to sequential data. Recall that the monthly data do show that there's a more significant broad slowing in May compared to April, but that's on the month-to-month comparison alone.

Percentile standings have become more midrange Percentile standings based on the queue method of assessment show only three jurisdictions with readings below their medians since January 2019. Those three are Sweden which is exceptionally weak with the 2% standing, Egypt with a 36.7 percentile standing, and France with a 40.8 percentile standing. All the rest have standings that are above their historic medians which means they have queue percentile standings above the level of 50. India in May logs its highest composite PMI reading since January 2019; Japan logs a 98-percetile standing on the same period.
by:Robert Brusca
|in:Economy in Brief
France| Jun 02 2023
French Manufacturing IP Makes Second Gain in Two Months
French manufacturing registered a gain of 0.7% in April following a 1.1% decline in March and a 1.3% increase in February. Trends in French manufacturing show output is up by 2.1% over 12 months, rising at a 2.8% annual rate over six months and rising at a 10% annual rate over three months showing steady acceleration in the gains for output.

Trends by sector By sector, the trends are not so clear, but they are largely supportive. For consumer durables, output rises by 9% over 12 months, slows to a 2% gain over six months and then rises at an 8.1% annual rate over three months. Durable goods trends do not support the acceleration hypothesis. Consumer nondurable goods show output lower by 0.8% over 12 months, falling at a slightly reduced 0.5% annual rate over six months and then rising by 1.3% at an annual rate over three months. This progression offers strong support to the acceleration hypothesis. For capital goods, output is up 8.7% over 12 months. It improves slightly to an 8.9% annual rate over six months, and then reverts to an 8.7% annual rate pace over three months. The output for capital goods is strong and firm across all three horizons, but that doesn't support the idea that output is accelerating. It does support the idea that output is strong. Intermediate goods output falls by 2.5% over 12 months, falling at a 2.1% annual rate over six months, then advancing at a 3.5% annual rate over three months. Intermediate goods support the acceleration hypothesis as output swings from declining over six and 12 months to growth over three months.

Auto cross-currents Separately the output of autos shows sequential slowing. Output is up by 35.5% over 12 months, slowing to a 6.6% pace over six months and then slowing further to 2.6% annual rate over three months. Auto production also shows sequential slowing monthly, from February to March to April. The trends in output belie the strength in motor vehicle registrations with registrations firm-to-strengthening showing a gain of 25% over 12 months, slowing slightly to a 20% annual rate over six months, and accelerating sharply to a 65.5% annual rate over three months. But vehicle registrations do slow their growth monthly, from February to March to April; the growth rates for registrations in each of those months erode although each month shows ongoing strength. Sometimes trends simply refuse to be consistent in their messaging.

Quarter to date This is the first month in the new quarter. The quarter-to-date statistics at this point are rather tenuous. The calculation looks at the growth in April compared to the first quarter base of spending on average. By that calculation, industrial production is growing at a 2.1% annual rate in the second quarter to date. This is led by a 12.9% annual rate gain in consumer durable goods, a 6.6% annual rate gain in capital goods, and a 3.3% annual rate gain in intermediate goods. These gains are offset by a 2% decline in the output of consumer nondurable goods. Also in the new quarter, auto output is falling at a 7.7% annual rate while motor vehicle registrations are up by a strong 48.8%.
by:Robert Brusca
|in:Economy in Brief
Global| Jun 01 2023
Asian PMIs Are Off Peak But Show Resilience
The Asian PMIs show somewhat mixed patterns over the last year and across the recent three months. In May alone the average manufacturing reading stepped back to 49.8 from 51.0, leaving May weaker than April or March. Manufacturing PMIs for this select group of Asian countries improved in only one-third of the estimates in May, compared to improvement for 50% of them in April and one third of them in March. None of these trends is particularly striking.

However, the three-month averages show that 44.4% of the countries experienced increased PMIs compared to the six-month average. Over six months 55.6% improved compared to the 12-month average. And 55.6% improved for the 12-month average compared to the year-ago 12-month average.

The unweighted standing for manufacturing overall is at its 43rd percentile with five of the reporting countries having readings below their respective 50th percentiles. That means they lie below their medians for the period. Thailand has the strongest standing with a 96.2 percentile reading, while Myanmar has a reading at its 84.9 percentile. For the most part, the manufacturing percentile standings are moderate to low.

There are few services observations; China and Japan present services/nonmanufacturing observations. The Japanese figures here are still preliminary. Still, services from 12-months to six-months to three-months are trending stronger there. Across the individual recent three months, the Japanese services sector has remained firm. China’s nonmanufacturing readings weaken over the recent three months.

May is a showing of mixed performance in Asia for services. Japan shows weakening PMI services data from 12-months to three-months with a small bounce in between, while China shows slight strengthening over those same horizons for nonmanufacturing. Neither country, however, shows markedly strong moves in either direction.

