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

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
Germany| Jul 06 2023
German Orders Rebound Strongly in May- Without Much Consequence
German real orders in May grew strongly, rising 6.4% month-to-month with foreign orders rising 6.4% and domestic orders rising 6.2%. There are back-to-back monthly increases in total orders and in domestic orders. However, March saw even weaker orders with total orders falling by 10.9% month-to-month, foreign orders falling by 13.2%, and domestic orders falling by 7.7%. The strength in May reflects an unwinding of some of the weakness in March, albeit with a one-month lag.

Domestic vs. foreign growth trends in orders Because March was so weak, the three-month change in orders continues to be negative for Germany. Total orders are down by 4.1% over 12 months; they rebound to log a 3.2% annual rate of growth over 6 months, but then they are declining at an 18.7% annual rate over 3 months. This sequence is repeated for foreign orders that fall by 6% over 12 months, have a small 0.4% annual rate gain over 6 months and then decline at a 29.6% annual rate over 3 months. Domestic orders fall by 1.3% over 12months, rise by 7% at an annual rate over 6 months and then execute a small decline at a 0.4% annual rate over 3 months. For now, the greater weakness is in foreign orders on the recent horizon as well as over 12 months.

Real sector sales patterns Real sales by sector also show strength with gains across consumer goods, capital goods and intermediate goods in May. Within the consumer goods sector, consumer durables spending falls by 0.1% in May, the only sector or subsector to register a decline in the month.

Sector sales do not show any clear trends over the sequential period from 12-months, to 6-months, to 3-months. Manufacturing sales overall show a gain of 4.2% over 12 months, a decline of 1.5% at an annual rate over 6 months, and a gain of 0.8% annualized over 3 months. There is a 4% gain in real sales over 12 months, but over 3 months and 6 months there's not much change in sales at all. Consumer goods show sales declines over 12 months and over 6 months with a rebound over 3 months. Capital goods show growth over all three horizons at a 13.6% annual rate over 12 months, slowing to a 4.2% annualized gain over 6 months and then accelerating to log a 7.8% annual rate gain over 3 months. Capital goods sales rise on all horizons but do not accelerate. In contrast, intermediate goods sales fall on all horizons and their fall gets progressively worse as intermediate goods sales fall by 4.3% over 12 months, at a 6.6% annual rate decline over 6 months and at a 7.8% annual rate decline over 3 months.

EMU Big Four economies and EU Commission indexes The EU Commission industrial confidence gauges for Germany, France, Italy, and Spain show negative readings in March, April, and May. The monthly progression for Germany shows increasing weakness. Italy shows increasing weakness. Spain and France show less straightforward results but generally look to be on a weakening path since the May reading is weaker than the March reading for each of them. Sequentially the German industrial confidence indicator weakens from an average of +4 over 12 months to +0.4 over 6 months, to -2.3 over 3 months. France also shows sequential deterioration that gets worse as does Italy; Spain breaks the pattern with the -4.1 reading over 12 months, slightly worse at a -4.2 reading over 6 months and then logging a small improvement to -3.5 over 3 months. However, there's nothing in any of those sequences that looks like it's a real improvement. The queue standings for the EU Commission readings in May show all of them below their respective 50th percentiles, a level that marks the median since 1990.

The quarter-to-date In the quarter-to-date (QTD) as of May, two months into the second quarter, orders are falling at a 13.5% annual rate, foreign orders are falling at a 24.6% annual rate, while domestic orders in Germany are rising at a 5.2% annual rate. Real sales by sector show total manufacturing sales up by 0.6% at an annual rate in the QTD with consumer durables showing a 10.8% annual rate increase in sales and capital goods logging at a 6.5% annual increase in sales. Total consumer goods, consumer nondurables and intermediate goods sales are falling out on the QTD basis.
by:Robert Brusca
|in:Economy in Brief
Global| Jul 05 2023
Composite PMIs Weaken in June
Among the 25 countries/regions reporting composite PMIs that reflect the manufacturing and services sectors of their respective economies, only four show improvement in June. Those four are Russia, Saudi Arabia, United Arab Emirates, and Egypt. The domination of oil producers on the list is notable. We mark Zambia as unchanged as its data are unavailable in June. We use the May value for June only in the case of Zambia. This overall result is a substantial step-down and worsening from May when only 13 reporters logged worsening. In April, only 7 had cited a worsening.

The sequential averages show worsening over 3-months compared to 6-months in only seven reporters, a worsening at 6-months compared to 12-months for only five reporters and a worsening over 12-months compared to 12-months ago in 14 reporters.