The bottom line is that Asia seems to be listless for both manufacturing and services, without strong momentum. Percentile standings indicate that weak levels accompany the meandering momentum trends in manufacturing. PMI readings with few exceptions are weak compared to where the various PMI levels have been since January 2019. Services tell a different story of relative firmness enduring.
by:Robert Brusca
|in:Economy in Brief
Japan| May 31 2023
Japan’s Industrial Output Is Flat in April But Carries Momentum
Japan’s industrial output was flat in April after rising by 0.2% in March and by 4.5% in February. Manufacturing output fell by 0.2% in April after rising 0.8% in March and gaining 4.9% in February. Despite the flat or declining output in April for industry overall and manufacturing, Japan carries momentum from strong gains in February and further gains in March after stumbling in a deep hole in January. As a result of this output pattern, these weak-seeming monthly numbers are setting output up for a strong gain in the second quarter relative to what was a disappointing first quarter in Japan. Overall output is growing at an annual rate of 10% in the second quarter as manufacturing output is growing at a 12.1% annual rate. These early returns for the second quarter occur with only one month's worth of data in hand.

Sequential growth rates show total industry output growing 0.2% over 12 months, advancing at a 0.6% annual rate over six months and exploding at a 20.2% annual rate over three months. Manufacturing output is up by 0.6% over 12 months, growing at a slightly faster 0.8% pace over six months and then bursting out at a 23.9% annual rate over three months.

IP manufacturing sectors Sector growth rates show acceleration in progress for consumer goods. Their 7.4% growth over 12 months is substantially preserved over six months and then mushrooms to a 24.1% annual rate over three months. Intermediate goods output falls by 3.3% over 12 months, improves to a decline at just a 0.9% pace over six months and then surges higher to a 25.8% annual rate over three months. Investment goods have a more complicated pattern, with output rising by 1.6% over 12 months, then giving ground to fall at an 11.4% annual rate over six months but recovering to surge at a 26% annual rate over three months.

On monthly data, the manufacturing sectors show three output gains in a row for consumer goods, and gains in April and February with a decline in March for intermediate goods, while investment goods display three monthly increases over February, March, and April. On balance, the second quarter looks like it's on its way to delivering strong growth in Japan. The quarter-to-date growth rates for consumer goods, intermediate goods, and investment goods lie in a range of 15% to 20% at an annual rate. These are quite strong growth rates for output.

Other industry Mining is a different story, showing output declines in February, March and April although the output declines diminish in April. Mining shows an 8.9% output drop over 12 months that worsens to a 17.6% annual rate decline over six months and worsens further to a 22.4% annual rate decline over three months. The mining sector in the Japanese economy is weak by months as well as sequentially weak and is still weakening over the past year.

Utilities for electricity & gas show declines in February and March month-to-month but bounce back as output increases by 1.4% in April. Sequentially utilities are showing a weakening trend with a 5.7% decline over 12 months, a 6.9% annual rate decline over six months and a 19.8% annual rate decline over three months. It's a bit of a surprise that electricity & gas usage can sequentially decline while manufacturing, for the most part, is accelerating.

Both mining and electricity & gas show output declines in progress in the second quarter with mining showing a 21.4% annual rate decline early in the quarter and electricity & gas showing a 14.3% annual rate decline early in the quarter.

Despite what looks to be good momentum over the last 12 months, Japanese output has not generally been impressive. Total industry output is still 2.5% lower than it was in January 2020 before COVID struck most of the global economy. Manufacturing output is lower by 3.4%, consumer goods output is lower by 2.5%, intermediate goods output is lower by 5.6%. Only investment goods show output stronger in April 2023 than it was in January 2020 with a gain of 2.4% over that three-year period. Mining and utilities both show weak output with mining weaker by 16% than it was in January 2020; utilities output is weaker by just 1.9%.
by:Robert Brusca
|in:Economy in Brief
Global| May 30 2023
Clear Monetary Deceleration in Global Money Centers
The growth in nominal money supply is declining globally in the major money center areas. Japan shows the most resistance to deceleration while the U.S. is the strongest example of monetary deceleration.

United States: U.S. money supply growth has not only decelerated but it's contracting in nominal terms as it is declining at an accelerating rate. U.S. money supply falls by 4.6% over 12 months, its annualized growth rate is -7% over six months, the annualized growth rate over three months is -9.8%.

EMU: The European Monetary Union (EMU) also shows declining money supply growth and contracting money supply. Over 12 months money supply in the monetary union is still increasing by 1.3%, but over six months it's declining at a 2.8% annual rate and over three months it's declining at a 3.5% annual rate.

United Kingdom: The U.K. shows a somewhat more erratic deceleration in money supply with growth up by 0.5% over 12 months following at a -0.3% annual rate over six months and rising at a 1.1% annual rate over three months. The U.K. money growth rates are still substantially decelerated from what we saw over 2-years when money grew at a 3.2% annual rate and 3-years when it grew to 6.3% annual rate. Also, U.K. money stock data are one month behind the other countries because of data availability - that could explain some of their differences in pattern.