Some weakening The month’s data are sharply weaker (month-to-month), showing much more breadth of weakening than what we've seen in some time although the PMI averages have not so sharply deteriorated. The average PMI stands at 52.1 in June and the 12-month average is 51.5. That compares to a 3-month average at 53.0; its 6-month average is at 52.3. This sequence shows improving PMI averages over shorter, timelier, periods (except month-to-month). The medians also show improvements from 51 over 12 months to 52.3 over 6 months to 53.0 over 3 months. However, in the month-to-month data, the April reading is 53.8, rising to 54.0 in May and then dropping to 51.5 in June. The median and the averages both show a fall-off in June; however, the PMI values remain above 50 indicating economic expansion based upon the comprehensive composite PMI readings.

Little contraction PMI readings show composite PMI is below 50 in June indicating contraction for only five countries; that compares to three in May and three in April. For the three-month average, there's only three weaker compared to six-months; for the six-month average there's only three weaker than over 12 months. For the 12-month average, there's only five weaker than a year-ago. While there is great concern about a coming global slowdown and potentially a global recession based upon composite PMIs, there aren't many countries or regions now that are experiencing contraction.

Much weakening in June On a month-to-month basis, there's a much more significant indication of slowing with 20 of 25 reporters showing weaker values in June compared to May. That compares to 13 in May compared to April and 6 for April compared to March. Over three months there are seven out of 25 that show weakening compared to six months; over six months there are five that show weakening compared to 12 months, but over 12 there are 18 that show weakening compared to 12-months ago. Even so, we can see that the tendency for weakening is mostly a month-to-month phenomenon that has emerged in June. It is not yet indicative of the broader trends.

Standings are weak and mixed The queue percentile standings place the current observations in an ordered queue of data back to January 2019; it shows the average standing at the 53.4 percentile mark and a median standing at the 50-percentile mark. That means that the median for the group over the period is at such a level that it corresponds to the median value for each reporter on average. There are 12 of 25 of the reporters with composites below the historic medians on this timeline.
by:Robert Brusca
|in:Economy in Brief
Global| Jul 03 2023
Global Manufacturing PMIs Mostly Worsen in June
Among the eighteen reporters of manufacturing PMIs in June, only seven improve on a month-to-month basis. The table treats Canada as unchanged. Its June value is not available; for the purposes of statistics and aggregation, we're using the May value for Canada in June.

Over 3 months, 7 reporters show improved reading compared to 6 months. Over 6 months compared to 12 months, 8 reporters showed improvements in their manufacturing PMIs. Over 12 months compared to their level of 12-months ago, only four reporters show improvement: those are Mexico, Russia, India, and Indonesia.

For the most part, manufacturing continues to be under a great deal of pressure. The median reading for this group of countries this month is 47.8 on a PMI basis. However, despite the breadth of the deterioration, the median measure has not changed very much over the three horizons. In the table, over 12 months the PMI average is 48.8, over 6 months it falls to 48.1, and over 3 months it stabilizes at 48.2. All of these diffusion values show manufacturing activity declining on balance (all below 50), but declines are not getting worse according to the median statistics although they are getting worse based upon deteriorating breadth.

The ranking statistics show only five of these reporting entities with June readings above their historic medians. India has a strong 92-percentile standing, Mexico has an 88.5 percentile standing, Russia reports an 84.6 percentile standing, Indonesia has a 78.8 percentile standing, and Turkey has a 71-percentile standing. Apart from those, the standing of the other countries is generally much worse with the highest among the remaining countries being Japan at 48.1% and after Japan the next highest ranking being at 19.2% for Taiwan and for South Korea.

For some of the larger economies, the U.S. has a ranking for its S&P Global manufacturing PMI at its 5.8percentile, the euro area is at its 3.8 percentile, and the U.K. is at its 9.6 percentile. The large countries show a great deal of weakness in their manufacturing sectors; Japan is an exception.

Comparing these readings to where they were in January 2020 before COVID struck, there are only six countries that show better manufacturing PMI values in June 2023 than they had in January 2020. These are Russia that has a 4.7-point improvement, Indonesia that has a 3.2-point improvement, India that has a 2.5-point improvement, Mexico that has a 2.0-point improvement, Japan that has a 1.0-point improvement, and Turkey that has a 0.2-point improvement. By comparison, the median shows the decline of 1.7 points compared to January 2020. The euro area is weaker by 4.5 points and the U.S. is weaker by 5.6 points.
by:Robert Brusca
|in:Economy in Brief