Japan: Money supply in Japan continues to grow and shows a very slight acceleration from 12-months, to 6-months, to 3-months with the growth rates progressing at annual rates from 2.5% over 12 months to 2.6% over six months to 3.2% over three months- they are tightly clustered more than trending. These rates compare to growth over two years of 3% and three years of 5%. Generally, growth in money has slowed in Japan but it is not as clearly slowing over this recent period as it is in the other monetary centers.

Real money balances erode Adjusting money supply for inflation puts just about all the money growth rates across all the countries in negative territory. In the EMU, negative growth rates extend back over two years. In the USA, negative real growth rates extend back over two years as well. In the U.K., negative real money growth rates extend back over two years. In Japan, over two years money growth is flat; falls by 0.9% over 12 months and then falls at a less-weak 0.4% annual rate over six months, and Japan manages to break with the rest of the group posting growth in real money balances at a 2% annual rate over three months.

Weak credit in EMU In addition to the weak money growth, the European Monetary Union is showing weak growth in private credit as well as in credit to residents. Both credit aggregates credit show declines in nominal credit extension over three months and over six months. Deflating the statistics for inflation, finds that real credit growth is falling over at least the last three years on both measures... and the pace of decline is accelerating.

Money and credit trends These sorts of trends in money and credit growth have economists thinking that inflation has peaked and that it's due to come down in the period ahead because money grows it's so weak and of course it's weak broadly across most of the major money center countries. However, it's also true that money supply is simply weakening after it had experienced booms in all these countries. In some sense, money growth is still only returning itself to a more sustainable long-term path and that's what makes money growth more difficult to interpret.
by:Robert Brusca
|in:Economy in Brief
United Kingdom| May 25 2023
U.K. Distributive Trades Survey Weakens
Retailing In retailing, sales in May for the distributive trades survey compared to a year ago show that the May reading dropped to -10 from +5 in April and from a positive reading in March. Orders compared to a year ago fell to a - 30 reading in May from a +1 in April. Sales adjusted for the time of year fell to a -18 reading from +21 in April. The stock-sales ratio rose to a +25 in May after a -2 in April, indicating potentially that inventories are beginning to build while sales are weakening.

The queue percentile standings for these readings show that orders compared to a year ago are extremely weak with the 8.8% standing. Sales compared to a year ago have a 20-percentile standing; sales compared to the time of year have a 23.9% standing. The stock-sales ratio has nearly an 89-percentile standing, potentially an indication of a building stock-sales imbalance.

The readings for expectations in retailing show that the June expectations for sales compared to a year ago are flat, an improvement from -7 logged for May. Expected sales adjusted for the time of year have been running hot and cold month-by-month. Orders compared to a year-ago are decisively weaker than the -25 reading in June when compared to -8 in May; they are even slightly weaker than the March reading of -23. Expected sales for the time of year at a -9 reading compares to a +16 reading for the month of May. The -9 reading breaks a string of positive numbers. The stock-sales ratio moves up to +14 in June from +5 in May.

The queue percentile standings for expectations essentially mirror the readings that we see for sales in the current period. Orders compared to a year ago have a 7.4 percentile standing. Sales compared to a year ago are at a 27-percentile standing. Sales evaluated for the time of year log a 29.5 percentile standing. The stock-sales ratio expected for June has a 64.6 percentile standing.

Wholesaling Wholesaling readings roughly mirror the retailing with slightly firmer percentile standings. Sales in May compared to a year ago slipped to a -5 reading from +13 in April. Orders compared to a year ago fall to -8 from -2 in April. Sales for the time of year have a +8 reading compared to plus 15 in April. The stock-sales ratio moves up to +31 from plus 18 in April.

The queue rankings show percentile standings for wholesale sales a year ago at a 23.6 percentile mark. Orders compared to a year ago have a 31-percentile standing, much stronger than their counterpart reading for retailing. Sales for the time of year have a 41.2 percentile standing, also stronger than its counterpart reading for retailing. The stock-sales ratio has a 90.5 percentile standing, close to the queue standing for retailing.

Expected wholesale sales in June compared to a year ago show a -3 net reading compared to a +9 in May. Orders, compared to a year ago, have a -6 reading, a worsening from -1 in May but an improvement from April and March. Wholesale sales for the time of year slipped to -6 in June from +14 in May. The stock-sales ratio edged lower to a net reading of +17 in June from +20 in May.

The percentile standings for expected wholesale sales in June show a 27-percentile standing for sales compared to a year ago. Orders compared to a year ago have a 32-percentile standing; that's much stronger than the counterpart reading in retailing for expectations. Sales for the time of year have a 44.9 percentile standing, also considerably stronger than the retail counterpart for expectations. However, the stock-sales ratio, with a 67.7 percentile-standing, is close to the ranking for expected sales in retailing.
by:Robert Brusca
|in:Economy in Brief